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?