Are Timesheets Really an Effective Management Tool?

My previous post on the issue of timesheets (Do You Need Timesheest to Determine Profitability?)talked about whether timesheets are truly needed to determine whether your practice is profitable. Last week I also posted once again on value pricing issues in The Debate Over Value Pricing Rages On, That post concerned one objection to value pricing. Another objection, raised in an article on value pricing from the UK site, AccountingWeb, entitled, Value pricing: a debate without end, involves timesheets again.

Timesheets - or lack of them - is one of the most controversial aspects of value pricing. There are two reasons that most professionals currently keep timesheets: pricing and management. This post will specifically address the claim that timesheets are an effective and useful management tool, and that therefore they should be kept even if they're not being used as the basis for the lawyer's fees.

The AccountingWeb article asserts, "timesheets are a useful management tool, and on occasion they collate handy information to present to the client too."  Timesheets are time consuming. If you're looking for a way to collate information to present to the client, there are other, more efficient and effective ways to collate information for a client than writing down everything you do in 10th of an hour increments.

But what about using timesheets to manage employees? How can law firms compensate associates without timesheets? How will they know if the associate is productive? How will they know if a particular associate is valuable to the firm?

Having been a partner on a management team at a law firm, I can tell you that timesheets and 'billable hours' are a poor way to determine whether a particular employee is valuable to the firm - or even to determine whether they're actually doing their work. First of all, employees create their own timesheets, so you're taking them on faith.

Second of all, if you've ever filled out a timesheet, you know that they're rarely a reflection of how hard you actually worked, of your productivity or of your effectiveness in solving the client's problems. How many times have you spent hours in the office and found only a measly few hours on your timesheet at the end of the day? Associates face the same issues.

Sometimes the timesheet isn't accurate because, in the heat of working with clients and doing the actual work you're getting paid for, you don't have time to stop and write down what you did. Those little missed .1s add up. And then you spend additional time agonizing over what you forgot to write down or where that time went. Who cares? If you're not billing your clients based on time spent, you don't have to waste time worrying about it.

One of the reasons to ditch hourly billing in the first place is that the amount of time you spend on a matter or on a particular task bears little to no relationship to the benefit your service provided to your client. All hours are  not created equal.

There's a great comment left by Eric Fetterolf to the above AccountingWeb article. Fetterolf challenges the value of the timesheet as a management tool and asks these questions about timesheets:

• Does it tell you, for this custom project, that your charge spent too much or to little time?
• Does it tell you that the customer is satisfied, delighted, or horrified with the result?
• Does the time sheet alone tell you how to innovate the process, or even whether innovation occurred that could provide future profits to both your firm and your customer firm?

As you become more efficient, more proficient, and are able to use technology more to your advantage, the time it takes to complete discrete tasks will be reduced. That should allow for more time to innovate, to come up with new arguments or new solutions for clients. But how do you bill the time for 'thinking?'

As Fetterolf says:

Our minds do not switch off once we leave our desks.

I have come up with great solutions in the shower, at the dinner table, and all other sort of places far removed from the office. In truth, the 15 minutes of active, consious thinking, say at the dinner table, was not the only time I spent on the problem. My mind, subconsiously, was churning on the issue the entire time. Can I bill for that time spent? Can I even articulate it to the customer without being thrown out?

If your associate comes up with a great solution to a client's problem at the dinner table and saves the account, or creates a loyal client for life as a result, do you really care what their timesheet says? Won't you be able to determine whether they're a valuable employee?

Managers that compensate or value employees strictly (or even largely) based on the hours that are written on a timesheet miss many of the most important ways of evaluating employees: their ability to work as a team, their ability to keep clients happy, their ability to bring in business, their ability to creatively solve a problem, or make a cogent and succinct argument, or write an intelligent analysis to the client, or take a good deposition, their leadership qualities, etc.

Managment by timesheet just doesn't make sense when you're dealing with professional services, like lawyers.

Comments

[Dee]

Bravo! The timesheets and billable hour system must go. The value of an employee ought not to be reduced to the figures on a timesheets (inserted by that same lawyer) while failing to account for other important factors like said lawyers speed and efficiency. One lawyer may simply be a plodder and be rewarded for it to boot. Partners and legal administrators need to open their eyes to the reality and the future.

[Michelle Golden]

Great post Allison! I gave a talk today to partners of accounting firms and covered several of the points you've made above, but you encapsulated this all so nicely here that I'm going to point them over. Well done!

Michelle