Here is Greg’s second contribution in defense of the billable hour and timesheet.
]]>Ron Baker, you were wrong once again. The night before last was one of the biggest nights of the year for my firm. You and the rest of the VeraSage flunkies could have had a piece of it too, but I guess you ditched the timesheet an hour too soon.
You see, we have an annual tradition during the heart of busy season. Everyone in our firm is expected to work the night before daylight savings time. We all work until 3:30 a.m. at which point we have a party. The party consists of waffles and a cheese tray. How we can afford to treat our people that good, you ask? Well, it’s all thanks to Ben Franklin and a little thing that we like to call the TIMESHEET because at precisely 2 a.m. we set our clocks ahead to 3 a.m. With a staff of 52 and an average billable rate of $120, our firm pockets an extra $6,240 just for staying up late and “springing ahead”.
Talk about leveraging people power! The lever is the timesheet and the hands pulling it are the hands of our clock. Hey, relax; we know this doesn’t work for our affiliates in Arizona or Hawaii. And we are very careful in that we forbid our people from working late when we “fall back”. (Imagine that: we’ve thought it through even though we don’t have the luxury of a think tank.)
Boom! Did you hear that? That was the sound of another hole blown in the hull of the Good Ship VeraSage. Sorry, Cap’n Ron.
How do you think that the regulation of the professions in the market effect you, your businesses and even your customers?
]]>
Cecil Graham What is a cynic? Lord Darlington A man who knows the price of everything and the value of nothing. Cecil Graham And a sentimentalist, my dear Darlington, is a man who sees an absurd value in everything, and doesn’t know the market price of any single thing.
It is obvious, to me anyway, that as pricers we are striving for the midpoint between the two. However, I am curious as to your thoughts on this.
Go!
]]>Brenda chips in, “Isn’t the time sheet the ultimate standardized form?”
Yes, Brenda, it sure is!
Greg Kyte is the self-proclaimed “Champion of the Dissenters.”
I’m proud to post his first contribution and let our readers decide for themselves the merits of his arguments. I’m sure this won’t be the last we hear from Greg.
Enjoy!
Ron Baker is Wrong
]]>Ron Baker and his stooges at VeraSage have long tried to discredit the well established modus operandi of professional firms: Time Accounting. To do so, they use the following simplistic equation:
Revenue = People Power x Efficiency x Hourly Rate
Unfortunately for the VeraSage minions, they have been attacking a straw man. The manifestation of the formula as conjured by Mr. Baker does not accurately represent the robust nature of the hourly billing convention. Professional firms naturally augment the formula with the processes by which they calculate Hourly Rates for their personnel. Best practices for calculating the Hourly Rate element include the use of the following formula:
Hourly Rate = RABR x Experience Factor x Stupidity Factor x Biorhythm Factor x Opportunity Cost Adjustment.
Allow me to enlighten the brainwashed value pricing hoard on the components of the augmented hourly rate element.
Reputation Adjusted Base Rate (RABR). Every firm has a reputation within the context of the business community that it serves, and this reputation determines the base rate to be used as the starting point for calculating billing rates for personnel within the firm. Also, it is universally accepted that the reputation of a firm equals the quality of its service. Arthur Anderson was unquestionably the most reputable accounting firm in the world in 2000, and to this day nobody questions the quality of their work.
Experience Factor. To begin to hone the firm-wide RABR to the individual practitioner’s hourly rate, it is obvious to everyone but Ron Baker and his goons that experience is the most important factor. Without a doubt, a college graduate with a piercing analytical mind and a penchant for big picture value creation cannot deliver the same quality of service that a middle-age alcoholic in the middle of a years-long divorce and a crippling debt burden with 20 years of experience can.
Stupidity Factor. Stupid individuals should have a lower billable rate than smart people. A Stupidity Factor of 1.00 means that the individual has committed the average number of errors during the prior period. A Stupidity factor above 1.00 indicates more errors, more stupidity, and a lower billing rate. No, no wait. A lower stupidity factor means lower intelligence and more errors. No, that doesn’t seem right. A higher stupidity factor means stupider people with higher rates. Yeah, there we go.
Biorhythm Factor. I am a morning person. I work best in the morning, and I am virtually useless in the mid-afternoon. Therefore, since my efficiency and the quality of my work are higher in the morning, I bill clients 15 percent higher before lunch. I also charge a fifteen percent premium for the 20 minutes right after drinking a Diet Coke. To be fair, I also give my clients a 15 percent discount for the 20 minutes immediately following calls from my ex-wife or for any time that I happen to be hung over. For price sensitive clients, we have a partner with clinical depression and irritable bowel syndrome.
Opportunity Cost Adjustment. One of Ron Baker’s harebrained arguments against time accounting is that it does not reflect the realities of economic laws. Is there a more irrefutable economic concept than opportunity cost? Opportunity cost comes into play constantly during busy season when personnel are working odd hours. I charge an opportunity cost premium on Tuesday and Wednesday evenings because I hate missing Idol, and I give a discount on Sunday mornings just so I can have a good excuse for skipping church.
So, sorry, Ron, your simplistic revenue formula has been turned on its head. It looks like I’ve single-handedly brought VeraSage to its knees, and I sincerely hope that you can get out of the lease on the office space for your (virtual) headquarters.
Explain to me (and the world) how any of you and your methodologies would have come up with the idea of putting a piano in the atrium of the Mayo Clinic where this could happen?
The telling spot about the advertisement Craigslist Lawyers Sells Degree is his description of why he wants out. If you are at all curious as to why brilliant minds opt out of a distinguished profession, read the full post. What is it about the law that has so tainted this young person to leave after spending in excess of $100,000 at a top tier law school to leave his chosen profession?
And this creative lawyer is merely a representative of those that are annually leaving the profession. At least the lawyers are asking some of the questions as to why? Legal leaders know that young people have no desire to be slaves to the almighty hourly bill. Additionally, the exchange for unnecessary legal work for merely a paycheck isn’t a standard of an honorable profession. Finally, law firm leaders frequently lack leadership (meaning they aren’t nice people to work for).
From my perspective, it is simply another wooden stake into the Vampire’s Heart (that being the hourly bill and its timesheet). I will offer some silver bullets as well and have already invited him to read this blog.
Whoever he is, I want to thank him for cheering up my evening.
]]>There were approximately 25 people in the live audience, and for the first time (for me), it was Webcast to approximately 65 people.
This course explains:
The Foundation Team did a wonderful job handling the technology, and moderating the questions from the Webcast audience. Since we show video clips, it has always been a challenge to pull off a Webcast, but this went smoothly.
You can view the entire program here. (Be sure to fast forward through the lunch hour, as they keep the camera rolling).
I hope you find it valuable and thought provoking.
And as always, any and all feedback is more than welcome.
]]>
Problems with this:
Now, I did view their product page and the system itself seems like it would be helpful to collect and disseminate tactic knowledge throughout an organization. This is, in fact, something sorely needed in professional knowledge firms. However, I would suggest to them:
If any of you pursue looking at this further, please let us know what you think about it.
]]>This morning, I was thrilled to receive a mention in post entitled Passing the Torch of Value Pricing by a consultant in the FileMaker community named Jonathan Stark. To Jonathan, I wish to express my thanks for the mention. I had trouble posting a comment, so I thought I would just mention it here.
In addition, a shout out to Kirk Bowman, another FileMaker consultant who I met for lunch shortly before his presentation at a FileMaker un-conference. I hope to post his slides and the audio from his session in a future post.
Jonathan and Kirk, thanks for advancing the cause!
]]>
The copy reads:
TIME IS a lawyer’s commodity - or rather - it is how most lawyers quantify their expertise.
How successful you are as a lawyer depends fundamentally on how you use your time. There is direct correlation between how much value you can extract from your time and your profitability. Most lawyers must record how they spend their time on a daily basis and regularly justify their use of time to clients, the court or their employers.
BTW - The blog post title is Morse code.
]]>Small spoiler alert if you are planning to watch the show!
In Season 3, Don happens upon an elderly gentleman in the back unused bar of a country club named Connie. It turns out, he is Conrad Hilton. In this later scene, Hilton asks Don for his opinion on a new ad campaign. What follows is a terrific lesson on providing a free sample without giving away too much.
Enjoy!
]]>
I’ve been working on my new book since December.
My publisher (John Wiley & Sons, Inc.) and I are struggling with the title of the book, so I thought I’d solicit the “wisdom of the crowds,” because there is so much of it in this community.
Structure of the Book
The book deals with much more than just implementing Value Pricing. When professional firms eliminate billable hours and timesheets, it changes the DNA of the firm, not just its pricing, but everything: its marketing, it value proposition, how it communicates with clients and manages their expectations, what it measures for customers and team members, and so forth.
The book is actually proposing a new Business Model, from “We sell time” to “We sell intellectual capital.”
It will have a toolkit, along with a 7 step process for pricing an engagement. Moreover, an Appendix for each professional sector—advertising agencies, CPA, Law and IT firms— and will include customized checklists, sample forms, examples, issues, etc., from that particular profession.
So, it’s a Toolkit + Reference Book + an explanation of a revolutionary business model. It’s a one-stop read that is not dependent on reading any of my other books.
Some Titles So Far
The Timeless Practice: VeraSage Institute’s Revolutionary Business Model for Professional Firms
Transitioning to Timeless: VeraSage Institute’s Guide to Selling Intellectual Capital, Not Time
From Time to Timeless: VeraSage Institute’s Guide to Selling Intellectual Capital, Not Time
The Timeless Firm: VeraSage Institute’s Revolutionary Business Model for Professional Firms
Professional Firm 3.0: VeraSage Institute’s Revolutionary Business Model for Professional Firms
Timeless: The Professional’s Guide to Profitability, Effectiveness, Intellectual Capital, and Value Pricing. Thanks to Ed for the subtitle on this one!
Any suggestions folks? There’s a bottle of Dan Morris’ finest wine in it for the best suggestion.
]]>
To create your own visit AddLetters.com.
]]>- Edgar Allen Poe
There it was on page 64 of the January 23, 2010 issue of The Economist! Another death knell for the billable hour has sounded.
In a recent paper, ’The Death of Big Law,’ Larry Ribstein, a law professor at the University of Illinois, argued that after decades without changing, law firms are likely to have an outburst of experimentation with different business models: even the venerable and lucrative “billable hour” method of charging clients is in doubt.
It reads like an obituary doesn’t it. We hear at VeraSage anxiously await the wake!
]]>