From Charge Hours to Revenue Generated: How to Make the Mindset Shift (Part II)
In part I of this article series on shifting from charge hours to revenue generated, we discussed the simple math you can use to implement this new method of metric- and performance-tracking. In part II, we will wrap up that discussion and talk through how you can initiate the change management process to encourage your team and leadership to buy into the shift.
Imagine that it’s the beginning of the year, and you’re sitting down with your team to review their budgets. It’s a neutral meeting at best — it’s not exciting, and they’re probably dreading the projected hours increase because there is too much work and not enough people to do it.
You can change the outlook of your entire year by how you approach this meeting now. Take a look at the chart below:
The conversation will go something like this:
“This year, we’re trying a new approach to our internal metrics. We are going to move away from a focus on charge hours to a focus on revenue generated. Here’s what the new scorecard will look like. We’re going to start with a trimester view that aligns with our workflow as opposed to strictly month to month.
“I’ll be honest — it’s our first try at this, and we’re not going to get it 100% right the first time. But we are committed to this because we believe in it. And we believe in it because we believe in you. We believe you are enormously talented individuals who can use your skills and technology to provide our clients with excellent client service, and charge hours alone is an imperfect metric to measure that.”
It is 100% critical that you show your team vulnerability and your willingness to fail. You will fail along the way; your firm employs people with unique circumstances, because they’re humans, and so are you. By leading with the opportunity to fail, you can show your team that it is OK to fail.
Failure is when we learn. It’s not called trial and succeed; it’s called trial and error. We make mistakes, we learn from them, and we get better. Why does this matter to your team? It will give them the leash they need to try new ways to be efficient, better serve clients, use technology, and explore automations. Your team members know that as long as they generate the revenue they’re supposed to, the hours, realization, and rate are just “how” they generate it.
Look closely at the chart above again; we will call this team member Melissa. How would you approach the performance conversation with Melissa before today? Would you think she’s not pulling her weight? Would you be worried that others on the team see her leaving earlier than them or logging off earlier?
Look closer at the chart: Melissa was able to give herself the equivalent of an entire work week back in her life. That’s time she can spend with friends, family, her pet, adventuring, relaxing, and recharging. Creating this space likely allowed her to maintain her creativity and efficiency during the busiest time of her year. What if you sent out a client experience survey after April? How do you think Melissa’s clients would respond?
Here is my hypothesis: 80% of you have a supremely talented individual who has learned the charge-hour game. She was super efficient on an early project when she was a rising senior. She was proud of herself for figuring out a better way to get her work done. And some charge-hour-focused manager or partner told her that she missed her hours budget that week. She was immediately deflated. Remember, she’s brilliant — she has now learned that a 20-hour job should take her 20 hours, even if she can finish it in 6. Now, the job always takes her 20 hours, but she looks average by your metrics. She’s not engaged at work; a new offer for more money to play the same game starts to look intriguing to her.
Here's what happens if you change how you approach the metrics: with this new approach, Melissa can put in 6 hours on that project and be done. And here’s a key point: the person billing the project had better bill 15% higher than last year and totally ignore the WIP.
Yes, that’s right … totally ignore the WIP. While the WIP can be a super useful metric for capacity, but it is useless for billing. If you need a quick “how-to” on this point, ask your admin to draft a bill that is 15% higher than the prior year and give it to the biller to approve, along with the WIP. If the WIP is lower, the bill CANNOT be written down; it can only be written up higher if the biller believes the value is even more than 15% greater than last year.
I’ll pause while you recover from that revelation and give you the chance to ask yourself a question: What will Melissa do with those “extra” 14 hours? Here are some ideas:
Melissa goes home and works 14 fewer hours than her colleagues that week.
The key here is that you let Melissa choose what to do with her extra time. Her choices may change over the course of her career; maybe right now, Melissa has a lot going on personally, and her ability to get her work done efficiently gives her the opportunity to focus on what she needs to in her personal life.
Maybe Melissa is in super-saver mode, and the idea of getting 20% of everything she can do over budget helps pad her savings faster. She can buy a house, pay off her student loans, get the car she’s always wanted, or help put her siblings through college.
Maybe Melissa just gets “it” when it comes to being an accounting professional. You can see her being one of the firm’s partners within 10 years of graduating. Scoff if you will, but I have friends who went from intern to partner while being mothers and fathers to multiple children during those 10 years. Like I said, these people we hire are brilliant.
I gave you a lot to think about in parts I and II of this article series. But the hard part isn’t the metrics or the math — it’s the mindset.
Doing nothing different is a decision, and it has consequences. Are you willing to commit to change and reap the benefits? Are you willing to risk losing the best people you have at your firm because you’re conforming to historical norms that were created before the technological revolution that we’re living in?
Take a chance and make the mindset shift. If you need help navigating the math or the change management process, contact our team at Aprio Firm Alliance. We’re here to provide the guidance and solutions you need to become the firm of the future.