Why Timesheets Are Innovation Killers

LinkedIn Article by Tim Williams
November 1, 2017

Why aren’t professional services firms more proactive on behalf of their clients? Because it’s not billable.

There’s no job number for “innovation,” and if there were, it would be considered non-billable and therefore not a priority in a firm that makes its money by logging hours on timesheets.

The billable hour system produces a spectrum of unhealthy behaviors among attorneys, accountants, advertising professionals, and countless other professional service providers. Executives in these firms are evaluated primarily based on how “busy” they are on client business because only billable hours produce revenue for the firm. But what actually produces value for the firm is not hours worked, but satisfied clients.

Clients of professional firms give their firms credit for being responsive but have a completely different opinion about their firm's willingness and ability to be proactive. The client view is that the firm does what they’re asked, but don’t come to the table with innovative ideas on their own. They will respond to texts on weekends and emails late at night, but they don’t offer up thinking and solutions that weren’t requested in an official scope of work.

Perverse Incentives

The principal culprit in this misalignment of expectations is the misalignment of incentives. Unless the incentives inside the firm support what’s in the best interest of the client, firms will have an impossible time delivering on what every smart client wants most: unasked-for ideas and recommendations for moving their business forward.

The top executives in most advertising agencies will tell you their most innovative thinking goes into new business pitches, not current client business. They have a strong incentive to inject innovation and proactive ideation into impressing a prospect, but once that same company becomes a client the incentive is to make sure their teams are spending the right amount of time servicing the business. To make matters worse, the most talented thinkers in the agency — top creatives and strategists — spend the majority of their time and energy working on new business, not actual clients. This is a travesty for all parties. 

The primary things that should be measured in a professional firm are the things that matter to clients: effectiveness of recommendations, quality of work, and results. Instead, most firms are busy measuring “busyness” and fret much more about reaching quarterly revenue targets than meeting the expectations their clients have regarding the level of proactive thinking provided by their professional counselors.

Turning the Tables

Surveys done by professional services associations show that the vast majority of firms track work effort, but precious few apply measurements to the actual work itself. Ad agencies, for example, track:

  • The number of hours they spend, but not the number of ads they produce. 
  • Whether the time was spent, but not whether the deadline was met. 
  • If the team producing the work was “efficient,” but not if they were effective. 
  • If the client was invoiced, but not if they were satisfied the work performed. 

Imagine Samsung not knowing how many mobile phones they produced last year. Or how many production schedules were met. Or the number of hardware defects or software bugs. More importantly, imagine them not tracking customer satisfaction and customer complaints, the leading indicators of success in almost any business.

By failing to measure and manage their actual workload (not just the hours spent), professional firms are flying blind. And by neglecting the practice of tracking the outcomes they produce for their clients, they are undermining their long-term reputation and future prosperity.

The firms that view their success through the lens of effectiveness instead of efficiency create and cultivate the kind of environment that supports and rewards innovation. They understand what their inventory really is: intellectual capital and original thinking — not hours. They sell innovation, not utilization.

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