Consultants are part of the problem, not the solution

Anyone who knows anything about VeraSage and the work we do knows I have little respect for the consultants to the profession. I believe they are one of the main barriers to extricating the profession from the tyranny of the billable hour and timesheet. They spread their orthodoxies by imposing the same measurements on all firms they come into contact with, thinking that the key metrics of running a professional knowledge firm are revenue per hour, realization and efficiency.

I have destroyed these arguments, both logically and empirically, with the work we’ve done in firms around the world. I came across two recent examples just this past week of how the consultants are keeping the profession mired in the mentality it sells time. I believe this does an incredible disservice to the profession, not just its current members, but also posterity. If we continue to teach another generation of accountants they sell time, then we deserve the problems we are having with respect to attracting the best and brightest into our profession.

The first example is an interview conducted by Rob Nixon from Australia. Here is how Rob describes himself: “A leading speaker, trainer and business coach to the accounting profession. He is passionate about the accounting profession and its possibilities.” I know Rob, he used to work for Paul Dunn. He may be passionate about the profession, but he’s part of the problem when it comes to changing the business model.

He recently posted an interview with the Aintree Group, a suburban Melbourne 6 person firm owned by Shane McKenna and his wife Andrea. It’s a fascinating interview because Shane understands that his firm sells intellectual capital, and he’s doing some progressive things on the marketing side, including Value Pricing and Fixed Price Agreements. However, he still tracks revenue per hour, which is futile if you’re customers are not buying (and you’re not selling) time. He also tracks write-ups and productivity. These indicators are what Rob calls KPIs.

But they aren’t KPIs, since they are all lagging. No doubt they are measurements, but they are not predictive of a firm’s success. Rob continues to make this colossal mistake in all of his writings, and it amazes me beyond belief. He seems to think that measuring yourself more often will change your weight. What firms need to measure are leading indicators, which are measurements guided by a theory of customer behavior. No customer cares what a firm’s average hourly rate, or productivity, is.

Then Rob goes on to make this entirely groundless and specious statement:

A number of firms have gotten rid of timesheets but I think the key thing from what I see is that firms need to get rid of time based billing but keep time recording as a method of measurement and management.

Yes, Rob, this is how you bring out the best in your knowledge workers—make them account for every six minutes of their day. This is such a ridiculous position, because on the one hand he recognizes firms have to move away from hourly billing, but then he still thinks you need to track time. Why can’t these consultants see that it’s the timesheet keeping firms mired in the mentality they sell time? As long as they exist, they will go back and use them for pricing. Indeed, Shane still does this, which is why he isn’t exactly Value Pricing the way we at VeraSage teach.

And exactly how does one manage a knowledge worker with timesheets? It simply ignores the most essential characteristics for success—interpersonal skills, customer service, pride, passion, attitude, risk taking, creativity, etc. One would think a “leading speaker, trainer and business coach to the accounting profession” would know better, but obviously not. Rob Nixon has been espousing the same pablum since I’ve met him, and his thinking never evolves beyond the obvious and trivial. He is doing a disservice to the firms he works with, and the profession he professes to be passionate about. I don’t know if it’s because he’s intellectually lazy, or because teaching firms to rid themselves of timesheets is a tough, unpopular position to take (not a great way for a consultant to get more clients).

Whatever his motives, we will continue to refute his work where he is wrong.

The second example happened last week while I was in Denver. A consultant to the profession was telling me about a sole proprietorship he was working with. When he sent him the standard survey to complete, asking various questions about his firm, the consultant noticed the practitioner marked all of the questions regarding hours, realization, revenue per hour, with a “Not Applicable.” So the consultant calls the CPA, and was informed the CPA does everything on a fixed price and doesn’t have timesheets.

This CPA grosses $1.8 million per year, and puts a bit more than 50% of that to the bottom line. So rather than the consultant wondering what this CPA does that’s different, and if there’s any lessons to be learned, he offers the following advice: “You need to get a time and billing program so you can measure the efficiency of your people.” Then he has the temerity to ask me (of all people!) if this was the right advice?

I’m sorry, but this CPA is in the top 1% of profitable firms in the world. He got there by bucking the status quo of selling and tracking hours, not embracing it. Why does the consultant want him to conform to the same practices used by less effective firms? It’s an interesting question, and I’m not sure I have a satisfactory answer, except for this: consultants are intellectually lazy, and will take the easy way out. They like to standardize firms, and spread “best practices” among the firms they come into contact with.

They also don’t innovate, or think of ways to constantly improve firms. They don’t understand the difference between a knowledge worker and a service worker, continuing to think they can move people around like bags of cement to increase hours and efficiency. They also don’t ever put their own pet theories to the test of evidence, and thus they ignore results that don’t fit their patterns. Rather than positing and testing better theories, they stick with their orthodoxies. This is certainly much easier than innovating and taking risks, which is why I’m sure the buggy whip manufacturers were guided by consultants all the way into oblivion.

It’s hard enough to make the changes we at VeraSage are proposing for the professions. We don’t need the so-called “leading consultants” keeping us mired in a past that is already dying. Wake up consultants. Stop taking the easy way out. Do what is right, both for the firms you are privileged to work with and the profession you claim to serve. The world has changed. We are a knowledge economy, where firms sell intellectual capital not time. You can’t “manage” a knowledge worker with a timesheet. I wonder if Rob Nixon does a timesheet?


  1. I think doing value pricing and abolishing time sheets are the two sides of the same coin, and must come hand in hand. One without the other is as productive as a eunuch in a harem. He may be equipped with a bucket of Viagra, but still not being able to do anything ?productive?.

    Running a value-centred firms is a mindset. To the client it?s value pricing and to associates it?s value tracking, that is, how much value have I added to the client (tracking) which the firm has the right to charge for (pricing).

    Brilliant discussion, Ron. Keep it up.

  2. James E. Mason says

    Whoa, slow down there, killer! SOME consultants may be part of the problem, it’s true, but SOME of us have advocated “value pricing” for years, even before the concept of charging what the “thing itself” was worth, rather than by “the mile, the yard, the hour, or whatever” got folded in “value pricing.”

    The problem with the philosophy is the terminology, not the other way round. Too many people equate “value” with “discounting.” Even when the term “added value” was out there in the ether, it implied “a little something extra” which is why it got turned around into “value added” which makes less sense, but is less likely to be perverted into a catch-all phrase for discounting.

    Does that mean that I’ve figured out the right term? Not only not exactly, but absolutely not. However, I ALWAYS take time to explain the pricing model, make sure the client doesn’t think they’re getting discounted work, and work from the concept of deeply-embedded value in the project itself.

    Do clients still convert my price to a “cost per hour”? Of course they do. But as long as they seem “get” that the pricing model is NOT a per hour model, I’m happy, they’re happy, and my banker is happy. Not a bad way to end the day.

  3. James,

    Thank you for your comment.

    I agree that most consultants have agreed with the concept of Value Pricing, and that is not why I am taking them to task.

    I’m taking them to task over their attitude about the timesheet. We believe they need to go, and indeed over 350 firms have gotten rid of them. The consultants don’t seem to be intellectually curious about how these firms operate without them.

    It’s not just a terminology problem, it’s a significant theoretical shift (paradigm, if you prefer). You can see my article “Diffusion of an Idea” that explores this issue in more depth.

    Value Pricing emphatically does not mean “discounting,” it really means pricing commensurate with the value you are creating. Sometimes, that may equate to a lower price.

    If your customers are still computing an hourly rate, they are focused on the wrong thing. I can take Bill Gates annual pay and divide it by the number of hours he works, but what does that tell me?

    Bill Gates doesn’t do that because he doesn’t sell time. And neither do you. Nor do CPAs, or other knowledge workers.

    The timesheet keeps us mired in the mentality that we sell time, and that is the cancer we are trying to remove from the professions.

  4. Great dialogue!

    I have had this same dialogue with three people this week alone. Whenever, I get the argument about needing the timesheet to assess the productivity of their people, I pose the following question – If one of your “people” figure out how to do something in three hours what normally takes six hours what should they put on their timesheet?

    Long periods of silence follow.

    Peter Block in The Answer to How is Yes! writes masterfully about measurement. He believes that even asking the question “How do we measure it?” creates a problem.

    “The question makes the statement ‘If you cannot measure it, it does not exist.’ So much for love… Our obsession with measurement is really an expression of doubt. It is most urgent when we have lost faith in something. Doubt is fine, but no amount of measurement will assuage it.”


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