The Yank Strikes Back

David Connell is a consultant to accounting firms in Australia. I debated him back in 2000 while I was touring with Paul Dunn. He recently wrote about the timesheet debate in his newsletter, with not very pleasant comments about Yours Truly (though he never named me, but you can judge for yourself who he was referring to).

Well, as you know, VeraSage loves a good debate, since we take our Quest of burying the billable hour and timesheet very seriously. In that spirit, I wrote the following letter to David today.

We will see if he responds. In the meantime, I’d love all our Fellows to weigh in on this debate, and make points I inevitably missed.

Buckle up, folks, this is a high speed ride, not for the faint of heart.

January 17, 2008

Hello David,

I’m sure you remember me, we crossed swords many years ago, regarding firms trashing timesheets, after a series of presentations I gave in Australia on Value Pricing.

It’s sure nice to see your Nov/Dec 2007 newsletter, “Future Directions and Practice Solutions,” where you admit that “value pricing is the direction that many if not most firms will take in the years ahead.”

Since I’m the person who put Value Pricing, Fixed Price Agreements, Change Orders, and Trashing Timesheets on the map around the world in what we at VeraSage Institute call Professional Knowledge Firms (PKFs), that’s a nice tribute to my work. Thank you. I’m happy to see the consultants to the profession down under, such as Andrew Geddes, Dave Smith, Rob Nixon, among others, finally join the parade, even if they are trying to get in front of it.

However, I notice that your thinking hasn’t evolved since our debate years ago, nor have your colleagues mentioned above. Ours has. It’s obvious you haven’t kept current with our work, the books I’ve written since, or all of the firms that have trashed timesheets since then—quite successfully I must say.

Just so you’re clear what I’m responding to, I’m going to quote you at length:

“Just be sure that you have the basics right first and by this I do mean making sure that your timesheet system in particular is properly used with ALL staff and partners having a clear understanding why. Readers will be very aware of my views in regard to maintaining a proper costing/timesheet system. Whilst ‘throwing timesheet systems out’ sounds like a marvelous idea it often means throwing the baby out with the bathwater. Don’t fall for the over simplistic advice to get rid of timesheets by one or two (very much in the minority) so-called Yank experts/authors. By all means let me have your views on this important subject—to date I have received many, many responses—all positively in support of this view.”

I understand the positive responses you’ve received; after all, the tailless dog often praises taillessness. But you are conveniently ignoring a plethora of contradictory evidence, which can’t be dismissed by labeling my argument “simplistic,” or me a “so-called expert,” or even a “Yank.”

You see, David, there are over 500+ firms around the world that have trashed timesheets, across all PKF sectors—advertising agencies, consulting firms, IT firms, accounting firms, and law firms. These are black swans to you, because you think all swans are white. Your theories cannot explain these black swans. Many of these firms are the most profitable firms in the world. (For an understanding of what I mean by the metaphor of black swans, see Nassim Nicholas Taleb’s book, The Black Swan—that is, if you’re still reading).

For someone who believes Value Pricing is the wave of the future, I’m amazed that your thinking hasn’t evolved beyond the timesheet. It’s obvious that you haven’t innovated a new idea for running a firm since the Soviets launched Sputnik. Do you not have any intellectual curiosity at all about how these firms have achieved what even you yourself call a “marvelous idea?”

Let me attempt to educate you. I see from page 1 of your newsletter you are a fan of Toyota. So am I. Are you aware that Toyota does not have a standard cost accounting system? If you’re not aware, I suggest you read Profit Beyond Measure, by H. Thomas Johnson, an accounting professor who studied Toyota in depth, as well as launched the Activity Based Costing movement with his earlier book, Relevance Lost. You see, if you utilize price-led costing (what Toyota calls Target Costing, part of its famous Toyota Production System) you don’t need to have standard, average cost, cost accounting systems.

Timesheets are no different. Timesheets cost by using average, not marginal or incremental, costing, an egregious error that leads to pricing mistakes. They are lagging indicators, yet firms need leading indicators, an enormous difference that you don’t seem to address at all, except that you cling to your benchmarked lagging indicators of realization, hours, etc. Not to mention that being a more accurate cost accountant does not make one a better pricer. Only understanding value and economic price theory does.

I refute every one of your arguments for maintaining timesheets in my books, The Firm of the Future, and especially, Pricing On Purpose and Measure What Matters to Customers. Have you read any of these?

Now, the difference between you and me, David, is when I read, hear, or see something that contradicts my firmly held beliefs of the way the world works, I will thoroughly investigate it. If empirical evidence proves there’s a better way, I will admit my error and change my mind. What do you do?

Apparently, you dismiss the evidence because it’s from a Yank, or because it’s just a minority of firms that do it. But that’s not how science, economics, or business management progresses. Wisdom and truth are not determined by seniority, nor majority vote.

Under your logic, the fact that only a few automobiles were made in the early years of the combustion engine was proof the buggy whip manufacturers had nothing to fear. The fact that vacuum tubes were at the apogee of their market penetration was proof the transistor was just a fad. But the efficacy of new technologies, theories, or management ideas are not determined by how many people are using them, but whether or not they work—it’s the availability and efficacy, not penetration, that counts. It’s not a show of hands, majority vote process.

Technically, it’s called diffusion theory. And with respect to new theories, it can take decades, generations, or even centuries, before a population accepts them.

For example, germ theory took nearly 100 years (some scholars say centuries) to diffuse within the medical profession, and that was the simple idea that doctors should wash their hands between examining patients. The fact that a majority of doctors did not believe this theory, or abide by it, did not make it wrong. Nor did it mean that by following its precepts, they would have been throwing the baby out with the bathwater. It does means their thinking and efficacy would have progressed the sooner they accepted the theory.

So, you may ask, what replaces timesheets—that stale and putrid bathwater you insist firms continue marinating in? Here’s the answer:

  • Price-led costing

  • Project management
  • Key Predictive (not performance) Indicators
  • After Action Reviews
  • Before Action Reviews
  • Fixed Price Agreements, Change Orders
  • Chief Value Officer and/or a Pricing Cartel

The advantage of these methods are they actually enhance the intellectual capital of a firm, something I don’t see mentioned at all in your work. If you are not familiar with these methods, you have some serious learning to do. You also have some serious thinking to do.

Today, and for the last 50 years, accountants live and operate in a knowledge (or intellectual capital) economy, not an industrial or even a service economy. Do you know the difference?

Knowledge workers own the means of production, unlike in the Industrial Era where, say, Henry Ford owned the means of production and workers had to work to the rhythms and cadences of an assembly line. According to the World Bank, and other economists who study human capital, 75% of a country’s wealth resides in the head’s of its people. This is true at a macro level, and at the micro level of an accounting firm. My latest book, Mind Over Matter, explores this topic in tremendous detail.

Another difference between a knowledge worker and an industrial or service worker is this: We don’t know how to measure their “productivity.” All the metrics you cite—realization, utilization, hours, etc—are inadequate to measure the effectiveness of an accountant because these only measure inputs and activities, not results and value.

You cling to these metrics because you know nothing else and they can be easily measured. But weighing ourselves more frequently, or accurately, doesn’t change our weight. The fact is, we don’t know how to measure the efficiency of a knowledge worker because we can’t see what’s going on inside their heads. We have to discern it from the quality of their work. It requires judgment, not measurement.

Someone can look great on a timesheet, but have a lousy customer service attitude, perform work so sub-standard it has to be redone, or be disruptive to colleagues. So what good is measuring hours logged on a timesheet? Do you think you can measure the value of a Picasso, the deliciousness of a meal prepared by a five-star chef, the splendor of a building designed by an architect, or the acting ability of an actress, by looking at the hours they work? As they say, it’s easier to count the bottles than describe the wine. You remain mired in counting and costing the bottles, while we are interested in the quality, taste and subjective value of the wine.

Knowledge workers aren’t inspired to track every six minutes of their day. No one entered this profession with the objective of logging the most hours. Not only is it the wrong theory of value, it’s also demeaning, demonstrating a lack of trust, treating them like children. The Marginalist Revolution of 1871 proved hours/costs are not determinants of value, refuting Karl Marx’s labor theory of value, which you also seem to cling to for dear life. We’ve proven it in hundreds of firms that don’t use timesheets. Some of these firms are in your country. Some are in New Zealand, some in the UK, some in Canada. Most are Yanks.

I was taught in 1984 by Peat Marwick Mitchell that I sold time. Yet no customer buys time, hence no accountant sells it. How can we possibly sell something the customer doesn’t buy? This nonsense on stilts has been perpetuated by two generations of firm leaders and consultants to the profession. You are advocating a status quo that is already dying.

You wonder why there is a talent crisis in the profession? Well, stars don’t work for idiots. Knowledge workers now understand—certainly better than you and I did when we entered the profession—that the value they create is not predicated on the time they spend. It’s based on the quality of their work, their passion, dedication, professionalism, customer service ethic, innovation, creativity, mentoring, communication, interpersonal, listening, coaching and learning skills. None of these characteristics can be measured by your sacred timesheets. Timesheets do not capture the most important traits of a successful knowledge worker.

[I also suggest you read The Future of Management, by Gary Hamel (you’ll be happy to know he’s not a Yank). Read anything by Peter Drucker, especially his work on knowledge workers, emphasizing the difference between efficiency and effectiveness. Also, check out Stephen Covey’s The 8th Habit].

The talent crisis we face is the fault of current firm leadership, and consultants such as yourself, who keep the profession mired in the mentality that it sells time. We at VeraSage do not want one more single generation of knowledge workers to be taught these economically fallacious theories.

Therefore, we operate a think tank, not a consulting firm. We are dedicated to improving the posterity of the professions by removing the billable hour and the timesheet from all PKFs. We are disseminating our message far and wide, with emphasis on young professionals. We teach them they don’t have to be galley slaves on the SS Billable Hour. We teach them their value lies in their creativity and ideas, not accounting for every six minutes of their day like prisoners.

Our 15 worldwide VeraSage Fellows advance our cause in the arena of ideas, posit and test new theories, constantly read, think, and revise our theories. Most of them operate accounting, law, or consulting firms where they Value Price and don’t have timesheets. We have already transcended you and your old, anarchistic theories, moving on to greener pastures. Your ideas are past their sell date. You’ve done enough damage to our profession. It irritates the hell out of me that you continue to teach this nonsense to the younger generations. But that’s alright, the world needs its museums. The sunlight of truth is the best disinfectant.

In any event, we will free the professions from the tyranny of time. It’s merely a question of how long it will take to diffuse these theories. Comparing our progress to historical precedents, I’m encouraged.

You can bury your head in the sand, you can call us names, label us simplistic, ad nauseam. The one thing you can’t do is refute facts. Facts are stubborn things. And while you are entitled to your opinions you are not entitled to your facts.

For more information, you can read our Community Blog and Trailblazers Section of our Web site, where we have case studies from firms that are doing what you say can’t—or shouldn’t—be done from around the world.

It’s nearly impossible to debate with someone who claims that what is being done cannot be done. It’s not how civilization advances, and it certainly is not how the professions advance. Maybe Max Planck was right: Science advances funeral by funeral. So be it. The younger generations will be the ones who transform this profession, and they will be around a lot longer than you and existing firm leaders. Our job is not to leave them outdated legacy systems and negative intellectual capital, but rather useful theories and concepts they can build on to progress.

In the meantime, rest assured that the validity of a new theory is not determined by how many people are doing it. A theory stands or falls on its own strength. And the evidence is overwhelming that our theories work. Everyday, more and more enlightened firms adopt them. Some you may even know.

Of course, if anyone falsifies our theories, we will revise them, as this is how we progress. But you have failed to do that since your theories have already been falsified. We are always open to new and better ways to implement our theories. But so far you have contributed nothing new to the debate in the seven years since I became aware of you.

If you do respond to this letter, please make specific refutations of the evidence presented, not merely label it “simplistic.” I’ve provided incredibly deep specificity refuting your arguments, and the only way this debate will advance is if you do the same. Though I’m doubtful you will be able to refute anything contained herein since you clearly are not aware of most of the evidence.

A leading indicator will be if you post this letter on your Web site. I am posting it on ours. Feel free to respond to it there and let the debate continue. But be warned: You will be debating with people who live and breath this topic as much as I do, who do it every single day of their lives, who educate others about it, all of which means they understand it a level of depth you cannot even fathom. I wouldn’t show up to a gunfight with a butter knife.

If I were you, I’d be very nervous about my precarious worldview that has already been shattered by empirical reality. It’s not a matter of me being right and you being wrong, David. It’s an empirical test of what works. I have the courage to face the evidence, to be wrong, and subject my theories and ideas to the test of the marketplace. Do you?

I think you do.

After all, by your own tacit admission, this Yank was right about the future of Value Pricing. What makes you think he’s wrong about the inevitable death of timesheets?


Ron Baker, Founder
VeraSage Institute


  1. Great post, Ron!
    One thing – in addition to being suboptimal from a practice management standpoint, billing by the hour and requiring true professionals to do timesheets is unethical and immoral.
    It is unethical because it puts the customer at risk or at least in an adversarial position with the professional. It is always in the professional’s best interest to maximize the number of hour, while it is in the best interest of the customer to minimize the number of hours.
    It is immoral because it rewards the less intelligent. Let’s face it, if you are a stupid, terrible lawyer/accountant/architect/technologist billing by the hour is great. Hence my oft quoted line, “If you suck at what you do, by all means, bill by the hour.”

  2. I look forward to David Connell’s response in defense of the timesheet. Our practice has run without timesheets for many years. It’s been so long that I can’t remember what is thought to be so advantageous about timesheets. What does David Connell think they do? His newsletter does not explain why he thinks they are important only that they are. His opinions and advice must have some theory behind them or perhaps they are unencumbered by theory. I only hope that David is brave enough to enter into a debate.

  3. Baker’s on fire! It seems to me that using a timesheet to measure someone’s effectiveness is just plain lazy management. How nice it must be to sit in your office with the door closed and just get notices from a timesheet application about how you think your firm is performing. I guess we’re all just too darn simple to get it.

    Unfortunately, everyone in our firm would quit if we went back to timesheets.

    And we would be a heck of a lot less profitable!

  4. I love it. Great post, Ron.

    Regarding the germ theory it’s so interesting that Semmelweis had overwhelming practical evidence to validate his “oddball” approach, but the medical establishment dismissed it.

    I guess washing hands was not “professional enough” of a remedy. After all, smart doctors are supposed to come up with appropriately smart solutions, not this “wash your hands” nonsense.

    Just look at the food pyramid. It’s making North Americans fatter and fatter but the medical institution is still promoting it.

    Have we found it funny how the medical profession has adopted the food pyramid that was invented by the US Department of Agriculture to fatten animals. And the medical institution uses this animal fattening approach to keep people healthy.

    And doctors who go against the food pyramid can lose their licences to practise. Amazing.

    At least we are free to do value pricing without being punished, regardless of how many “professionals” find it dirty price gouging.

    Eventually Semmelweis got a nervous breakdown and got locked up in a lunatic asylum.

  5. Let us hope that fate does not fall on our fearless founder, er, co-founder. (Sorry, Dan, I wanted the alliteration.)

  6. Mark,

    The concept of “billing for value” sounds somewhat dodgy to me.

    I think “billing” implies paying for the activity regardless of value.

    When a doctor operates on, let’s say, my wife, and she dies as a result of a medical error, the doctor “bills” me for the procedure. There is no value for me (only grievance), but have to pay regardless – for the time and materials.

    If the doctor “priced for value” I would have the right not to pay.

    In the billing “case”, the doctor basically laughs at me, “You must be paid for the ‘work’ regardless of value. And don’t try to sue me because I have access to better lawyers than you, so you have no leg to stand on.”

    This sounds like billing to me.

  7. Mark….I think what David is saying is that he understands to bill based on value but that he should track costs by using a timesheet. That’s why I think it is just lazy management. He needs to learn how to actually manage his team and not depend on antiquated and demoralizing tools.

  8. I do an enormous amount of work in the professional services industry here in Australia and especially in VBP … never heard of him!

    Ric Willmot

  9. Day 3 and no response in this space from Mr. Connell. Perhaps he is using the weekend to gather his thoughts.

  10. I too, am curious to see if Mr. Connell will respond to Ron Baker’s letter. For the record our CPA/Consulting firm has not completed a timesheet in 7 years…and we are still here…and thriving. I am also curious if Mr. Connell, when evaluating a purchase, inquires how long it took to build his vehicle, his lawnmower, or to prepare his most recent meal. Curiosity again creeps in as to whether he would pay more based on the length of time to produce these products.

    I propose that “time” and “value” have little correlation in the minds of consumers. And,so what if he knows exactly the time and costs…would he pay more than the market will bear if the costs and time are excessive?

    Still curious.

    Tim McKey…Fellow/Verasage Institue

  11. Brendon Harrex says:

    Firstly, Ron, thanks for the energy and detail you have put in the response to David Connell. Like you, I read the November/December 2007 Newsletter from Anzan Professionals with horror. We trashed timesheets many months ago and it has not only substantially improved my own life and business, but that of all our employees and customers. Like so many comments I receive from other professionals, those from David Connell provide no intellectual basis for continuing to operate with timesheets, other than fear of change (or perhaps it is intellectual laziness).

    Having made the transition, it is my firm view that it is impossible to prepare your business for value pricing by making sure everyone knows how to fill in their timesheet properly – to use Ron’s example, how can you become more successful at losing weight by becoming more familiar with how to operate the scales? There is no way that better managing your costs is going to help you create value for your customers—one looks backward, the other looks forward. Customers simply do not care about your costs or how you infuriate, belittle, and punish your people by talking about how they are your greatest asset, yet require them to account for every 6 minutes of their time.

    It constantly amazes me how professional knowledge firm leaders (and consultants) are willing to only implement changes in their business if they are risk free. I wonder if we would ever have an ipod if this was the approach taken by Apple. The world is improved when risk takers take a leap of faith on behalf of customers. The market has demonstrated it is prepared to reward such risk takers generously. Surely it is the role of a profession to be proactive in creating a more attractive career for our young people and to be more relevant and deliver increased value to our customers. Clinging to what we know as safe is not only gutless but short sighted and detrimental to our profession.


    mmm, I feel a fence pailing … for me!

    To move to value based pricing and throw out timesheets is a HUGE move for most accountants. I am 100% for value based pricing and tried to implement same when I was in public practice. I found my own courage in setting fees and years of training as an ‘accountant’ held me back.

    Since then, our ‘solution’ is a tool to help accountants move forward … keep the timesheets for the time being and implement a task based pricing matrix for compliance work with fee agreed in advance. Other services price on value (or at least a price up front rather than rate x hour).

    Timesheets are the ‘costing’ record, and for the faint hearted a measurement tool of productivity … in time they will change.

    Accounants are ‘drawn’ to the profession by their very nature which means they are cautious, analytical and reserved (all generally speaking of course). Yes, there are early adopters, but like Ron notes, the take up rate for the concepts he has been advocating is somewhat slow.

    Our goal is to give the accountants the tools to get to the ‘value pricing’ utopia and everything that comes with it.

  13. I note the editors comment and would be grateful if you could advise why you believe “… it to be dangerous and harmful …”.

    I note that the ‘price matrix’ for compliance work is not a ‘true’ value based model … rather a tool to get accountants moving toward value pricing.

    If they can get away from ‘seeing’ and ‘thinking’ of the WIP amount as the ‘price’ that has to be a good thing, right?

    It is a leap of faith to go straight to ‘value based pricing’ and to ‘throw out the timesheets’ … and as Ron has already noted in several places the ‘take up’ is very slow across the globe.

    Is the ‘implmentation process’ the problem?

    Is the ‘leap of faith required’ the problem?

    Is the ‘nature / personality’ of the people drawn to being an accountant the problem?

    Maybe we need a process of getting to the utopia?

    I agree, it would be great if everyone changed overnight, and I would love to see that, but it seems that is not happening.

  14. [An email I wrote to Dean on July 18, 2008, in response to all his comments, as well as an email he had sent me].

    Hi Dean,

    You should know I do not profess to be a “guru” either–I hate the term. I like consultants even less. I’m an aggressive student of price theory, always learning.

    We at VeraSage are very reluctant to promote any consultants, except for the ones we have strong relationships with. So when I saw your pricing matrix plug, I wanted to put a “surgeon general’s warning statement” on it. We are a think tank, so we love ideas, but we refuse to promote anything we are not intimately familiar with.

    I understand your pricing matrix, and a lot of firms have done the same. I reject any “standard” price, and believe you need to have an in-depth conversation with the customer to determine a true value price. That said, many firms have menu options with fixed prices for simple compliance work. I don’t have a problem with this, but I still believe they are leaving a serious amount of money on the table by limiting their price discrimination ability.

    Your idea of measuring the “effectiveness” of team members based on hours I reject. Isn’t this why you left accounting? Timesheets do not measure the effectiveness of accountants. Period. You should read my Measure What Matters to Customers book. I have torn down this argument brick by brick.

    I really don’t care if team member A takes 10x as long to do something as Team Member B. So what? Maybe A is giving a higher level of customer delight, or has personal problems, or a million other issues that HAVE TO BE JUDGED, NOT MEASURED.

    In fact, Dean, you can’t measure the “productivity”–let alone effectiveness–of a knowledge worker. It has to be judged. Hence our rejection of time as a basis to do so. Was Einstein on budget? Who knows, and who cares? How would you measure the efficiency of Picasso? As they say, it’s easier to count the bottles than describe the wine. Knowledge work is art, not a factory producing widgets. Unless a firm wants factory workers, timesheets have no place in a knowledge environment, period. That’s why the profession continues to lose smart people like yourself. They are treated like factory workers, not knowledge workers.

    This offends the hell out of us at VeraSage, and we have little tolerance for consultants who don’t get it. Thus my strike at David Connell, who I believe is dangerous to the profession. He’s keeping it in a 19th century Industrial Era mindset. Worse, he refuses to confront the empirical reality of firms who operate without timesheets. The fact is, a firm can operate with no timesheets, as over 600+ firms of all sizes are doing, across all PKF sectors. In fact, the first Top 100 accounting firm in the USA is trashing timesheets June 30, 2009.

    As for your question of how to allocate revenue from a job when multiple people are working on it: This does not have to be done on time. But our first question is why should we do this in the first place? It creates silos in firms, not a real business. My brother works for Procter & Gamble, and he doesn’t have “revenue” allocated to him. It’s insane. Doesn’t everyone work for the same firm? This is why we hate the partnership model as much as the billable hour and the timesheet. It’s creates nothing but roommates sharing overhead, not a real business.

    That said, here’s the answer: you throw every team member in a room who will work on the engagement, and since they already know the price, you let them allocate the revenue amongst themselves. Not only will it be perceived as more fair than arbitrary timesheets (who gets to write off time?), but they will be more committed and responsible to each other.

    All the consultants you mention are not change agents. Not one of them advocates eliminating timesheets, hence they are harming our profession. We don’t work with many consultants for this very reason. They don’t grasp the idea of knowledge workers. It’s frustrating as hell. I don’t think Connell or Nixon could tell you what a knowledge worker is, despite the fact that Peter Drucker (one of the only management consultant I have true respect for) wrote about it in 1959!

    We also reject “incrementalism” in this process. You’re either a knowledge worker, and treated like one, or you’re not. If a firm maintains timesheets but says it’s value pricing, it’s not. Time has no basis for price, or as a metric of efficiency. The case studies in our Trailblazers section, our community blog, articles, and books all refute this premise. The intellectual argument is over. Our theory has been proven by empirical evidence.

    To your point about diffusion, and why haven’t more firms taken this up. Because they have to think. Because it’s a theory change, not a technology change. That can take decades, if not centuries. Germ theory took centuries before people in the medical community believed in it. I see this change taking decades, not years. I wrote an article on this very topic you can read at:

    Hence, we at VeraSage don’t really care about firms who don’t have the intellectual horsepower to get it. We don’t need 100% conversion. We need roughly 20%, and that’s going to come from forward thinkers, not the minds of Rob Nixon and David Connell. Once we get 20% they will get the train running down the track, then the other firms can either hop on, or under, it. Take a look at the Harrex Group in New Zealand for an example of The Firm of the Future.

    When you leave a comment on VeraSage, recognize that there are 15 world-wide fellows who live, breath and operate their own firms with no timesheets and 100% true Value Pricing. They are zealots. Also our community is full of firms that have already done it, and frankly they don’t care if no other firm does it–they love the competitive advantage, especially in the talent attraction power of not having timesheets. Yet, most of them are committed to changing the profession for posterity, and hence are quite willing to share their experiences.

    I hope that clarifies. I strongly suggest you read my books, especially Measure What Matters, and if you really want to go deep on knowledge workers, Mind Over Matter.

    Thanks for your contributions Dean.


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