This podcast addresses a major misunderstanding about billable hours. The concept is not bad at all, but works only in certain circumstances. This podcast carefully explains those circumstances, and crucially examines how billable hours hurts consulting assignments. It has nothing to do with the focus on profits, but rather who has the focus on profits.

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2 responses to Billable Hours Are Not Bad

  1. Hi Phillip,

    Thanks – these are some very good points and I would suggest everyone reads them after listening to the podcast.

    Billable hours get a very, very bad rap but they are not bad, just their execution at some firms, and in other cases they work quite well.

    The issue on learning is a major problem. It is something we are trying to fix right now through the strategy library and live blog. I do not think it is will be easy to fix this within your firm since it will take a massive commitment of time, energy and resources from management to move this behaviour in the right direction.

    Michael

  2. Just to add to this, a personal example of 114% utilisation over the last financial year. This (thankfully) was never a case of charging two clients simultaneously for the same time or any unethical reason whatsoever. Simply put the Big 4 firm I work for with will calculate the number of potential working days per year (for example 230 per annum once all forms of leave are removed) multiplied by the working hours in a contracted day (usually 9hrs). So in this example 2070 chargeable hours per annum is equal to the 100% utilisation baseline. I was engaged with 3 different clients over the year, and by working longer hours than the baseline assumption of 9 hours a day, I achieved 114% last year. Something that can easily skew the figures (although not myself in this case), some staff also end up with high utilisation figures because they don’t take their annual leave, this can have reasonable impact if you’re working on chargeable work for most of the year.

    Speaking purely from my own perspective, the member firm that I work for have the outlook that the junior members of firm should network with other teams and service lines to keep themselves utilised and therefore demonstrate their ability to earn for the firm, and their aptitude/networking abilities. I have not yet seen an emphasis for junior staff to bring in new billable clients or leverage further work from a client. The focus is on delivering a high quality output on time, and to the client brief.

    Only once you get to Manager level does the aspect of billing/client generation start to move into your peripheral vision and become a KPI for your performance rating.

    Utilisation has limited weight for your promotion business case for any levels, however it does act as a KPI for an individuals performance rating at the end of the year, so it’s a guideline if you will. Though utilisation accounts for less than 10% of the total weighted performance rating. 75% of your performance rating is directly based on management/leadership/client engagement performance reviews.

    I found this to be useful, because in my first 8 months I did not meet the utilisation KPI suggested by the member firm, however by consistently receiving client/management feedback of “exceeding expectations” I was still promoted. The utilisation KPI does however still have a limiting effect if your dramatically below the target, it could potentially be career limiting within the firm if it becomes a trend.

    I still have my issues with billable hours, but in reality its not the billing itself; its really the lack of learning from past engagements that really causes me issues. There is never enough benchmarking of previous engagements; this can lead to repeated shortfalls in engagement budgets, or simply not winning competitively bid work because the fees are not as competitive as they could be.

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