The hidden flaws in agency timesheets and retainers

This post is by Darren Woolley, Founder of TrinityP3With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.

When I worked in Medical Research, there were no time cards or timesheets. They were for the nursing staff and the medicos, who had to clock on and off each day just inside their entrances to the hospital. But in our laboratory the staff had no such requirement.

When I commenced in an agency as a junior copywriter, I was surprised to be asked to keep a timesheet weekly, especially as I was only working on one client – Myer. 100% of my time was committed to that account and yet I was required to keep a timesheet on the hours I spent in briefing meetings, presentation meetings, production meetings and even time developing ideas, headlines and scripts for weekly press and radio advertising.

But over the 15 years I was working in agencies, I was required to keep a timesheet for my time which was used to either bill the client or justified the amount billed to the client. Here are some of the flaws I noted in the various ways this was applied within agencies.

1. No increments

There are many systems available now, but within agencies there are usually not the type of time keeping systems such as you find in a legal or accounting practices. Most of the systems I was required to use were paper based or e-mail. There were also no minimum increments. I chose 30 minute increments as most meetings were multiples of an hour, while most tasks were 20 – 30 minutes.

But I remember seeing the EA to the Head of Client Services at one agency I worked using 8 hour increments. That is they allocated a day a week to the five largest clients. Or the account director who had half their time allocated to one client and the other half to another and simply applied half day increments in the hope it would add up to 50 / 50.

2. Pressure to fill in the day

I discovered fairly early in my agency career that deep in the bowels of the Finance department there was a report that reviewed the billable hours per staff resource. It appears that the account teams were always at the top of this list with their timesheet keeping described above.

But the creative and production people were often at the bottom because they found it difficult to find 8 billable hours a day to bill the various clients across the various tasks. In fact I wish I had kept the memo that informed us that billable hours would be considered as part of our performance bonus.

At one agency I made a concerted effort and was rewarded by the agency CFO informing me I had the highest billable recovery of any creative person in the agency.

3. No uniform application

Timesheets were not always completed on the day. In some agencies they were collected weekly and other monthly. I used my diary to record meetings and then fill in tasks and time in the margins. I would use this to complete the timesheet daily or every few days, rather than having the rush at the end of the week.

I also started to make it a habit to keep copies of my timesheet for my art director, who under threat of not being paid unless he completed the past month of timesheets, would come to me for inspiration and literally copy my timesheets as his own.

It seemed that it did not matter how accurate or consistent the process was, as long as it was completed.

4. Question of allocation

If I was sitting in an internal WIP meeting where we were covering the half a dozen clients that I was working on, where would I allocate this in the timesheet?

Was I to simply split the two hours equally over the six clients? Or perhaps mark it as an non-billable internal agency meeting?

Or how about when I was sitting at an edit suite for hours of post-production and actually working on ideas for another client? Do I bill both times to the different clients?

Under the pressure to recover our costs, it was not considered double dipping to put the same hours down for two different clients if it meant getting to the magical 100% recovery.

5. Punishment or revenge

I remember one old art director who would spend hours on their timesheets when requested of them. I asked why they took so long, was it to get it accurate?

They smiled and explained to me that it was their time for revenge on the clients they did not like. The ones who made ridiculously minor changes to the work, or required multiple iterations of work before they would approve it, or were just plain difficult.

What they would do is apportion their time to these clients at a much higher level than the clients they liked working with. I asked how this was punishment. Either directly (if the client was billed by the hour) or indirectly (if the client was paying a retainer) the financials would look much better for the good clients and much worse for the bad clients.

A solution for timesheets

Timesheets are a great way for an agency to determine their internal resource recovery rate. But they are far too inaccurate in almost every case to be used as a basis of the agency’s remuneration. I have already spoken and written previously on the folly of using head hours for charging the cost of ideas and concepts. But the lack of rigour makes the use of timesheets to justify agency costs and charges completely flawed.

This is why we favour value-based or value-priced models over the cost recovery head hour model. It is why we have been recommending both agencies and advertisers should move away from what is currently the most common model, but is also largely flawed.

When advertiser and procurement professionals ask what is best practice in this space, I am forced to clarify if they mean ‘best practice’ or ‘common practice’. The retainer or resource model is the most common practice. But it is by no means the best practice.

It would seem that for agency and advertiser, it is better the model they know, even if it is flawed, than to try a model that solves this issue and eliminates the need for timesheets forever from the advertising industry.

What are your thoughts on this? Let me know here and add the time it takes to your timesheet as “Industry development”.

6 thoughts on “The hidden flaws in agency timesheets and retainers

  1. Darren, Everyone knows that timesheets are sometimes the most creative thing to come out of advertising agencies. But it like the 9-5 work day is a hard habit to quit. I am hoping the solution lies somewhere between a retainer and performance base pay. Actually, I'm leaning towards a fee based minimum with a performance based incentives, like some NFL players' contracts. It gives the agency the capital it needs to do the work while also having the incentives to encourage the agency to deliver. Maybe you covered this but that is where I am at. I was telling a friend that advertising agencies are going to have to pull our heads out of the sand and address this quickly, because the client solutions are too weighted in their favor.

  2. Darren, I agree time sheets based retainers are not necessarily the best way forward into the future.
    Only retainers can encourage mediocrity at times. Agencies that go over and beyond will perhaps look for a combination of part retainer ( to lock in good staff) + variable element which is needs based /campaign driven + success fee. if an agency helps clients to achieve more than the ROI metrics they should be rewarded too.

  3. Darren, I have found that the more transparency you deliver to clients regarding when and how you spend their money, the easier it is for them to understand the multitude of work that needs to be done to complete a task. More often than not, the client appreciates the honesty and has meetings to make decisions about the work being done rather than having meetings about money and arguing and negotiation at invoice stage. Conversely the client should have responsible budget management and lock away the funds with Finance and never request work from an agency without doing so. Simple!

  4. Darren, There's no doubt that value-based pricing has its merits, but it's not universally accepted and technology has solved the problems of inaccurate and late timesheets. For example, CreativeWorx (http://www.creativeworx.com) has a wonderful add-on for any professional services firm call TimeTracker that will automatically capture how employees spend their time and then let them review & submit for billing. Gone are the days of trying to remember how time was spent…or which billing code to use.

    Given that the timesheet compliance issue has been eliminated by TimeTracker, the real question is whether there's value in having that data. Whether it's used to determine pricing is dependent on the organization, its clients and other market practices. However, it's vital to understand client and job profitability, regardless of whether that information will be used for pricing.

    Timesheets are essential, because it measures a key performance indicator of the company.

    1. Hi Mark, technology is only as good as the ability to get people to use it. In my experience, the problem is not the capture method, the problem is the users not working in time increments. I think you would be hard pressed to find any creative person with the discipline to keep time increments throughout the day. And as you say, the next issue is the data generated worth it?

      1. Darren – Sorry for the delayed response. I agree that in your experience (and everyone else's), it has been impossible to track time and associate the right increments. But hopefully you're not suggesting that technology won't catch up to the problem…because it has. And the TimeTracker solution I referenced was developed by former Adobe employees. In fact, it was originally designed for Creatives, though now it's appropriate for all disciplines. We're seeing agencies reporting major gains in compliance & accuracy.

        With accurate & timely timesheets, it becomes possible to track budgets (Actuals versus estimates) in near real-time, to understand resourcing requirements, and to minimize admin time thereby allowing more time for billable work. The ad industry has long needed a solution for its timesheet problem, and the automatic TimeTracker delivers exceptionally well. (Check it out at http://www.creativeworx.com)

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