Brian David Hall

Agency Optimization

What's wrong with hourly

13 February 2019

There are tons of articles, studies, books, even podcasts on this topic - but I’m putting it down in my own words, so I can share it with people I’d really like to work with - if we could just get past the billing thing.

(That means you! 😁)

The incentives are wrong

Let’s be real: as an agency or contractor billing hourly, you do best when you bill as many hours as you possibly can without arousing suspicion that you’re over-billing.

If you’re thinking “I’ve got good people; they wouldn’t do that to me” you’re probably right. But consider this: they’re deincentivized to work efficiently. Getting better at what they do, improving their performance, this literally reduces their paycheck. Is that what you want?

Meanhile, as a client, you’re incentivized to scrutinize time sheets. “Did it really take 2.5 hours to update DNS settings? Hold on a minute, didn’t that get done in 1.75 hours back in November? Lemme check” 🤔

“The new logo’s good … but is it 3.75 hours’ worth of good?”

Stop and take notice: you’re now spending your time reviewing time sheets and guessing about whether they’re right. This is work you’ve created for yourself. Are you enjoying it? Is it a good use of your time?

Hourly work does not equal value

As a client, contractor hours are not value. Say it with me: contractor hours are not value.

To the contractor billing you, the value of the hour is equivalent to the joy she could have obtained playing with her dog or having dinner with her girlfriend. But there’s no guarantee that you obtain any business value from that same hour.

In fact, when you bring people in on an hourly basis and point them in the direction of work to be done, there’s a very real risk that months and thousands of dollars will go by without any measurable value being created at all.

So … these hours might not make you money, but they definitely cost you money. That’s kind of a lousy deal.

What to do instead

Clear your calendar for an hour. Clear your desk. Clear your mind. What is the objective you’re trying to achieve by hiring an hourly contractor? Where do you want your business to be when this work is done? How will you know when you’re there? What will it look like?

Write this down. In plain English, write down what it looks like to achieve the goal you’re pursuing.

Next, how much is it worth? Put a dollar amount on it. This should be easy!

If not, spoiler alert: your objective might be a flight of fancy or a nice-to-have. And if so, congratulations! You just saved a ton of money, and you can always come back to it later. But for now, you’ve saved yourself the contractor cost, the management cost, and the stress involved in running this non-essential project. Take another hour to celebrate 🍾.

On the other hand, if you can put a value on this outcome, seek to purchase the outcome.

This probably means hiring a more expensive resource than you’re used to working with. That might feel scary. But this actually reduces your risk; after all: no outcome, no payment. But if they get it done, you know exactly what your margin is.

So instead of settling for hiring, making tasks, and being busy, do the hard work of defining the value you’re seeking to create. This is something that only you can do. And if you find that there’s no one out there willing to deliver this work for a set price, even better!

If you alone possess the unique skill to define a process and leverage less skilled workers to accomplish the task, you’ve just created a new line of business. Look at you go ! 🚀

I hope I’ve convinced you to think twice before bringing on your next hourly contributor. If not, or if you can’t quite seem to define the outcome you’re seeking, please reach out.

You’ve read this far; I’d love to chat about your situation. No hourly fee will be applied 😁.

Photo by Sonja Langford on Unsplash