The End of Clocking In & Clocking Out

My Life in Six Minute Intervals

In my first job as a paralegal, I loved the reward of seeing the direct effect of my efforts. I felt like a knowledge worker who was evaluated based on results and meeting deadlines. I had a salaried position and was surrounded by brilliant attorneys and professionals. It felt natural to be rewarded for results and paid a consistent salary, but there was just one thing, I also had to track my time in six-minute intervals, because that’s how we billed clients.

I hated tracking time, but to make it easier on myself and our accounting department, I created a fillable form in Excel to track my time throughout the day instead of (gasp!) through handwritten notes and blocked-off time intervals. That made the process a little easier, but didn’t solve the wider problems: The clients still hated the uncertainty of being billed on an hourly basis, the attorneys hated dealing with invoices, and when the attorney’s reviewed invoices, they would often cut time either because they felt it took too long or to resolve a client dispute. We were expected to bill at 70%, and those cuts affected our raises and performance reviews. Meanwhile, my bonuses were based on successful deadlines and winning cases.

At the time, I wondered why in the world we operated that way. Why was I paid a flat salary and judged on performance, yet the company was not? Why didn’t we charge a fixed rate with set performance expectations? Our time-based billing model inherently led to people fudging their time or forgetting to track time and then submitting inaccurate estimates. Time-tracking was a constant distraction; for instance, if I was researching a case for one client and got interrupted by answering another client’s phone call, I had to remember to make a note as I switched gears. It was frustrating and time-consuming, especially because the clients only cared about knowing that we would meet their legal needs, make their court deadlines, and solve their problems.

When I left the law firm, I missed many aspects of that job, like learning new laws, helping a wide variety of business owners, digging into different industries and types of businesses, successfully completing cases, and my co-workers. But I never had to live my life in six-minute intervals ever again. Oh, sweet relief.

Thinking Outside the Time Box

When I joined Gauge, I came in with fresh eyes, with the objective to analyze past projects, contract structure, and cash flow issues. I was not surprised to learn I’d be tracking my time again, but I was open-minded. At least we were using an online program that let us start and stop timers with a simple button. It even had a phone app. Yet our Accounts Receivable was high and unpredictable. We were constantly going back and forth on invoices with clients, delaying payment during discussions about the blocks of time, and discounting invoices. We had to push our team to remember to track their time so we could get paid, and it felt like a struggle.

In my first two weeks, I attended Refresh Savannah, a local networking event for tech professionals. The focus that month was on measuring time and effort.

Erik Reagan from Focus Lab advised everyone to read Implementing Value Pricing by Ron Baker. I came back to Gauge with a sense that we could do billing differently. I talked one of our owners, Mark, who is also a friend and peer of Erik, and after Mark read the book, he decided our company needed a deeper conversation about dramatically shifting our entire business strategy with pricing model.

The Gauge  book club was born. We spent the next several months going through Implementing Value Pricing a couple chapters at a time. Through a lot of thorough discussion about these new ideas, the benefits of this approach became very apparent. We decided to try adopting Value Pricing as a radical new way to break away from timesheets, delayed billing, and invoices based on hours spent instead of value created.

To argue that you can measure value in hours is to say the value of Jonas Salk’s polio vaccine is based on how long it took him to develop it.

– Ron Baker, Implementing Value Pricing

If not time, then what?

Slowly we began to change our pricing model by pitching new contracts as fixed price agreements. Our sales process probed more deeply into what Ron Baker describes as “The Five Cs of Value”:

  • Comprehend value to customers
  • Create value for customers
  • Communicate the value you create
  • Convince customers they must pay for value
  • Capture value with strategic pricing based on value, not costs and efforts

The cornerstone of all of these talks went back to values and goals we hold as individuals and professionals: fairness, partnership, long-term relationships, lower risk, balance, and growth. We consciously integrated this new pricing model throughout our entire organization. Since it became a business strategy and structural shift for us, we were sensitive to check in with our mission statement—Guide our partners through eCommerce business growth—to make sure we stayed aligned.

You really do not buy drill bits; you buy the hole it makes. – old marketing axiom

In short, we moved away from the Industrial Age business approach of measuring efficiency based on time and cost, in favor of a modern and more relationship-based approach based on results and value.

Admittedly, like a lot of firms, we continued tracking time even after we changed to fixed price agreements. It’s incredibly hard to let go of something that’s been industry standard for years. It took a lot of communication and intentionally educating our team, our clients, and our potential clients about the new approach. I am happy to report that we have fully broken the tether of timesheets, and the house did not burn down.

The Value Proposition

Now value-based pricing seems so logical; we find ourselves wondering how we ever approached pricing strategy differently.

Price is what you pay. Value is what you get.

– Warren Buffett

We still think about our costs and how much it takes to run our business, but we don’t allow that basic business reality to pollute our pricing strategy.

“Too many people think of their own profit. But business opportunity seldom knocks on the door of self-centered people. No customer ever goes to a store merely to please the storekeeper.” – Kazuo Inamori, founder of Kyocera Corp.

Value Creation Model

The Value Creation Model outlined in Implementing Value Pricing is centered on the concept that voluntary transactions are entered into where both the seller and the buyer earn a profit.

value creation model

The challenge we have now is estimating what resources we need to fulfill the promises in our value-based, fixed price agreements. We created a capacity planning model based on the value we expect to create and stopped talking about hours throughout our entire organization. Through this shift, we explored tools online to find out if there were other firms on the same radical path. We found the Profit app from Purple Rock Scissors and after tinkering with their tool for a couple of months, we arranged a meeting. There is something incredibly powerful about meeting professionals on the same path away from historically normal business practices to compare notes and support each other. During our meeting, Purple Rock Scissors’ VP, Michael Parler, gave us a bite-size resource to read on Value Pricing, a free ebook called Breaking the Time Barrier.

Now when we think about measuring value and our resources, we no longer take the basic approach of tracking the most simple metric: time. Our intellectual capital is a cumulation of experience and education. Our confidence and unity as a firm has grown, and we all have a clear question we’re constantly asking: Does this add value to our client? Compared to value, time seems like the abstract and unrelated measurement now.

“One CFO of a top-tier law firm said to me, ‘You are right; we sell intellectual capital, but it is denominated in hours.’ Well, you might as well plunge a ruler into the oven to determine its temperature if you think hours spent is a good measure of value created.” – Ron Baker,Implementing Value Pricing

In his book, Ron Baker sums it up nicely by quoting advertising giant Leo Burnett: “Don’t tell me how good you make it; tell me how good it makes me when I use it.” If you’re tired of timesheets and wish there was a better way, feel free to reach out to us.

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