What a surprise! Just when he was ready to pay the customer took a final glance at the bill and noticed that the prices changed: not the 21 euro for the main dish, but 32,50; not the 9,50 for the dessert, but 15,80… Upon inquiring why the difference, he got a straight answer back – „the kitchen crew needed more time than planned and that’s why the the costs have increased!“
This surprise we all hate when paying our car-repair bill is an absolute no-go in a restaurant: fixed prices, also for services, are not subject to change, even if the rendering of the service took longer than expected. That’s why good service providers take great care to plan the rendering of a service in such a way that the price charged can cover the accumulated costs – plus a justifiable margin. When people are providing a service, the time spend is directly translating into cost. All well-running restaurants are aware of this logic: those who don’t are broke.
This logic also applies to the design industry. Also here efforts in rendering services is carefully planned so that a resulting price can be established. Clients simply insist to know upfront what they are expected to pay for their assignment. Design, like a five-course menu, is create by specialists who know what they are doing. As a client you can rely on that, and therefore are willing to pay the appropriate price.
Of course you have these penny-pinchers who want to skip out of the bill or who always argue that they didn’t get as promised. Way more difficult are those situations where a client changes the assignment during the project: then the service provider runs the risk to lose out if he forgets to translate these changes into the price.
When I once took over a branch management my boss told me that „a design business, like any restaurant, is financially viable only then, when the income (from the delivered services) can cover the costs (of all involved in the rendering)“: you can’t explain it more simple.
And this logic is valid – only as long as the business also is simple! But as soon as ‚controlling’ is moving in, this simple logic can turn pear-shaped.
As it occurred, controllers figured that the cost related to a singular project should also be recorder separately. No, not the estimated cost related to a service delivery (which determines the price), but the actual costs that went into the rendering thereof, which – according to the controller – were the ‚real‘ costs of a project: this marked the birth of the ‚hour-writing‘!
This control system is installed in most agencies: the designers and employees record their hours into financial systems (SAP!!) so that a controller can control the cost of the costs.
And this is not really needed: a project assignment always contains a delivery date and specified deliverables that determine the estimated cost and with that, the resulting price. This price (if payed) is determining the turnover, the accumulated turnover is determining if one can accommodate the cost that you have anyway (labor, material, depreciations, etc.).
To run a good business you don’t need time-sheets but a good planning. And of course a good sense for customer and market demands – and the best employees you can get hold of!
And here is where the controlling craze can backfire: the best employees are those who feel at ease and therefore can fully concentrate on their jobs. Who would really demand from a cook that he records the time spend on preparing an meal – you rather have the meal warm and tasty on the customer’s table!
If you insist to control the past, do it to reflect what happened! But if you reflect on numbers, rather then on achievements, you can only motivate your employees extrinsically and never get the best out of them. Because the true problem behind the control-obsession is that what it radiates to the time-writers: that they are not trusted!
The good intention to get a grip on the cost can turn into a melt-down of a good running organization: it undermines the intrinsic motivation of the employee, discourages entrepreneurial behavior, encourages fraud, fosters mistrust, ads even more costs and decreases the effectiveness.
Who really wants such an organization? Which CEO and which employee wants to work under such conditions?
You can administer your past, but your future you have to design. Who walks into the future facing backwards, because he has to fill-out stupid time sheets, cannot look ahead and enjoy what’s lying in front of him!