The Real Reason for Time Tracking Systems?

I invite any and all feedback to this post, which I consider my initial findings. In this post, I outline what I believe to be the dynamics behind agency time-tracking systems. I intend this post to be controversial for a reason: I want to know if I’m wrong. Tell me if I am!

An analytical device in sociology is finding the difference between the ostensible reason for something and the effective reason. A famous example is UC Berkeley prof Michael Burawoy’s Manufacturing Consent (not to be confused with Chomsky’s book). Burawoy worked as a machinist in an unnamed factory. He found that workers in the factory engaged in complex game-playing to “make out” or to reach a bonus. They would take “gravy jobs” to “bank” finished machines for their bonuses, they would avoid “crap jobs” to ensure they didn’t lose their bonuses, and they had intricate systems of alliances.

The OSTENSIBLE reason for “making out” was to get the bonus, but Burawoy argued that the EFFECTIVE reason for “making out” was to engage workers in high-productivity work that earned the company more money, while at the same time made it appear that they were at odds WITH EACH OTHER and not the company in their efforts.

My initial findings suggest that there is a similar dynamic in the time-tracking systems in agencies. The ostensible reason for these systems is for billing clients. Tracking time makes it possible to issue invoices to bill clients for hours put into their projects. But this conflicts with what I believe to be the effective reason.

But I’m finding that this systems is imperfect at best. Agency workers have told me that the system is often arbitrary, with the true number of billable hours more a function of what the client is willing to pay for, and not the actual number of hours worked. They also tell me there are many instances of inaccurate records, such as when they are asked to estimate their time ahead of actually doing work, or when they reconstruct how long it took them to finish a task through indicators like their Outlook calendar or their email inbox.

They also tell me there is an ambiguity about what is “billable” and what isn’t. Some workers assert that industry research is fully billable. Others argue that they must do that work “on their own time” and never bill the client for it.

Regardless of how accurate these individual workers’ time sheets, there is a significant amount of cynicism about the accuracy of the system IN GENERAL. Most of these workers know that what the client sees in an invoice is not necessarily an accurate representation of hours worked.

So if the OSTENSIBLE reason is false, what is the EFFECTIVE reason for time tracking? Besides the fact that there is no other system ready to replace it, time tracking has a useful side-effect: job insecurity. I base this on several themes emerging from my interviews.

  1. Workers in this study almost universally told me that you DO NOT bill yourself as “Available” or “Waiting for work,” even if that’s exactly what you are.
  2. Workers also express concern about not being “billable enough,” and some even know exactly how much revenue they must personally bring in to be deemed worthy.
  3. Workers struggle to “keep” the number of billable hours they have on their time sheets. If they worked 60 hours in a single week and their project manager says he cannot charge the client for all of it, they will concede to 40 hours of work as the official record as long as they’re all billable. This penalizes them when it comes time to ask for time off — their time sheets don’t reflect the true number of hours they worked.
  4. Workers are evaluated on their “utilization rates” or “billable rates,” which demonstrates how much time they spent on client-paid work. These rates, however, are largely out of the control of the individual worker, who have no control over what projects they work on. So workers will often feel anxiety about “not being billable” even if they have no control over the new projects coming.

The practice of billable hours for many agency workers appears to create an internalized commitment to the full commodification of labor. In other words, time sheets tend to create an implicit acceptance that agency labor should be bought and sold as a commodity. This conflicts with what most agencies say they sell — they say they sell “solutions” or “innovations.” But in this way, they are very similar to temp agencies, which sell nothing but the labor of their temp workers.

If your daily practice of categorizing your time into “billable” (good for the company) and “non-billable” (cost for the company) then it is arguable too that you internalize these goals. You believe it necessary to be sufficiently “billable” for you and the company to succeed. But what of the many profitable industries hire workers that are not “billable” at all? How do they survive? If profitability were about billable hours, then many high value-add industries such as pharmaceuticals, investment banking, and oil & gas would simply go under.

Now I am noticing though that this disciplining about being sufficiently billable does not necessarily extend to more senior people. The more senior people I have spoken to don’t seem to be as concerned in “recovering” the cost of their labor. They seem to be satisfied by defining their non-billable time as “business development” which is “good for the company.” But not all workers have the ability to directly record their own entrepreneurial activities as “business development,” and thereby will be penalized for not meeting their target utilizations.

As I mentioned above, I WANT YOUR COMMENTS. How valid is my theory about the ostensible and effective purposes of the time tracking systems? Please tell me!

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10 responses to “The Real Reason for Time Tracking Systems?

  1. Oh my, this is fantastic. In my experience, the client pays whatever they said they could afford to pay when the project began. If we go over, we seem to absorb it. I have so many time tracker stories from a variety of places:

    God forbid you are waiting for a PM to get you info and you bill to available! I have even tried to bill to knowledge sharing and have genuinly been reading research papers or usability reports, only to get the non-billable smack down from those up high!

    I was once even asked to put available time towards a project that was running low on hours.

    On one project I was once told NOT to bill weekend work at all because that would push us over budget. I’m sorry, but my client is not a buddy of mine and they shouldn’t get stuff for free (and neither should I have to work for them for free come to think of it).

    On the other hand, one agency I worked for had a time tracking system but had not convinced everyone of its value, so no one filled it in. It was a pretty relaxed place to work, and getting stuff done before the deadline was all that was required, not the number of hours it took you. If you juggled all your work successfully you were considered a success. I did wonder how we judged time for client estimates as there seemed to be no base from which to work. I also had doubts about how business savvy the owner was. Anyways, thats a whole other story….

    When consulting I have also been told to make sure I bill a minimum of 5 hours a day to get paid for a full day rather than a half day. Didn’t seem to matter if I actually didi 5 hours of work, just 5 hours in the TT.

    Not a scandelous post, it rings true to me, but I can think of lots of people who would wholly disagree (but maybe thats a part of the brainwashing).

  2. Interesting theory…

    But here’s a bit of a flaw. In your bonus-orinented example, the workers were able to pick and choose their work to hang more onto the “gravy” jobs to ensure those bonuses. (I know the same things tend to happen in union jobs — my brother-in-law complains that this happens all the time, and the non-gravy work still has to get done.)

    In the agency world — well, at least the one company you and I both know — each individual person should never have to be concerned about whether or not anything is, in fact, ultimately billed to the client. People are just asked to log the time they’ve worked.

    It is up to the accountants and the directors of given accounts to determine what they’ll ultimately send in an invoice to the company. Who cares if your 100 hours of hard labour is paid for by the client or sucked up as an expense? (Well, you probably *would* care if it happened — I’m sure it’s happened to me more times than I dare think about — but it shouldn’t be the mitigating factor in you logging the time you’ve spent.)

    Also, there’s the issue that you don’t get to choose the “gravy” jobs — you get stuck with something crappy, you gotta do it. Even if someone newer, and “less deserving” gets something you’d much prefer to do.

    Then there’s the view (however real) that the time tracking system is also used to keep track of the time people actually work. If you work 10 hours a day, every day, for a month, you’ve clocked in quite a lot of overtime. In a real system, you’d be appropriately compensated for that (doesn’t happy properly in real-life, but then who said life was fair, right?). It’s also used to ensure people aren’t logging more time than they worked.

    Still, I think you’ve got a thesis topic, here. I’m sure there’s more to this issue than meets the eye!

  3. wow — you interviewed agencies that actually billed hourly? Of all the large agencies I’ve ever worked with, almost every job was fixed-rate. Even Freelance, I’m 90/10 at most…

    For me, filling out a timesheet was always a practice of calculating profit on any one job, and evaluating costs for the next bid.

    Maybe that’s a Bay Area/Toronto or big/small agency difference.

  4. I know most of the agencies use time tracker like you mentioned, but I also know some other different type of agencies don’t do time tracker at all.

    If you think about the day back in the agency that both of us were in, the PM would have to give estimate of a project before the client says “Yes, let’s do it”. That is the money the client is going to pay for the job most likely. After kicking off the project, workers (designers, IA, copy writers) start to work on the project and put their hours in the time tracker.

    Therefore, in this case, the time tracker is more for internal usage than for billing the client. Unless it is a retention. But again, what is the point to do time tracker for retention type client?

    The real reason is obvious, the time tracker is used to CONTROL the internal resources, including the one who is managing time tracker such as a PM.

    I am not sure why you wrote on this subject. Is it just a report reflecting the facts? Or is it supposed to sprawl some sort of new ideas/solutions on how we should do this in a way most of agency workers would work more effectively?

    Like you said, if the oil&gas company charges by hourly rate, they would not be as profitable at all. So maybe we can just quickly compare interactive agencies and oil companies, how could we make an interactive agency as profitable of a oil company? This would be an interesting POV weather is market would accept it or not in reality.

  5. Sorry, I have to disagree with your theories here. While I would agree that your research proves a *perception* in terms of the EFFECTIVE reason, it fails to recognize why those perceptions exist.

    I have a great deal of experience in the industry and have worked in some companies where creative time tracking is “encouraged”. However, I’ve worked in more agencies where the philosophy is to track time accurately – it’s the only way “we” can learn to estimate accurately and therefore bill accurately and therefore make a PROFIT.

    In terms of why your respondents have the perception they do, I would suggest the following:
    – junior project managers, no one wants to manage scope creep, deliver bad news and issue change orders.
    – whether or not a client is billed for actual hours worked is only relevant to management and those responsible for write-offs. PMs don’t want to have to explain write-offs to management so they dictate hours to be logged.
    – PMs hoard resources so they won’t be loaned out, and then have them book non-billable time so it doesn’t kill the budget.
    – it is management’s responsibility to manage human resources effectively, and mature management structures expect a certain amount of non-billable time.
    – no one except mangement should be concerned with utilization rates, and I’m surprised that some of your research demonstrated clear targets for employees.
    – the fact that your research shows some concern in the area of utilization tells me there is an intentionally created culture of fear in some organizations. This culture does not exist in many environments. Certainly not the ones who want their employees to work collaboratively (rather than competitively) to produce the best possible product for clients.

    We are not oil and gas, nor do we make widgets. Our work is brain work and while we produce a final creative product, we get paid for our time. That will never change.

    All I can say is that, in my experience, established, mature organizations take a much more realistic, mature and fair view on this subject.

  6. interesting, i tend to agree with the last post, however we do work on a policy that people should know what their role based billable hours need to be to keep us healthy as a small agency. this is allows people to understand how to prioritise other work (like admin, internal systems dev and research not directly related to a project).

    that said different people in the office have a different number of expected billable hours as they have different roles, i.e less project time – and thats fine and accepted by everyone. So knowing how many billable hours are needed, doesnt nec. equate to competition or negativity.

    very interesting to see the various thinking (and the sameness too – its rather reassuring actually)

    goodluck with your research.

  7. To be honest, your arguments are a little technical for me. Agencies which bill time properly make money, those that don’t don’t. Unless they have a very clear alternative model. Your analysis seems to be about unpicking consequences of sloppy management with unclear direction, leadership and purpose coming from managers. Is it really worth analysing the ins and outs of a mess which should not really exist anyway? Managers should take responsibility for proper billing. Ask a lawyer.

  8. Hi Pembloke,
    My argument isn’t about improper billing per se; instead I’m arguing that because billing is imperfect its REAL reason cannot be to bill clients. Let me explain.

    Even “well managed” billing is imperfect because people simply CANNOT remember the correct amount of time they spent on a task. Time is not experienced this way.

    Everyone knows this when they fill out their time sheets; they struggle to have an accurate idea of what they did (leave side fraudulent time sheets for the moment).

    What this says to me is that time sheets are inaccurate, everyone knows it, so they are SUPPOSED to be for billing clients, but if they’re always inaccurate, something else is going on.

    In the full length of my dissertation I go into more detail. I talk about people “hiding” time that is not billable. This is a red flag for me, which suggests a time sheet is like your “permanent record” at school. People in charge can see it, and use it when making decisions about meaningful events (promotions, lay-offs, bonuses, good assignments, etc.).

    So time sheets aren’t about billing clients, but about teaching workers to internalize billable time. Billable time is desirable and makes the worker look good. They record this in their time sheet. This teaches them that billable time is the “good time” and should be put above non-billable time. Eventually non-billable time becomes “not work” and doesn’t “count” as much.

    That’s the sum total of my argument. There would be more in the whole length of course.

  9. Time tracking systems are a tool. How that tool is used is the issue. Time tracking can gather a lot of really important information about where time is going to a project, internal time, overhead… but I don’t think time tracking can be used as a metric for employee performance. I’ve been in meetings where our billable hours were compared to our nonbillable hours and the “obvious” question was posed “WHY ARE YOU SO UNBILLABLE?” The moment time systems are used to track employee performance is when time tracking system instantly starts gathering flawed data.

    Joel Spolsky – Owner of FogCreek has an interesting way to solve this issue. His time tracking software does not allow you to pull time cards out of the system. If you want it you have to do it by hand which forces management to work for that data.

    He has a very interesting post about how his company schedule time for tasks. One immediate concern I have is how applicable his method is to a creative agency.

    http://www.joelonsoftware.com/items/2007/10/26.html

  10. I think that also a part of the problem is that it’s not convenient to track time.
    During the whole day you have to keep time tracking in the back of your head and fill in the hours when you change from task or at the end of the day or week.

    We developed a tool just to address those problem just check out premember @ hesiodsoftware.com .
    It’s a time tracking tool that remembers what you where doing the day and at the end of day or week you can easily fill in your hours.

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