That’s right, no more time sheets!
I’m not going to write a Jerry Maguire-style memo, but I would like to explain some of the reasons behind our decision.
I’ve never been a fan of time sheets, and have always thought there was an alternate way to deliver the best results to our clients while still realizing profitability for my company.
Many businesses use time sheets for different purposes; as a pricing model, to measure productivity, worker accountability — all valid reasons, but we started to feel the accountability leans more on efficiency, often at the expense of effectiveness.
I wonder how many people succumb to the quoted price to build a website by justifying it as a necessary expense, and not as a valued investment in their growth and success.
Our customers are not buying websites, logos, brochures, etc. Our clients are hiring us for ideas. They want more sales, happier customers, and better projects to work on. They want credibility and their slice of the pie in an ever-broadening marketplace. They want people talking about them with passion.
Do ad agencies sell their sales-affecting campaigns by the hour? Why does a billboard on a back country road cost less than an identical one placed along a busy Interstate? Value? Effectiveness? Better exposure?
The client wants to be able to compare the price to the value before they buy, not after. If the value exceeds the price, the buyer’s profit, they will often be willing to pay that price. Our clients aren’t paying for time, they are paying for the quality of our output.
People want effectiveness, and that is a judgment, not a measurement. Do you purchase a sculpture at the art gallery based on the amount of time the artist spent on it? No, you buy it because it’s a really cool piece of work. Time sheets reward efficiency. However, efficiency and effectiveness are quite different. Effectiveness is where results live.
After talking to several folks about our new found liberation from time sheets, the first response I usually get, along with a puzzled look, is “How do you know how to price the job?” or “How do you not lose money on projects?”.
By being very good at project management, sticking to the scope of work and being able to do price-led costing, we’re able to give good estimates on our projects AND stay under budget. Also, keeping things simple and focused on the goal is another challenge we’ve learned to master. If we get to a point that we’re going beyond the scope of work and wandering off into feature bloat, then we talk to the client about saving those ideas for a second phase if they make sense to achieving more results. If that’s not possible, we work something out.
We’ve found that we have become better at pricing our estimates when we focus on the value of our output instead of the cost of our input.
Stanley Marcus, one of the sons of the founders of Neiman-Marcus, put it this way:
“You’re really not in business to make a profit, but you’re in business to render a service that is so good people are willing to pay a profit in recognition of what you’re doing for them.”
This is the ultimate principle for any business because it places the focus where it belongs, on the customer.
What matters to us at 2nd Floor is that our work is awesome, we solve our clients’ problems, and we have fun. You can’t measure any of that with a time sheet.
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Update #1
Bounced some emails back and forth with someone a little bit ago. She wanted to know how we track our progress on projects or know what everyone is working on. We use a project management system called Basecamp, which was developed by 37 Signals. Everyone here has used and tested several project management systems in the past; this is the best solution for us. Great features, easy to use and an open API.
We also use another product by 37 Signals called Backpack. I won’t go into all the details of this web app, but with the Journal, we update our status to show whatever we’re working on (just like how you update your Facebook status), and we can also add items that we’ve done that day. Our project manager, Courtney, or any other staff member for that matter, can go to the Journal and see what everyone is currently working on, and what they’ve done that day (or throughout the week). Quick and hassle-free.
And while I’m at it, we also use Highrise and occasionally, Campfire, as well.
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Update #2
Thanks for all of the positive response we’ve received in IMs, emails and Facebook messages!
I’ve been asked how we handle items such as minor changes on a website, or anything that isn’t project-related. We have an area in Basecamp set up for service tickets and we still bill hourly for those items.
