Captain’s log, stardate 20210113
An reader sent in the following juicy question (shared with permission, name withheld by request):
I bought your How to PDF’s and videos, I get your emails everyday and thought I’d reach out with a question.
I’m having a bit of tension with my team. We don’t track hours and we don’t bill by the hour. We aim to value price but we don’t quite get the high number we should. Not the issue right now, we are profitable year over year.
The question that I’m hoping you can help with is tracking hours.
Let’s say we quoted a complicated digital project at $400K there are a lot of parts. Typically we would move forward and do the best job no matter how long it takes to deliver the best result. Lately our dev. team wants to know if the job was profitable or not. So they want us to instigate hourly tracking of time.
I’m opposed for all the same reason as hourly pricing. But I don’t know how to answer, was the job profitable or not because we don’t track time.
How do I answer was a job profitable or not?
Here’s what I wrote back:
Great question! Sounds like the team wants a metric to focus on. If you give in to the hourly metric, they’ll start focusing on the wrong thing.
I’d find another metric that more closely aligns with your core values, like maybe customer satisfaction, or number of bugs, or something that speaks to the quality of the work they’re doing instead of the amount of labor.
You could also easily run a P&L to show them profitability numbers for the business as a whole. Whether or not a particular project was profitable isn’t particularly useful, IMHO.
Time is an easy thing to measure, so it’s tempting to measure it. But it’s never the most important thing to measure. You should look elsewhere if you want meaningful progress metrics.