How We Abandoned Billing by the Hour - Part Two
Welcome to this month's article of Let’s Be Frank, a monthly newsletter series hosted on LinkedIn and authored by our founder Digby. If you are interested in following along pop over to the Let’s Be Frank LinkedIn page here and hit the subscribe button to have these articles sent straight to your inbox.
September 8, 2020 – Launch Date
We spent six months creating Pricing Guidelines for 40 categories of projects (see article two) and we worked with a great branding company, Will Creative, to give our project a name that was descriptive (and also a bit fun). Welcome to “Frank Fee”.
When we launched Frank Fee, we knew it was going to be an adventure. We felt strongly that clients would like the idea of cost certainty so we implemented the new system and started having very different conversations with clients at the beginning of each project. I don’t recall being worried that it wasn’t going to work - instead, I was confident that if we came up against any challenges, we would figure it out as we moved along.
One of the things we knew would be fundamental to the success of Frank Fee was a commitment to continuous learning. We are now one year into its launch and that philosophy still rings true. While we’ve had many great pricing experiences, we’ve also encountered a handful of surprises along the way. Nevertheless, every experience leads to learning, better systems, and more successful outcomes.
Abandoning Time Sheets?
In order to learn, I believed it would be important for us to continue to track our time. So, we recorded our time just like in the past, and like other firms that bill by the hour. This approach has its pros and cons.
On the con side, tracking hours entrenches a traditional mindset of value based on time expended, with staff still tending to think about winning or losing on a file purely by whether it was billed at time cost.
On the pro side, tracking hours allows firms to track the inputs on producing the work so you can gauge and re-assess efficiencies. Being someone who almost decided to pursue his Masters of Science in Statistics, I leaned towards tracking the data.
How did it go in the first year?
The great news is that a year later (and now with sufficient data), it is clear we have become significantly more efficient based on “billing realization rates” as a Key Performance Indicator (KPI). This is a result of three things:
1. Getting better at pricing all the time by gaining an appreciation of the value delivered and the inputs necessary to complete a project;
2. Better allocation of resources to each project; and
3. Better systems (precedents).
Outliers
The key to continuous learning was tracking our outlier files, which we determined by having low and high billing realization rates. Every month, everyone that worked on an outlier file is asked to complete a very short questionnaire on the project to determine why the file resulted in high or low billing realization rates. Staff then commit to making any necessary changes in our systems or approach. This information is then shared firm-wide so that everyone can learn from the experience. Without keeping track of outliers, it would have been much more difficult to continuously improve as we have.
Please continue to share your thoughts in the comments and thanks for being part of the journey.
Until next time when we dig in further,
