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The Billable Hour Kills Your Firm’s Values: What Are the Alternatives?

By William Johnson, The Openside Group,

William Johnson, Managing Director of The Openside Group, examines the critical influence that metrics have on behaviour and why what gets measured, matters.

In December 2017, an 81-year-old Air Force veteran who fought in Vietnam hobbled into a hospital in Oregon seeking treatment. According to the New York Times, to his great surprise and alarm, he was turned away. It wasn’t that he wasn’t ill enough – the doctors who saw the sick man had no doubt that he should be admitted – the truth was that he was too ill. The hospital authorities deemed he was too “high risk” to be admitted.

Why did the hospital initially refuse to treat the sick man? The answer appears to be “metric fixation”. According to Jerry Muller in the Guardian, the behaviour of the hospital’s leadership was driven by their desire to improve the performance metrics of their institution. Based on these metrics, the hospital received a quality rating and the higher the quality rating, the higher the monetary bonuses for the hospital’s leadership.

What this story neatly illustrates is the critical influence metrics have on behaviour. Even in a sector such as healthcare, where the core values of those working in the industry are clear and indisputable, the scourge of metrics is overwhelming and people are driven to achieve the targets, even if they go against stated and implicit values.

As Simon Caulkin writes in the Observer, it’s time to move beyond Peter Drucker’s oft-repeated phrase “What gets measured gets managed” to “What get measured, matters” because when reward and punishment – particularly monetary reward – are directly linked to specific metrics, they will have a profound impact on behaviours.

As Muller writes, leaders of all organisations need to realise that metrics have a “dramatic effect beyond the world of the spreadsheet”.

How does this relate to professional services?

We have previously written about the problem with “the billable hour sacred cow” in professional services. In short, and rather predictably, it prioritises billable activity over any other behaviours, including professional development, business development, innovation, entrepreneurialism, client relationships, effciency and training, to name a few.

If we assume that a firm’s stated values should be “behaviours in action” then it’s highly likely that the billable hour (or utilisation targets) will override them – however wellmeaning or principled they might be. If people are punished and rewarded according to their ability to achieve a number of billable hours (or a utilisation target) then it is unlikely that they will embody the firm’s values because they will be superseded by the insatiable influence of the firm’s activity metrics.

The simple answer for firms would appear to be to identify the behaviours that embody the firm’s values and measure the use of these behaviours in action. Unfortunately, the reality is not so simple.

The diffculty facing professional services firms is that other behaviours – beyond time and activity – are often hard to determine and measure. Management guru W. Edwards Deming once wrote that “Running a company on visible figures alone” was one of his seven deadly management diseases and that “While visible figures are important, the figures that are unknown and unknowable are even more important”.

Deming’s quote is similar to one famously made by William Bruce Cameron: “Not everything that can be counted counts, and not everything that counts can be counted”.

Herein lies the problem. If not everything that counts can be counted, the most important figures are by their nature “unknown and unknowable” and more often than not are subjective and qualitative, it is understandable why firms take the easier option – to measure billable hours – and discard the hard-to-measure alternatives, even if this means the firm’s values are undermined.

So, what metrics could professional services firms use instead? What metrics are easy to measure while also aligned with the firm’s brand and values?

In our view, the answer comes from defining and then measuring direct actions and examples of the critical behaviours you want to see with as much energy as you measure hours billed and utilisation.

As Kristy Hull writes in strategy+business, firms should focus on keystone behaviours or “Patterns of actions that are tangible, repeatable, observable, and measurable, and will contribute to achieving an organisation’s strategic and operational objectives”.

Rather than focusing simply on “values”, which are often abstract and intangible, firms should instead measure and reward based on direct, tangible, “knowable” instances of their firm’s values in action. Firms might reward according to the number of occurrences of a specific “action” or based on a wider portfolio of evidence of behaviour gathered over a period of time, remembering the three critical roles of a partner: to exemplify the brand, to embody the culture and to ensure the legacy.

Examples of actions that could be tracked include (but are certainly not limited to), thought-leadership articles written, client referrals (from outside the firm), referrals to others internally (cross-selling), positive feedback from clients, examples of collaboration internally, evidence of self-driven development, evidence of coaching and mentoring.

Metric fixation can kill your values. As long as reward is linked to certain metrics, it is human nature to focus on the behaviours that will achieve those targets, whatever the organisation’s stated values. In many professional-services firms, the focus on activity-driven metrics such as utilisation and billable hours continues to drive behaviours that are in direct contradiction to the firm’s stated values.

Our view: if your firm’s values count for something more than just hours billed, then it’s time to count something more than just hours billed. Because what gets measured, matters.

The full article can be read on www.openside.group/billable-hourkills- firms-values-alternatives/


William Johnson

William Johnson

Managing Director of The Openside Group


Published: GGI Insider, No. 102, July 2019 l Photo: kasto - stock.adobe.com

 

 

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