During my time in the Organizational Leadership track I will be working with Integral Group, a mid-sized consulting firm specializing in deep green building design and engineering. Like most consulting firms (and law offices, where it's even more extreme), "billable hours" strongly influence the way Integral operates, making it a challenge to justify getting paid for the work I will be doing. In this post I'm going to examine some of the implications of this firmly entrenched method of accounting, and set the stage to perhaps find a new way forward.
During my year at a large architecture and engineering firm, I developed a distaste for billable hours. I found billable hours to be a strange practice that didn't seem to best serve the clients. While I was never at the negotiating table for a project proposal (and never put together a proposal) and therefore don't necessarily understand all of the inner workings, I can provide my impressions. Basically, we would build our proposals based on how much time we thought we would be able to bill to the client, and the client would pay us based on those hours and the going rate for the various people working on the project.
We'd have to record our time card with each hour classified by the project or task we were working on. Travel time was billable to clients. We needed to be billable a certain percent of our time - 80% on average if I remember correctly - the partners included. This left little time for innovation, mentorship, etc. It meant that when we were short on billable projects, our office wouldn't look so good to the Since partners could bill more than associates, who could bill more than staff professionals, they would often take the work that might otherwise be best delegated to others, and not include us in the big picture. We'd get the work that our superiors didn't have time to do. This legal affairs article even talks about lawyers billing one client for travel time and another for work performed en route, and it's quite common in the consulting world as well.
And looking at the big picture, it seemed to make the work more about money more than about doing the best possible work, and it took some of the joy out of doing good work. Since we were billing the clients based on the amount of time spent on the project, rather than the quality of work we were doing, it made for a strange double standard. There's that old saying: "Organizations are perfectly designed and operated to produce the results they get." And I believe the same applies to the way work is incentivized. A salaried salesperson is going to act differently than one working solely on commission - the former will likely have the customers' needs in mind while the latter will often work to sell them anything he can. A cab driver who meters by the minute would drive differently than one metering by the mile. The same must apply with consulting firms. If you make pay about how much time you spend working, well results might fall by the wayside.
So why have billable hours become the "gold" standard, and what might some alternatives be that could lead us to different outcomes? I'll start examining that in future blog posts!
