Putting a Final Nail in the Timekeeping Coffin

Is there anything your team hates more than timekeeping? I didn't think so. I haven't recorded my time in 26+ years, which reminds me that the worst offenders are always the firm's principal(s). Which is why your team might not take it too seriously.

In spite of the universal disdain for timesheets, the populist movement to never charge by the hour doesn't withstand a lot of scrutiny. So I'm going to destroy that bumper-sticker advice, help you understand the only valid reason for timekeeping, give you some suggestions to encourage compliance, and then explain when and how you should drop timekeeping.

As if you needed more ammunition in the fight against timekeeping, I'll repeat what everyone knows:

  1. Everyone universally hates it except that weird individual who loves structure and won't get invited to the parties anyway.
  2. Participants hardly ever record their time accurately in the first place. If they feel pressure to be useful, they'll pad their time to make it appear that they are busy. If they feel pressure to be more efficient, they'll under-report so as to avoid a slap on the wrist.
  3. There's no perceived feedback loop. Kind of like an Executive Leadership team, where known problems get thrown over the wall to never be heard about again. So too the team seldom knows what people do with the timekeeping data. Do overages get charged to the client? Do they pay? Are we doing a better job of estimating with the data?
  4. Hourly billing is a cap on what you can make. The only two variables are the hourly rate and the hours spent, which eliminates the opportunity for package pricing our value pricing.

You with me so far? I'm not gathering these reasons only to dispute them, one by one. I actually think all four of these reasons are valid. But there is still one (and only one) reason to do timekeeping, and it should never be indefinite. Here's how I would state this:

Timekeeping exists for only one reason, and timekeeping should always be temporary.

But let's take a quick time machine trip into the past and understand the role that "time" has played in the rise of commerce.

For millennia, the tallest man-made structures were the pyramids of Egypt. The shadows that they cast were then interpreted, much like sun dials. Jumping ahead to the 14th through 19th century, the tallest buildings were churches--usually in the town squares, and almost always with a clock in the tower at the tallest point. These towers also housed bells which rung on the hour, at least, and sometimes more frequently. Fast forward to today and the tallest buildings are in NYC, Hong Kong, Dubai, and Shanghai. Each of these centers of commerce is trying to scream that "we are an important commercial center in the world." (We don't need clocks in them because we're wearing one on our wrists.)

As time and commerce began to weave themselves into a strand of progress, standardization came next. We could all show up to a meeting on time, calculate how to disperse wages, arrange deliveries, and create financial statements that were bounded by time on either end.

One inescapable element of that historical progression is that time tended to measure the input (not output) of low-income labor. So the lower you were on the societal ladder, the more you were bound to specific segments of time.

The modern infatuation with value pricing is a repudiation of our perceived value to the client.

And in that sense, it's exactly correct. And this is something that needs to get fixed. But the way to fix it is to first get paid for all the time you're spending. And if you are delivering additional value to the client, it's fair to get paid for that. But until you learn to walk, you can't learn to run.

Firms in the digital, marketing, and creative space are still living back in the 14th century with admiring, supplicant workers just waiting for the 15-minute bell to ring before they move on to the next project. It's a disservice to our talent and a disgrace to our client arrangements.

Here's the thing, though. More than 85% of firms in this space are not even getting paid for the time they are spending (inputs), much less the value they are creating (outputs). So until they fix that, timekeeping can play a helpful role.

If you're not sure what I mean by that last statement, it comes from measuring this at a representative 3,000+ firms. Here's a quick way to do it for yourself.

Say you have 9 full-timers and 2 half-timers, for a total of 10 FTE (full-time equivalent) team members. Pretend that you use an internal hourly rate of $180/hour to come up with an initial estimate of how much you should charge a new client. I don't care if you're the only person who knows that hourly rate, and I don't care if you say that you don't charge by the hour. Everyone has some number they use on a mental scratch pad.

Assuming that you use the industry standard of billing 60% of all the time, across all the team (billable or not), the economic opportunity at our sample firm looks like this:

10 FTE x 0.6 target x 1,840 hours x $180 = $2,009,280

Like I noted above, 85% of firms do not regularly hit their economic opportunity threshold, yet they lie away at night worrying about value pricing while ignoring the first step of just freakin' getting paid for the time they are already spending. Once they master that basic step, I am a firm believer in value pricing and I use it myself. Two great thinkers in this space are Blair Enns, my podcast co-host, as well as Jonathan Stark. Now let's get to the heart of this.

The only reason to employ timekeeping is to improve the next estimate.

That means it's not valid as a management tool to see who's working hard on this project. If you need to look at someone's timesheet, you aren't a great manager.

It's not meant to establish more efficient boundaries around creative solutions as an artificial restraint, either. Time is a good creative restraint, but it shouldn't be applied with a stopwatch.

No, the only reason to track time is to create a feedback loop that allows you to do a better job estimating the next time around. And when you're pretty good at that, you drop timekeeping altogether and step up to value pricing. By the way, this gets easier if your client relationships slowly begin to look more and more alike as your positioning creeps into your service offerings. I wrote about that here.

My default recommendation is to not use timekeeping unless you find yourself in one of these four situations, and in that case only do it until that situation is resolved.

I think you'll find that your team members will welcome this alternate approach. They'll understand that timekeeping is an information tool and is not being weaponized to manage them more rigidly. There's a side benefit, too, in that the recordkeeping will be a lot more accurate if it's not meant to shape the current job...but rather to inform the next one. "Take however much time you need on this. Maybe I got the estimate wrong. It doesn't matter. I just want to learn from this process and develop a more accurate estimate next time we do something like this."

Here are the only four cases where temporary timekeeping makes sense. Do it when:

  • You introduce a new service offering and you want to "package" it but need some initial feedback on the inputs as a foundation for the value pricing.
  • A new employee joins the team, just for a few weeks, to get a sense of where they might be stuck. This would only apply to young team members without much experience in the industry.
  • Your growth rate tops 30% a year, measured in team count. Above that boundary things can spiral out of control quickly as systems struggle to keep up with the increased workload.
  • Your utilization (as measured above) hasn't yet reached 60% for two consecutive months.

If you couch the exercise by explaining the purpose and the limited timeframe, you won't have as much resistance. If you do, here are some ideas on getting better cooperation.

If you'd like to know more about your economic opportunity, try this free calculator.

Or we can do a Performance Benchmarking together and I can really dive in and get you some specific answers.

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