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Over the last 45 years, productivity increases and the full advent of the technology revolution have put increased pressure on our human capital. The nominal work week has declined from 44 hours in 1938 to 40 hours since 1940 and beyond. However, I know of fewer than a dozen attorneys working 40 hours per week (I am not talking about 40 billable) who are making enough to live even a comfortable middle-income lifestyle in our economy. (I arbitrarily define this as gross personal income of more than $125,000.) Most attorneys with more than seven years’ experience target incomes in the $250,000- $700,000 range depending on hours worked, status in the firm, rainmaking ability and geographic location. I do not believe that there has been any net decline in hours worked or expected in law firms across the country over the last seventy years. There has been, however, a shift among younger attorneys who want to achieve a better work/life balance.
How can we earn higher rates of return on our own human capital—which I define as the productive return on a lifetime of mental, physical, and emotional efforts? To some this might seem an unusual question to be posed in a financial planning column, but real financial and life planning takes into consideration personal, family, and business goals and then structures all of the available resources to meet those goals over time.
Invest Your Human Capital Wisely
As human beings, we only have a certain amount of personal time, energy and ability to work during our lifetimes. We achieve a higher rate of return on our human capital by spending less energy and effort to achieve more with our time and effort. We therefore maximize our human capital by increasing our human efficiency. Simply put, our human efficiency is directly based on the percentage of our time spent in highly productive and creative activities and efforts. These efforts can be spent in income-earning pursuits or by engaging in other areas of life that we find rewarding and fulfilling.
In stark contrast to the risk/return equation in the financial capital arena, the return on human capital is not maximized by taking more risk. The risk/return equation for human capital is more in tune with economy of effort and with how we function according to our unique abilities and in our creative zones. For example, one of our clients, a tax attorney, was in a mergers and acquisitions deal meeting in a western state along with 15 attorneys from both sides. After several hours of the typical back-and-forth wrangling and jockeying for position, during which he was absolutely quiet, our client raised his hand. Without notes, “on the fly,” he related a possible structure to the deal that would meet everyone’s tax needs. He was not jockeying for position, he was not wasting effort by establishing supremacy: he was simply observing and thinking. In an inspirational moment, he’d optimized his human capital by coming up with an artful solution to a very complex problem. His personal investment of emotional, physical, and mental energy paid off handsomely for the client because he was able to solve the problem with the least amount of investment of personal time and energy.
How can you spend more time working productively in the creative zone and waste less time feeling unfocused?
Take a regular, significant vacation and regular time off.
Vacations Aren’t Luxuries
Think about the last real vacation you took. It refreshed you; it left a pleasurable taste in your mouth, like eating mango sorbet on a hot afternoon—especially in contrast to the year when you couldn’t take a real vacation because of the deal you were working on. In contrast, that “working” vacation felt like drinking a flat, warm Coke.
You probably also remember what happened before you left on that real vacation. The two weeks before departure were stressful. Everyone knew you were leaving. There was the occasional frown from coworkers who knew about the seven-day cruise; whether they were envious or disapproving, you weren’t sure. The work load increased but you seemed to be more productive. You pushed especially hard that last week to get everything finished—or at least to a point where you trusted it wouldn’t blow up in your absence. You coordinated with partners and associates about the matters outstanding and the status of key clients who might call. Then came the hard stopping point. You left for vacation with a sense of accomplishment, a sense that you were on top of your game and you could close down—even temporarily—all thoughts of work.
Here’s how the rest of the vacation probably unfolded:
Day One: You were still keyed up from the hour mill at the law firm.
Day Two: You woke up early but went back to sleep.
Day Three: You started to really relax and grew interested in your planned vacation activities.
Day Four: You began really relaxing: you forgot your cell phone in the room, went kayaking at the beach, walked in the water at sunset with your spouse, found out what your daughter’s new boyfriend’s name is.
Day Five: You had a really meaningful conversation with your spouse, the best in many months; you felt closer to family members; you stopped caring about the office.
Day Six: You located the plane tickets and checked on a taxi for tomorrow; the last night’s dinner was fun but you were starting to put your armor on to go back to the rat race of the office.
Day Seven: You got home late but still felt strangely relaxed; you thought about the good, relaxing time that you had; you took a deep breath and got ready for your first day back.
Day One – Back at Work: You are in the office earlier than usual and feeling more relaxed. Your paralegal asks about your vacation. You ask him to block out another seven-day vacation five months from now so you have something to look forward to. Your work does not seem as intense as it did a couple of weeks ago. You smile before leaving the office and realize that you had a better than average billable day. Life is good again. You can’t wait until the next vacation.
Why Vacation?
1. Not having sufficient time away from work time causes stress-induced insomnia (The Benefits of the Power Nap by Elizabeth Scott).
2. Work related stress causes 1/3 of us to have at least one sleepless night per week. Six hours of sleep or less affects our fine motor skills (much like alcohol consumption). It also triples our quantifiable risk of having a car accident (The Better Sleep Council of Canada).
3. 50% of senior managers interviewed by SmartPro.com recognized that employees are more productive after a vacation than before it.
4. Taking a regular vacation reduces heart attacks in men by 50% and by 30% in women (Workplaces Try to Increase Productivity by Jeanie Croasmun, Ergoweb.com).
5. Vacationers tested in a New Zealand Study reported an increase in eye-hand coordination, lower stress and lower basal heart rate; they also reported a longer period of REM sleep.
6. The same study documented 82% better overall performance on specific tests on the last day of vacation than on the first day. Though this short-term result was expected, the long-term result was surprising. The study also showed a 25% longer term increase in productivity after the vacation.
A review of the results of scientific research into the beneficial effects of regular vacations demonstrate a positive correlation of the following benefits and regular vacations:
• Increased productivity
• Better sleep
• Increased overall health
• Increase in overall creativity
• Lower stress
Since our return on human capital is defined as the productive return on a lifetime of mental, physical, and emotional efforts, it’s clear that vacations have a positive correlation with and enhance our individual abilities in each of the three areas. We should look at vacations as our own personal competitive advantage. And take them. When is your next vacation scheduled?
NOTE: Robert Hockett takes six weeks vacation each year.
