In my post Time, A Nonrenewable Resource I pointed out how tracking time is fundamental for getting a grip on your profitability. You can’t fix what you don’t know is broken. I also addressed one of the barriers creative service firms face in tracking time. That is artists and designers tend to perceive time tracking as negative pressure on the creative process. There are some cures to that angst, but in the end, measuring time is necessary and the design firm owner needs to insist on it. It is a prerequisite for profitability. And in the end creative freedom is greater at a profitable firms since the symptomatic pressures of unprofitability (negative cash flow, desperation for new business, and getting behind on existing projects) are relieved.
So let’s assume you want to start measuring time and you’ve made a commitment to timesheets. Once you get over the hill of gathering the data, what do you do with it? How do you use it? Let’s consider some basic principles for using your time data effectively.
1. Completeness and Accuracy. You need to gather all the time of every employee—including your own. You also need to ensure that your data is gathered in a timely manner (pun intended). Completeness and accuracy are essential if this information is to be used in a meaningful way. Even if just one or two employees are negligent with their timesheets, or if they fudge them at the end of the week—your data will be inaccurate and do you little good. Likewise waiting longer than one day to log your time will introduce many opportunities for bad memory to distorted the data. Daily timesheet logging is mandatory.
Additionally, you need to track all the time spent in the office—not just project time. Timesheets do way more than tally up billable hours for invoicing. (By the way, you should probably move toward fee based billing as soon as possible.) Time analysis can give you a complete picture of where all the time is spent in your company. And this is important because it’s often your unbillable, internal, or client support time that puts downward pressure on your profitability.
But what about those late nights and weekends—should that time be tracked as well? Yes! Sometimes, especially in creative service firms, employees spend extra time on projects. They’ll stay late or work on weekends. They might consider this “off the clock” time that they volunteer because they are driven to produce excellent work. That’s commendable. However, all this time needs to be logged. If late night “off the clock” hours are not recorded then your evaluation of what it takes to produce a certain level of quality will be distorted. And without all the time data your next quote will not capture what is necessary to produce it. Then your employees will have to work those extra volunteer hours—but they might not be as eager as the last time. For the sake of the health of the whole firm you must capture every hour spent. No “off the clock” subsidies allowed!
2. Map Timesheet Categories to Measurable Benchmarks. Give careful thought to your timesheet categories. Too many categories and subcategories will make compliance difficult and measurement more complicated than it needs to be. You should be able to get by with no more than a dozen or so categories. What’s most important is that you build your categories according to the main areas you intend to track. Generally, I’ve found it most helpful to track time primarily against project phases rather than discrete tasks. Distinguishing between phases and tasks can make timesheet categorization confusing. “Design” as a category could refer to a phase or a task.
So rather than focusing on the tasks such as design, meeting, communication, research, planning, writing, editing, etc., build your main categories around the distinct phases that projects move through. Project phases might be: discovery, planning (or strategy), design (or production), post production, service (or support). Start with the way you break up proposals into phases, since time reports will most meaningfully be measured against these numbers anyway. If you are using a time tracking service application that does not include “project phase” options, just create separate projects for each phase.
Once you have the phase structure in place the specific tasks are less crucial. They function more as descriptions than categories. In addition to providing some of the common tasks in your timesheet sub categories, train your employees to use the description field to supply lower level detail about their time.
When it comes to measuring internal time though, it’s actually better to be task specific rather than phase specific—since internal time doesn’t correspond to project phases. Internal time should include tasks like: meetings, communication, admin, time off, marketing, sales, quoting, and professional development.
You should invest sufficient time formulating your categories from the start because you don’t want to have to change them very often. Because whenever you do change them it becomes difficult to connect old time data with new categories.
3. How to Use Time Data. Back in the day, gathering and reporting time data was a lot of work. Paper timesheets had to be manually entered into excel files or a Filemaker databases and custom reports produced. But with the many web based applications available today this is so much easier! I’m a big fan of Harvest. It’s relatively inexpensive, $12 per user per month. One big reason I use Harvest is its integration with its sister platform Forecast. Forecast allows you to assign projects and tasks and see how your time, and your team’s time is allocated over time. It’s a fantastic multi-project planning tool. And it forces you to observe the future resource costs, and resource availability compared to your project cash flow over time. One of the biggest mistakes creative professionals make is failing to distinguish between earned and unearned revenue which can lead to every increasing cash flow pressure all the while your time or your team is over capacity.
There are many other time tracking tools available. Look for ones that allow both browser and mobile app access—so you can easily log time from the road. The real features you want to evaluate though are the reporting features. These reports are the point of tracking time in the first place.
I would recommend running weekly reports for all ongoing projects and compare time spent to date against total budget. But before you run those you’ll need to do a quick check that each employee has entered all their time. When first implementing timesheets you’ll probably need to go back and ask employees to correct some entries that are misallocated or whose descriptions are insufficiently clear. It may feel like you’re being a pain, and you are, but getting accurate data will serve the company, work to improve bottom line and they will all thank you when their efforts are rewarded with pay increases and bonuses.
When you run your weekly projects evaluations and discover a problem (like you’re approaching the end of the budget but there is still a lot more work to do) you’ll need to investigate. Now it’s very important that you cultivate a culture that does not fear time evaluation. Nobody likes to be on a project is going over budget. But unless open communication can occur in the midst of these situations you and your team will not be able to learn how to adjust and adapt your process (or your quotes) for future work. Investigation is not for fixing blame, but to learn! It is so much easier to learn where things have gone wrong and why in the moment than months later when your recollections of what happened are very fuzzy. What are the circumstances, what are the complications? Are these rare events, or common and repeated realities with long term potential solutions?
In addition to tracking each ongoing project I also recommend a monthly overview of all the time spent in the firm. What is the overall balance of utilization, that is the time you’re getting paid for versus time you’re absorbing or spending on internal matters. (FYI, you should aim for about 60% utilization across the whole firm.)
4. Evaluate Your Processes. I began my first post on time tracking with a recollection of a Gantt chart that an employee researched that reveal to me that we were spending three times as many hours on typical projects than I was budgeted. (If I had been tracking and reviewing time in those days I would have already known that, but alas.) Seeing the problem forced me to rethink our process from the ground up, which ultimately led to an experiment that revolutionized how my company approached web development.
When you log time accurately and review reports regularly, you will see exactly where time is being wasted, where drains to productivity are happening, and you can then start to evaluate changes to your methodology and process which might possibly transform your business and increase profitability, like it did for mine. But until you have the data you’ll be left scratching your head wondering where all the time has gone.
Are you ready to take the struggle out of finding new clients?