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Implementing Value Pricing: A Radical Business Model for Professional Firms by Ronald J. Baker

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CHAPTER 18

Why Carthage Must Be Destroyed

We shall not grow wiser before we learn that much that we have done was very foolish.

––F. A. Hayek (1899–1992)

Hourly billing and timesheets are inextricably linked; you cannot discuss one without the other. The reason is that both use a common measuring device: time. Most professionals exploring this topic for the first time—maybe even you—are usually persuaded of the logic between the labor and subjective theories of value, as we discussed in Chapter 4. They intuitively understand they have left much money on the table with the suboptimal strategy of hourly billing, yet when they turn their attention to the timesheet, their natural defenses begin to emerge.

There are four primary defenses of timesheets:

1. They are a pricing tool.

2. They are a cost accounting tool.

3. They are a project management tool.

4. They measure the productivity of our professionals.

We have falsified the first of these defenses with the subjective theory of value, price discrimination, and other value creating strategies discussed so far. Logic teaches us that if time is the incorrect measure of value, then timesheets are the wrong measuring device for knowledge workers. He who says A must also say B. Despite this impeccable logic, the most frequently asked question we receive at VeraSage Institute is “I agree with value pricing, but why must I discard my timesheets when they have so many useful purposes?” A creative example of such an inquiry is reproduced ...

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