Dan Ariely presents his thoughts in an excellent Ted Talk about our Buggy Moral Code and discusses why he believes people cheat. His conclusions include:
Ron Baker and I use this Ted Talk to stimulate conversations about cheating in our Ethics Class that we teach around the country for CPA Societies, law firms, PKFs, and a number of associations. And lively conversations they are. Additional key points include that when people are reminded about their duty to be truthful, cheating goes down and when leaders and/or peer groups don’t cheat, cheating goes down, and finally, when actions are more closely tied to money itself rather then say a timesheet, cheating goes down.
For years (decades almost) I have inherently understood that one of the evils of timesheets and hourly pricing is that people lie on their timesheets and these lies end up as additional charges on invoices to customers. In other words, cheating. Now Ric Payne of Principa has argued with Ron Baker that although people lie on their timesheets, over time, the lies cancel each other out and and these lies aren’t a significant variance between actual time-based pricing invoices presented to customers and the ethical time-based efforts actually incurred. Now from a Kantian ethics perspective, if lying is wrong, it is universally wrong, and just because over a significant number of years/events, the overall invoiced value approximates the actually earned value, doesn’t justify leadership (e.g. partners, managing partners, directors, managers, seniors, supervisors, etc.) from perpetuating a firm culture of acceptable approximation of efforts in a time-based pricing paradigm.
There are many challenges associated with time-based pricing that have been fully discussed on this blog. Defenders of time-based pricing and timesheet based models justify themselves using any number of spurious and intellectually immature arguments surrounding their incapability of understanding the value of what they provide and based upon a misguided supervirsorial notion that as leaders/managers they wouldn’t know what their team (I refuse to use the word “staff” when it relates to people – as ‘staff’ is a homonym of Staph and Staph is a deadly infection and people aren’t infections – so there) and if that isn’t a self-incrmination of a person’s lack of leadership capabilities if their only and best tool for understanding what their colleagues are paying attention to is to wait until the timesheet is completed – that isn’t leadership – that is an historian’s recording – and such leaders should be demoted to below the level of their clear incapabilities. Beyond these defenses, the “I Love My Timesheet” crowd are seriously cowards afraid of a conversation about value (e.g. their ego is too weak to simply stand proud and express a price – or their communication skills lack the creativity and curiosity to hold a conversation with their customer about the scope and value of the proposed project, and appear to be satisfied to allow their lying timesheets to dictate the price (but never the value unless by pure coincidence) of a project.
But, I digress. Timesheets and time-based pricing is for morons, buffoons, and idiots. As my colleague Ed Kless is found of saying, “if you suck at pricing, bill by the hour”. There is no adequate defense for timesheets or time-based billing methods. Just as there is no defense for the historical practice of “Separate but Equal”. Let just hope it doesn’t take another couple of generations for Billable Hour Luddites to learn that their thinking is akin to the “Flat Earth Society“.
The problem with timesheets is that their recording and the ultimate invoice are separated by too much…………time (OMG – it is time that is the challenge here – another post I am sure – LOL). Hence, in Ariely terms, the separation of the event (cheating on your timesheet) is too distant from the invoice (the money) to have people recognize their cheating and this cheating is simply part of the PFF (personal fudge factors). It is like in the film, The Firm, staring Tom Cruise, when there is a scene between Cruise and one his clients about the Firm’s billings. The client expresses doubts that the Firm spent xxx hours on his projects, and Cruise response is akin to, “I have no idea………I just fill out my timesheet”
The problem therefore (one of cheating) is acceptable by the firm and at the expense of their customers. No ethical professional would ever steal money from their clients. No ethical professional would lie about their “days” efforts and present an invoice on the spot (like a day laborer) to their client. Yet, firms knowingly and unknowingly, create an environment where small lies (and some whoppers) are presented on the daily timesheet. The lag between the Sin and the confrontation with the client via the submission of the invoice is frequently months, and when the responsible billing party reviews the tabloid of lies, unless it is outlandish, the calculated price is simply presented and the customer pays for cheating and when the check arrives, the partners celebrate. As leadership allows these fibs, lies, concealments, misdirections, and other assorted unethical behaviors, the message throughout the firm is clear, lying on your timesheet is a permissible activity within the firm, and since peers are promoted based upon billable hours, bonuses paid based upon billable hours, the measurement reinforces the internal values and cheating continues.
Some partners and firm leaders trick themselves into believing that lying doesn’t exist in their firm. That their firm is an exception. The modern day version of the three most prolific lies should include (along with “I will love you in the morning, and the check is in the mail”) “we don’t lie on our timesheets”. Only a fool would be so duped. You don’t have to believe me, just ask the team. Or better yet, consider the internal inconsistency when say the firm prices tax returns on a (even after the fact) stated price without timesheet detail when it is in their favor and bills by the hour when it is not.
Ultimately, the subtle challenge is the separation of the event and the invoice. When a firm separates the invoicing mechanics from the conversation with the customer, it allows the sewage to seep into the system, polluting the truth and spritzing the firm’s favorite cologne (Ode de Dollar) thereby masking the stench of lies. Whereas a Firm of the Future incorporates their value proposition, pricing, scope, and related service matters up front, there is no requirement for a timesheet, and without timesheets, firms no longer need to lie to their customers about efforts to justify an invoice.
I call this a Win Win. What do you call it?