Dissent is Democracy: Rethinking the Hourly Billing Model
May 31, 2024
I have been an advisor or consultant, or however you want to label it, since the late 1980s. My journey began as an internal consultant, and I quickly found myself working at one of the Big Six firms. I was introduced to the prevalent “hourly billing” model early on. This timeless model operates on a simple premise: consultants have an hourly rate, and clients receive a bill reflecting the hours worked multiplied by this rate. This model extends beyond consulting to accounting, tax advisory, and legal services. At one point, all these professionals operated under one roof until regulatory bodies intervened, mandating separation to avoid conflicts of interest.
What is my point? For years, I have preferred not to work under the hourly billing model, instead opting for a so-called fixed fee. But why? Allow me to illustrate with my pet project: developing the Knowledge Zone Curaçao. For weeks, I pondered how to get the domain www.kzone-curacao.com indexed on Google. The solution finally came to me in five minutes this morning. How many hours should I bill for that?
My brain doesn't conform to the hourly billing model. It works 24/7. Often, I find a solution almost instantly, but to achieve that, I constantly absorb and process information. The hourly billing model doesn't work for me. I can't fathom how others manage it or how their brains operate.
The Drawbacks of Hourly Billing
The hourly billing model, while straightforward, has several drawbacks:
Discourages Efficiency: It punishes efficiency and rewards longer hours, potentially leading to inflated bills without added value.
Client Distrust: Clients may feel skeptical about the hours reported, doubting whether they reflect actual productive work.
Limits Creativity: This model can stifle creativity and problem-solving, as it doesn't account for the value of quick, effective solutions.
The Case for Fixed Fees
Fixed fees, on the other hand, offer several advantages:
Value Over Time: Clients pay for the value delivered, not the time spent. This encourages efficiency and effectiveness.
Transparency: Fixed fees provide clear upfront costs, fostering trust and clarity.
Encourages Innovation: Consultants can focus on innovative and effective solutions knowing that they won't be penalized for working faster.
In my practice, I’ve found fixed fees far more suitable. For instance, while working on the Knowledge Zone Curaçao project, I often engage in intensive thought processes that aren’t tied to specific billable hours. My solutions, though sometimes arrived at quickly, result from continuous, around-the-clock thinking and processing. This holistic approach to problem-solving simply doesn't fit into the traditional hourly billing mold.
The hourly billing model is an archaic system that fails to account for the modern, dynamic ways consultants work today. For many of us, our brains are constantly processing and problem-solving, far beyond the hours we could log on a timesheet. Fixed fees reflect our value more accurately, ensuring clients pay for results rather than time. As we continue to evolve in our professional practices, we must rethink and challenge traditional models, embracing those that foster efficiency, trust, and innovation.
In the spirit of dissent and democracy, it's time to question the status quo and push for a system that truly reflects the nature of our work.
Miguel Goede
Comments