Many businesses, such as law and accounting firms, bill clients by the hour. It’s been this way for decades and it’s generally expected that when you’re paying more, you’re getting the best. But the system is fundamentally flawed. It rewards the unproductive. It also wastes time on behalf of clients. Don’t get me wrong; you should get what you pay for. But if you spend two hours going through old invoices with a fine-tooth comb to see if you can find even an hour of erroneously billed time, what’s that really saving? If you charged $100 an hour for your services would it be worth $200 to find a $50 error?
Now in my own profession, you’ll find the majority of Virtual Assistants prefer to work with retainers, but they are still based on hours. So if you have a very efficient Virtual Assistant who charges $50 an hour and completes a project, error-free in an hour and another less experienced one at $25 an hour who takes 3 times as long to complete the same work, you see the problem. No one should benefit from dragging their feet or working slower than a more qualified professional.
Here’s the upside. More and more businesses are rethinking the hourly billing model and are leaning toward more realistic billing policies that benefit both partners in a working relationship.
Kyle Westaway is an attorney who is running his law firm like a startup, working with a Virtual Assistant and opting out of the Park Avenue office structure. “There is a new model of the practice of law, and it’s about applying lean startup principles and challenging the old norms of the billable hour, command-and-control structure at a price that’s more approachable, lacking all the extra added bloat,” he says. “I think the beauty of doing things your own way is that you can reconsider the question, ‘What works best for the client?’ Read more here.
For some of my clients this same model has already proven effective. After a few months of working together, we review where time has been spent and on what types of work and determine a reasonable flat rate. This frees me to be even more useful to them. I might not spend a few hours a month promoting content on social media that I notice isn’t getting attention (a blog post, for instance) without specifically being asked if a client is being charged hourly. But if we have arranged a flat rate, I’m free to fill in our down time with valuable tasks that benefit them that they may not have even considered when we were watching the clock. It’s not about the time spent; it’s about doing what needs to be done. Period.
In his book Extreme Productivity, Harvard Business School lecturer Robert Pozen gives some excellent tips on how to maximize the 24 hours we have in a day. The key takeaway is that we need to focus more on results and less on hours worked. “You have various institutions like law firms and accounting firms which bill by the hour,” he tells us. “I’m really against that. You have an incentive to go slowly, be there as long as possible, to over-research things and over-staff.”
Pozen, who is also a senior fellow at the Brookings Institution and has juggled several high-profile jobs while writing six books, gives advice based on his personal experience. He says to ignore 80 percent of emails and requests, focus on high-priority tasks, and to absorb the conclusion first when reading. Here’s the interview Pozen had with Aimee Groth of Business Insider.
It will greatly benefit your business and your personal life to focus on metrics, not hours.
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