Any one particular client, you’re probably not. You’re tracking it on a less granular basis. Group the clients by characteristics that make them similar (size, plan characteristics, maybe even how easy or difficult they are to work with) and see.
When I was in group insurance most of our biggest clients were experience rated, so we were tracking those clients at the client level, but we were still using assumptions about their overhead cost.
And we were always using assumptions about overhead cost when determining pricing. I think it was something like
I’ve also worked for a consulting shop and I’d be careful assuming that just because it’s some big consulting shop they’re therefore doing it in the most optimal way.
I didn’t do pension consulting but we definitely weren’t doing “optimal” pricing analyses.
And again, it’s not always even very fair to go by the hours you spent.
Maybe one of our claim analysts made a bone-headed decision to deny a claim that shouldn’t have been denied and then the claimant sued us and our legal team spent a ton of time dealing with the lawsuit. Not really the client’s fault.
But a different client hires almost exclusively divas who think they are disabled when they break a fingernail and they are filing a ton of frivolous claims. That IS the clients fault.
So we figured out that government and union employees are a lot more likely to file frivolous claims and/or sue, so we charge extra to government & union groups because of that. We spend more time doing stupid crap for the New York insurance department than any other state, so our New York clients get charged more to cover our cost of dealing with their crazy insurance department. These are all factors that go into both our premiums and our profitability calculations
To the extent that our estimates are wrong, then the calculations based on them are wrong too.
I would argue that’s true for you too. When you work on New_Task for Client A before you work on New_Task for Client B you might erroneously reach the conclusion that Client A is more work than Client B. You’re not factoring in the human variable that it took YOU more time to work on Client A because you were more experienced when you got to Client B.
To some extent that’s probably captured in your billable rate, but not totally. You’ll have a higher billable rate than a newbie because you’re experienced in the industry. But when you get a new software or the regulators throw a new task at you you’ll have a learning curve that is almost certainly not captured in your hourly billing rate.
It seems to me like I was bending over backwards to NOT say that. At least it feels like I was bending over backwards. Maybe I didn’t make it clear enough?
I’ve worked with three law firms recently. One charges per 10 minute interval. One charges a flat fee for a service (varies depending on the service). The third charges a flat fee, with a provision to charge more if they end up spending a lot more time than they expect.
There are definitely choices, and charging per hour is not the only choice.
Yeah my current client is inconsistent in how they charge their clients. Hourly (billed in quarter-hour increments) for some services, flat fee for others. Flat fee is a lot easier, but there’s some stuff with too much variation for my client to feel comfortable with that. A lot of my client’s competitors are flat fee for everything. (By “flat” I really mean “defined” with a base plus multiplicative factors.)
There’s loads of options.
When I went to a presentation on Experience Rating, the presenter discussed all the various arrangements the company had in place and added that they were essentially only limited by the creativity of the underwriter and sales rep on the group.
I’m not talking about charging by the hour. I’m talking about tracking hours as a way to monitor if a client is profitable and managing the fixed fee by using that as a metric.
You can make reasonable assumptions. It’s how a lot of business is conducted. And you accept that it’s not precise. Like… basically everything. Your billable hours have their flaws and imprecisions too.
No. But I guess it depends on the size of your firm. I’ve worked for a few small firms (between 3-25 people). And the owners/managers knew which cases took an inordinate amount of time and which ones hardly take any time at all.
Also, the hours that it takes to complete a project also depends on who’s doing the work, their level of competency and familiarity with everything involved.
If someone isn’t that fluent with the recordkeeping/testing system it will take longer to get results. Someone less knowledgeable about the rules may have the work sent back to them for correction. Some people are just slower or more deliberate than another. What takes one person 5 hours to complete may take another 7 or 8.
Exactly. Some of that is getting captured in different billing rates. But it’s almost certain that the rate of the guy who takes 7.5 hours is not precisely 0.6666667x the billing rate of the guy who takes 5 hours.
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