The Law Of Diminishing Returns – Michael Dennis, CBF

Diminishing Returns
Diminishing Returns

One aspect or application of the Law of Diminishing Returns states that there is a break-even-point at which the cost of additional resources [including time and energy and effort] does not match the benefits associated with the application of these resources.   This is true in manufacturing, as well as in credit and collections.  At a recent credit group meeting, I took an informal poll over lunch and found that no one at a table of 12 worked less than 50 hours a week and the majority worked 55 hours or more.  Every one at that table agreed that they wanted were trying to demonstrate their commitment to the success of their employer, and not one credit manager wanted to be labeled a clock watcher. Next, I asked:  How many of you work more hours than your peers and your manager?  The answer was almost everyone.

Here are some indications that you ether you have passed the break-even-point:

·         You are working more than 50 hours a week

·         Your spouse, or children, or co-workers or manager consider you to be a workaholic

·         At least once a week, you return to the office less than 12 hours after you left the previous day

·         You start reviewing your messages and emails before arriving at the office

·         You work weekends more than once a month

·         You gather more information than is necessary to make the credit decision based on the rationale that More is Better

·         When performing financial analysis, you calculate more financial ratios than you actually need or use to in the decision-making process

·         When internal customers request an explanation, you provide a lengthy narrative attempting to answer questions that have not been asked which may or may not be relevant to the internal customer

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Please visit the Encyclopedia of Credit at for time management and time saving strategies.

By: Michael C. Dennis. Michael is the co-author of the Encyclopedia of Credit. Please visit

5 Replies to “The Law Of Diminishing Returns – Michael Dennis, CBF”

  1. Michael,

    This is very similar to your Update on the Overworked article. My comment is somewhat the same. You must continually re-assess your duties and responsibilities as they shift constantly. As a credit manager’s portfolio grows, he must prioritize. Tough decisions need to be made. For example, does one do a full-blown credit investigation on a customer with a $5,000 exposure or spend that time on a $50,000 potential exposure account? At some point your law dictates that they must calculate the risk and consider changing policies/procedures. In this case, an argument could be made that credit automatically be given (or not given) at certain low levels of risk depending upon the frequency of the customer’s orders and profitability versus what might be a standard department policy to do a thorough investigation on all new accounts. The added work hours may not translate into meaningful value to the employer. Your $1000 of value per hour at 8am – 5pm might drop to $100 or less. At that point, well, there is no point in putting in the extra time. Your loss of that valuable time isn’t adding much, if anything to the company’s bottom line.

  2. Mike – common sense tells us something is wrong when we marry our job and divorce our wife (or husband)…. Best advice I ever received was as a 20-something branch manager for a consumer finance company. My regional manager asked me how many hours a day I work, and I told him 50 (I lied – more). He told me to cut back to 45, because if I couldn’t get the work done in 45 hrs. I was the wrong manager for the job. As a divorced man, he then gave me a little exercise. He says when you lock the door in the afternoon to close up, put a mental key in your forehead & turn it from work to play. He said I cannot be effective in either my work or family life if I’m out of balance. He learned that too late. Every place I have worked since then is different, and we all have peak or emergency times when more hours are needed. However, I’ve never regretted taking that advice because my wife of 41 years knows who is #1.

  3. We need to balance work with life. This is not an option! Success and happiness require it.

    I like to share a couple of quotes I collected on balance:

    One has to find a balance between what people need from you and what you need for yourself. – Jessye Norman

    The ancient Chinese yin-yang symbol represents the balance of yin (peacefulness, serenity, acceptance, rest, rejuvenation, roots, tradition) with yang (activity, strength, striving, movement, change, wings, invention, progress). A meaningful and joyful life is to be found in balance.

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