Wealth vs. Poverty

Political mentor of mine, David Hall, recently turned me on to a new Google labs web service – Books Ngram Viewer. It allows you to search for the percentage of occurrence of words or phrases in book published from 1800 until today.


While playing with it, I typed in the terms wealth and poverty. From 1800 until 1960 wealth doubled poverty consistently. In 1960, poverty is mentioned with increasing frequency.

I am not sure if it means anything, but I do find it intriguing that while actual poverty is in the decline, mentions of it are increasing. Could it be that bringing poverty to the public eye has influenced the decline? Could it be that people are writing about this decline more often?

On the end of DADT, but a troubling image

Note to readers: While running for Texas State Senate, I kept my political posts in this space to a minimum, but now that the election is over, I find it difficult to continue to separate the political stuff. So, if you don’t like the political stuff, please just ignore it. Most of my post will still be business related.

Yesterday, it was announced that the Congress has authorized an end to the “Do Ask, Don’t Tell” policy which will enable openly homosexual men and women to serve in the United States military. I applaud this decision and believe it will ultimately lead to a stronger more vital force.

I have long believed that anyone who wants to serve in this capacity should have the right to do so. My thanks to anyone who has served in the past! Here, here!

altThat said, accompanying the story was this photo of President Barack Obama:

The image of the President seems to be a common occurrence, and goes all the way back to some of his campaign shots in which the circle representing the halo was the logo from his campaign.

What is even more troubling to me is that Obama is not alone in being portrayed in this fashion. It seems this was trend for George Bush as well although the number of different images is considerably less. What is more, you cannot find this type of image for Clinton, Bush 39, or Reagan. (I did not go back any further.)

I do not think it is helpful for us to see images as sanctifying our leaders. Our Presidents, on both sides of the aisle, are humans with humans flaws and failings. They are not capable of miracles, nor, quite frankly, should we want or expect them to be.

MOASQ

For the past six months I have been delivering a workshop for Sage partners on developing business strategy in a small business. There is nothing like teaching a subject over a sustained period of time to help you clarify your thoughts.

(By the way, I believe this is the case because of the number of times you are challenged by participants. So to those of you who challenged me, I thank you!)

In my last session in Herndon, VA, I believe I have stumbled across the Mother of All Strategy Questions – MOASQ.

Most strategy sessions begin with the following premise – How much revenue do we need to make (in the time period for the plan) and how are we going to achieve it?

The MOASQ shifts this – How much value are we going to create for our customers (in the period) and how are we going to do that?

Thoughts?

Rethinking Peter Block’s Questions

For a long time I have been an admirer of Peter Block. His works Flawless Consulting, The Answer to How is Yes! and Community have long been on my recommended reading list.

Especially intriguing to me have been the six transformations of questions that he posits in The Answer to How… Here they are as he sees them:

How do you do it? What is the refusal I have been postponing?
How long will it take? What is the commitment I am willing to make?
How much does it cost? What is the price I am willing to pay?
How do you get those people to change? What is my contribution to the problem?
How do you measure it? What is the crossroads at which I find myself?
How have others done it successfully? What do we want to create together?

 

Block’s general thesis is that while the How-based questions are important and need to be answered, the problem is that when they are asked and answered too early in the consulting process they tend to be a defensive  mechanism against change and, therefore, they stifle creativity and innovation. According to Peter Block a great consultant is one who is able to shift the dialogue to the What-based questions first and later return, if needed, to the How-based.

With all of this, I agree. However, after having spent about seven years teaching these as is, I am ready (and perhaps bold enough) to recommend a couple of changes to the What-based questions.

First, in place of “What is the price I am willing to pay?” I suggest the following: “What is the value of it to me?” After much thought, I believe this is the better question because it focuses on the primary idea of perceived value. As we know price is derived from perceived value, so looking at price is incorrect because it presupposes value.

Second, in place of “What is the crossroads at which I find myself?” I suggest, “What is the judgment I need to make?” Unlike the first, I believe I am still completely in alignment with Block on this idea and my change is more in semantics. However, I like this question better because a) it is easier to understand and b) it is in alignment with my mantra much written about on this blog that all measurements are judgments in disguise.

If you find this post confusing, might I suggest that you read The Answer to How… It is truly one of the best books on the subject of consulting ever written.

Ed Kless Is Wrong

Once again, the self-proclaimed Defender of the Timesheet and Champion of the Dissenters, Greg Kyte, is at it again. This time he takes me on rather than Ron Baker of VeraSage.

Dear Ron,

Quite awhile ago, I sent the following letter to the Journal of Accountancy, but apparently they were too scared to print the truth. Enjoy as I expose the falsehood of your co-conspirator, Ed Kless.

In April 2010 the Journal of Accountancy published the article, Project Management for Accountants by Ed Kless. Although the article contained a significant number of words, many of those words created lines, and if one reads between those fabricated lines, one may find the same offensive subtext that I found. The author is waging a guerilla war – not against gorillas, but against the accounting profession. Project management is for ignoble professions such as contractors, engineers, and doctorate-level pharmacology researchers. Project management may be good enough for those and other financial Cro-Magnons. We accountants, however, are the progeny of a dignified tradition, and our collective pecuniary prowess has led us as a community to a near-universal acceptance and usage of the financially sophisticated and elegantly simple concepts of the billable hour and the timesheet.

Mr. Kless’ approach to project management is his attempt to rob our profession of the fringe benefits that accompany the billable hour and the timesheet. In his article, Fast Eddie lists eleven essential components of a scope statement. He advocates the use of a scope statement because it is designed to limit “scope creep”; however, he ignores that fact that under the billable hour paradigm, scope creep creates revenue. Ergo, Fast Eddie is trying to decrease your firm’s revenue, and if you consult your accountant, she’ll verify that revenue is a good thing.

In his opinion, all assumptions between a firm and a client are to be clearly enumerated. Mr. Kless exhorts us to “answer the question, ‘What should we not leave unsaid?’” But since I bill by the hour, there is only one assumption that I can’t leave unsaid—the assumption that if I work on an engagement for an hour, the client is going to pay me for an hour.

I actually liked his idea of maintaining a “future project list.” It’s a list of possible projects and major tasks that will be deferred until the future … like when I need more billable hours.

He argues that constraints need to be brainstormed and specified. Constraints are limitations and restrictions that could hinder the efficiency of an engagement. The article states that constraints are “risks in waiting.” Don’t look at constraints as risks in waiting; look at them as semi-avoidable wellsprings of cash flow.

Possibly the most offensive part of this article was the following assertion made while discussing how to calculate percentage of completion: “Measuring the completeness of your projects by hours billed is akin to listening for the smoke detector to determine when your cookies are done. The alarm only goes off when it’s too late.” This is blatantly invalid. The beauty of using billable hours is that we don’t need to measure completeness. Billable hours and timesheets are actually like cooking with the Ronco Rotisserie and BBQ Oven: “Just set it and forget it!”

Once again, Greg demonstrates that he is quite deserving of his self-developed moniker.

So Very Close!

In an on-line article in Accounting Today entitled Value is in the eye of the beholder, Deena Katz writes eloquently about the subjective theory of value. For that I salute her.

However, she misses the mark when it comes to understanding exactly what she is providing. She writes:

Think about your services.

First of all, they are services (not goods), so people have a hard time determining their value. If you were selling toasters, it would be pretty easy for clients to pick one up, look it over and get a sense of how that item would look in their home. But no matter how specific we are about what we can and will do for our financial planning clients, it’s not easy for them to visualize the impact or outcome.

Close, but not quite.

What she misses is that her organization does not even sell service, it sells access to and/or transfer of knowledge.

PS – I wrote this as a post because Accounting Today does not allow for comments on articles.

On Timesheets and Cost Allocation

Earlier this week I received an email from friend of VeraSage, Kirk Bowman of Mighty Data, who, by the way, his given himself the great title of Visionary of Value in his email signature and on his business card. He writes:

At the most recent meeting of our FileMaker Business Group this week, I got a question for which I did not have a good answer. The question is, if we are not tracking time, how do I know if a specific project is profitable? They were asking for a metric to measure financial success or failure on a project by project basis. I’m going to review the slides from August but I thought I would ask your input also.

The short answer is, “If overall profit is up xx percent, who cares?”

The more detailed answer: You allocate your costs ahead of time, like Toyota does as they do not have a traditional cost accounting system. They use what is called targeted costing.

Say you plan to do 12 major projects a year and $1.2 million in overall cost. You would start by allocating $100,000 to each. Now some would argue that some projects are bigger than others. OK, fine. Let’s allocate $200,000 to two of them, $50,000 to four of them, and leave the remaining six at $100,000. Of course, you can adjust them based on your judgment, so long as the total remains $1.2 million.

Project Straight Adjusted
A 100,000 200,000
B 100,000 200,000
C 100,000 100,000
D 100,000 100,000
E 100,000 100,000
F 100,000 100,000
G 100,000 100,000
H 100,000 100,000
I 100,000 50,000
J 100,000 50,000
K 100,000 50,000
L 100,000 50,000
Total 1,200,000 1,200,000

Is it perfect? No, but allocating costs based on a time unit is just as flawed as assigning value to the customer based on a time unit. It is the same false premise: value or cost does not equal rate times hours.

Is an hour billed on a project a good thing or a bad thing? No one knows, some hours might be good others bad. It is a judgment and therefore there is no reason to measure it. Allocating costs as above will make you approximately correct, rather than precisely wrong!

Tracking time might make you a better cost accountant, but cost accountants make lousy pricers. I would rather be a better pricer.

Lastly, timesheets are the cancer of the professions. They cause us to focus on the wrong things, the inputs. Professionals should focus on the right things, the outputs to the customer: deliverables, objectives, overcoming risks, solving issues, etc.

TIMESHEETS DELENDA EST!

Considering Facebook Advertising

At the end of my recent failed political campaign for Texas State Senate, I took out a few Facebook ads which I believe to have been moderately successful.

The first was early in the campaign after launching my campaign Facebook site. The ad was to all anyone in the United States who had listed “Libertarian” in their profile. Within four days I had gone from 150 friends of the site to over 600. The ad cost me $100 and while I do not think anyone who “liked” the page from this ad donated money, several become regular contributors the conversation on the site lending it higher credibility to subsequent visitors who did, in fact contribute.

The second ad was over the five day period before Election Day. In created an ad specifically targeted at the four major cities in the Senatorial District in which I was running and it excluded people who were already friends of the page. In all, I received 1,227,893 impressions over this critical five day period. I am certain that this helped my campaign with name recognition and increased my overall vote total.

image

What I find so fascinating about this is the ad engine works 180 degrees differently that Google Adwords. With Adwords, you are trying figure out what a prospect might type into the search box, with Facebook, you are selecting the criteria of the intended target audience. It is very powerful.

imageAs an example, I created an ad for everyone over the age of 18 in the state of Texas who listed “Accounting” as a interest. As you can see this ad, if I ran it would target 8,440. Not a large number, but certainly a very targeted list.

I see this as assisting not only prospecting, but in the creation of candidate pools for jobs.

If any of you have additional experience with Facebook ads and care to share your results, I would love to hear about them.

Killing the timesheet in seven minutes

On August 5, 2010, my friend and mentor, Ron Baker  participated in the American Bar Association’s Journal’s program, 10 Ways to Build Your Perfect Practice & Career, as part of the 2010 Legal Rebels project during the ABA’s Annual Meeting in San Francisco.

The presentation is entitled Escaping the Tyranny of Time. He had seven minutes to make his point. I think he did an outstanding job!