May 15

I’ve posted frequently about the deleterious effect I believe time sheets have on professional knowledge workers and professional knowledge firms. Regardless of the origin, or the use for which they were originally intended they have become at once a measurement of productivity, value, worth and efficiency. And I don’t believe they do any of those things particularly well. Granted they can generate useful and important information for reactive decision making but the costs of that information to the culture of the user far outweigh any marginal benefit derived. They are a very efficient tool for micromanaging. There are other very efficient micromanagement tools as well. There are performance evaluations - which we’ve previously posted about. How about ‘checklists’?

The purpose of using checklists is to ’standardize’. By standardizing our engagements we believe we can reduce risk and simultaneously improve efficiency. Checklists are tools for ‘control’ (micromanagement).

The paranoia that drives the need for control has resulted in a mechanical system that attempts to drive out risk but in fact drives out professionalism and diminishes quality. Audit programs are an example.
When I began my career with the BIG 8 as an auditor, we were assigned a half dozen or so manuals. Personnel / Audit / SEC / Reporting / Admin. The audit manuals outlined the objectives of auditing each financial statement account, e.g. accounts receivable, accounts payable, equity, revenue, etc. There were no canned audit programs included, with the exception of ‘cash’ (which as I recall was a pre-printed two sided mess sold by the AICPA.) We were charged with writing custom programs for each client based on their systems and the objectives outlined in the audit manual.

Six years ago during the exit interview for our peer review, the reviewer criticized us for not using ‘canned programs’ in favor of the custom programs we wrote for each client. He agreed our programs were better than canned programs but if we used PPC or Cch or some other canned programs we would by default be considered in compliance with all the professional standards. (I now realize he was just lazy). We immediately converted to canned programs.

In the mid 1970’s we had very few checklists. I recall a reporting checklist, an internal control evaluation guide (ICEG), and a post issuance review checklist (PIRCL). There were probably a couple more. We used them after the fact as a double check. We understood the audit process and the objectives very thoroughly. Today, even the simplest assurance engagement requires no less than a dozen check lists, each with up to 30 pages of single spaced, ubiquitous, multi-part questions, the vast majority of which are answered ‘n/a’ for any specific engagement. And they’ve replaced the necessity to analyze and understand. Correspondingly, I believe audit skills have degenerated as well.

We are evaluating the process necessary to eliminate canned programs and checklists - at least until the engagement is complete, and then using them as a ‘double check’ only. ( I’ll let you know how that goes. I can already hear the crying, moaning and gnashing of teeth by the audit teams at the prospect of losing their security blankets.)

It’s not just the audit process. Look around your firm, at the checklists you use. I’ll bet you lunch, that in most cases your knowledge workers would be more effective after a short period of time if they didn’t rely on them, because they would have to understand what they were doing and why, rather than just being able to check off steps.

You hire and pay for intelligent, motivated, conscientious, creative minds and then smother all those characteristics with a business model based on control and doom your professional knowledge workers to be only as good as the checklist they fill out. Does that make sense?

Apr 21

“Twas brillig and the slithey toves did gyre and gimble in the wabe,  all mimsy were the borogoves, and the mome raths outgrabe.”

Written by Lewis Carroll, his poem “Jabberwocky’ in “Through the Looking Glass and What Alice Found There” is considered the most famous nonsensical poem in the English language.  It was certainly one of my favorites during my alcoholiclly impaired college years in the 1960’s.  It re-occurred to me today as I read a post by Ric Payne on the Principa blog titled Time Based Billing is Unethical - What Rubbish

I wouldn’t recommend reading the entire post.  Payne talks in circles.  He at once advocates advising clients of the proposed fee in advance (which I agree with) but supports using timesheets as a necessary tool in doing so.  He has thoroughly confused the importance of knowing what your resource cost is with the value of the project.   He naively seems to believe that the majority of clients who receive invoices based on time sheets know in advance how much those bills will be and they are “happy with a bill based on hours” because they were some how able to divine how much it would be prior to receiving it.  That is counter intuitive.  He rants on and on trying to justify time sheets, but at the same time advocating ’pricing’ in advance as a superior alternative.  It all seems to make sense, until you realize the methodolgy he is proposing can’t get you to the results he seeks.   That’s my point.  Don’t take everything you read at face value - especially if it comes from a consultant - think about whether or not it makes sense.  Question authority.

Most consultants I’ve met are regurgitating the same tired old garbage they were taught in college 40 years ago.  They wouldn’t recognize a new idea if it bit them.  The practice management methodology they espouse is antiquated and without innovation.  You can’t get better doing the same old thing.  Yes it’s safer, but remember the reward for risk is profit.  People like Ric Payne know there is opportunity for improvement, but they will consistently try to justify old methodology because it is safe, they are cowards and they don’t know any other way. 

Like Jabberwocky it sounds good and seems to make sense.  It just doesn’t work.  Oh, and if anyone wants to debate the specific issues of his post I’m happy to do so.  Just comment.

Apr 18

Earlier this week David Maister posted Satisfaction Guaranteed on his website.  You can read it for yourself, but the essence is committing to a service and performance guarantee for the services you provide.  Several years ago we began including this language in our client service agreements:

                 ”Our work is guaranteed to the satisfaction of the customer.  If you are not completely satisfied with the services performed by Mark Bailey and Company, Ltd., we will, at the option of the Company, refund the price or accept a portion of said price that reflects the Company’s level of satisfaction.”

Initially this sentence caused serious concern among my associates, and I’ve have heard numerous ‘warnings’ from peers.  But what is it that we have to be afraid of?  It’s our work, and certainly if we don’t have enough confidence to back it up we shouldn’t be a service provider.  Should we be concerned about the unscrupulous client who arbitrarily decides not to pay, and uses our guarantee as an excuse?  We’ve never run into that problem, and don’t expect to.  We ‘price’ our services in advance so that our client agrees up front and is not ’surprised’ by a bill they didn’t expect.  Realistically you are already giving this guarantee, whether you realize it or not, because it’s usually not worth a lawsuit.

If a client claims to be dissatisfied with your service and refuses to pay your invoice are you really going to pursue it in court?  Hopefully not.  Most lawsuits against accountants are filed as counter claims to collection attempts.  The legal costs, including the wasted efforts, frustration and stress on your part generally just aren’t worth it.  Negotiate a settlement that makes everyone unhappy, and  move on.  (And then fire them.)  Certainly if your service was sub-standard you would already have agreed to negotiate a write-down. 

The confidence our clients gain from receiving our ‘guaranty’ extends not only to the price, but also to the quality of work we are doing for them.   Offering performance guarantees has set us apart, and  has been nothing but positive for us. 

Mar 29

Recently I was asked by a former tax partner of an international firm how we measured the productivity of our associates given that we no longer keep time sheets. Ignoring for the moment that Peter Block has already answered that question in his book The Answer to How is Yes, I have more than one issue with this question. » » » more

Mar 11

In a post by Rita Keller on CPA Management she advocates the practice of publishing rankings of the firms associates. It would seem this is a practice of Moss Adams, a large national firm. The post titled Ranking Your Individual Team Members doesn’t provide specifics as to what the criteria that were used in the ranking scheme by Moss Adams. They state that you should rank people by the criteria that are important to your firm. The article goes on to state that the staff felt it was a positive motivator and “no one quit”. (Yet!) » » » more

Feb 26

In virtually every survey of accounting firm managing partners and human resource directors they rate the difficulty in finding and retaining professional staff as their number one challenge. Yet the work environment in most professional accounting firms is the same ’sweat shop’ it was 50 years ago when there was an unlimited labor pool. » » » more

Feb 7

We do not believe the ‘benefits’ of a system based on time sheets justify the ‘costs’.

So how much does a system based on time sheets and the billable hour cost? » » » more