Chapter 9. Getting Paid for Creating Value

Now more than ever, professional knowledge firms are struggling to preserve their margins. Many executives believe that a big part of the problem is their firms' chronic tendency to exceed estimated hours on client relationships and assignments. As a result, professional firms are feverishly trying to improve their estimating systems while at the same time pressing their accounting departments for increasingly detailed analyses of how employee time is spent. They are on a quest to improve how their firms estimate, track, and bill their time.

The problem, of course, isn't the practices; it's the paradigm.

The correct paradigm for a professional knowledge firm is that you're selling business results, not time. Clients don't buy your efforts; they buy the outcomes the efforts produce. Your internal costs have nothing to do with the external value you create for your clients.

A cost-based paradigm treats knowledge workers as though they're hourly wage laborers from the industrial age. The value-based paradigm considers knowledge workers to be capable of creating incredible wealth and value for their clients—irrespective of hours worked.

The clock is an outdated metaphor in an age of knowledge work. It's really a relic of the industrial age when it really mattered whether you were "on the clock" because it meant you were present on the assembly line "creating value." But knowledge workers can create value at their desk, sitting in a Starbucks, or ...

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