The Deleterious Effects of Hourly Billing
Hourly billing is deeply entrenched and has been widely used for decades, which proves is has some advantages. The case against the billable hour is not that it is not a profitable pricing policy. Rather, it’s that hourly billing is suboptimal (if profitability and value creation is your goal), and its disadvantages outweigh its advantages. It has become, to borrow a term from the medical profession, an iatrogenic illness, that is, a disease caused by the doctor. Time is indeed precious; it's what we give up when we are at work, and thus professionals have started to think their lives are bifurcated into billable and nonbillable hours. But this focus is far too narrow. That value is not measured by time, but rather results. Hourly billing forces us to focus on the wrong measurement. Albert Einstein once wrote, “Our theories determine what we measure.” Hourly billing is the wrong theory that measures the wrong things. Join Ed and Ron to find out why.