No, Time Is Not Money

How many thousands of times have you heard — or uttered — the expression “Time is money?” Especially in professional services, we’ve come to accept this assertion as doctrine. The problem is, it’s simply not true. 

Pioneering scientists like Isaac Newton viewed time as part of the fundamental structure of the universe — an objective dimension independent of events, in which events occur in sequence. Philosophers like Immanuel Kant had a much more subjective view, asserting that time is neither an event nor a thing, and thus is not itself measurable. 

Albert Einstein introduced the concept that time is actually an illusion. Time is relative and can vary for different observers depending on one’s frame of reference. In an exhibition on Einstein, the American Museum of Natural History explains it this way: “Just as observers in two different frames of reference don’t always agree on how to describe the motion of a bouncing ball, they also don’t always agree on when an event happened or how long it took.” 

Time vs. manual work vs. knowledge work

In professional services, we unfortunately not only accept that time follows a universal rhythm that is the same for everyone, but that because of the billable hour, “time is money.” For this, we can thank Boston lawyer Reginald Heber Smith, who in the 1940s introduced in his firm the concept of tracking time in six-minute increments. 

Smith was inspired in part by the time-and-motion studies of Frederick Winslow Taylor (author of “Scientific Management," the bible of manufacturing organizations in the early 1900s). The problem, of course, is that Taylor was studying and systemizing manual work, whereas attorneys and other professionals are knowledge workers. 

Time is a relevant measure if you’re fitting parts on an automotive assembly line. The more parts accurately fit together in an hour, the greater the value to the manufacturer. But that’s not what professionals like accountants, architects, attorneys, and marketing executives do. The value we create cannot be measured and quantified in a unit of time. 

Time vs. “eureka moments”

Time is simply the wrong container for knowledge work. When solving a client problem, how should you charge for a “eureka moment” in which a brilliant solution emerges in a fraction of a second? What should you put on your timesheet?

Marketing executive Rory Sutherland tells the story of a pharmaceutical company asking their advertising agency to help them educate consumers that it’s important to take the full course of antibiotics prescribed. The conventional solution would be a multi-media advertising campaign; television commercials, billboards, social media advertising, and more, which would involve hundreds of hours of agency time and thousands of production and media dollars. Sutherland’s solution? Of the 24 pills prescribed, give patients 18 white pills and six blue ones, and tell them to take the white pills first and then the blue ones. Problem solved, and money saved.

In knowledge work, value created is correlated to expertise and experience, not time spent. So measuring and billing for time is, as my colleague Ron Baker says, “like plunging a ruler into an oven to measure the temperature.” 

Time vs. cost accounting

Cost accountants will argue that even if time is an imperfect way to charge for professional services, it still plays an important role in measuring cost. But in purely economic terms, time is not a cost. Paper clips are a cost. Office rent is a cost. Even salaries are a cost. But time is not a cost; it’s merely a constraint.

In his paradigm-shifting book, “Lies, Damned Lies, and Cost Accounting,” Reginald Tomas Lee argues that traditional cost accounting forces mathematical relationships where none exist (like time equals cost). Depending on the cost accounting method used, one can calculate radically different cost allocations. There have been many approved cost accounting methods—standard costing, total absorption costing, average costing, lean costing, marginal costing, activity-based costing—all of which will result in a wide range of costs per unit that have nothing to do with actual cash.

Lee observes that “Furthermore, most costs, especially in a professional firm, are for capacity: labor, rent, equipment, and technology. These costs do not vary with how that capacity is utilized; this is why airlines, hotels, and cruise ships don’t use standard cost accounting either, but rather focus on pricing, cash flow, and capacity modeling.” Professional firms can and should do likewise.

When contemplating the nature of time, remember Segal’s Law: “A person with one watch knows what time it is; a person with two watches is never quite sure.”

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Tim Williams leads Ignition Consulting Group, an international consultancy that advises professional service firms in the areas of business strategy and revenue models. Tim is the author of several books, including "Positioning for Professionals: How Professional Service Firms Can Differentiate Their Way to Success." Tim also writes a monthly blog, Propulsion, and shares insights on Twitter @TimWilliamsICG.