What You Should Track Instead of Time
LinkedIn Article by Tim Williams
April 29, 2016
Professional firms who have come to terms with the fact they don't sell time still fear the prospect of trying to manage their staffing, workflow, and finances without the information provided by timesheets. They fear they'll be operating in the dark, devoid of the data they need to evaluate and manage their success. But trading hourly billing for modern pricing practices provides the perfect opportunity to start measuring the things that really matter -- effectiveness, innovation, accountability, profit growth, and true productivity.
Ad agencies in particular are notoriously resistant to measuring anything that's not a unit of input (hours, labor rates, time of staff) or a form of income. As ad exec turned professor Brian Sheehan points out, "Most agencies track their revenue increases or declines year over year, but they rarely track workload year over year, and almost never track the basic financial formula that gives a clear picture of the long-term nature of their businesses: revenue divided by workload over time."
CHASING THE WRONG RABBIT
Tracking actual workload instead of time of staff is infinitely sensible, but deeply ingrained habits created by the increasingly discredited and disliked hourly billing system keep firms mired in infective ways of measuring their organizational effectiveness. In effect, they're collecting the wrong data.
Agencies can't claim to be "vested in their clients' success" if the only thing they pay attention to is their own costs and revenues. And by failing to effectively measure even their workloads, much less their effectiveness, agencies and other professional firms do a great disservice to both their employees and their clients.
By turning away from the simplistic tracking of utilization to more meaningful performance measures, professional firms can not only better evaluate their success, but to some degree predict it.
Here's a partial list of the measurements that matter:
Profit Generation and Profitable Growth
1. Year-over-year profit growth
2. Number of 20%+ profit clients over prior year
3. Average turnaround time by project type
4. Velocity of teams
5. Revenue per employee
6. Revenue divided by workload
7. Profit per employee
Strategic Integrity and Success Orientation
8. Percent of clients/assignments judged to be a good fit with the firm's strategic focus
9. Percent of assignments with clearly defined scope of value (desired outcomes), not just scope of work
10. Percent of clients for whom firm effectively identifies and tracks metrics of success
Workflow Effectiveness and Internal Collaboration
11. Average turnaround time for each major project type
12. Number of projects completed on deadline
13. Extent of internal collaboration
14. Effectiveness of individuals and teams
Work Quality and Client Satisfaction
15. Effectiveness of firm's work and recommendations
16. Performance ratings by clients
17. Client compliments and complaints
18. Number of errors and omissions
19. Percent of client agreements with a clear, detailed definition of scope
20. Percent of work that is repriced due to scope creep
21. Income derived from changes in scope
Revenue Streams and Innovation
22. Number of new compensation agreements representing new approaches to pricing
23. Diversity and balance of risk in compensation agreements
24. Number of new products, services, or methodologies developed
25. Percent of total revenues derived from sale or licensing of IP developed by the firm
Remember that your firm's goal isn't to be busy; it's to be productive and profitable. The faulty utilization information provided by timesheets is a poor substitute for the management tools your firm really needs to effectively deploy talent, optimize workflow, increase productivity, and develop more profitable client relationships.
If you're looking for a good reason to put the final nail in the time tracking coffin, consider that somewhere between 15-20% of your firm's resources are spent feeding, managing, and supporting the "time machine." Imagine what would happen if you redirected that time and money to measuring and improving what really matters in professional services: competence, proficiency, effectiveness and ultimately the ability to create and capture value for both your firm and your clients.