Timesheets: A Cruel Hoax

A partner of mine recently retired and noted in her farewell speech what she was going to miss the least…filling out her weekly timesheet. Everybody hates timesheets. Looking back on my career as an operations guy, I realize that I spent way too much effort thinking of ways to optimize timesheets in the firm. I realize now that timesheets usually do more harm than good.

Why do we fill out timesheets anyway?

The answers usually go something like this:

  • We’ve always done timesheets and so does everyone else.
  • The firm sells time so it must track time in order to get paid.
  • The firm needs to know how much time went into each project so we can estimate fees on future projects.
  • People are paid by the hour so time must be tracked.
  • We wouldn’t know how we’re doing financially without timesheet data to calculate key performance indicators, like Direct Labour Multipliers and Utilization ratios.

These answers might seem logical enough, but the truth is, they’re all flawed.

First, timesheets are not very accurate. Folks often have a hard time remembering what they did in the morning — never mind five days ago. They don’t measure efficiency because—as we are all too aware in the design professions—“work expands so as to fill the time available for its completion.” In fact, people are incentivized to “polish” their work beyond the value the client asks for. Polishing allows individuals to indulge their creativity, allowing the firm to charge more for their time. Plus…because projects are so different, hourly data from previous projects is often useless, even if the data could be found in the firm’s database.

Timesheets also consume huge amounts of administrative effort. It’s not uncommon for some folks to record a half hour every week just to fill out their timesheet. Timesheets then have to be collected, which is especially time consuming when it comes to chronically delinquent time keepers (you know who you are). Timesheets also need to be checked and signed-off by a manager, and entered into the financial system. Or maybe they’re done online requiring expensive software and training. That’s a lot of time and resources spent to add zero value for clients.

We’re foolish to be using timesheets. There’s a much better way: just don’t do it!

Timesheets act as an impediment to changing our thinking: They encourage us to sell time as opposed to value; they prevent us from pricing our work on value instead of our cost; they prohibit us from focusing our practice on becoming experts, so that we can charge for the value we create; and they prevent us from paying our staff for the value that they deliver on behalf of the firm, as opposed to how much time they spend in the office or working from home. Ultimately, timesheets keep us from simplifying our key performance indicators so that we don’t have to rely on timesheet data.

If we could rid ourselves of timesheets (and we can), we would have stronger firms. If we were incentivized to solve our client’s problems effectively, using our expertise and technology, we would not be penalized for being smart and progressive.

I have a client who doesn’t use timesheets. All of their work is priced on value, using fixed fees. When recruiting staff, part of the pitch is that they won’t ever have to fill out timesheets again. The staff is engaged because the firm takes the same “keep it simple, stupid” approach to other aspects of their practice. The firm’s clients love knowing how much they’re going to pay before the work starts, and of course the firm loves knowing what their revenue is going to be at the project outset. It works because the client and the firm have incentives that are aligned. The client isn’t worried about inefficient execution, and the firm delivers value for the client and gets paid to be smart.

Getting rid of timesheets is not as difficult as you might think, and doing so can pay huge dividends. It’s a paradigm shift that’s happening in other practices too, like accounting, advertising and law. There are a number of steps, but the first is to accept the idea that a firm can operate without timesheets. They’re just a cruel hoax.

Before retirement, Rick Linley was Chief Operating Officer at Smith Carter Architects and Engineers Inc. in Winnipeg. He now leads Strong Practice Strategies, a consultancy focused on helping emerging and evolving firms to be strong. He can be reached via www.strongpracticestrategies.com