In honor of the release of my new book: Agency: Starting a Creative Firm in the Age of Digital Marketing, I’m releasing this outtake. This chapter was mostly cut from the book — reduced from 1,500 words to maybe 500. My editor and I had a pretty hilarious argument about it, and she not-so-unreasonably assumed that it was too detailed, and too vitriolic. In the end, she won, and I edited most of this out. Yet not long after we submitted the final edit, I was invited to speak at the Advertising Age small agency conference in Austin. I took questions in advance from small agency owners and employees throughout the country, organized them into a presentation, and answered them all. It was super fun. I hope to do it again next year. One thing that stuck out, though, was how many questions were about tracking time. I basically presented what you see here. The reactions were amazing. Turns out everyone hates tracking time. Everyone knows it’s a sham in agency life. This is how we worked around it, successfully, for nearly a decade at my old agency.
Agency is a book designed for any and all creative professionals who are looking to grow their firm past the freelance stage into a full-fledged business. It covers the nitty-gritty of agency management from growth, to new business, to HR, to operations. You can check out a full table of contents along with an intro for the book here.
My hatred of time sheets came from my time in the trenches.
I remember back at the agency I worked at in the 90's, once a month or so, someone would come by my cubicle and nag the entire interactive department to fill out their time sheets. If you were good at avoiding this person, you could go 2–3 months without doing a time sheet. Eventually, around the end of the quarter, they’d get you. You can run but you can’t hide. This is normal for most companies. Everyone avoids time sheets until someone — my sympathies run high for whomever is stuck with this job — has the unenviable task of going around to each person in the agency and forcing them to do their time sheets.
This typically requires tracking each person down, walking them to their desk and physically standing over them until the time sheet is filled out. Usually you have to tell them what to actually put on the time sheet as well. Of course no one can perfectly remember what they’ve been doing the past three months. Unless they only have one project, full time, and if they only have one project full time, why would they need to fill out a time sheet? For the rest of us, there is no particular incentive to tell the truth, and a tacit incentive to lie. “What should I put down if I can’t remember what I worked on?” I asked on more than one occasion. Invariably the response would either be a yawn, and the time sheet taskmaster would laconically reply “whatever.” Perhaps they’d look down at their clipboard, inform you what percentage of your body was supposed to be billed to various clients, and advise you to put down something along the lines of “25 percent client A, 25 percent client B and 50 percent client C.” Thus you were essentially being instructed to tell the client you were working the amount that they were paying for you. Quite the effective audit trail — which is supposedly the whole point of the exercise.
This is, of course, not confined to the advertising industry. I was a time sheet skeptic before I ever set foot in an agency, from my Ernst & Young days. The template was different, but the illusion and lies were more or less the same. I initially made some semblance of effort at them until one of the partners at the firm was in my office one day laughing about how no one tells the truth on them. Really? Okay, well, F that then.
Time sheets are a joke. They are an outright lie.
They are, first and foremost a massive fraud, contentedly performed and affirmed by all parties in the ecosystem — the agency, the client, and the employees. Finance knows it. Your client knows it. Your client’s finance department knows it. Your boss knows it. His boss knows it. Everyone knows it, no one cares. There is zero accountability or incentive to discover the truth.
Don’t let the electronic tools persuade you that time can be tracked automatically. It cannot and does not work.
Your shop lives invoice to invoice. If you undercharge for a job, you’ll lose money, and you have no money to lose. You know how to estimate a job. But when the job is done, you need to make sure that it was profitable. This is called actualization. And part in parcel in actualization is knowing how much time people spent on a job.
It would seem like time sheets would play an integral part of that process, but they don’t, not just because time sheets lie (never, ever forget this). Say you had some task in your estimate that you put 1 person for like 12 hours on, thinking “oh, hey, they could probably do it in 7 but let’s be safe and also I can probably get away with 12 hours on my estimate” and then the person who is filling out their time sheet was told they had 2 days to do this, so then they put 16 hours down on their time sheet, and then a thing that was supposed to take 7 hours looks like it took and costed for 16 hours and oh hey now it’s audit time and I see that really it took 16 hours so next time let’s make sure to scope that right and maybe put 18 to be safe and now you are seriously divorcing yourself from reality and starting to get kind of pointlessly expensive. Now your employees know that they can get away with it, and suddenly you’ve created an environment where you give someone 3 days to do something that takes them ten minutes and they spend the rest of the time in the game room or, worse, working on their startup they plan to ultimately leave you for. Yes, it really is that bad. And then multiply the whole thing by a team size of, what? Like 10, 15 people these days? And six months? You’re screwed.
This must be constantly, vigilantly guarded against or your company soon becomes comically expensive and two kids down the street pop in with their common sense and their early-firm pricing strategy of “we’ll do it for whatever number we make up in our head because it’s probably gonna be less than that big company over there” and the next thing you know, they have taken your client, and you funded your employees startup and aren’t even going to get points on it.
There’s another major reason why time sheets are so awful — they kill creativity.
They foster an environment of mistrust. It’s sad that services firms spend so much time fostering creativity and giving their employees so much in terms of freedom and creativity, but almost all of them expect this ridiculous charade to continue.
Looked through this lens, it becomes hard not to see time sheets as a manifestation of small minds or evil ones. Neither is particularly flattering.
A simple actualization process
Time sheets or no, you will still need some method of actualization.
So, then. Here’s what we did. You make your best estimate. We’ve talked about that. Then the team does the job. No one on the team really worries about how many hours they spend on the project. We pay them a salary, this is the project they’re on, and they do their job. They know the due date. They’re treated with respect and manage their own time. Like human beings. If you’re being paid for 40 hours of dev time, but you pay a developer a salary, by the week, this is really the place to resolve those two different cost calculations. If the developer does it in 30 hours, good for her, she is being efficient. If she needs 42, and she scrambled to work late, that’s cool too. I still got paid for 40 hours and she got paid for a week either way. It’s humane. It’s fair. It’s civilized.
Of course occasionally there are all nighters, and there are some challenges when they’re assigned to two projects half time. So we have a resource manager. In a small shop, this is your person who’s good with time management. We’ve talked about this. She goes around, asks everyone how they’re doing, and keeps track of things. Even without the resource manager problems would bubble up — if two producers are using the same developer, and one project is eating up too much of their time, the other producer will usually say something. The resource manager is there to fix it, track it, report it.
At the end of the project, the producer fills out a simple one-page form. How many weeks was this project supposed to go? How many did it go? Did it go over? Why? Did we get paid for the overage? How many people were on the team? How many were supposed to be? Boom. Done. From this, we see that we estimated accurately and got paid. If we went over, in weeks or personnel, we can see if we got paid for it. If we messed up, we can see it, we can see why, how much it cost us (team size times costs), and we fix it for the future. If it was a one off, we know how much of a hit we took. Done.
Actualization doesn’t need to be hard core, but you do need some system in place. Like all end-of-job processes, it’s difficult to make sure everyone complies — everyone seems to want to move on to the next thing — but you, and your finance department, must police this heavily.