The headline for an August 2009 article in the New York Times read “‘Billable Hour’ Under Attack.” As authors of hourly billing software, we’ve seen this debate before, but usually in blogs or forums, living in obscure corners of the Internet. However, considering the economic climate, it wasn’t that surprising to see the topic show up on the New York Times front page.
The debate is usually centered around competiting incentives. The argument goes that if ethics are removed from the equation, then the biller has the incentive to take longer to complete the work so they can bill more money. As someone who used to bill by the hour, I’ve always found this argument stupid. Restated it sounds like this: The vendor will try to exploit you. Even when the argument is stated using cool-headed economic and psychological verbage, it still always comes across as paranoid and hateful to me. Just because a business has the possibility of ripping you off, they will?
In fact, one could make the argument that the client is the one with unreasonable expectations here. After all, the cilent is looking to have his or her risk completely mitigated. What if the vendor provides a flat rate and then the client “scope creeps” the case or project to entail more than was originally discussed. Billing vendors need to mitigate their risk as well.
Yes, you should protect yourself. I check my restaurant take-out order before I walk away, because people can be sloppy. And certainly hourly billers are capable of being sloppy. But that’s not the argument made in most of these op-ed pieces. The argument is usually black-and-white. “Billing by the hour is flawed.” “It can’t work.” “It’s a racket.” I agree there should be auditing. A client should feel comfortable asking about any particular line item, and the vendor should provide a lot of detail. I also feel there should be auditing in any business transaction. Even when a flat rate is provided, a professional services company might look for ways to cut corners and reduce the time spent to bring the over all “revenue per hour” amount up higher.
Hourly billing can work. When all the chips are distributed, it comes down to the people. You need to trust your vendor to protect your interests across the board. As a vendor, I was happy to give a flat-rate to a client I trusted not to pile onto the list after the work was completed. But I truly believe that the system has it’s own built-in check and balances. A vendor who pads hours or charges unfairly will simply find themselves out of business because businesses who bill fairly can compete better. A long established company is almost always a safe bet, and when done correctly, hourly billing is one of the few ways to protect both sides from getting ripped off.