“Companies that track time are idiots!” It was the final round of questions at the selection meeting for the government-sponsored growth potential program, GazelleGrowth, and the man behind that controversial statement was Dan Meiland, the long-time CEO of Egon Zehnder International, one of the world’s largest executive search firms.
I was representing TimeLog’s GazelleGrowth application, and after Meiland’s statement, my first thought was that our challenge would begin NOW, if we managed to be among the top five out of fifty Danish companies selected twice yearly to participate in the program.
But Dan Meiland’s statement was not really about whether consulting firms should actually track time, but if they should settle accounts based on time spent, or by a fixed price. Here he gets to the heart of the debate that I believe affects management at many other companies: How much risk will you take to maximize profit on the company’s projects and services?
As a consulting firm, it can be a plain choice between delivering services on a time-spent basis, where possible budget overruns are partially transferred to the customer, but where a typical contribution margin is €50-70 per hour. Or, you can choose to deliver services at a fixed price, where the supplier bears the budgetary risk - but a well-run, fair-priced project can deliver a gross margin of well over €100 per hour, if the project is managed effectively.
Minimizing the budgetary risk of fixed-price projects is a well-known, troublesome exercise that includes effective budgeting, effective feedback from project participants, continuous progress evaluation, economic and temporal overview, and early warnings when a project gets into trouble. It’s a heavy administrative task to manage larger projects effectively, causing many businesses to drop ongoing economic monitoring and instead rely on post calculations that are first implemented at project’s end.
In recent years, TimeLog has intensively invested in developing tools and methods for the effective financial management of complex contracts and projects - in real time. Based on a unique linking of budgets, recorded time, and estimated value creation, we can automatically calculate how a project is progressing in comparison to the project plan. We’re still striving towards the end goal, and are continually driven by the vision to offer solutions that allow our customers to deliver projects with the highest possible returns and the lowest possible financial risk.
We'd love to have our clients and others interested in a close dialogue regarding how we develop a solution that combines good usability and advanced financial management. As part of this strategy, we will be conducting individual interviews in the upcoming weeks with a number of our customers and representatives of the consulting industry, to work together to identify how the future TimeLog Project should look, if we are to achieve this ambitious goal.
Who knows, perhaps one day Egon Zehnder will be part of the TimeLog clientele – one of many passionate users of TimeLog Project for daily project management.
Let the debate continue on LinkedIn where this post will be published, so we can hear everyone’s ideas and opinions.