It’s utterly amazing to me how someone, on the one hand, can say they support Value Pricing, and then on the other insist that timesheets are absolutely necessary. He’s arguing they are necessary from a cost accounting perspective, which is nonsense.
We at VeraSage have dealt with this so many times, I’m not sure what else to say. It’s get tiring informing people who should know better that there are, indeed, firms that operate without timesheets. What does it take to get them to see this?
Here’s the comment I left on Kane’s Blog:
You can’t make a profit on fixed fees unless you know what your costs are;
You can’t know what your costs are unless you know how much time (and other dollars) are consumed by the matter; and
There is no way to know how much time is being spent on matters if you don’t keep track of hours!
No, not Duh. There are over 500+ firms worldwide, across all professional knowledge firm sectors, from advertising to CPA firms and law to IT consulting firms, that don’t do timesheets.
This doesn’t mean they don’t know their costs, it’s a question of WHEN do they know their costs. With timesheets, you only know them in arrears. With our methods, you know them BEFORE you do the work.
What good is it to know your costs if the client doesn’t like your price? This is known as price-led costing; Toyota has been using since it was founded in the 1880s, and Toyota does not have a standard cost accounting system (nor do they do timesheets).
In the real world, value drives price, not costs. Price actually drives costs, so it makes sense to know value and price before you spend a nickel on any costs.
So, what replaces timesheets?:
Key Predictive (not performance) Indicators
After Action Reviews
Before Action Reviews
Fixed Price Agreements, Change Orders
Chief Value Officer and/or a Pricing Cartel
All of the above add to a firm’s intellectual capital, whereas timesheets destroy intellectual capital, especially human capital, who are treated to tracking every six minutes of their lives. Timesheets keep professionals mired in the mentality they sell time.
It is the Quest of my think tank, VeraSage Institute, to rid all professional knowledge firms of both the billable hour and timesheets, as they inextricably linked. You simply can’t Value Price if you’re paying attention to hours.
If you support Value Pricing, you must reach the conclusion that timesheets hinder its adoption. He who says A must say B.
Our Trailblazers section is full of firms that don’t maintain timesheets. Usually, people who say something can’t be done are being blown away by others already doing it.
You will find many other resources, free books, articles, case studies, and blog posts, all on how firms can enter the 21st century with Value Pricing and no timesheets. A good start would be here.
I just wanted to set the record straight. If the Shepherd Law Group is smart—and they are—they will trash timesheets. They are the cancer in the professions; it is just a matter time before they will be buried.
Ron Baker, Founder
This is more evidence that the world doesn’t need consultants.