I hate timesheets.? I really do.? My employees joke that the mere mention of the word “timesheets” turns me into an incredible hulk-like monster with choice four-letter words, or causes cranky-toddler-kick-and-scream syndrome.? But I?ve been entering timesheets for 20 frickin? years, and I can?t stand it anymore!? I am a 47-year-old adult.? Why should I have to record what I accomplish during the day in 15-minute increments?
Timesheets = Proper Cost Allocation
The reason companies ask you to complete timesheets is so that they can properly account for payroll costs across projects.? By doing this, management will know whether the project made or lost money.
Overhead Costs Also Need to Be Accounted For
Other costs such as?office supplies, rent, and liability insurance are captured in overhead pools. On a periodic basis, these costs are calculated as a percentage of total direct costs or direct labor costs.? Once a ratio is calculated, then each real project is allocated a portion of the total overhead costs incurred.
Project Cost Accounting Is Important
Going through this process helps determine which projects are winners and which are losers.? This information can be critical to ensuring accurate bids down the road or determining whether your employees are working slower than dial-up Internet.
Percent Utilization Defined
In most consulting firms, all of this is watched closely by upper management.? Most go one level deeper, using what is known as percent utilization, which is calculated as the number of hours worked on billable projects divided by the total number of hours paid (in a given payroll period).? Expected utilization rates? may differ based on the employee’s role within the company (eg, Project Manager vs. Field Technician).
Utilization Rate Thresholds = Enormous Pressure on Workers
And herein lies the problem?pushing employees to meet or exceed defined utilization rates.? Lets say that Joe Blow, who has worked as a Project Manager at the company for the past 6 years, has a bad week.? One of his daughters is sick, so he takes time off, and one of the projects he is working on is winding down.? He knows his utilization rate is going to drop because he has less billable work, and if it drops to a certain level, he knows that he will get a phone call from his boss?s boss asking him about this.? He knows this because he has worked there for 6 years and knows the system.? He also knows how to game the system.? So what does Joe do?? He pads his billable hours.? Simple as that.? Add a few extra hours here and there, and presto!? No call from upper management, life is good.? Problem solved…
Meeting Specific Utilization Rates Can Lead to Stealing
…Well, not quite.? If the project is a time and materials project, the client will receive an inaccurate bill.? This is wrong, plain and simple.? Clients need to be treated with respect, care, and honesty.? Charging them more than what was performed is stealing.? Period.? It is also likely that the client will notice some cost overages, bring that up, and scrutinize their bills more closely in the future (or find another firm to work with).
If the project where Joe padded his hours is a task-based lump sum project, padding his hours will lower the project?s margins, thus skewing project financials.? And wasn?t this the whole point of using timesheets in the first place?? To figure out if a project is profitable or not?
Padding Hours is More Common Than You Think
Not convinced that people pad? It happened to us! On one of our long-term Navy projects, we noticed something odd when the data provided to us indicated that a remediation treatment system pump was running for more hours than is physically possible in a month!? It was like having 30 hours per day!? The technician was simply inventing data and not actually doing the work, even though our invoices kept getting larger and larger every month.? When confronted, the firm backed down on the invoice charges, but the damage was already done.? Will we ever trust this firm again? Not a chance.
This is not an isolated exception.? It happens all the time.? And I believe it does because of the intense pressure placed on workers by upper management.? It?s these artificial utilization rate thresholds that workers are supposed to meet or exceed that are at the heart of the problem.? Meeting these thresholds can be challenging, and employees will inevitably pad hours to keep the timesheet and utilization police from knocking at their door.
Can We Eliminate the Use of Utilization Rates and the Timesheet Police?
Who makes up these utilization rate thresholds anyway?? Are they based on historical data, the accounting department, management, or a combination of these?? How were they derived?? Should they change over time, as the industry changes?? Who ultimately is responsible for ensuring that there is plenty of billable work to go around?? Why penalize the workers and their clients for the lack of work or high overhead structure?? Why not just eliminate timesheets and utilization rates altogether?? Can we just get rid of this stuff, simplify, and treat workers as adults? Who says we can?t or shouldn?t? ?Who makes up these rules, anyway?
What are your thoughts?? Leave me a comment, but please, whatever you do, don?t tell me to fill out another damn timesheet.