One of the amazing things about Blog is the chance to meet and discuss ideas with people all over the world. We’ve had some heated debates on this Web site in the past, but mostly we are preaching to the choir amongst our loyal readers. This is because you already understand the concepts of Value Pricing and getting rid of timesheets. You are what the scientists call early adapters.
So it’s always fun when someone writes in to challenge our theories, like Ted Needleman who wrote in response to my post Why we don’t need consultants. I ended up sending Ted a copy of my book Pricing on Purpose.
I might be an aggressive debater on some of these topics, but that doesn’t mean I can’t change my mind or modify my theories. After all, I learn very little from discussing topics with people who agree with me. It’s never a waste of time to rehash these issues, even with people who are not familiar with our work, for many reasons. Just a few: you might learn something new; you might learn something that will modify an existing theory, thereby making it better; at the least, it forces you to defend your position and articulate your theory, which can only enhance your understanding.
So when I recently received the following comment in response to my post from Janaury 30, 2007, No Timesheets? Is it Possible?, from Nile Mosley I responded immediately. Even though our initial exchange is posted in the comments section to that post, I am reprinting it here so we can continue the debate in a fresh thread. I’m also hoping others will chime in with their perspectives.
After a further exchange with Nile, three things impressed me: 1) he owns a dog; 2) he mentions the Monty Python Argument Sketch; and 3) he has a PhD (I’m not sure in what, but I’m sure he’ll let us know). As Benny Hill used to say, “Any man who dresses as a woman can’t be all bad.” So even though I disagree with the good Dr., vehemently, I like where this is heading, and I hope you join us.
Here is Nile’s initial email:
Interesting articles on trashing timesheets. However, it is possible to remove the necessity for time sheets simply by using an intelligent business timing software like MetriQ. This software will still record every second of your time, and is fully automated—the computer does all the work for you, while you and your staff work as normal. We already know that keeping time-sheets can cost thousands of dollars a year simply from filling them in, not to mention lost time through interruptions, forgetting to write the time down, rounding errors etc. From a historical perspective, time-sheets had their place, but we should also re that ‘modern’ time-sheet software is simply a digital version of an old pen-and-paper technology with none of the salient disadvantages concerned with this now dated method of time tracking being suitably addressed.
As for the question—is there a need to know how much time staff spend on a job? Absolutely—and not just for those that bill by the hour. A number of our clients track time so they can ascertain exactly how much time went into different aspects of a job. For example, a web design company will track how long it takes to create new images, edit old images—how long to use ‘Components off the Shelf’ or to define their own in-house functionality, how long to create new web pages etc. and so forth. This treasure trove of valuable timing data is then used with Case Based Reasoning, Regression Trees and Bayesian Networks to help the web company predict how much the next job will cost, allowing for a more accurate bid on client tenders, giving the company a clear market advantage.
In essence and to paraphrase Ben Franklin—’Lost time is lost money’—and if you don’t know exactly to the nearest second where your time is going, then you’ve lost this non-renewable resource for good.
Here’s my reply:
Nice try, but you are starting from two false premises. The first: time equates to value, which it cleary does not. This is Karl Marx’s labor theory of value, which was repudiated by the margin revolution in 1871.
The second false premise: the only way to perform accurate cost accounting is by tracking every minute of one’s day. This is patently absurd, as most industries don’t use timesheets. Toyota doesn’t even have a standard cost accounting system. There are other ways to perform cost accounting, and time is not the only one.
Your quote from Ben Franklin is also incorrect, as it dealt with opportunity cost, not cost accounting, and certainly not the value of one’s output. Nor is time a resource. It’s just time, so what? Do you think Bill Gates tracks his every minute?
I’ve written about every one of these fallacies in all of my books in great detail, so I won’t repeat them in this short response.
I will ask you this: if you are so sure that timesheets are necessary, then how do you explain the hundreds of professional knowledge firms that don’t keep them? They are not suffering profit losses, or any of the other deleterious effects you intimate would occur in their absence. In fact, they are among the best pricers and most profitable firms we know of. Not to mention the most innovative.
A little intellectual curiousity on your part would go a long way to f your erroneous premises. Your theory has been falsified. If I were you, that would scare the hell out of me.
And Nile’s reply:
Well, thanks for your comments. Clearly we are in dispute about the benefits of collecting time, and I would very much enjoy the process of debating this with you. However, we are a startup company with a new and innovative approach to the collection of the time metric, which as already stated DOES NOT use time sheets, and yet is still able to collect and log this valuable information statistic. What an industry/business does with this metric, be it for the purpose of prediction, or cost accounting is a different issue—however, my own time, can only be used sequentially. So if I debate with you without our discussion being on-line, so we can get feedback from your readers, then its just two people banging their heads together, each with their own agenda.
First there is little point to this as it can realize little it terms of outcome for us, and second, it uses time—just how much, well for this email, 5 minutes 23 seconds up to this point—which according to your own premise, is of little interest to a business. However, should our debate go online, if you can take the risk that I won’t blow your arguments out of the water, then I’m willing to put more of my time into the debate.
Somehow, I don’t think you’ll do this. 1) because you may think I’m goading you 2) because the quantized entity of time is the ONLY metric of value to business. It’s how every single market-place widget is costed, its how we run our lives—quite simply because each and every widget becomes a widget because of the man/woman ‘hours’ used to produce, grow or dig it out of the ground. But I’m back to debating…ooops, sorry, and I’m beginning to feel I’m trapped deep inside monty python’s argument sketch.
Finally, I ‘paraphrased’ Franklin, which is why you think the quote to be incorrect. If time = money, then by inverting both sides, it does actually follow that not time = not money, and in the same way, L*time = L*money (L = Lost).
I wish you well.
And my reply:
You bet I will debate with you, or anyone else about the value of collecting time. I have no fear you will blow my argument out of the water, since most businesses don’t collect this pointless statistic.
Moreover, there are PKFs on VeraSage (see Trailblazers section) that have trashed timesheets and have not looked back. What about them? I suppose you can ignore them, however, they are a black swan, since you either don’t know they exist, or believe they can’t exist.
Time is not the ONLY metric in business. That’s absurd. I wrote an entire book on Key Predictive Indicators, none of which are based on time. Given that a business could collect statistics on literally millions of things, what they need to do is figure out what metrics have predictive value. Time is not a theory, nor is tracking it. Hence, it can’t be a leading KPI, by definition.
It’s simply not true that “every single market-place widget is costed” with time—like I said, Toyota doesn’t even have a standard costing system. They don’t use timesheets. I wonder if you think Picasso should have tracked time? Would that help determine the value of his work? Would it have helped him price better? To ask the question is to answer it.
If you read my work first, I think you’d at least understand my argument.
I didn’t say you quoted Franklin incorrectly; I’m saying Franklin wasn’t saying time=money as much as he was explaining opportunity cost. In two of my books, I quote the letter at length where Franklin writes this (it’s “Advice to a Young Tradesman”), and he’s positing the concept of opportunity cost, not value, or cost accounting. Cost accounting doesn’t allocate profit, where the concept of opportunity cost does.
I also don’t think you’re goading, but I do believe your self-interest is in your product. What I’m saying is your product is the buggy whip of the knowledge economy. It’s already been proven by the hundreds of firms that don’t use timesheets. This does not mean they don’t perform cost accounting, but it’s a question of WHEN THEY PERFORM COST ACCOUNTING. For what good does it do to know your costs (to the penny or minute) if the customer doesn’t value your output? This is why Toyota costs things BEFORE THEY MANUFACTURER THEM, NOT AFTER. It’s an enormous difference, and one I’m not sure you understand given your comments.
Moreover, cost accounting deals with average unit costs, not marginal costs, and pricers need marginal cost information. There are other ways to get this (Activity Based Costing is one).
I’ve debated thousands of people on this topic. It’s not a matter of me right, you wrong. It’s a matter of which theory better predicts creating value in a knowledge economy. Accurate cost accounting does not equate to better skill at Value Pricing. If it did, CPAs would be the best pricers in the world. They aren’t. They are among the worst.
I say let’s take this all on line and have it out. I’ve written tons of words on this topic, though, and would only ask you read my work and refute the Black Swans that already exist without timesheets. Your theory doesn’t explain them, and hence, it has already been falsified.
Hardly a good start to “blowing my theory out of the water.”
And Nile’s response:
Many thanks for your reply, and your argument reads well. Yes, by all means post my initial post and your reply. When online, if you are happy, I’ll post my response.
Until then, its 11:53 Sunday morning, and the dog is begging me for a walk. A pleasant day to you and your family.
Kind regads, Nile.
And just to “goad” Nile’s into responding, I’ll add another point of contention. Time is not a resource! It may be non-renewable—after all, we are mortals—but this hardly implies that time, in and of itself, is valuable. It’s what we do with the time we have that creates value (or cost, or opportunity cost).
Tracking the pasage of time, and allocating it to various activities is not useful without a theory. Airlines certainly track the time airplanes fly so they know when to perform maintenance and overhauls, so it’s useful in this instance. But that’s a theory—fly a Boeing 747 X hours and then you need to overhaul it to keep it safe.
In contrast, tracking the time elapsed for how long a knowledge worker performs a job doesn’t say anything about the quality of her output, or its value. I think Nile might say you could at least figure out the cost. And I’d say, so what? There are other ways to track, and ascertain, that cost.
But I have an even more fundamental question. Why would you need to know the cost at all? A PKFs expenses are fixed, and what matters is yield, not cost allocation.
And Nile, Peter Byers, a fellow Kiwi, has mailed you a complimentary copy of my book, Measure What Matters to Customers, so you can see where I’m coming from.
I look forward to furthering this debate and your comments.
Sure enough, Nile responded with this rather lengthy post:
Indeed great stuff. You’ve kept to your word and posted my comments, thanks—hey and I look forward to your book. Not often I get press! Phd was in differential geometry and applied computational fluid dynamics—but that was a different life—long ago, forgotten like the wind.
As for my response—here it is (bit longer than I anticipated—brevity, as you can see, is not my forte. I too have enjoyed the debate, and yes, perhaps we will meet, as you seem to be both fair and not ‘completely blinkered’ *smile* like me *smile*.
The discussion is ‘should we trash time sheets?’ Ron has provided many thought provoking assertions as to why time sheets should be trashed. As a business that specializes in intelligent business timing, we are in complete agreement with this assertion, because we believe the same, that the use of time sheets are a waste of time, literally costing business thousands if not millions of dollars a year depending on the number of staff and the frequency the time sheets are filled in.
It’s for this and many other reasons associated with the problems this dated pen and paper technique (made digital), that we developed a software package that automatically collects every second of time that staff use their computer, without the use of timesheets, stopwatches etc. So with our software a business can tell ‘who’ spent ‘how long’ on ‘what’ and for ‘whom’, without ever being told. For example our software will show that yesterday Jane spent 3:24:15 working on a graphics package for Acme Inc. web page images. She also spent 1:43:27 for lunch, 0:23:18 going to the toilette and 2:18:43 using IExplorer. Jane neither filled in a time sheet nor did anything different from her daily working routine—ie there was no external time-cost to the collection of this metric.
How Jane’s boss accounts for her time, be he happy or otherwise is a different issue. What he does with the time information, will be up to his organization. Not having this time information, means that Jane’s boss can only have an approximate idea of his employee’s productivity, and what he’s paying her for. He cannot say, ‘right—heads up—we are spending too much time developing in-house images, its cheaper to outsource’, simply because he doesn’t have the raw data.
Knowing exactly how much an individual, and hence a body of people spend doing a task, gives a ‘starting point’ for assessing the worth of the task. It doesn’t assess the quality, value, durability or anything else—all it does is to give a baseline view of how long the task took, and because we are all finite beings we all have an inherent understanding that the longer it takes to do something, the more it will cost. And here’s why.
My wife wants to buy a shawl. In the shop there are two brands, one made from sheep’s wool, the other made from pashmina a rare and highly sort after hair that comes from a special breed of goat indigenous to the high altitudes of the Himalayan mountains. While in the shop the two shawls may look identical, they do not feel identical, nor are they of the same insulating quality or have the same thermal tog. In addition, the pashmina shawl is 100 times the cost of the sheep’s wool, and the central reason for this is because of the ‘time it takes men and women to collect the wool from these remote and hard to find goats. There is simply no way out of this dilemma. Each of the wool gathers are entwined in the barter system, their time collecting wool in exchange for monetary units, so they can feed their own families exchanging the barter currency, money, for some else’s time to for example, first plant and dig potatoes out of the ground. There is no issue here about the quality or durability of their collection techniques or deliverables—the wool gathers are paid only on the weight of wool they harvest.
In contrast, for sheep’s wool, where livestock are domesticated, harvesting and processing the wool for a single shawl can be say, done in one day by one person. For the pashmina perhaps it takes 10 people 10 days to gather the same quantity of pashmina. If we go on to assume that wool and pashmina gathers around the world are educated to the same level, and have similar social economic backgrounds and are in general paid the same amount of money for an hour of their time, then it follows that pashmina will be 100 times the cost of wool. What’s important here is to realize that the wool merchant is not paying for a fleece, but the time of his gathers. In the same way, when the wool is taken to market, the merchant pays for the time of the oil company to find, drill, pump, refine the otherwise free-to-who-can-ever-extract-it crude oil which powers his truck. On this basis I would argue that to serial thinking temporal beings such as ourselves, time is the only real thing of value—not ‘time in and of itself, but what we each do in the time we have. And if we don’t measure it, we cannot say that we don’t waste it.
Now to address some of your points directly.
>Moreover, there are PKFs on VeraSage (see Trailblazers section) that have trashed >timesheets and have not looked back. What about them? I suppose you can ignore >them, however, they are a black swan, since you either don’t know they exist, or believe >they can’t exist.
I read some of the examples in the Trailblazers section, in which for example, Fred McBreen states “I really like the approach that your team costs are broadly fixed and not tracking time allows us to focus on doing the job well.” This is exactly the point of MetriQ which records time accurately without user intervention, so there is no more time tracking per say. As for being billed 3 times the going rate to deliver a job with a guaranteed outcome, the ‘ticket price shock’ as you’ve called it, if Mr. McBreen had at his disposal raw and highly accurate time data for his staff, and an experienced eye for the duration of the job, then he would be in a much better position to give a value costing—given the staffing resources that he has. As it stands, I can only assume that the ‘ticket price shock’ has fat built in, to address the unforeseen. Initially great, but soon to wither on the vine, as soon as Fred’s competitors who ‘have’ collected accurate time data, giving them leverage to reduce the fat, and yet still guarantee value satisfaction for only twice the going rate. Empiricism rules!
>Time is not the ONLY metric in business. That’s absurd. I wrote an entire book on Key >Predictive Indicators, none of which are based on time. Given that a business could >collect statistics on literally millions of things, what they need to do is figure out what >metrics have predictive value. Time is not a theory, nor is tracking it. Hence, it can’t be >a leading KPI, by definition.
If Secretary Joe touch types at 100 words a minute, while Secretary Anne types at just 10 words a minute, both to the same quality—and I have a 10k word book on tape that needs transcribing—then I would say that time is a KPI, as I can say it will take Joe 100 minutes to type the manuscript, and it will take Anne 10 times longer. If however, Joe and Anne and all the other typists in the world all type at 50 words a minute, then certainly time as a KPI can be dropped from the equation.
>It’s simply not true that “every single market-place widget is costed” with time; like I said, Toyota doesn’t even have a standard costing system. They don’t use timesheets. I wonder if you think Picasso should have tracked time? Would that help determine the value of his work? Would it have helped him price better? To ask the question is to answer it.
Picasso—the principle reason his work is worth so much is because he’s dead—he has no more time to produce more. The value of his work is determined by many factors, but one of the most obvious is scarcity. If there were a 100 million original Picasso’s available in the world, his work would not and could not re the same monetary value as his current work. And of course there could never have been this many Picasso paintings because he didn’t have enough…time. Conversely, if Picasso painted one picture a week, his agent would know that next week, there would be a new painting to sell and the week after that…and so on. So the agent uses his knowledge of Picasso’s throughput to estimate the next job and he can only do this because he knows the time for each painting to be completed. As for the monetary value of each painting, well this may well change if Picasso was able to produce 1000 paintings a day.
>If you read my work first, I think you’d at least understand my argument.
Indeed, and as I’ve said I believe you have some very important points, and agree completely with you about ‘time sheets’—but I would say in defence, that at the time of writing your books, you did not have access to a software package like MetriQ, which I hope changes the landscape somewhat.
>I also don’t think you’re gloating, but I do believe your self-interest is in your
Absolutely correct. The only reason I’m debating with you is because we have developed a software product that has not been seen before, and its cost effective to spend ‘time writing my point of view to get air-time on your web-site. I’ve been upfront about that from word one. If you’d said you would not publish my arguments, I would not have continued with the discourse, because it would, for me as a businessman, be a ‘waste of time’ relative to the goals and agenda I’m following—please, no disrespect to you Ron! My time is finite, and I need to direct it towards those mechanisms that (in the business sense) optimizes our chances of selling software.
>What I’m saying is your product is the buggy whip of the knowledge economy.
You’ve not seen nor used our product.
>It’s already been proven by the hundreds of firms that don’t use timesheets.
Our software obviously wasn’t around when the evidence to this assertion was presented. Now, I’m afraid, this would have to be re-visited, as we now present to industry the ability to collect accurate time metrics without using time sheets and importantly without costing time in the process of collection.
>This does not mean they don’t perform cost accounting, but it’s a question of WHEN >THEY PERFORM COST ACCOUNTING.
>For what good does it do to know your costs (to the penny or minute) if the customer >doesn’t value your output?
Agreed, but in the same breath, if we both compete for the same customer with the same product, and I know how I can make the same widget cheaper than you because I have the data that tells me its going to be more cost effective to outsource part of its manufacture, then I have a competitive edge over you, as I can sell the same quality product cheaper than you can.
We may not agree on the ‘rightness’ of this and we may also both agree that this is not how it ‘should’ be—but if you haven’t already guessed—I’m a pragmatist, I can only go with what is.
>This is why Toyota costs things BEFORE THEY MANUFACTURER THEM, NOT >AFTER. It’s an enormous difference, and one I’m sure you understand given your >comments.
I’m afraid the likes of Toyata et al. would not exist today if it were not for the pioneering work in Time and Motion studies from F.W. Taylor, at Ford. If Toyota do not measure staff productivity on the assembly lines or in the design studios or where ever, then its not to say they have succeeded because of this, but rather, how much more they could have succeed if they had.
>I’ve debated thousands of people on this topic. It’s not a matter of me right, you >wrong. It’s a matter of which theory better predicts creating value in a knowledge >economy.
Agreed. But until we are all paid the same dollar for doing different jobs, then I don’t think its theoretical—I think rather it’s a mundane practicality.
CEO MetriQ Limited.
Your response illustrates how complex fallacies can become when you use the wrong theory. You are mired in Karl Marx’s Labor Theory of Value, and nothing illustrates this better than your wife’s shawl example and your views on the value of Picasso’s paintings because he’s dead. I can’t even begin to correct your mistakes in your post. I’ll give you a hint: scarcity does not determine value, nor does death. Otherwise, I suggest we kill ourselves right now and let our heirs sell this exchange. I will direct you to two posts on this site which blow 95% of your reply out of the water. Period. No debate.
If you can read these two posts and still subscribe to your theory, I give up. I understand your PhD was a long time ago, long forgotten as you say. The economics you took must have went with it.
Just a fair warning. You are still wasting time getting published on this site, as no one who reads this Blog is a believer in timesheets. They all operate under the Subjective Theory of Value, which obsoletes your views.
I would also suggest you look at what Best Buy, a large electronics chain in the USA, is doing with its ROWE program—Results-Only Work Environment. This disproves your notion that managers must know employee efforts to determine productivity. I say look at their results. Efforts will be rewarded in heaven.
I stand by my assertion that your software is the buggywhip of the knowledge economy. You’re right, I’ve not seen it or used it. But I haven’t had boils either, and I’m sure I can live just fine without them.
As for Frederick Taylor, I, too, am a huge admirer of his work. I detail his contributions in three of my books, one of which is on its way to you. But you have to understand, Taylor wasn’t doing time-and-motion studies on knowledge workers; he was doing them on manual and service workers. Knowledge workers are different. Tracking their time is meaningless. I can have a million dollar idea in the shower, and what’s your software going to do for me? How will it help me determine value? Merv Griffin wrote the theme song to Jeopardy in less than one minute in the 1960s, and has earned $80 million in royalties. I promise you he didn’t know consider his time, nor did he care if it was 1 minute or 1 hour.
Let’s not add to this exchange until you’ve read the above posts and my book. I also suggest Pricing on Purpose, as it spends many chapters detailing the difference between the labor theory of value and the subjective theory of value. If it doesn’t change the way you see the world, there’s nothing else I can do. I gave it my best shot.
And I’ll add one more item: I, too, used to subscribe to your thinking. It was the way I was taught as a CPA. It wasn’t until I learned economics, and I mean the different theories of value, that I saw the world as it is, not the way I was erroneously taught it was. There is nothing more practical than the correct theory. So, I’m a pragmatist as well. I repent every day for my mistaken views. It’s one thing to be wrong. It’s quite another to stay wrong. That is unforgivable.
None of this diminishes, of course, the fun I’ve had debating you, and I still hope we can meet someday.