Abolishing Timesheets at Brains on Fire – straight from the CPA’s mouth

The following is a guest post from Brandy Amidon – not only our Princess of Particulars, but one the smartest CPAs we’ve ever met. Yeah, we’re braggin’ on her. Read on to find out why.

One of the great things about working at Brains is that you do a little of everything. Yeah, I’m not only a CPA & half of our accounting team,  but here I’m also an event planner, assembly line worker, catering chef, snow flake making machine and now a writer for just a day.

Starting January 2009, we’ve abolished timesheets. You heard me. They are gone. Not just for some, but for all. It started with a simple question of “Why?” not and grew into “Let’s do it!”

We don’t sell our time. We sell happiness for our clients, which comes in the form of results, exceeded expectations, and solutions to problems – none of which are measured by a billable hour. Why did it take us so long to let go? Because we had to relinquish control. Control over profitability and being able to measure something tangible.

How long it takes us to create something memorable and out of this world doesn’t matter. What matters is that it’s awesome and changes the world.

It may take some time for this to sink in. So let it marinate. Take a shot of tequila – we did! Then leave a comment or if you have specific questions for your company, feel free to email me – brandy (at) brainsonfire (dot) com.

Timesheets-Promo

  • http://www.twitter.com/theupstate Jason B.

    Way to go. That is a huge leap to make. “We don’t sell our time” is a philosophy that I can totally get behind. Would be very interested to hear a progress report in 6 months time (what challenges this poses from a billing / client relations angle). Thanks for sharing (and leading the way?)

  • http://gretemangroup.com/blog Todd

    Whoa. That’s a big step. I eagerly await the three-, six- and 12-month updates on how this change is going – straight from the CPA’s mouth, again.

    Seriously, congrats on the bold move.

  • http://www.engageinpr.com Kyle Flaherty

    As someone who has worked most of his life at an agency and has filled out hundreds of timesheets I say BRAVO! I’ve always believed it was possible and that someone needed to take the leap, so thanks for doing it and I can’t wait to hear how it helps you in the future.

  • http://twitter.com/getdonovan Jay Donovan

    OMG, it’s reason #1023 why all branding folks should want to work at this place! No innovation takes place by playing it safe. In the end, this may work and it may not work, but the set of ba**s it takes to attempt this is daring and honorable. You all REALLY DO put your money where your mouth is! Btw, I think this will be successful, if people are committed to making it be successful. Bravo!

  • http://socialgumbo.com Loki

    As a Web Content Producer I have pretty much always sold the deliverables, not the time it takes to produce them. For instance, I’ve been brought on board by several companies to do new roundup blogs focused on their respective fields. Sometimes research and writing on a post takes half an hour, sometimes it takes four hours. The bottom line is that the client is pleased with the results and I am not selling myself short.

    It s a brave move and one that I look forward to comparing notes with you about as time progresses.
    As they say in theater, break a leg!

  • http://punkrockHR.com Laurie Ruettimann

    It sounds like you’re well on your way to implementing ROWE:

    http://en.wikipedia.org/wiki/ROWE

    Good luck and great job!

  • http://innerspaeth.com Jill Spaeth

    This is a brilliant idea. Just out of curiosity, how are you managing contracts that might normally run on an hourly basis? Will they now run on a “happiness” basis? If so how would you manage that? Sounds like a great concept to brainstorm.

  • Brandy

    Jill,
    We only have a few projects that are hourly and not ‘Fixed Pricing Agreements’. We will establish clear deliverables and an estimate of the project before the job starts instead of after & based on billable hours. What’s great about letting go of time sheets is that we can take time to see what value we can add to our client projects without worrying about write offs.

    Check out this website for more details on the process of abolishing time sheets.

    http://verasage.com/

  • http://www.centerline.net John Lane

    I’m very curious about your move.

    Even with a Fixed Pricing Agreement or “not to exceed” limit you would still have to estimate the cost for projects; and that would probably be based on people’s estimated time which logically breaks down to a cost per hour. Then you calculate profitability of the job by knowing the actual cost to do it, which again is tied to time.

    What’s the new math to get yourself away from time?

  • Brandy

    John,
    You have to completely let go of the billable time concept and the old formula to calculate profitability.

    It’s no longer about how many billable hours it takes to complete a project. It’s all about the value you provide to your client and what your client is willing to pay. It starts at the beginning when you are estimating the project and flows through when you complete the deliverables. You no longer determine profitability based on time.

    It’s based on the simple principal of did you do what you said you’ll do and was the client happy.

  • http://www.ignitiongroup.com Tim Williams

    Congratulations on making not only a change in practices, but a significant change in paradigm. By trashing time sheets, you’re acknowledging that clients don’t buy cost or efficiency. They buy outcomes and effectiveness.

    As your firm clearly understands, most financial systems tell us the costs of everything and the value of nothing. So in our experience, the next step is to replace the old cost-based tools and reports with new value-based reports that measure and demonstrate effectiveness, so that you’re able to show your clients (and your own associates) the value you create, not just the costs you incur. These include:

    Value Plans
    Value Briefs
    Value Reports
    Value Case Histories

    For too long marketing communications firms have tracked only inputs and not outputs. They’ve been chasing the wrong rabbit.

    Keep up the great work.

  • http://www.verasage.com Ron Baker

    Hi Brandy,

    Congratulations on your firm’s transition to becoming a Firm of the Future.

    Marketing firms are professional knowledge firms that sell intellectual capital, not time. No customer buys time, they buy value and results. By pricing on purpose you are dedicated to capturing the value you create for the customers you are privileged to serve.

    By trashing timesheets you will begin to focus upon that value, as well as the results and outputs you create, rather than costs, activities, and efforts. You will also become a lightening rod for knowledge worker talent, since no knowledge worker enjoys accounting for every six minutes of their day.

    We at VeraSage Institute are dedicated to burying the billable hour and trashing timesheets in professional knowledge firms around the world. We have helped thousands of firms across all PKF sectors–from accounting and law to ad and IT firms–make this transition.

    There are plenty free resources at our Web site, including Trailblazer case studies from firms that have made the transition, an active Blog, essays, books, etc.

    It’s way past time to bury the billable hour! Congratulations on being part of the Revolution.

    Regards,
    Ron Baker, Founder
    VeraSage Institute
    http://www.verasage.com

  • Amanda

    Think of all the time re-cooped trying to fill out time sheets that will be used making your work even more remarkable than it already is. I don’t think you can put a price tag on that.

  • Jim Caruso

    Brandy,

    In your response to John Lane, you said you “no longer determine profitability based on time” – but you did not describe how you determine it instead. Although I agree that clients do not buy time, payroll is still your primary cost. It would seem to me that, without timesheets to allocate payroll to clients and/or projects, you can only look at profitability in the aggregate for the entire firm – correct?

    Jim Caruso

  • Brandy

    Jim,

    Payroll and operating expenses are relatively fixed costs. Using the billable hour method, we marked ourselves up (for overhead) and then used write offs to bring ourselves back down to what the client paid us for the job.

    Once you eliminate timesheets, you stop allocating overhead based on hours worked.

    Instead, we determine profitability of each client using Leading and Lagging Key Indicators. Check out this link and read both articles to help think about which Key Indicators would work for your business. (http://www.verasage.com/index.php/resources/C59/ )

    The closest Key Indicator to the old method is where you allocate overhead to each client based on AGI (Revenue less COGS). You’ll find that once you take out the allocation of time, your profitable clients are still your profitable clients. You are assuming that the more revenue clients bring in the more company resources (overhead) they’ll use.

    This is the hardest part of the whole process. Wrapping your mind around how to measure profitability. I urge you to start testing how your client profitability will look if you eliminate timesheets and compare to your current method. This really helped us feel secured that the new method was more effective.

    Please feel free to call or email me and we’ll chat this out!

    Thanks!

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  • Laura Dellinger

    Congratulations on this great leap. What great confidence you express in your team and the value of creative thinking and great strategy, which we all know truly can’t be measured in time. I will look forward to hearing more about how it works.

  • http://www.theuniuni.com/ Payton_vege

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