Michelle Golden - 06/27/2007
My always controversial friend (and fellow VeraSage fellow) Chris Marston musta had an extra shot of espresso on Thursday...he was heated!
30-something Christopher Marston runs Exemplar Law Partners, the Boston law firm touting "no hourly bill, no hourly bull--law practice the way it should be."
He not only graduated from the relatively new schools of value pricing and blowing up the partnership model, he is breaking new ground daily in both of these areas. He shares his thoughts regularly on his Inside the Firm of the Future blog.
In keeping with his ‘take no prisoners’ blogging style, Chris’ latest post, "Top 10 Reasons Why Professionals Don’t ‘Get It’ When it Comes to Pricing and Service" doesn’t sugarcoat how he really feels about most of the legal profession (much applies to accounting, too).
Abrasive? Yup. But well worth the read. Chris makes several valid points.
(originally posted on Golden Practices)
Ron Baker - 06/27/2007
Dan Kravitz with the most frequently asked question we at VeraSage get:
Mr. Baker:
Our firm is reviewing the possibility of moving away from a time and billing system. We are a third party administrator in the retirement plan industry with 65 employees and about 1,000 clients. We work and function like many accounting firms.
We are having difficulties understanding how you (1) measure client profitability and (2) measure employee productivity if you are no longer tracking time?
Thanks,
Dan Kravitz
Thanks for the question Dan. As you can imagine, we have devised ways to both measure client profitability and team member effectiveness without timesheets. So have the 400+ firms around the world that don’t operate with timesheets.
There’s no way I can provide a short answer in a post. Instead, I’m going to have you read the following, from our Web site:
Why get rid of timesheets
Why we don’t need consultants
No timesheets, is it possible?
My ACCA book, Trashing the Timseheet
Timesheets are training wheels
For much greater depth, get my book, Measure What Matters to Customers: Using Key Predictive Indicators
I also strongly recommend the essays by Paul and O’Byrne and Paul Kennedy.
Once you’ve read these, you can find even more by typing in “Timesheets” in the VeraSage Search engine. Also, read our Trailblazers and Main Thread sections for more examples of firms without timesheets.
Better yet, have each of your executive team read various articles and provide a report to the group. You’ll be amazed at how simple the answers to your questions really are.
I hope that helps.
Ron Baker - 06/27/2007
“Our answer is the world’s hope; it is to rely on youth. The cruelties and obstacles of this swiftly changing planet will not yield to obsolete dogmas and outworn slogans. It cannot be moved by those who cling to a present which is already dying, who prefer the illusion of security to the excitement of danger.” —Robert F. Kennedy, “Day of Affirmation” address, June 6, 1966, University of Capetown, South Africa
I first heard of Brendon Harrex when he e-mailed me on July 13, 2004. While many firm leaders pay lip service to the idea of innovation, when it comes down to actually implementing new systems and processes the status quo proves to be firmly entrenched.
Brendon had read my ACCA booklet, Trashing the Timesheet, a radical idea, to say the least. Most accountants start by reading the first booklet in the series, Burying the Billable Hour, but Brendon made the connection instantly. Here is what he asked me in that first communication:
Your thoughts further confirm my thinking that as a profession we cannot continue to create value and attract young people to accounting as a career as long as we sell time and not value. I am one partner in a practice of 10 partners and I have the opportunity to convince them of the merits of your thinking in an upcoming strategic retreat in early August. I think I have created a compelling argument in support of “value” thinking; however, I suspect I will get lots of questions relating to how this works in practice.
Do you have any contacts in New Zealand who are further through the conversion process than our firm or any material that may be useful in strengthening my case? I want to see us adopt value pricing as soon as possible otherwise we will be overtaken by technology and clients who demand more from us than our systems can deliver.
I would greatly appreciate any assistance you could provide. Keep up the fantastic message.
These questions demonstrate Brendon’s passion for continuously learning, inquisitiveness, and challenging the conventional wisdom endemic in most firms, which states: “Because that’s the way we’ve always done it.”
After providing Brendon with more resources, including an extensive reading list, and putting him in touch with my colleague Peter Byers (who had already implemented these ideas into his practice), Brendon was able to communicate the message to his partners and build enough of a consensus to allow me to visit his firm in February 2005 to conduct a two-day workshop on Value Pricing and Trashing Timesheets—no small feat in a partnership full of skeptics.
Shortly after this meeting, Brendon was appointed Chief Value Officer—the first in the world that I am aware of. This is an incredibly challenging position, the responsibilities of which you can read about in my article: “Who’s In Charge of Value at Your Firm?” Brendon’s performance in this function was outstanding and he was subsequently appointed Chairman of the firm on May 2, 2006.
On June 21, 2007, while I was in London presenting at the CIMA Conference, Brendon sent me the following email, updating me with his exciting news:
Hi Ron,
Well, who would have thought 12 months ago that Ward Wilson would be part of the consolidator trend that appears to be gaining more momentum in our profession as the average age of qualified accountants continues to rise. To paraphrase Tom Peters’ quote that you also used in Professionals Guide to Value Pricing, “I struggle to see how mating two dinosaurs would create a gazelle!”
This mating has provided me with the incredible opportunity to create my own gazelle known as the Harrex Group. I have attached for your information a copy of our launching advert that ran full page in the local newspaper.
The Harrex Group truly is a firm of the future, offering customers accountancy-led ideas, advice, and project management. Of course, we operate without timesheet and this frees us to focus on the delivery of high value business solutions rather than assuming that all time has the same value (as long as it is productive of course!).
I have appointed a non-accountant CEO, Nicki Morsink, who is the former CEO of Ward Wilson. Unlike most accounting firms where the CEO is the person you blame when the committee (the committee = all owners as everyone must have their say) makes a bad decision, Nicki is a real CEO—she signs the cheques, drives the business and ensures we are all performing. This works well as I am focused on the customer interface/selling, pricing and coaching.
Ron, I believe that the future of our profession lies in smaller accounting businesses led by innovative individuals. I share Chris Marston’s concerns about the ability of large firms to implement value pricing—most have such a fear of reduced income that they cling very tightly to what they can measure (regardless of its relevance). I simply believe that many traditional accountants are incapable of operating without timesheet.
Upon formation of the Harrex Group, I was approached by the very best people who wanted to be part of a firm of the future and not a firm of the past! We currently have a waiting list of talented people wishing to join us and this is certainly not a common complaint of the profession in our part of the world.
I believe the smaller, innovative firms will attract all the talented staff and eventually dominate the accounting world, as their innovative services and ability to respond to the market will become increasingly in demand by business.
Thanks for your fantastic support and energy, Ron—you don’t know how marvelous it feels to be in a business that is focused on the right things!
Regards,
Brendon
Brendon understands the vision and leadership required to operate a firm of the future. It is not solely about creating a more profitable firm, but about creating a better quality of life, both for the team members of Harrex Group as well as the prosperity of our profession. Accountants are among the premier knowledge workers, not union employees. The value they create is not determined by how many hours they work, but rather the value of their ideas. Yet the metrics in most firms treat workers as if they worked in a factory. Knowledge workers do not work to the rhythm and cadence of an assembly line, but rather an iterative and reiterative process of the mind.
How many accounting firms do you know that maintain a waiting list of people dying to work for it? If this doesn’t prove the power of operating within a Value and no timesheet culture, than the leaders of this profession are blind, and the only way we will make progress is funeral by funeral.
The Harrex Group is a shot across the bow of the SS Billable Hour, along with its last-of-the-Luddites captains. Wake up firm leaders, the future is already here, it’s just unequally distributed. Once more and more firms, like the Harrex Group and Exemplar Law, begin to pilfer your human capital you’ll be forced to change your ossified ways or be destined for an existence of mediocrity.
Today’s knowledge workers own the means of production, which tilts the economic power in their favor when selecting a firm in which to invest their intellectual capital. Most firms haven’t even recognized this fundamental shift in how wealth is produced because they are trapped in an Industrial Era mindset. Harrex Group recognize the realities of a knowledge economy, and have adopted a better business model—one that will inevitably be replicated by other firms in the future—in order to attract the best and brightest into our profession. This cannot be accomplished by today’s firm leaders who cling to a present which is already dying, and who prefer the illusion of security and mediocrity to the excitement of dynamism and change. It must be achieved by truly visionary and courageous leaders.
Brendon embodies the essential characteristics of such a leader: Effective interpersonal skills; risk taking, innovation, and creativity; ability to change minds; continuous learning; pride, passion and commitment
None of these characteristics can be measured—they must be judged, discerned and experienced. It is a rare accountant that possesses all of them while still remaining humble and grounded in a deep abiding faith in the future.
I have had the great good fortune to spend time with this incredible individual, and he continues to teach me lessons and add immensely to my intellectual capital. It was a personal honor when he became part of the think tank I founded—VeraSage Institute—in order to help spread our message and ideals around the world for the betterment of our chosen profession.
Meeting Brendon reminded me of what Winston Churchill wrote in A Roving Commission, in 1930:
Don’t be content with things as they are…Don’t take no for an answer. Never submit to failure. You will make all kinds of mistakes, but as long as you are generous and true, and also fierce, you cannot hurt the world or even seriously distress her. She was made to be wooed and won by youth.
No doubt, I am biased with respect to Brendon’s leadership and vision. But I have absolutely no doubt that his contribution to our profession has just begun. This is the beginning of the end for the Last of Luddites, those firm leaders that don’t have the guts or the vision to imagine any other way to run a professional knowledge firm.
Brendon is leaving a legacy, not just for his firm, but for our profession. Brendon has already created quite a legacy, and I have no doubt the best is yet to come. His leadership, courage, and perseverance is an inspiration to thousands of professionals around the world, and yet he remains humble in exaltation. I am honored beyond words to have him as a colleague, and—more importantly—a friend.
Check out Brendon’s innovative advertisement (as a pdf for a better view) explaining the Harrex Group.
Ron Baker - 06/25/2007
Since the post from May 28th that published Paul’s letter announcing his cancer, we have been asked by many people how he is doing.
Paul recently set up Blog to keep everyone posted on his treatment and progress. You can also leave him comments. Here is the letter he sent announcing this, along with an update on his condition:
Dear friends
I hope you understand and forgive the impersonal
nature of a bulk email and ... a blog. So many of you
want to keep in touch but don’t want to hassle—bless
you. Some may not want to be pestered by bulk emails
or want too much detail, so you can go to the blog or
not.
So I’ve set up links from what is now just a referral
site here. What I will be keeping
regularly posted is the blog so you can get updates.
you can go direct to it here.
You will see under each entry there is a line that
says x comments, you can click there and make comments
that will appear on the blog. Next to it is an
envelope icon, so you an forward that blog entry to
someone by email. Feel free to use them as you wish.
As I keep saying the warmth of feeling is a great
tonic—thank you all.
Paul
Paul is handling this amazingly well; what an inspiration to all of us.
All of our prayers and wishes are with him, always.
Ed Kless - 06/20/2007
In an article published in RainToday, Bruce Marcus begins his article on professional service marketing by stating, “If all the world of professional services is ruled by billable hours, which says that thou shalt feel guilty about any hours spent that are non-billable, and at the same time you realize that some time must be spent in practice development, then a way must be found to make your practice development hours more productive.”
Well Bruce may have hit a tree, but he missed the target. While I know that it was not the focus of his article, this opening line is the problem. Not spending time on marketing, building intellectual capital, customer service, et al. are all symptoms of the disease called ABH — the Almighty Billable Hour!
Understanding the categories of lead sources is important, but we will never make any headway unless the underlying disease is cut out. We must kill the billable hour as the Satan-spawned offspring of Marx’ Labor Theory of Value that it is.
As a consultant to the professions Bruce should be assisting us in leading the charge against this insidious beast. I invite him and all of you to join us! Come sign the VeraSage Declaration of Independence.
Ed Kless - 06/15/2007
In response to a question posed by one of the participants at a recent Project Management Boot Camp I conducted, Organizational Provocateur, Tom “Bald Dog” Varjan of Dynamic Innovations Squad wrote what I think is a great response.
First here is the original question:
Have pitched one of our first value billing non-hour engagements. We have done a very detailed scope document and the customer is looking for a time and cost break down for each task. Suggestions on dealing with this one.
And now Tom’s terrific response:
Dear Prospect,
I understand that you may have never faced this situation of paying for value. The reason we’re doing pricing this way is that by focusing on hours and costs, we are forced to shift our sights off the results.
We pride ourselves on managing our projects with the precision of brain surgery. In any project there can be only so many variables to focus on. We’ve chosen this pricing model because we are on the same side of the table as you and want to focus on the results you’re seeking.
People don’t go to brain surgery for five hours of fiddling with their gray matter. They want to get healthy.
Similarly, no one wakes up in the morning saying, “Let’s hire an IT firm for 10 hours of server tweaking.” They have specific problems.
Unfortunately, we believe the hourly pricing model you’re requesting is unethical to clients. Basically, the longer I can prolong your problems, the more you’ll pay me. We’re proud to operate as trusted advisors to our clients who seek us out for care, protection and guidance on their IT issues.
There is a key distinction. Professionals who set value-based fees focus on the outcome of the project, that is, the improvement in the client’s condition. Professionals who set time-based fees focus merely on selling more hours, which may or may not contribute to the end result. Value-based fees are client and outcome-centered, hourly fees are self-centered.
I know this approach may be new to you, and sadly ignored by our industry, but from the ethical standpoint, this is the only way we can sing the same song.
With hourly pricing you and your IT firm not only struggling to sing the same, they are not even on the same page of the song sheet.
In your lifetime, you’ll meet many people who try to sell you “time” and expect you to pay them, but you’ll find only a handful of people who can help you to achieve specific business objectives.
At the end of the day, clients buy results not time chunks. Working on a value-pricing basis is an investment. Working on a per hour basis is just another cost.
Hope it helps a bit.
As they say on the Guinness commercial — Brilliant!
Ron Baker - 06/14/2007
RainToday recently published an old article of mine about the obstacles to implementing Value Pricing and getting rid of timesheets.
I received the following email question from a reader:
I enjoyed your article on the end of billable hours and timesheets.
I’ve got a consulting business and over 95% of our revenues come from value pricing contracts. But we track our time. Why get rid of timesheets? Isn’t there some value to knowing where time is allocated? How do you analyze client profitability if you don’t track the cost inputs? I’d love to get some perspective on this, as we all hate time sheets.
Thanks for your consideration.
One thing that has always amazed me about the VeraSage Quest to bury the billable hour and trash timesheets is how people ask us questions they think we’ve never thought about before. The most common with respect to trashing timesheets is: “How would you know if you’re making any money?”
Part of me wants to be impudent, slap my forehead and respond: “Damn, I never thought of that. You’re right. Let me recuse my 5 books and millions of written words on this topic until I can find a satisfactory answer to your question.”
Nevertheless, the question illustrates how endemic that belief is that professionals sell time. Not only that, it’s the wrong question.
Here is my reply to the reader:
Why get rid of timesheets? Because they measure the wrong things. They are lagging indicators.
I get your question all the time, it’s not new, or original, nor insurmountable. Let me ask you a better question: How much money are you leaving on the table? Timesheets will NEVER be able to answer that question.
The professions are not going to become better at Value Pricing by being better (or more accurate) cost accountants. If that was true, CPAs would be best the pricers in the world, and they are among the worst.
Here’s what replaces timesheets: Excellent project management skills, Key Predictive Indicators (not performance indicators--there’s a huge difference), and After Action Reviews. You can read all about this in my book, Measure What Matters to Customers: Using Key Predictive Indicators, available at:
You can also read about firms that have ditched timesheets on our Community Blog and Trailblazer sections of our Web site. One particularly insightful essay is by Paul Kennedy:
Other essays on the subject
Basically, your clients don’t care how long it took you to do something, so we should measure things that matter to them: like turnaround time, responsiveness, etc. Firms that don’t waste their time filling out timesheets can focus on adding value, rather than measuring a lagging indicator no one cares about.
Bottom line: It’s being done around the world. You can do it too. If you do, you’ll become a lightening rod for attracting talent ("If you work here, you don’t have to complete timesheets. We treat you like adults, not children").
I hope this inspires you to read more about this. We at VeraSage offer a huge reward to anyone who come up with an objection to Value Pricing or getting rid of timesheets that we haven’t heard before. It amazes me how people think we haven’t thought long and hard about all of these issues, especially when many fellows operate firms without timesheets! We know it’s possible to trash the most anarchistic legacy in the professions.
Of course, to understand that you have to understand that we are knowledge workers, not union employees.
I will have more to say about the right question (how much money are you leaving on the table?) versus the wrong question (how do you know if you’re making money?) in a future post.
Ron Baker - 06/12/2007
Tim Williams and I had the good fortune to present at the Association of National Advertisers (ANA) in May in Phoenix, Arizona, where Tim presented the results of a survey of agencies and marketers of value drivers, while I presented Measure What Matters: Using Key Predictive Indicators.
We included some of the highlights of the survey findings, along with a model we believe agencies and marketers need to move towards to create a value-based relationship, in an article that has now been published (June 11, 2007) in Advertising Age: New Value-Based Comp Model Needed.
Tim and I have been working on this value-based model (tentatively titled LIVe—Leading Indicators of Value—since we met in 2005. It’s gone through several iterations, and we know it will go through many more as it begins to get implemented in marketers and agencies alike. Tim has actually implemented it with all his clients in his consulting firm, with excellent results.
If you are interested in the LIVE model, contact either or for more information.
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