Accountants often think time tracking is 100% necessary for service based businesses. How else will you know what projects are profitable and what employees are performing? Project managers feel itâ€™s necessary to see how their projects are doing. Your employees hate it, but itâ€™s the â€œonly wayâ€.Â
I get the accounting and project management point of view. Hell, Iâ€™ve spent time in my career extolling the virtues of time tracking. However, I also see that itâ€™s a culture killer.
- Great employees feel stressed to be super efficient, but also do excellent work. You know what happens when faced with that conundrum? They work longer hours without recording it. They slowly burn themselves out. They begin to resent the job and everyone who clocks out for the weekend. Eventually, they will move on.
- If youâ€™re billing hourly, employees see no point in finding a better way, being more efficient, or stopping the clock for non-client work. Non-performers can look like heroes in this environment. Continue down this path for long and youâ€™ll end up with a culture of non-performers and find it difficult to win work.
In both of these cases, youâ€™re also fostering a culture of lying. There is little incentive for an employee to be truthful regarding their hours. This, of course, also means that â€œnecessaryâ€ data is based on inaccurate information. So what is the point of it anyway?
Even worse than just time tracking and hourly billing is paying on a hourly basis. In this scenario, you expect accurate client time for projects and push for efficiency, but the employee is rewarded with a smaller paycheck or more work. How is that for killing a culture? Great job being efficient and making me more profitableâ€¦hereâ€™s your smaller paycheck. Heaven help those over-achievers who canâ€™t help themselves and actually give more than they record. Good luck keeping performers long term in this environment.
Hereâ€™s the thing, time tracking seems necessary, but generally itâ€™s only avoiding risk taking and instilling an illusion of control. There are definitely certain situations and clients that â€œrequireâ€ time tracking, but as an overarching, non-negotiable requirement there isâ€¦.
A Better Way
There are other ways to measure performance. At my last agency, I was the major proponent of stopping the time tracking marathon. Instead, I did some financial analysis and gathered industry standards. With some historical data and tribal knowledge, we were able to determine our own goals for various key performance indicators (KPIs). Two KPIs gave the most information regarding productivity: AGI Billings/FTE and AGI/Wages.
Using the above stated benchmarks, will you know how each project does? Nope. Do you need to? Can you let go of the magnifying glass and just watch the indicators? If you arenâ€™t meeting your targets, then you need to dig in. Isnâ€™t that a more productive use of everyoneâ€™s time?
If you donâ€™t track time, you must have a culture of performance and be willing to have hard conversations when people arenâ€™t performingâ€¦.ANDâ€¦youâ€™ll need to be checked in enough to know who is performing. You canâ€™t just look at one report and make decisions. Then again, that one report was faulty anyway.
I think having a happy and productive workforce is worth the risk of not micromanaging the minutes worked. How about you?