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Another downside of the billable hour: it encourages perverse incentives. I was recently talking with a potential customer in the legal field, and he was interested in my startup's software, which helps people read on screen more quickly/easily. But at one point he turned to me and said "I know one of the senior lawyers is going to ask me if using your software is going to cause the billable volume to go down for the…
I've been beating a related drum on HN for years, about billing hours, and I'll try not to repeat too much of it: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu... I know this post is mostly not about billing strategy (though that's what the thread is now about), but I'm going to chime in with a simple bit of advice for tech workers that I believe is universally applicable: Bill days, minimum. A lot of…
> A lot of the [...] perverse incentives vanish when you bill days instead of hours. I'm confused how that's supposed to eliminate perverse incentives. Doesn't it exacerbate them? Don't you now have an incentive to spread out every client's work over every day possible? Like doing a few minutes of work for each client every day round-robin?
(If you can bill weeks, you should bill weeks!)
It also made no sense. If I could get the work done in 5 minutes or 5 hours why does it matter? It should be about the end result right? If I am too efficient that is bad. If I am not efficient enough that is also bad.
When hiring an outside vendor I suggest negotiating a specific deliverable for a specific price. Everyone will be happier, better work will be done and you will probably pay less.
Another downside of the billable hour: it encourages perverse incentives. I was recently talking with a potential customer in the legal field, and he was interested in my startup's software, which helps people read on screen more quickly/easily. But at one point he turned to me and said "I know one of the senior lawyers is going to ask me if using your software is going to cause the billable volume to go down for the…
Presumably this law firm may not like lower billable hours, but some upstart law firm might use it to bid lower and take their business.
Earlier quoted context omitted.
* A retainer block is a fixed price for up to a certain number of hours per week, usually 10 hours and clients can buy multiple blocks. There are four blocks in total (all sold currently) * The client pays this amount regardless of how much time is worked * The advantage for the client is they have this time available to them and them alone - no one else will take it since it is already sold * The limit of hours per…
How often does the client use all the reserved hours?
There's good ways of implementing billable time and bad. What makes it good:
1. When you have a billable target, only calculating it based off the available pool of working hours (i.e. minus holidays and your PTO time). My first billable job was billable in the sense I had an hourly rate, and when I didn't have billable work, I'd use up my vacation days and my boss thanked me for it because it made hitting his numbers easier as well as mine. It was nice.
2. Not micromanaging your employee's time sheets. I only ever put in 15 minute increments, but sometimes I put in blocks of 1 hour. My boss doesn't bug me on it because she trusts me. In turn, she trusts me because I deliver.
3. Having NBUE time allotted for some things (like self-study, hiring people, etc.).
When you don't have 1, you start seeing people work 80 hour weeks just before they take a week off. When you don't have 2, bosses spend a lot more energy reviewing time sheets, and employees spend a lot more time submitting them. When you don't have 3, you have people avoiding important, but non-billable activities and the company is loses out.
I've been beating a related drum on HN for years, about billing hours, and I'll try not to repeat too much of it: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu... I know this post is mostly not about billing strategy (though that's what the thread is now about), but I'm going to chime in with a simple bit of advice for tech workers that I believe is universally applicable: Bill days, minimum. A lot of…
Billing daily and not tracking time doesn't make lazy contractors less likely to be inefficient. If anything, it gives them more opportunity to obscure what they're doing.
The only model that really eliminates the perverse incentive to be inefficient is project-based billing.
Earlier quoted context omitted.
That is fraud, and if you get caught you would be looking at prison time. And in the case of the legal and accounting professions, doing this will get your license revoked.
It's inconclusive if it's fraud without knowing contract details. If you're being paid simply to travel, then it is not fraudulent to also work on another client. If your being paid to travel _and_ focus on that client, then it would be fraudulent to work on another client.
If you bill two clients for the same hour, that's "double billing," and it's fraud, and a number of accountants and lawyers have had their licenses suspended or (more commonly) terminated over this. Most of them usually plea bargain to avoid time behind bars, and this is generally acceptable because the true punishment is that their professional career is dead.
Very few (basically no) client will agree to pay you for travel time while also permitting you to work on another client's case for that same time. (Note however that if invoicing client for expenses like tickets but not for travel time, it is generally acceptable to work on another client's matter during the time spent traveling.)
If anything, the biggest problem I had was knowing that the client had an alloted pool of hours, and I had to make my solution fit within that budget. Many times, I gave them unbilled hours just to ship something I was happy with. That's a separate problem worthy of its own discussion at some other time.
But even if you do work extra hours in order to make more money, that's better than doing the same thing on salary. I see people now working 50+ hours a week, with no incentive other than, I suppose, a go-getter attitude that they hope will result in them working 50+ hours a week for more money, with a fancier title, someday.
My point is that the billing model by itself is neither the problem nor the solution: overworking yourself, or letting your employer overwork you, is something you can do under any system if you aren't careful.
I've been beating a related drum on HN for years, about billing hours, and I'll try not to repeat too much of it: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu... I know this post is mostly not about billing strategy (though that's what the thread is now about), but I'm going to chime in with a simple bit of advice for tech workers that I believe is universally applicable: Bill days, minimum. A lot of…
> A lot of the pathologies involved in metered billing, time tracking, and perverse incentives vanish when you bill days instead of hours. Billing daily and not tracking time doesn't make lazy contractors less likely to be inefficient. If anything, it gives them more opportunity to obscure what they're doing. The only model that really eliminates the perverse incentive to be inefficient is project-based billing.