Rewarding Effort vs Results

Sometimes we confuse effort with outcome. We think that hours spent are more important than outcomes achieved. Or we unintentionally create a system where effort is rewarded, rather than outcomes.

Consider a situation where you work for a consulting firm, doing capped Time & Materials jobs. The client gets charged for the amount of time actually worked. Any amount of time up to the cap will be accepted. If more time is needed to complete a task, you’ll need to go back to the client to negotiate for more time/money. Occasionally you’ll need to do that, but usually the job will be completed under the cap.

As a consultant, you’re normally measured on your utilisation, and the amount you bill. So what’s the optimum amount of work to do for each job? Funnily enough, it is very close to the amount estimated - no matter what the estimate was. Maximise revenue & utilisation, while still doing the work under budget. There’s no incentive to do the job quicker.

Look at it from the perspective of two different consultants, Alice & Bob:

  • Alice is a diligent worker, who gets through her work as quickly as possible. Repeatable tasks are scripted. She doesn’t muck around.
  • Bob is a bit more relaxed. He still gets the job done, but is in no rush. Faced with a list of boring tasks, he doesn’t mind plodding through them, manually entering details.

So what’s the outcome for Alice & Bob?

  • Alice ends up being under-utilised, and bills less. So she gets assigned more work. Now she’s working flat out all week, getting through a lot of work, but only just billing the same as everyone else. Increased stress levels, for no personal benefit.
  • Bob has good utilisation and billing numbers, but he’s not under any real pressure. He’s relaxed, and happy with his job.

Which consultant would you rather be?

Of course, you might say that Alice will get noticed as an effective worker, and if business conditions change, she’ll keep her job when others lose theirs. Or she’ll find that she’s well-positioned for other opportunities. But life doesn’t always work that way.

All this said, I am not at all against T&M jobs. I do not believe all jobs should be done as fixed-price. Sometimes the complexity/unique nature of the job makes it impossible to estimate. Other times there is so much wasted effort that goes into estimating, and making allowances for over-runs, that it can push the fixed price well beyond what T&M would cost.

But you need to pay careful attention to the behaviours that you encourage.