What if the metrics of success used by most professional firms are wrong? What if law firms, accounting firms, ad agencies, and a wide variety of consultancies are investing their resources at getting better and better at measuring the wrong things?
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What Timesheets Don't Tell You
LinkedIn Article by Tim Williams
January 31, 2017
Is it possible to run a successful professional service firm without billing for the hours recorded on timesheets? Apparently so, as thousands of the most successful ones have already abandoned the idea of selling inputs and instead focus on outputs and outcomes.
But even those professionals who concede that time-based billing is a suboptimal way to capture value fret that without timesheet data, they’ll lose the essential information they need to run their business. Given that time tracking has become so ubiquitous in professional firms, most professional managers have been brought up to believe it’s the only tool they have to manage their resources and profitability.
Indeed, because time reports look so precise and scientific, they create the illusion of providing crucial metrics. But the reality is timesheets tell you almost nothing about the measurements that really matter in knowledge work. And if you accept (as most informed managers do) that timesheets are notoriously inaccurate, their true utility is marginal at best. (Not to mention the many negative effects time tracking produces in terms of internal motivation and misalignment of economic interests with clients, but that’s another story.)
To illustrate what timesheets do and don’t tell you, take the following 10-question quiz:
TRUE OR FALSE
Timesheets are an effective measurement of:
TRUE OR FALSE 1. COST OF COMPLETING A PROJECT
TRUE OR FALSE 2. QUALITY OF THE WORK COMPLETED
TRUE OR FALSE 3. CLIENT SATISFACTION
TRUE OR FALSE 4. DEGREE OF PROJECT COMPLETION
TRUE OR FALSE 5. EXTENT OF INTERNAL COLLABORATION
TRUE OR FALSE 6. SCOPE COMPLIANCE
TRUE OR FALSE 7. EFFECTIVENESS OF INDIVIDUALS OR TEAMS
TRUE OR FALSE 8. PROMISES KEPT AND DEADLINES MET
TRUE OR FALSE 9. EFFECTIVENESS OF FIRM’S RECOMMENDATIONS
TRUE OR FALSE 10. ABILITY TO FOLLOW DIRECTIONS AND COMPLY WITH COMPANY POLICY
Now let's analyze these questions one at a time.
1. COST OF COMPLETING A PROJECT
False. Even if timesheets were accurate (which we know they're not), adding up time spent on a project does not provide what a cost accountant would consider an actual cost. In economic terms, time is not a cost. Salaries are a cost. Rent is a cost. Office supplies are a cost. Time is not a cost. In knowledge work, time is a constraint.
2. QUALITY OF THE WORK COMPLETED
False. Hopefully, no explanation is needed here. It would be dead wrong to conclude that “more time” on a project necessarily means better quality.
3. CLIENT SATISFACTION
False. If client satisfaction is correlated to time spent in any way, it would only be in a negative sense. What do clients want? Fewer billable hours. What do firms want? More billable hours.
4. DEGREE OF PROJECT COMPLETION
False. Timesheets tell you nothing about the degree of completion on a project. No matter that 5 hours were estimated for the discovery phase and 4.5 of them have already been spent; the responsible party may just be getting started.
5. EXTENT OF INTERNAL COLLABORATION
False. Internal collaboration is desirable, but timesheets will never tell you if it’s happening. Indeed, they are likely to hide it, given the economic disincentive for too many people to “spend time” on a project, or meet together in a conference room to solve a problem.
6. SCOPE COMPLIANCE
False. Ask a project management professional in an engineering firm what it means to manage the scope of a project and they will say nothing about hours. A project is “in scope” if deadlines are being met, hard costs are within budget, and the client hasn’t requested changes or additions beyond the original Scope of Work — period — and hours logged don’t give you the answers to any of those questions. If the exercise of monitoring time “overages” tells you anything (remember, timesheets aren’t accurate), it would be that either the firm is poor at estimating or the project team is poor at time management — not whether the project is staying within the agreed-upon scope.
7. EFFECTIVENESS OF INDIVIDUALS OR TEAMS
False. Timesheets tell you nothing about individual or team performance, and provide no basis for helping teams or individuals improve their professional effectiveness.
8. PROMISES KEPT AND DEADLINES MET
False. As a manager, can you rely on timesheets to help gauge whether deadlines are being met? Does a timesheet tell you if the firm is keeping its promises to clients? Or if associates are honoring their commitments to one another? Does a time report help you know when the company is truly over capacity, or does it mostly reflect internal perceptions of being busy?
9. EFFECTIVENESS OF FIRM'S RECOMMENDATIONS
False. Nothing in the time tracking system even attempts to measure the thing professional services firms get hired for in the first place: effectiveness.
10. ABILITY OF STAFF TO FOLLOW DIRECTIONS AND COMPLY WITH COMPANY POLICY
True. In the final analysis, this is really the only accurate (and dubiously useful) information provided by the timesheet system. What proportion of your staff is willing to do as they’re told and submit a regular timesheet? If you’re looking for a leading indicator of obedience, you might as well ask them all to wear non-matching socks and see who’s willing to comply.
Of the measurements above that most professionals would agree are vital to success, what kind of tools do we have to measure them? For many firms, the answer is almost none. Instead, we keep peering through the wrong end of the telescope, looking for ever more precise ways of measuring the wrong thing.
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