Ask VeraSage: Why get rid of timesheets?

RainToday recently published an old article of mine about the obstacles to implementing Value Pricing and getting rid of timesheets.

I received the following email question from a reader:

I enjoyed your article on the end of billable hours and timesheets.

I’ve got a consulting business and over 95% of our revenues come from value pricing contracts. But we track our time. Why get rid of timesheets? Isn’t there some value to knowing where time is allocated? How do you analyze client profitability if you don’t track the cost inputs? I’d love to get some perspective on this, as we all hate time sheets.

Thanks for your consideration.

One thing that has always amazed me about the VeraSage Quest to bury the billable hour and trash timesheets is how people ask us questions they think we’ve never thought about before. The most common with respect to trashing timesheets is: “How would you know if you’re making any money?”

Part of me wants to be impudent, slap my forehead and respond: “Damn, I never thought of that. You’re right. Let me recuse my 5 books and millions of written words on this topic until I can find a satisfactory answer to your question.”

Nevertheless, the question illustrates how endemic that belief is that professionals sell time. Not only that, it’s the wrong question.

Here is my reply to the reader:

Why get rid of timesheets? Because they measure the wrong things. They are lagging indicators.

I get your question all the time, it’s not new, or original, nor insurmountable. Let me ask you a better question: How much money are you leaving on the table? Timesheets will NEVER be able to answer that question.

The professions are not going to become better at Value Pricing by being better (or more accurate) cost accountants. If that was true, CPAs would be best the pricers in the world, and they are among the worst.

Here’s what replaces timesheets: Excellent project management skills, Key Predictive Indicators (not performance indicators–there’s a huge difference), and After Action Reviews. You can read all about this in my book, Measure What Matters to Customers: Using Key Predictive Indicators, available at:

You can also read about firms that have ditched timesheets on our Community Blog and Trailblazer sections of our Web site. One particularly insightful essay is by Paul Kennedy:

Other essays on the subject

Basically, your clients don’t care how long it took you to do something, so we should measure things that matter to them: like turnaround time, responsiveness, etc. Firms that don’t waste their time filling out timesheets can focus on adding value, rather than measuring a lagging indicator no one cares about.

Bottom line: It’s being done around the world. You can do it too. If you do, you’ll become a lightening rod for attracting talent (“If you work here, you don’t have to complete timesheets. We treat you like adults, not children”).

I hope this inspires you to read more about this. We at VeraSage offer a huge reward to anyone who come up with an objection to Value Pricing or getting rid of timesheets that we haven’t heard before. It amazes me how people think we haven’t thought long and hard about all of these issues, especially when many fellows operate firms without timesheets! We know it’s possible to trash the most anarchistic legacy in the professions.

Of course, to understand that you have to understand that we are knowledge workers, not union employees.

I will have more to say about the right question (how much money are you leaving on the table?) versus the wrong question (how do you know if you’re making money?) in a future post.


  1. Ron–You’re assuming a bit much on my questions. I don’t believe we sell time.

    A typical situation for me is something like this. We have a client project that will deliver say $1 million of benefits to the client. I believe we should price this at $300K to give a good return. The next question to our project manager is, what will it take to deliver this service? We need a work plan and resource estimate. And, I need to know that for $300K, is this going to be profitable business. We aren’t selling time, but people’s time is definitely a cost input. I’ve had project managers that significantly underestimate the resources needed for projects. When we value price, this can be an issue.

    Without tracking the resources allocated to projects, it’s hard to know when we are: a) doing a good job engineering our projects; and b) doing a good job managing projects.

    The most important measurements are still ones clients care about.

  2. Jeff,

    I understand what you’re saying, but here’s the difference between price-led costing (like Toyota uses) and cost-plus pricing (the billable hour).

    With price-led costing, you do your cost accounting BEFORE you begin the project. This is what Toyota does, and by the way, they do not have a standard cost accounting system!

    They don’t spend a penny on a car until they know the value and price to the customer.

    What good is it to know your costs if the customer doesn’t agree with the value of your price?

    No doubt, time is an input, as is all activity. If your project managers are significantly underestimating the resources required, you need new project managers. Timesheets only tell you this after the fact, whereas project management has to forecast the future.

    What good are timesheets if your project managers are continously underestimating the time required?

    Nevertheless, based on your example, I think you are doing this, since you established value first, then price, then determined whether or not you can do the job at an acceptable profit, given the resources it will require.

    What I’m saying is there are more ways to perform cost accounting than with timesheets. Most PKFs are fixed-cost environments anyway, so cost accounting isn’t rocket science.

    You can use After Action Reviews, KPIs, and good project management and that’s what replaces timesheets.

  3. Ron–Thanks for the additional insights. I’m learning a lot and look forward to reading your book and keeping up on the web site.

  4. Let me weight in here. In short, I think we are all on the same page.

    Ron, you are correct in asserting that there are much better ways to cost, postfacto, a project. In a multi-project PKF environment, I have found that doing a best guess allocation is more than sufficient. For example, a company does about 24 projects per year. They have payroll cost of $2.4 million. (Yes, I am making the math easy.) I would start by allocating $100,000 in cost to each project and then doing a best guess to adjust them up or down. For example, a smaller project might get a cost allocation of $50,000, while a larger $150,000. No it is not 100% accurate, but neither are timesheets. (Please note that this is a simple sample to enhance this dialogue.)

    That having been said, there are some projects, mostly those that are done for governmental agencies, where timesheets are required to develop what is call earned value. It should be noted that this is a governmental requirement for a reason, it is a non-sense theory. Once again it is founded on the belief that time = cost. It does not take innovation into account. If someone figures a way to do something in three instead of 30 hours, it would dilute the earned value.

    JT, I think you are clearly value pricing that is not the issue. Kudos to you! As Ron states, AARs are more effective in gaining understanding than timesheets. In addition, rather than time spent, I look at three other metrics during a project: 1) percent of tasks completed, 2) percent of task completed on or before the original estimated completion date and 3) confidence level in the project.

    This last one was a subjective measure of the entire project team?s belief that the project was going well. On a weekly basis, everyone on the project team was expected to send the project manager a number on a scale of 1 to 6, their belief in the confidence level of the project. The scores were averaged and we looked for drastic changes in the attitude. I found this to be a much better indictor (it was not predictive) of how well the project was going than ANY time based measure.

    Hope this continues the thinking.

  5. I like the “confidence level” approach a lot, even though I usually tend towards harder data. Great idea!

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