Thinking time is money could be expensive mistake

An obsession with the “billable hour” has led to junior employees being overworked and long-term strategic challenges being overlooked at many professional services firms, according to academics.

Although the traditional practice of accountants, lawyers and consultants to charge clients by the hour has been called into question since the economic downturn, as clients increasingly demand big discounts and capped rates, it remains the system used by most firms as the main measure of their employees’ performance, the academics said.

Pressure on employees to rack up the number of hours charged has increased significantly in recent years as firms become bigger and more centrally controlled. This has been exacerbated by the recession as managements try to keep utilisation rates high to compensate for falling fees. Andre Spicer, of Cass Business School, said that big advisory firms had become so obsessed with the number of hours their employees bill that their traditional partnership values and professional ethos had been eroded.

Professor Spicer said: “If you look at the history of how professional services firms were run, there used to be a strong professional ethos, it was all about collegiality and partnership. But as the big firms have become more like corporations ... billable hours have become more and more important.

“They talk about client service [being their primary focus], but in fact if you just scratch the surface what you find is billable hours still dominates.”

Professor Spicer and Johan Alvehus, of Lund University in Sweden, spent two years studying a group of tax lawyers at one of the Big Four accountancy firms. They found that the consultants were encouraged to bill as many hours as possible to increase their chances of making it to partner, often at the expense of spending time on developing their skills.

“It is something that actually encourages active game-playing, intervention and entrepreneurial manipulation,” the study found.

Non-billable tasks would have to be completed in their own time, resulting in gruelling hours being the norm at most big firms, Professor Spicer said.

This was at odds with a desire among a new generation of professionals for more flexible working arrangements and a better work-life balance, he said. Big firms could struggle to attract and retain the best young people if they do not address the problem.

“Most of them are really young, straight out of university when they start, and they don’t know any better. They’re shocked [at the long hours] at first. They very quickly get used to it and think this is reality, this is how things are. They learn to spend a lot of time gaming the system but after a few years realise it isn’t working very well.

“They’ve put on ten kilograms because they never get time to exercise, they haven’t seen their best friends in three or four months. When that kicks in, people start asking questions, asking about alternatives. Big firms are going to have to grapple with it.”

James Knight, managing partner of Keystone Law, one of a new breed of law firms that have tried to change the traditional business model, said: “There are no signs that the culture in the larger firms is changing. What is changing is there are more alternatives to the larger firms and more people looking for more work-life balance and more flexibility.”

“The larger firms still maintain a basic ethos of: ‘If you can’t stand the heat, get out of the kitchen. That’s who we are and if you don’t like it, go elsewhere.’ ”