Yesterday Jody Padar shared a great post on LinkedIn titled "Stop Playing the Time Game" (originally published in Accounting Today, Oct. 1, 2013). The article focused on the pros of ditching the billable hour and focusing on pricing your services based on the actual value you are providing, instead of the time it takes you to complete the project.
I took the liberty of using the comment box to voice my frustrations about what comes to mind when I hear the phrase “The Time Game”.
Here’s my original comment:
Jody – when I read the title to your post I had one thought, “thank God I don’t have to play the dreaded Time Game anymore!” In addition to the reasons you laid out for getting rid of the time clock mentality, here’s what we back home refer to as “The Time Game”. You get a project with a 3 hour budget slapped on it. Does the budget have any merit or reflect the actual time it should take to complete the project? Most likely NO. Instead it’s correlated to the fee proposal. How much can I bill, so how much time should it take based on our hourly billing rates? There are so many reasons this creates failure at the firm management level. I could go on and on. Let’s dig deeper: You have 2 projects in front of you. Project A has a 3 hour budget and took you 5 hours. Project B has a 6 hour budget but only took you 2 hours. Guess how you allocate your time? Project A gets the actual time it took, 5 hours, less 2 hours so you make sure to come “within budget”. Project B gets the actual time it took, 2 hours + 2 hours to make up for your overage on Project A + .5 because well hell, it’s in the budget. Here’s the best part: what happens next year? The partner or billing manager thinks, “cool, the budget was reasonable last year, so we’ll go with it again this year”. And hence, the never ending, dreaded, awful, stress producing cycle of The Time Game. I know this isn’t breaking news to anyone, but for whatever reason it seems like it’s an overlooked outcome of the hourly billing mentality.
Today, I thought I would put my selfish frustrations aside and visit the detriment “The Time Game” has on client relationships and the public’s view of the CPA community as a whole.
Over the last few months my husband and I have been meeting with contractors to go over a potential remodel to our home. We’ve received a few bids, all of which came in at staggering different price points. This phenomenon is amazing to me. We are asking you to demo and rebuild our kitchen. I realize that what fixtures and materials we choose will play a huge role in total budget, but at the end of the day, shouldn’t the cost of the demo be pretty much standard across the board?
So how does this relate to the accounting industry? Can you imagine if a contractor told his employees or subs, “we bid $500 on the demo which translates into 4 hours of billable time, so when you hit 4 hours on the project stop and walk away. Even if the project isn’t done, let alone done well, just stop because we can only bill $500 for our work.”
That would NEVER happen. And if it did, the contractor would be out of business before he even got started. For that reason, contractors have entire teams dedicated to estimating job costs. When they bid for a job, it is based on a thorough, and hopefully for the contractor, accurate estimate of time and materials it will take to complete the job with the desired profit built-in. If they bid wrong, they lose money….bottom line. But they still finish the job, and if they want to maintain their reputation they do it right.
Switching gears back to the CPA firm. Our clients have a certain set of expectations for what they will receive from us, and to be honest, that’s what they should get. It doesn’t matter if it takes us 5x longer to complete the project than we estimated. As long as the scope of the project remains in-line with the original proposal, we should finish the job. We should never walk away from the “demo” and say here’s what you paid us for, so here’s what you get. Sorry Charlie.