Congratulations to Mark Bailey and the whole team at Mark Bailey & Co. for being named the Best Accounting Firms to Work For by Accounting Today for a second straight year. The article specifically identifies the trashing of the timesheet as the reason for their tremendous success.
"We threw out timesheets," explained Mark Bailey, the firm’s managing partner. "But the motivation to throw them out is that they didn’t really reflect the value of the service that was being given. What we came to realize very quickly was that a timesheet is a control tool."
The 16-person firm decided that controlling professionals didn’t drive productivity; instead, it hampered innovation and creativity.
I don’t know most of the other Legal Rebels, but I would bet that Chris Marston is the only practicing lawyer among them who doesn’t do timesheets. I don’t know how you can be a Legal Rebel if you still complete a timesheet—the buggy whip of the intellectual capital economy.
Also, check out Exemplar’s new Website and our Australian colleague John Chisholm’s blog post on meeting Chris on his recent tour of the USA.
Congratulations Chris and Exemplar—you are truly a Firm of the Future!
From August 13th to the 29th, I had the great good fortune of touring Australia with my colleague, VeraSage supporter, lawyer, and legal consultant John Chisholm.
It was an amazing journey. I met several incredibly interesting and gracious people, went to an Aussie Rules football game, drank way too much OZ wine (all excellent!); got my butt kicked on the golf course by John; flew several non-United airlines (a reminder how valuable 1K status truly is); did sixteen speaking engagements over 11 days and 5 cities—Gold Coast, Sydney, Brisbane, Melbourne, and Geelong—including the ALPMA Summit, 11 law firms, a Young Lawyers group, ACLA members (General Counsel association), and a meeting with government officials.
As you can imagine, it’s hard to summarize such a tour, but here are some of the interesting insights I came away with:
The Young Lawyers I spoke with were blown away with the concept of a “knowledge worker.” Essentially I told them that all the talk about Baby Boomers, Gen X, Gen Y, etc., was nonsense on stilts. The real change in the economy is the transition from industrial/service to intellectual capital, and the knowledge worker theory is far more robust and predictive of what the workforce is undergoing. Gen X, Y, etc., is as useful as reading your Horoscope—it’s absurd to stereotype people based on the year they were born.
I believe law firms in Australia are further behind the accounting firms in implementing and experimenting with Value Pricing. I think both sectors are far behind the USA in pricing generally. That said, there is the same level of interest among both countries, as firm leaders sense that the billable hour’s days are numbered.
The general counsel group and individuals I spoke with are very interested in the Value Pricing message. All expressed a desire to have a “value dialogue” with their law firms, to help them understand value. All would willingly pay a premium for certainty in price. Law firms, are you listening to this?
Liz Harris, a consultant and friend of VeraSage whom I had the pleasure of meeting for the first time and spending time discussing our Quest, taught me that the GCs in Australia are far more concentrated than in the States, and thus could definitely exert more influence in getting law firms to change pricing strategies.
This runs counter to my strong opinion that sellers change pricing strategies and business models, not buyers. However, I concede she makes a compelling point, and I would be all for buyers helping force law firms to change. I remain totally unconvinced, however, that buyers have the economic power—or incentive—to accomplish this.
To support my contention, I issued the GCs the following challenge: Stop issuing tenders (RFPs) asking for hourly rates. Simply insist on your law firms quoting fixed prices for a fixed scope of work. Period. If they continue to give firms the option, out of pure inertia firms will default to hourly rates.
Of course, some GCs are as mired in the billable hour mentality as are law firms, so this is not as easy as it sounds. I hope proponents such as Liz and John can get in front of more GCs to explain the benefits of Value Pricing for both sides.
The Global Financial Crisis (GFC) was milder in Australia than America, and the leading indicators point to them already coming out of a shallower downturn. This lessens the pressure on firms to change pricing strategies. The news of Pfizer forcing its outside counsel into fixed prices—and less profit—did send ripples of fear over law firms, as well as procurement beginning to get involved in negotiating law firm pricing. Whether or not this forces widespread change remains to be seen.
John and I met with government attorneys who understand the need for change. Like the general counsel we met, they, too, left the practice of law firms because of the timesheet and billable hour treadmill. How do their employers know if they are producing without timesheets? The question seems sort of silly, doesn’t it? After all, the private sector doesn’t use timesheets.
Several law firms have sprung up that offer alternative pricing, such as Optim Legal, Advent Lawyers, and Marque Lawyers. I had the pleasure of meeting the directors of the first two, and I applaud their efforts to offer innovative pricing alternatives to hourly billing. However, I do not understand why they are using a “penetration” pricing strategy. I believe they should be using a “neutral” or better yet, a “skim” pricing strategy.
Michael Stewart from Integrity Financial Solutions, a VeraSage Trailblazer firm, hosted a seminar I gave to a mixed audience of professionals. I also met the CEO of APS, a large software firm that is working on a project management and pricing module for accounting firms. If more software firms begin to offer alternatives to their time and billing programs—literally the buggy whip of the knowledge economy—that would certainly validate the concept of Value Pricing, the uselessness of timesheets, and would help diffuse the ideas faster.
I had the pleasure of finally meeting Matthew Tol and some of his team in Geelong. Matthew is a VeraSage Trailblazer firm that thoroughly understands that valuing knowledge by tracking time is the equivalent of plunging a ruler into your oven to determine its temperature—it’s simply the wrong measuring device.
I also met some folks who truly don’t understand the concept of Value Pricing and are mired in the Old Practice Equation, with its obsessive focus on efficiency, realization and hourly rates. Some of these are employed in very large firms. I came away thinking large firm equals small brain; larger firm equals even smaller brain.
I asked this one question every time I encountered one of these proponents of The Firm of the Past: Do you really believe that the value of Jonas Salk’s polio vaccine is determined based on how long it took him to develop? To ask the question is to answer it—unless you lack intellectual curiosity, not to mention honesty.
The billable hour has had an deleterious effect on the “trusted advisor” role of lawyers. It has created a zero-sum mentality between client and lawyer, with both focusing on how much the one gains at the other’s expense. It has allowed both sides to disregard the creation of value—the very reason law firms exist. Even Pfizer does not understand this, which is why I find the video of the GC so repugnant—specifically the idea that law firms will have to live with less profit (I totally agree with them, however, for forcing their law firms to change pricing strategies). Why can’t both sides create and capture more value?
I’m beginning to develop a “pincer claw” theory of change: there are several pincers squeezing the old “we sell time” business model—general counsel, government regulators, young attorneys who don’t want to be a prisoner to the timesheet, the competition for talent, the GFC, competition from upstarts such as Optim, Advent, Marque, among others, and partners themselves who intellectually understand that time does not equate to value but who are too risk-adverse to do anything about it. The confluence of these pincers, it seems to me, will bring about change one way or another. It’s just a matter of time. And, of course, progress will happen funeral by funeral. Sorry, but it’s true.
I met and had dinner with the father of Hamish, of the famed OZ national radio program Hamish and Andy. The significance of this is that Hamish and Andy are responsible for the “Street Accountants” video clip that we’ve played for audiences around the world (first shown to me by Tom Hood of the Maryland Association of CPAs). One of the best clips ever made!
John and his welcoming wife Karen showed me hospitality over and above the call of duty, allowing me to invade their home for a week and get to know some of their family. John also shared several fantastic bottles of wine, as did many of the firms I presented to. For more on Australian wines, subscribe to John’s newsletter where his lovely daughter Kate will introduce you to many boutique wineries that you will love.
I’d like to know how Ozzie’s compute golf handicaps? John told me the entire trip he was a 20, then when we played 9 holes and he shot a 40, while I spent my time duffing around in every sand trap on the course. 20 my (Aussie) foot!
OK, I’d be remiss not mentioning by far the highlight of the trip: I learned I would have been a great goat racer. Attorney John de Groot gave me a signed copy of his book, Memoirs of a Goat Racer and more, which I will always remember. You can learn more here.
All in all, this was a great trip and an incredible learning experience. John plans to visit the United States, and if you are interested in meeting him, please contact him or me directly.
The billable hour is on the defensive around the world. I’m still waiting for someone to defend it with an argument that VeraSage hasn’t nuked. Some are still trying, but I’ve yet to read or hear anything new in its favor in the 15 years I’ve been on this Quest.
It’s simply the wrong theory of value. And just like your high school algebra class, if you begin a long problem with the wrong first answer, it doesn’t matter how efficient you are in the rest of your work, it’s will still going to turn out wrong.
Let us hope law firm leaders in both the USA and Australia have the vision, fortitude and guts to put the billable hour where it belongs—its grave. R.I.P.
The Journal of Accountancy recent posted excerpts of an interview they conducted with Ron Baker. In this seven minute clip, Ron does a great job at summarizing the concepts surrounding the firm of the future, also known as a professional knowledge firm.
This is my latest slide that illustrates this powerful idea. It differs from what Ron espouses in that I make a change in the mathematical operator used in the equation to signify that the transformations enhance each other.
Yesterday, on the front page of the Wall Street Journal opposition to the billable hour went mainstream - ‘Billable Hour’ Under Attack. The article begins, “With the recession crimping legal budgets, some big companies are fighting back against law firms’ longstanding practice of billing them by the hour.”
In addition, the Journal also posted this accompanying video, in which the client (Pfizer) lays down the law (of economics that is) to her firms. While there is much here to agree with, she misses an important point. No billing by the hour can be financially beneficial to the firm as well. The question that I have for these firms is will you now eliminate the time sheet? Your customer has just told you that you have no reason to keep them. If anyone out there works for one of these firms, please let us know what the buzz is.
I’m thrilled to announce the Maryland Association of CPAs is repeating my first Second Life Webinar, which will be held this Tuesday, July 28th, 1:00 - 2:00 pm Eastern Time.
You’ll have to be registered for Second Life, as well as the Maryland Association’s CPA Island on Second Life.
For more information on the Webinar’s content, and how to register on Second Life, visit Maryland’s Web site here.
Two recent articles in the June 2009 CFO Magazine on trends in professional firm pricing quote Dan Morris, Chris Marston, and Ron Baker.
One article discusses consulting firm pricing, while the other article discusses law, recruiting, and accounting firm pricing.
Trailblazer Jay Shepherd is also mentioned, as is the law firm Bartlit Beck, a boutique litigation firm that does not price by the hour.
We are hoping to receive a Trailblazer case study from Bartlit Beck, an amazing firm with approximately 100 lawyers. They are doing precisely what some lawyers (John, are you reading this?) insist can’t be done.
Last Friday, I—along with my father—had the pleasure of visiting TrailblazerBrains on Fire in Greenville, South Carolina.
This is an amazing agency, which as of January 1st of this year trashed its timesheets. This initiative was pushed through by Kathie Conway, Keeper of the Cash, and Brandy Amidon, Princess of Particulars.
They were able to achieve this after reading the Journal of Accountancy Firm of the Future article from November, 2008, along with The Firm of the Future book.
Very few firms that we know of have been able to accomplish this feat without at least attending a seminar, or hiring consulting help.
After a great lunch, we sat down for an interview on trashing timesheeets. Some of the questions came from people who follow @BrainsOnFire on Twitter, and some were from Cathy and Brandy.
Thank you Cathy, Brandy, and the rest of the team at Brains on Fire—you are true pioneers and it was an honor to meet you. I’m only sorry I didn’t get to meet Mud.
I get asked this question all the time, and I’m afraid I’ve never given a completely satisfactory answer.
We get asked constantly for endorsements, for example, or affiliations to promote various products and services, and I always have to explain we are a think tank and that’s not part of our Purpose.
But a lot of people don’t have much contact with think tanks. I’ll freely admit I’ve been “over-invested” in think tanks for at least twenty years and have learned an enormous amount from all of them, as well as having mentors in nearly all of them.
So I thought I’d share with the VeraSage community the origins of our founding. It dates back to September 4, 1999, in a paper titled “Operation Telescope.”
This was written for Paul Dunn (and Ric Payne), at that time the founders/owners of Results Accountants’ Systems (RAS).
Obviously, the original vision did not come to fruition since Paul Dunn sold his portion of the company in 2001.
But the idea didn’t die, and my colleagues, Dan Morris and Justin Barnett, and I founded VeraSage in 2001.
As an organization, it’s a disembodied entity held together by an idea—that is, to improve the professions.
I recently read the Noble prize winning economist Herbert Simon’s autobiography—Models of My Life—wherein the last page reads:
To make interesting scientific discoveries, you should acquire as many good friends as possible, who are as energetic, intelligent, and knowledgeable as they can be. Form partnerships with them whenever you can. Then sit back and relax. You will find that all the programs you need are stored in your friends, and will execute productively and creatively as long as you don’t interfere too much.
Measured by this standard, VeraSage has certainly met my expectations. I get to work with some of the brightest people I’ve ever met, with the added bonus that they are all good friends.
I’d like to express my deep appreciation and gratitude to everyone of them:
Justin Barnett
Dan Morris
Scott Abbott
Peter Byers
Michelle Golden
Daryl Golemb
Brendon Harrex
Paul Kennedy
Ed Kless
Chris Marston
Tim McKey
Paul O’Byrne (R.I.P.)
Tim Williams
Yan Zhu
And of course thanks to our community who support us: readers, friends, colleagues, and a myriad of others too numerous to list.
You won’t want to miss this Webinar sponsored by the 4A’s Finance Committee and presented by Coca-Cola’s Director of Worldwide Media and Communications, Sarah Armstrong.
The program will air on May 12th, at 1:30 - 3:30 p.m. EDT. You can register here.
As the 4A’s announcement states:
Learn how and why Coca-Cola is moving to value-based compensation with their agencies and how they have crafted pay for performance.
The Coca-Cola Company (TCCC) recently announced that they are changing their methodology for compensating agencies. TCCC will now compensate their agencies via an innovative value-based compensation (VBC) method. Coca-Cola determined that labor-based arrangements were not optimal and embarked on a program to build a framework for assigning value ranges for individual scopes of work.
This insightful Webinar discussion of value-based compensation will explore:
Why Coca-Cola is moving to value-based compensation
The strategic principles of the new Coca-Cola agency compensation plan.
How Coca-Cola determines the value of the agency’s work
The techniques that Coca-Cola will use to reward agencies for positive performance
Tools and templates that Coca-Cola has developed to facilitate the ultimate expansion of their value-based compensation plan across 200 brands and all global markets.
Sarah Armstrong will answer your questions about why and how this iconic marketer is changing the compensation paradigm. Ms. Armstrong will share tools that Coca-Cola has developed to help frame and manage scope of work. She will discuss value considerations and describe a “Value Calculator” that Coca-Cola has developed to help frame and manage scope of work. She will discuss value considerations and describe a “Value Calculator” that Coca-Cola has developed to guide their value compensation determination.
If you’re in the advertising profession, please don’t miss this ground-breaking program.
VeraSage Fellow and CEO of Exemplar Law Partners Chris Marston was interviewed on the billable hour, Value Pricing, knowledge management, and Exemplar’s disruptive business model.
Listen to the interview here, approximately 19 minutes.
Congratulations to Mark Bailey and the whole team at Mark Bailey & Co. for being named the Best Accounting Firms to Work For by Accounting Today for a second straight year. The article specifically identifies the trashing of the timesheet as the reason for their tremendous success.
RSS Feed
Comments | 0 Trackbacks | Permalink | In the Media Leadership News On the Web Trashing the Timesheet Choose an Industry: Accounting