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by Vault Consulting Editors | March 04, 2010


As I've mentioned before, junior consultants are measured predominantly on one thing—utilization, or billable hours divided by total hours of the year (40 hours x 52 weeks). Project managers, however, are rated on project profitability. The client has a budget to be funded, which consists of a certain number of hours per consultant plus some percentage of wiggle room for a little overtime here and there. In a way, clients view consultants as salaried employees. Your consulting firm also needs appropriate records on hours for each type of project to estimate the next, and they also don't want to burn you out (I'm optimistic). These concerns are perfectly appropriate.

I firmly believe that there are no true conflicts among rational men—only opportunities to come to agreement. However, a system that's not setup properly cannot yield a positive result. The billing hours system set up to take into account the consultant, project manager, firm and client is set up in such a way that only that causes pain for all.

We are consistently told by our continuing education instructors and resource (assignment) managers (and of course by basic ethical standards) to book only the hours we actually work. Project managers will tell you to book only 40, 42, etc., perhaps with some sort of verbiage wrapped around it. Sometimes special permission is granted (usually ahead of time) to exceed that limit, but sometimes it is not. The contract may define those limits, or the project manager may be trying to contain costs for the client in good will to develop the relationship. Often, project managers have a very valid point that you should only be booking hours that are "value added." But what that means, exactly, is less clearly defined. And, if you are not approved to work beyond those hours, but then must do so in order to get the job done, then you're out of luck and the hours do not count toward your utilization.

You have a job to do; it's not measured in hours, it's measured in task completion. You have certain deliverables to complete and they must be done. But what if the work takes longer than projected? If you're recording 40 hours of work that actually took you 60 hours to do, your firm will have an inaccurate view of how long those tasks take to complete. Consequently, the next project will be underbid on hours and costs; project managers will then reduce those hours by a certain percentage, since they expect that you will improve your performance the next time, having already completed a similar engagement. It's hard to see how this cannot become an Atlas-like weight on the shoulders of consultants, increasing in weight by each subsequent misrepresentation.

The problem here, as is often the case, is one of measurement and accounting. What happens to the hours that you record on your time sheet beyond the stated limit? Are you credited (not likely monetarily, unless you're a subcontractor) for them? Do they count against your project? It's likely that the extra hours would be chargeable to the project, but not billable to the client, which means that you are now a profitability black hole precisely because of how you recorded your hours. I suppose this is supposed to discourage project managers from working you too hard, but I'm not sure that's ever worked in practice. In the short term, the company is not injured financially by your working extra hours, but this accounting method ultimately penalizes the project and likely the division you're working in.

In an ideal world, I think the hours you work would be recorded separately, and your project manager and the manager you report to (they should be separate people) would decide what to charge the client out of those hours and what to credit you for utilization. In that scenario, if a consulting firm decides to make an "investment" by billing for fewer hours than the project will realistically take, that is up to the project managers or the firm, not the consultants.

--Taylor O'Neal is a supply chain consultant for a major consulting firm. He graduated from Miami University School of Business in 2005 and Indiana University's Kelley Masters of Information Systems program in 2006.


Filed Under: Consulting