Skip to content

Posts tagged ‘time tracking’

Dec 19

10 Comments

The dirty little secret of many professional service firms

http://www.flickr.com/photos/andraspfaff/2266026377/sizes/z/in/photostream/

Ooops... the client just found out

I’ve previously blogged about why I think tracking and billing for time is a bad idea and even openly mocked it with a satirical example. I would like to cotinue along that line by revealing the <gasp> dirty little secret of many professional service firms.

Here it is: many firms compensate their professionals by the amount of billable hours they generate in a given period.

It can vary slightly – chargeable hours vs billable hours, utilization rate % (chargeable hours vs total hours worked) over a baseline amount, whatever.

What it boils down to is the individual consultants profit from charging clients more time.

Don’t get me wrong here.

I realize that this model was created with the best of intentions – to compensate workers for doing a great job by helping more clients out.

After all, the guy or girl that is busting ass and working really hard on client jobs should be rewarded. That makes sense, right? After all, they are helping the firm bring in money. And the deadbeats that aren’t charging hours shouldn’t be rewarded, right? [please re-read that last sentence and think that one through]

The problems with this model are manyfold. The biggest are:

  1. It encourages heroic efforts. I see this all the time in traditional consulting firms. Consultants faced with a problem will keep chipping away and chipping away and chipping away until they resolve it. Sometimes this requires long hours and late nights and dereliction of other responsibliities but, hey, the problem got resolved! To me, these situations are timebombs waiting to blow up in everyone’s faces.
  2. It encourages inflation of hours on timesheets. Now, I’m not questioning any one of you in particular but the point stands. When you compensate individuals for work tracked, billed or charged to a client, you will encourage that tracking, billing and charging behavior. It might be a small bump of time here, a little over there, whatever. I’m sure it doesn’t happen in your firms but it happens in other firms.
  3. It discourages team efforts. Related to point one, an individual in these firms gains nothing from bringing in their peers to resolve problems quickly. This is a serious problem for the firm, for the clients and for the entire team at the firm. Projects take longer than necessary, knowledge transfer among team members is not happening and the client relationship is at the individual level – not the firm as a whole.
  4. It discourages shared goals with clients. The firm and the individuals at firms that practice this compensation model are focused on maximizing hours while clients are focused on minimizing hours. The fox is guarding the hen house – the situation has been primed from the start to have winners and losers. With long-term value creation, everyone wins.

These points don’t even cover all of the problems with the practice but hopefully it drives home the underlying message: a true client advocacy position results from a shared goal system.

You can’t have truly shared goals when you are billing by time – particularly if your organization is incented to drive up billable hours at the individual level.

Look: I completely understand how these models come to be.

It’s an attempt by the firm to align everyone in the firm towards a common, shared goal and to compensate the individuals that are on board with the goal.

That’s wonderful … truly. I’m a huge fan of goal-setting and aligning purposes to maximize end results. But this practice isn’t good for anyone – the firms, the individuals and particularly not the clients.

The good news is the solution is simple.

Change the goal.

Instead of maximizing revenue through billable hours, consider team based revenue goals based on meeting client expectations?

Instead of individuals aiming to have the most billable hours shift focus on where do we stand as a firm?

Are we providing team-based solutions? Does the client feel that we operate effectively and efficiently to meet their goals? Is the relationship with the firm or the super-hero consultant?

How are the clients doing? Are we meeting client goals? Are we getting repeat work?

Will the client refer us to others? Will the client act as a reference?

Hopefully the suggestions above will give you something to consider the next time you evaluate your firm compensation policies.

Nov 29

7 Comments

Breaking News! Decades long struggle ends with Hollywood actors winning right to hourly pay!

http://www.flickr.com/photos/neilarmstrong2/5314500070/sizes/z/in/photostream/In a surprising turn of events, the Screen Actor’s Guild (SAG) has successfully lobbied all major and independent movie studios to allow their member actors and actress to begin getting paid by the hour instead of by the movie.

“We lobbied long and hard for this behind the scenes for decades” stated SAG president Imad Ummy. “We are finally done watching from the sidelines as lawyers and other professsionals benefit from the lucrative time and billing system while we struggle under a fixed price model based on demand for individual actors and actresses.”

Unsurprisingly, the majority of SAG members universally applaud this direction.

The old model left it impossible for individual actors and actresses to determine if a movie was worth doing as they were unable to predict how long they would spend on set and if the compensation would be worth it. In many cases, it was impossible to determine if movies were profitable ventures for the individual SAG members as they could not assess properly without a system to track total hours worked.

Oscar award winning actress, Meryl Streep had this to say:

“It was really an impossible situation. We were asked to set a fixed price for our services without knowing how long we would be forced to work on certain projects. It was quite unbearable. Some directors require take after take after take to get the scene just right. It’s hardly fair to expect us to be required to do this work for free. Now we can get paid fairly for work done regardless of irrational demands from the studios.”

To help ensure their members are compensated fairly, SAG is providing members with ankle bracelets that will be worn at all times while on set. These patented devices will track their movements and record time properly down to the milli-second while they are on camera – regardless of whether specific shots are used in final production or discarded on the editing floor. This will ensure that full and fair compensation is received for hours worked.

These devices provided the final break through in the decades long battle for hourly billing rights.

Studios had demanded the ability to double-check and confirm that hours were being reported accurately. Some suggestions included assigning a monitor to follow around the actors while on set or a punch card with a clock in and out system.

The final solution was simple with the new technology: the SAG-assigned bracelets will track the actors’ and actresses’ movement using equipment installed throughout movie lots to prevent time in the bathroom or trailers or other off-camera time from being billed through to the movie studios. Each individual member will be assigned a unique bracelet to prevent fraudulent behavior of actors clocking in for friends.

Heralding the tracking devices as the greatest advancement in film making since the introduction of “talkies”, Mr. Ummy suggested it was only a matter of time before professionals in all service fields were using these devices to improve client relationships by tracking their every movement and ensuring proper time recording for both the professional and the client.

Related news: All major movie studios report average movie length to decrease by 45 minutes within the next three years in an effort to make more efficient movies.

More related news: A new website promising “the right actor for the right hourly rate” has sprung up to help studios find the best priced talent.

In even more related news: Movies to begin sucking as they become more efficient.

Nov 9

17 Comments

Two good reasons why time-tracking and billing for time is stupid

http://www.flickr.com/photos/servus/16117730/sizes/z/in/photostream/Thanks to Ed Kless, raconteur and self-described iconoclast, I had the pleasure of reading a great summary of the Insanity of Time-tracking. You can read it yourself here.

The article sums up nicely why billing by the hour and even time-tracking itself is backwards and should be completely eliminated.

For me, it boils down to two main points:

1. Why should seasoned, experienced, knowledgeable professionals get paid less than rookies? Think about it. A task that took you 20 hours to accomplish (most likely poorly at that) in your early years probably takes you a fraction of the time to accomplish (in a more polished way) as you build more experience through the years.

2. Why should a customer be forced to care about whether a junior or a senior person is doing the work and the time it takes for each? The only reason is because the time and billing method forces them to care. The junior person might take longer than the senior person but the billing rate for the junior is only 2/3rd of the senior person so I carry the one, multiply by x and …

STOP! The customer wants results – not math. Remember: people buy 3/4″ holes, not 3/4″ drill bits.

By perpetuating the time and billing dogma, the ultimate irony is that we create a world of inefficiency where people waste their time worrying about time. My recommendations:

  • Focus on the stuff that really matters: end results, deliverables, time frames and, ultimately, value.
  • Align the project goals with the customer’s goals – don’t sweat if you are over or under hours on individual task. Are you effectively making progress towards the end result?
  • Discuss how effective you were in the end (not how efficient by micro-analyzing hours on a spreadsheet).

Please realize that I’m not talking about abdicating proper project management. In fact, this approach underlines the importance of proper project management – it just isn’t done by putting timesheets under a magnifying glass. We’ll cover that in a future article.

For now, give it some thought. I’ve given you two good reasons why time tracking and billing should be eliminated and there are all sorts of other reasons to explore but … I’ve run out of time.

Follow

Get every new post delivered to your Inbox.

Join 39 other followers