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The Value Of Executive Time |
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In nearly all instances, aircraft and profitability complement each other, but of all available business tools, aircraft are the most controversial. Therefore, there have been repeated attempts to quantify the value of executive time as the prime means by which to justify the cost of using a corporate aircraft. Unfortunately, a satisfactory equation that blends the intangibles of business aviation just has not been found.
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In 1991, Tucson-based PRC Aviation developed a new formula for the General Aviation Manufacturers Association to measure the value of executive's time. The following table is based upon that review of several commonly accepted methods of computing the value of executive time in a variety of Industries.
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Productivity should be considered a leveraged multiple of what management expects to get back on investment in an employee. It should be noted that although this table averages an executive's time to a constant per hour figure, in reality, the value varies by activity. Otherwise, a trip to the restroom might cost the company $5,000 a minute. Likewise, the 12 hours it might take to close a deal might be worth $50,000 a minute, while the time spent signing routine papers might be worth only 20 bucks.
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Assuming that most salaried employees spend about 2,000 hours per year on the job, hourly rates are 1/2000 of annual wage, multiplied by a productivity factor (a fraction of hourly pay that produces the individual value-per-hour to the company), and then multiplied by 1,500 hours, a realistic figure for the time that is productivity occupied.
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| Yearly Salary |
Hourly Pay |
Productivity Factor |
Dollar Value/Hr |
Annual Contribution |
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| $50,000 |
$25.00 |
5.7 |
$142.50 |
$213,750 |
| $75,000 |
$37.50 |
5.7 |
$213.75 |
$320,625 |
| $100,000 |
$50.00 |
5.7 |
$285.00 |
$427,500 |
| $200,000 |
$100.00 |
5.7 |
$570.00 |
$855,000 |
| $250,000 |
$125.00 |
5.7 |
$712.50 |
$1,068,750 |
| $300,000 |
$150.00 |
5.7 |
$855.00 |
$1,282,500 |
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Based on this formula, if the table was to be continued, the hourly value of the most senior executives far exceeds the cost of a seat on even the most expensive business aircraft. Thus, if use of flying on a corporate business aircraft produces even a modest "savings in time" then, it is worthwhile without a doubt.
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