The keystone of practice management for the accounting profession and most law firms has long been the billable hour. We rely on hours accumulated on time sheets in six minute increments to drive most every aspect of our practices from setting the value of the services we provide, to evaluating the individual competency of our professional staff, to measuring productivity, to establishing compensation levels, to measuring the cost of the services provided. What an amazing tool! It does virtually everything and provides all the information we need to manage our firms! The universal tool! The Swiss Army Knife of professional service firms! Unfortunately it doesn’t do any of these things very well.
Some years ago, author Ron Baker began his crusade to ‘bury the billable hour’ in his book Professional’s Guide to Value Pricing, now in it’s sixth edition. A prevailing theme in much of Ron’s writing is his disdain for setting value based on time spent. He is well known for equating the billable hour to Karl Marx’s Labor Theory of Value, which obviously created such a successful template for communism it’s appropriate to apply it to our own little ‘business autocracies’. While I happen to agree with Ron, that’s not my biggest gripe with time sheets and the billable hour. If practitioners are committed to billing by the hour, so be it as long as they are only hurting themselves. My gripe is that the billable hour is hurting our profession by driving the talented young professionals out.
I think one of the greatest flaws in a timesheet culture is the disincentive created for knowledge sharing and on the job training.
The focus is often directed towards a single engagement’s economics rather than the firm’s economics.
When firm members at every level are required to be accountable for a minimum number of “charge” hours- I think it takes away the willingness of seniors and managers to take the time to thoroughly answer questions, ESPECIALLY if they’re not assigned to the same job.
The biggest change I’ve noticed in eliminating timesheets is a switch from “just get it done as quickly as possible with the least amount of knowledge necessary” to my managers and partners taking a vested interest in my development on a daily basis, leaving me more prepared for future jobs.
Comment by Lea — February 1, 2008 @ 9:42 am
I find the question “are you chargeable?” to be rather annoying, when it is asked as if it is the only measure of whether or not one is busy. I would like to be more familiar with a working environment that is not tied to the billable hour, but I fear there are not many revolutionary firms in the Omaha area.
It also seems a bit unfair and unreasonable from my perspective to assess someone’s performance based on factors that are largely out of their control ie. scheduling, proper influx of clients, proper policy regarding non-busy times etc.
Hope to see and end to timesheets myself.
Comment by Shane — February 1, 2008 @ 12:32 pm