Longtime friend of the list Anthony English sent in this stellar example of the misalignment of financial incentives created by hourly billing (shared with permission):
Just dropped off my 16-year-old daughter at her work at the coffee shop on Saturday morning.
We drove past a field and she said: “oh darn! The football’s on this morning. That means we’ll be busy.
I commented: “great! You’ll make some money.”
She said: “I get paid anyway.” Of course she does! She gets paid for the hours she works.
Misalignment of motivation between the business owner (who wants business) and a casual employee (who works hard, but doesn’t really care about gross revenues, as long as she keeps her job).
Hourly Billing Is Nuts!
I am the first to admit that punching the clock at a coffeeshop is meaningfully different from billing by the hour for client work.
But they do have one dynamic in common:
The misalignment of financial incentives.
In either case, you get paid no matter what.
Is this arrangement less risky for you?
Yes, of course.
But with little risk comes a little reward.