Most of the time, we start by setting a target time we think the game experience should take for a first-time player to feel what we want them to feel, and then add about 50% to that. A long fight should feel like a protracted fight and the time limit should reflect that. A short fight should feel like a sudden burst with a lot of pressure to finish it quickly. After we set our estimate, we playtest it to see how it feels. If we don’t like it or we were off in our estimations, we adjust, playtest, and repeat. We can also ratchet that time limit up or down for various difficulty levels or challenges/achievements.

If we have to do this a lot of times, then yeah - we usually come up with a formula to generate it for us so encounters and similar timed events stay consistent and reasonable, and then tweak the important ones as needed. Consistency is really important for establishing player expectations, so having things become familiar and (to some extent) predictable helps players feel comfortable.

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