Friday, March 29, 2013

SOP Friday: Is This a Profitable Hour?

From time to time, it's good to sit your staff down and teach them this mantra: "Is this a profitable hour for our company?"

In the KPEnterprises Standards and Procedures manual, it looks like this:

    The KPEnterprises Mantra
    Is this a profitable hour for KPEnterprises?

and shortly after that we have:

Work Ethics and Core Beliefs

  • We strive for continuous improvement to all of our processes to ensure a high standard of work delivered.
  • The best way to work is to focus on one thing completely and, when it is done or at a stopping point, you move on to the next thing.
  • Only change focus or allow distraction to the one thing you are doing if that interruption is directly related to the success or completion of the task at hand.
  • All things can wait or be handled by someone else if their current status is correctly recorded for others to access.  That is to say, if Autotask is up to date with notes etc. anyone else with the correct technical ability can take over that Service Request or help it move forward toward resolution.
  • We get all the information the first time and document it.
  • We do complete work the first time around. No rework.
  • The client you are currently servicing is the most important client right now.
  • We complete all work possible before leaving a client’s office.

Not everything on that list is directly related to profitability, but everything in the entire company is at least indirectly related to it.

Look back on a few earlier SOPs. For example,

"Service Manager Roles and Responsibilities:
Focus on making every work hour a profitable hour for KPE."

. . . and . . .

"Technician Roles and Responsibilities
Focus on making every work hour a profitable hour for KPE."

Everyone's In On This!

No matter how large or small your company is, every employee needs to keep an eye on profitability. Of course many of them will not see a direct line between their daily activities and the profitability of the company. That means it's up to you to draw the lines for them.

For example, administrative assistants need to know that their work helps marketing efforts, which leads to sale, which leads to money that runs the whole company.

The front office staff do a lot of work with billing, mailings, and finances. So even though they don't perform billable labor, they do all the hard work that actually brings the money in so the company can operate. And sometimes they do a better job of this than the owner! For example, it is very common that the owner will give discounts and forgive bills from time to time. That happens a lot less when billing is turned over to the front office staff.

Sales people obviously understand the connection between their success and the company's success.

The tech department - the service delivery department - has the strongest connection between their daily activities and the profitability of the company. In fact, they're the only employees who are evaluated on the basis of how "billable" they are.

When you break down a technician's hour, it might contain several activities, such as

- Check the service board
- Work tickets (deliver service)
- Read email
- Perform administrative duties
- Training / studying for exams
- Taking exams
- Attend meetings
- Wasting time on Facebook,, and YouTube

Most of these are either known to be profitable (billable labor is still considered "billable" if it is productive labor in support of a prepaid managed service agreement) or administrative. One of the reasons 60-70% billability is acceptable is that you expect technicians to read email, learn new technologies, and attend meetings.

The hidden culprits to profitability are not in the hours spent in each of the categories. The hidden culprits have to do with actual job performance and skills. For example, rework is extremely expensive for I.T. companies. If work is not properly documented, the chances for rework go way up. If a technician is thrown into a job with insufficient training, the probability for rework goes way up.

Inefficient troubleshooting is also a huge time waster. That's why we have a rule that the maximum time anyone should work on any problem before stopping and calling for feedback or support is 30 minutes. It is extremely important that technicians do not waste time continually trying the same thing over and over and expecting new results. Sometimes they just need a "fresh pair of eyes" on the problem. Sometimes they need to escalate to vendor support or other third party support.

Very often, we geeks refuse to give up. We won't let a USB device defeat us! So we want to keep working until we fix the problem. That's great if you're a sole proprietor and your time is worth nothing. But when you have employees, this can get very expensive very fast.

One time I had a tech who spent four hours working on a cell phone issue, making no progress. Then, after one six minute call to the Sprint store, it was fixed. Lesson learned. I can't charge a client for four hours labor. But I have to pay the technician. This is a losing proposition in at least three ways.

1) We look incompetent. That doesn't cost money right away, but it certainly can in the long run.

2) At about $25/hour with taxes, that tech's labor cost me $100.

3) More importantly, that's four hours we did not bill out in productive labor. At the time, our rate was $120/hr, which adds up to $480.

(That was about ten years ago and may actually be the reason we implemented the 30 minute limit.)

Productive Labor

Even technicians don't have to think in terms of dollars when they evaluate whether the hour is profitable. Rather, they can consider whether their actions are productive. Are they moving a ticket toward completion, or spinning their wheels? Is time better spent finding the cause of a problem or simply fixing it? Does this action advance the goals of the company with regard to client relationships or service department goals?


It is also critical that employees see how their actions fit in the big picture. For example, technicians often say that entering time and notes into the PSA is wasteful. They see it as bureaucratic activity and not productive labor. Very often, that's because they do not enter time into the ticket as soon as it's completed. When the last thing you do on a ticket is enter the notes, that activity is part of the ticket. When you wait until the end of the day, or the next day, that activity is administrative catch-up.

More importantly, accurate notes at time of service help us avoid rework. They help the service manager answer questions from a client as soon as the job is complete - and not have to wait until the next day when notes are in the system. Accurate notes also help the front office product accurate billing. And they help whoever does customer service to justify the bill if a client has a question.

It is worthwhile to bring up the topic "Is this a profitable hour for the company?" at least once or twice a year in your company meetings. No one should obsess over it, but everyone should think about it.

Profitability doesn't just happen.

Productivity doesn't just happen.

Comments welcome.

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About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at

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Next week's topic: Using a White Board


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