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Each week on the Content Marketing World blog, we’re going to feature a CMWorld 2020 speaker, one of their blog posts that dives into the topic they’ll be covering at CMWorld, and a few additional articles they’ve written to help you prepare for their session.
Today, we’re keeping the series rolling with Adam Morgan, an expert in creative leadership. His prescriptive and detailed blog posts have helped so many people in our community, so you’re not going to want to miss this one.
The CEO of an ad agency I used to work for often asked an important question, “Do you know how your client makes money?” He would make this point because he wanted us to really understand our client’s business and do work that helped their business succeed. If the work wasn’t helping the client grow, then we shouldn’t do it.
In the spirit of that question, I would ask all agencies and marketing departments a similar question. Do you know how your business makes money? Because the answer you give has everything to do with whether you should use timesheets to track employee time.
If the way your business makes money is by selling time, then timesheets may be appropriate. For example, a law firm might make money by giving advice an hour at a time. That’s what they are selling, time.
But most creative agencies or marketing departments make money by selling things. They make videos, websites, radio spots, event activations, and campaigns—digital and physical experiences. If you make money from your ideas or your designs, then you should be selling the value of those ideas. Not time.
What are those things worth to your clients or stakeholders? Are your campaigns or ideas worth a premium or a discount? Are you a luxury brand or a wholesaler? And before you decide and then say your hourly rate reflects it, stay with me a bit longer.
For too long in our industry, we have been commoditizing our work by trying to convert it into time. Mostly because time is an easy thing to measure. Which makes this topic really difficult for us to wrap our heads around collectively. It’s easy to track an hour of effort and then we sell it for an average value based on company overhead with a bit of profit.
This practice of tracking hours goes back to the birth of the industrial age. We measured productivity based on how many hours an employee worked. The work was mechanical. The only way to grow your business was to do more of it. Your value was based on how much work got done.
But today, in large part, if you are in a creative business, more time doesn’t always mean more value. We are now in the informational age. The currency is based on ideas, not cogs and widgets. If you understand how inspiration and ideas work, they don’t follow the clock.
Let’s go back to the question of how your business makes money, as the answer will also determine whether you are selling yourself as a production house or a creative partner. Timesheets are great for one, and terrible for the other.
If you are a production house or department, your business model is usually focused on speed or price. Your value to clients is to quickly produce a commodity or to make things cheaper. A client buys your services because they want production, not ideas. Like a business in the industrial revolution, the more time you work, the more money you make. For this business model, just like a law firm, timesheets are an appropriate tool.
However, if you sell ideas to your stakeholders, then your business model should be focused on quality. This is usually the case for creative agencies, design boutiques, and internal creative teams who value their position as a creative partner.
If you truly value creative and emotional ideas. If you don’t want your work to be a commodity. If you believe that creativity is your business advantage. If you feel that your ideas are valuable and will change the world. Then I want you to consider the following ways that timesheets will undermine your efforts to create amazing creative work.
Your company culture is critical. It’s what drives productivity and helps you attract talent. The environment you foster will make a huge impact on the quality of output from your company. But culture is finicky. Real culture isn’t something you write on a mission statement. It’s the unspoken rules that are followed in the daily grind.
Simon Hankin did a great job expressing this point in his article, Why it’s time to scrap timesheets and focus on producing great work.
“The real, unspoken problem with timesheets is the pernicious, insidious effect that they have on culture. Culture is observed. Culture is learned, absorbed and propagated through unwritten ground rules. Unwritten ground rules like, “No one ever turns up on time for internal meetings here and it doesn’t seem to matter.”
If you are concerned with attracting, motivating, retaining and unleashing the full potential of creative talent then you can ill afford an unwritten ground rule like “This company is more concerned with measuring inputs than it is with improving the quality of output.” Creative people want to work where the work is all that matters. They obsess about output. To them your obsession with measuring input is a bummer.”
If you make money from your creative ideas, then the last thing you want is to have a culture that focuses on the wrong thing. Does your mission statement say that you believe in a high percentage of billable hours? Or that you are going to make a dent in the world through creative ideas? Because your culture will decide the outcome, not the plaque on your wall.
Timesheets change the focus from obsessing about quality output to focusing on input. Creative culture and morale is constantly marginalized. Teams are unnecessarily pressured to worry about billable hours instead of thinking about amazing experiences.
And if only one department or certain teams are required to use timesheets, it creates a class system where people feel undervalued. Hey, management doesn’t have to do timesheets, but the rest of us plebeians must. This is a big drain on a creative culture.
Timesheets create an environment of mistrust. They invite big brother into your business and give him a seat on your board of directors. You may not have a physical punch clock near the front door, but that’s exactly what timesheets are communicating. You are telling your employees that you will only pay them if they are on the clock. The clock does not mean being productive. Being productive in a creative environment is completely different. If you’ve ever had to come up with ideas for a living, you understand that creative productivity isn’t something you turn on and off. Creativity follows its own timeline.
With timesheets, your employees know that you are monitoring them and watching. Even when you assure them that you’re not basing their performance or job on timesheets, the unspoken words communicate that they are only valuable if they are logging billable hours.
This encourages them to protect themselves. They begin to lie and pad the numbers so that they look like they are working hard. They round up on hours. They find jobs where they can time dump. But they do it in a way that doesn’t bring too much attention to their record. They lie just enough to avoid an awkward conversation with a manager.
For twenty years, I worked at several international agencies where timesheets were required. I saw this type of behavior at every one of them. I knew my creative teams were padding their numbers. And I did it myself. You never wanted to turn in a timesheet with low billable hours. So you fabricated the hours just enough to avoid HR.
We all do it because we are placed on high alert. In one agency, a naughty list would be emailed to the whole company every two weeks, showing who hadn’t turned in their timesheets. And if you were on the naughty list twice in a row, your name was bolded and placed at the top of the list. It was a public shaming intended to motivate the rest of the subordinates to get in line.
At another agency, they would hold your paycheck if you forgot to turn in a timesheet for the previous two weeks. The head of HR wanted to have us clock in at the front desk every morning, and when the president denied the request, she decided to watch the doors and take notes of who came in late and who left early—cross referencing that data against an employee’s timesheet so she could prove how employees were stealing from the company.
And yet another agency in town, one of the founders would walk around and do bed checks in every office at 5 p.m. to make sure people were at their desks and being productive. That same agency would have the employees check out on a clipboard at the front desk if they left the building for lunch. Once while I was meeting an employee from that agency for lunch, and he stayed out 15 minutes longer than the allocated hour, the receptionist called his mobile to check in and tell him to hurry back.
All these agencies professed to be creative powerhouses. They showcased creative awards in the lobby. They pitched clients with the agency’s most creative work, promising that they would create even better ideas if they won the business. And back at the office, their employees were watching the clock, thinking more about job security than new creative campaigns.
These types of tactics may seem harmless. Certainly, your motivation is to help the business stay profitable. But the real message is clear. They are watching you. They don’t trust you. They create an environment where people don’t feel safe. Where employees are constantly looking over their shoulder. Where your productivity is based on time, not great work.
Timesheets are supposed to make your business more profitable. But here’s the reality, a ton of time is spent managing, analyzing, and filling out timesheets. It’s supposed to only take a few minutes each day. You just write down your hours before you go home, right?
That’s not reality. We forget or we have bigger priorities. Because timesheets are always nagging at the back of our minds, we put them on the backburner. Then time passes and suddenly you’re a week behind. Then you spend half a day going back through your emails and calendar trying to figure out what projects you worked on. You call up project managers asking for job numbers. They take a few hours tracking down the right one. You become a part-time detective, trying to piece together a realistic looking timesheet. Truth is, it’s all made up. The same is true for digital time tracking systems. I’ve used both types, and you still spend a bunch of time getting them calibrated and filled out.
Beyond the time it takes an individual to fill a timesheet, there is a ton of time required for management and HR. As a senior manager, I experienced a variety of scenarios. At one agency, I would receive a weekly report from HR where I would spend half a day going through the list and checking to see who was low on billable time. Then I was required to have a one-on-one with each offender, even though I already knew what was going on in that employee’s personal life and why they were distracted.
At another agency, we would have monthly meetings where we would sit as a management team and go through all the reports together. If an employee fell below the 70% billable time ratio, we would have to waste time explaining to the group why it happened. And don’t forget that the company is constantly hiring more and more people to track and make all the timesheet reports for managers and the board as the business grows. Just for fun, I encourage you to add up all the hours in your company that are wasted on time management, from all the controllers, time police, managers, and employees. I bet you will be surprised.
The next question I would ask is if all this effort we put into timesheets is worth it? Do we make better management decisions because of the timesheet data?
First of all, if you’re honest with yourself, you shouldn’t trust the data. Because people are making it all up. It’s not accurate. And is it really giving us new information? I agree with Phil Adams in his article, The real, unspoken problem with timesheets.Here’s Phil’s perspective on the topic.
“I ran an advertising agency for six years and on precisely zero occasions did I make a decision based on timesheet data that I wouldn’t have made otherwise. This is because on precisely zero occasions did timesheet data tell me anything I didn’t know already. If you know your agency, if you walk the floor and talk to people; more importantly if you walk the floor and listen to people, you will know which projects are making money and you will know which clients are taking advantage of you.”
It’s true. In my two decades of experience with timesheets, the only purpose for that data is knowing if a person is filling out their timesheets. Period. The data doesn’t tell me if someone is being more or less creative, I know that from an internal creative review. It doesn’t tell me if the company is profitable, I already know that from the balance sheet. It doesn’t tell me if someone is productive. It doesn’t tell me if an account is worth keeping or if an employee is talented or if people are trying their hardest. I can get the answer to all these important issues without timesheets.
There are better ways to figure out profitability, to balance the workload, to understand the internal value versus an agency, and to justify headcount. Timesheets are not an accurate source of actionable data. They are made up numbers that make us feel safe. But they are far from any source of truth.
Timesheet data feels important because it’s collected into reports and it’s easy to justify. You add up all these hours and those hours are money, therefore we get more money if we work more hours. But suddenly you are putting the value on time, not the work. Not the ideas. Not the value of the things you make.
So how do we make money without timesheets? The simple answer is to understand the value of your work and charge appropriately. Many companies charge an appropriate cost for something they create. A house. An airplane. A pair of shoes. Figure out how much it costs you to make that thing, add some profit, and charge that amount.
To stay profitable, we still need to mind the store. We need project managers to push things along. We need creative people to commit to deadlines. I’m not suggesting you take away all the guide rails. Just the one that isn’t really helping. This may seem overly simple, but for me it comes down to a basic principle. Track projects, not people.
If you put value on what you make, you need to dig in and track the profitability of projects. With each project, you can estimate how many days and people it will take to produce. Then keep that project on track so you make money. I’m just suggesting you remove the hourly timesheet component of the whole formula.
The discussion of how to make sure your people are productive should be separated from how the business makes money. That’s all about managing their effort and creative talent in the right way to encourage their best work. You need to manage your team. Encourage good work. Have serious talks with those who are not performing. Even without timesheets, you still need to create great work in a short amount of time. But at least you’re creating an environment that fosters creativity, rather than eroding it.
In the book, Leaders Eat Last, Simon Sinek explains how the job of a leader is to create the right environment for people and teams to succeed. A safe and creative environment is one of the biggest factors for business success. According to Sinek, “Returning from work feeling inspired, safe, fulfilled and grateful is a natural human right to which we are all entitled and not a modern luxury that only a few lucky ones are able to find.”
With the right creative environment, people will step up to the challenge and create better work, rather than being beaten down by an oppressive environment with timesheets. Recently, I’ve heard of several agencies and companies that have abandoned timesheets and have remained profitable or even made more money. We should learn from these examples.
Here’s an example from Kerry Grahm, CEO of Bohn Advertising.
“The real challenge here is embracing change. It’s getting a left-brain CFO to think like a right-brain creative and contemplate the “what if.” What if there were no time sheets? How would that work? How would we account for staff time? How would we charge? For starters, I suggest it’s time to get rid of timesheets. We did, and we had our most profitable year ever.
“When your teams don’t have what our CFO calls the “time-sheet Nazis” looking over their shoulders, they are more focused on the work and in many cases more efficient — not less. They literally roll up their sleeves. And they look at success in different terms. It’s no longer about finishing the campaign before the time-sheet clock runs out, but about truly solving the business problem in elegant ways, while also looking at how that solution is working post-launch, and how successful it is in terms of client success.”
Timesheets are a tradition of our industry and certainly it will be difficult to change. But we all need to look at the problem with open minds. And if there’s any industry who can come up with creative solutions, it’s this one. If you believe in creativity, I ask you to consider the many reasons why timesheets are the enemy of creativity.
It’s time to bring more value to the creative work we are doing. We need to push for big ideas and the right type of thinking. We need to track projects, and manage people. Manage so employees are doing the things that matter. Push for the right quality. Or speed. Or the right type of thinking. The things that you should value in a business. Focus your time on the type of work that will make you and your client money. Not timesheets.
This post originally appeared on the Adam W Morgan Blog
Looking for even more from Adam? Check out these three blog posts that will help you dive deeper into the science of memorable content and prepare you for his CMWorld workshop:
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