Hi Dave,

At our company we use Changepoint as our PSA tool and we log all time both funded and unfunded, against a customer’s project. Time
such as any unfunded travel time, time spent on product issues, etc. We do this so we can see all of the time associated with a project
and can therefore look at the overall profitability of a project. This is quite easy to do, although our version of Changepoint is
heavily customized.

We don’t have overtime per se but our Statement of Works (SOWs) clearly say we only work business hours, but we all know the reality
of that! If one of my Consultants does have to work a Sunday perhaps for go-live or some type of cut-over, we normally give them time off
in lieu. Our Consultants are bonused on their billable utilization so the longer they work the bigger their bonus is, so working longer
hours every now and then is not a problem for most of them.

Regards

Louise L.

Dave,

I’m strongly in favor of tracking these “costs” on time and materials projects, and for fixed price it’s absolutely essential.  Unpaid overtime on a project has a non-zero cost in terms of culture, retention, job satisfaction, and sometimes revenue opportunity.  To avoid this costs, you want to make sure that your managers are incented to prepare honest estimates and manage schedules effectively.

On a fixed price case is a simple one—you left revenue on the table due to poor estimating and you need a way to track that.  These costs will impact the project margin and so will have a direct impact on the incentives of the managers responsible for the project.  In a time and materials project, the margin on the project has improved with the overtime, since you’re getting more revenue for less staffing costs.  This influences the incentive structure in a way that encourages poor estimating and Death March management.  By tracking the costs of this time as if the staff was being paid, you a margin calculation that reflects the margin on the project if it had been managed effectively. 

In either case, tracking these costs encourages better estimating and schedule management and aligns your incentive structure with the softer objectives to limiting overtime.

Chuck

I can’t help you as much with the European laws as I wouldn’t want to guess but…

Most systems are aware that overtime can be handled in a number of ways.  The system we use, Projector, is aware and allows us to dictate how time above normal hours are charged.  It understands that we have salaried employees and their cost is fixed for a given time period and that we have subcontractors that actually do charge by the hour. 

Don

Hi Louise,

Do you actually track travel as a cost to the project?  That seems somewhat of an arbitrary thing to track as where the person lives can’t be factored in to the project when being priced.  Burdening the project with that doesn’t seem like a good way to determine the health of the project and if it was the right one to take on.

Don

Don,

We track travel to monitor individual consultant activity rather than the cost to the project. You are correct, it is both difficult to factor and
rarely reimbursed by the client.

Joe G.

Hi Dave

On one side we track very meticulously the time our employeesinvest. All PS employee contracts cover over time as well, so we don’t
compensate for over time i.e. you win some you lose some. We use the Bonus mechanism to compensate an employee that consistently invests more
than others. On the other hand we do provide some sort of compensation if the employee flys or works over the weekend.

Udi

Don,

There are a number of reasons why we track travel to a project. Firstly we need to track this if a Consultant is driving during
business hours and they need to enter this time so they log their obligatory 40 hours. Secondly we can gather data as to the overall
impact to both that project and to our services profitabilty overall as we are starting to push for all travel time to be funded over a
certain time or mileage, so we need to know the financial imapct of that and use some examples of large projects where this has affected
its overall profitability.

Cheers

Louise

I agree on tracking the travel, just not as a cost to the project in terms of time spent.

Don

Dave,
I tie everything to the project, including prep work, travel time, post-project support.  By default I create those (usually non-billing) tasks when I setup a project in our PSA tool, OpenAir.  That give me visibility into the true cost of a project.

Regards,

Bruce I.

Regarding Overtime:

I have handled overtime as a part of utilization.  This is a factor in their quarterly bonus.  We track the hours (billable) to determine project profitability.  Also, we use these figures in our future SOWs.  What is harder to evaluate is “unbillable” hours.  I ask our Engagement Managers to look at those hours and report back any trends (extra warranty, sales expectations, efficiency, etc.).  Our goal is to establish a consistent project plan / deliverables and reward our consultants for additional work.
Regards,

Mark A.

Hi Dave,

I prefer to track all time against a project, even though the cost of the resource is considered hourly and things get somewhat skewed on profitability when you take hour for hour cost on the overtime costs.  Capturing all hours is how you start trending and gathering metrics for better estimations (as one response noted) in the future. 

I used OpenAir which has a feature to do a “cost adjustment” based on hours worked for a user considering their work schedule.  Basically what you can do is if a resource works 125%, the cost of that resource can be auto-adjusted for that month (or whatever time period) to be effective cost per hour (basically the hourly rate is lowered with the increase in hours so the cost of the resource is 100%).  This way you get true profitability on the project AND the total hours for estimation metrics use going forward.

I’ve worked with a lot of companies and total hours capture seems to be the bigger focus while accounting takes care of the actual company/department profitability reporting out of an accounting package.  Project profitability becomes a close approximation due to the gray lines such as travel time reporting, shadowing/mentoring, etc. and what detail information you have for employee cost in your project tracking system.

Thanks

Jodi

Bruce,
We do the same exact thing with OpenAir and it’s been working very well.

What kind of threshholds or benchmarks do you set for non-billable time? For example, if you have a project expected to generate 100 billable hours (or a fixed-bid at 100 hours), how many non-billable hours would you expect? 20? 50? That’s an area of efficiency that I struggle with; how much non-billable time is reasonable and when to know if it’s getting out of control.

Matt,
Right now my team is doing a lot of travel.  To be really frank, our benchmarks aren’t so good right now.  The last couple of years we kept the ratio at about 1:10 nonbillable:billable hours.  Because of our recent expansion in Europe (where we’ve needed to fly US consultants to support our operations there), and with the addition of some package offerings, I’ve watched in dismay as the ratio has climbed to 2:10.  To offset that, I recently added a travel time charge and higher rates for the European business.  The ratio will improve slightly, but the margins should improve significantly.

I would really like to go back to the previous 1:10 ratio (or better!).

Regards,

Bruce I.

Bruce,

Do you find the European market more willing to accept travel time charges as “norm” compared to US?  We have operations in both areas and trying to introdcue travel time billing in US had met serious resistence vs. Europe.

Thanks,

Scott H.

... if overtime is worked on project are we artificially inflating the costs on a project?

Yes and no. On the one hand, a one week project that took 50 hours, not 40, *really* “costs” 50 hours. I want to know about that.
On the other hand, if I didn’t pay overtime, then the extra ten hours don’t really exist in a meaningful way.

So I want to see it from both points of view. Any reasonable PSA tool will do that for you. For example, our PSA tool, Projector, allows
either to be used. Its reports can calculate cost (they call it Resource Direct Cost, or RDC) on a regular hourly basis, or on a
“Whole Day” version, which is simply RDC but capped at eight (in our case) hours. And this is a reporting-time decision, so I can run one
report and then the other, if I want to see both. The underlying data is unaffected.

As a matter of normal working though - and especially if I’m assessing performance of project managers - I use the regular hourly approach
exclusively. I used to use Whole Day RDC but, after discussion with various people, including the Projector architects, I changed to
regular per-hour RDC. So if a project uses someone for 10 hours in a day, that project gets charged for 10 hours, even though in practice
the person wasn’t paid any more for that day of work.

The reason was that I don’t want to lose visibility of those “extra” hours. If I’m in “nice caring boss” mode, I want to see them so my
people don’t get exhausted. And if I’m in “cruel, money grabbing boss” mode, I want to see them so I can calculate how much money I would
have made if the project manager hadn’t underestimated the project needs and the resources in question were therefore free to do other
billable work. And either way, I want to have an accurate measure of how effectively my project managers make use of firm resources.

* In addition, this also plays into other issues, especially in Europe where we have labor laws and works councils that need to be considered.

I can’t see that that matters in this context. Certainly you have to consider local rules as to *whether* you should be paying overtime or
not. If you do pay overtime, the problem goes away. Use hourly RDC, period. But if you decide not to pay it[1], then it reverts to the US
situation and you still have the same “hourly RDC” versus “Whole Day RDC” question as before. My advice would be still to use hourly RDC.

Tom

[1] There’s no general requirement to pay overtime in Europe (well, not in the UK or Germany at least). You may have to take care if your
people average over 48 hours a week, but even that is not always a problem.

Hello All,

Thank you for all the posts. Pretty lively thread if I must say. Since this is the first time joining a discussion and I am very much impressed with the results.

In summary, it appears that all of us are interested in tracking total time on a project and that we normally associate utilization, bonus structures, and quality of life issues by keeping track of the total time working on a project, even the non-billable time.

However, in all the posts with one exception (Tom Kelley), it appears that overtime hours that are worked but not part of the consulting comp. plan are not accounted for. This would result in a slight degradation of a project margin because extra hours are being worked and accounted for in an hourly calculation where the consultant is only paid for the standard 8 hour work day.

Tom suggests that there is a “whole day” mechanism of billing and cost calculations that would avoid this but in his experience this was less useful because you lost the extra hours for tracking.

Interesting discussion and very useful to my current challenges. Thanks.

Dave J.