People, overhead and profit

Why the profit share is where it is.

Six questions about the work, and only then a seventh about revenue. The order is the whole teaching here: selling more into a delivery problem adds work at the same margin and consumes the capacity that would have fixed it.

2 of these 7 questions can be answered from what this workspace holds today. The rest name what it would take, rather than filling in with something that would be true of any firm.

1. 1

   Is the work being sold for less time than it takes?

   First because an estimate that is wrong at the start is wrong in every period after it.

   The board already measures this. Work landing inside what it was sold for is what an estimate being right looks like in aggregate, and this is that number. Read it as a learning loop rather than a score: the useful move on a miss is the conversation about why a piece of work took what it took, not a tighter review at billing. There is no ratified level on it yet, so it can be read against its own history and not against a standard.

   On-budget delivery

   83%no target yet, pending a baseline, so there is no band to read it against

   On-budget delivery, from this board
2. 2

   Is the way the work runs adding time?

   Second because process time is invisible on an invoice and shows up only as cost.

   Not checked here

   Time is stored against a client and a number of hours, with nothing recording what the hours went into. So we can see how much time the work consumed and not whether it went into revision rounds, waiting on approvals, or doing something twice, which is the distinction this question turns on.

   A work type or phase on each time entry. It is the same record that would let the board show where non-billable time actually goes, and it is a change to how time is logged as much as to what is stored.

3. 3

   Is the wrong seniority doing the work?

   Third because senior people doing work a junior does faster is a cost problem that looks like a quality decision.

   Not checked here

   Hours are not joined to the person who worked them and their cost, so who did the work and what it cost to have them do it cannot be read. A blended cost per hour IS available and does not answer this: work can look cheap per hour and still be done by the wrong people.

   Hours attributed to a person, joined to that person's cost rate. Both halves are on file separately and nothing joins them per piece of work.

4. 4

   Does somebody need training?

   Fourth because one person materially slower than their peers in the same role is a specific and fixable version of the rung above.

   Not checked here

   Hours are not joined to the person who worked them and their cost, so who did the work and what it cost to have them do it cannot be read. A blended cost per hour IS available and does not answer this: work can look cheap per hour and still be done by the wrong people. Comparing one person against their peers needs that join before it needs anything else.

   Hours attributed to a person, joined to that person's cost rate. Both halves are on file separately and nothing joins them per piece of work.

5. 5

   Is the shape of the team wrong for the book?

   Fifth because capacity mismatched to the work is a structural cost nobody bills for.

   At least one of the two per-person readings is outside its band, which is what a mismatch between the size of the team and the size of the book looks like from the outside. It does not say which way to fix it: the same reading comes from too many people for the work and from too little work for the people. One caution on the first of these. Income per person rises on its own when work moves to contractors, to an offshore team, or to tooling, because the work leaves the count of people without leaving the firm. A rise is worth checking against how the work is actually staffed before it is read as improvement.

   AGI per FTE

   $187kagainst target ~$175K, which it is outside

   AGI per AE

   $456kagainst target $400K to $500K, which it is inside

   AGI per FTE, from this boardAGI per AE, from this board
6. 6

   Is a whole service line losing money?

   Sixth because it is the largest change on the list and should not be reached for until the five above have been asked.

   Not checked here

   Work is not classified by the kind of service it is, so revenue and cost cannot be totalled per service line. A line that loses money on every job is invisible when every job is counted together.

   A service line on each piece of work, carried through to what it billed and what it cost. It is the largest of the gaps on this ladder and it answers the largest question on it.

7. 7

   And only now: is this a revenue problem?

   Last, deliberately. This is the rung owners start at, and starting here is what turns a margin problem into a bigger margin problem: the new work arrives at the same margin and uses the capacity that would have fixed it.

   Not checked here

   This tile reports shares of earned income, and a share cannot separate income falling from cost rising. Both push the profit share the same way. Answering it needs the earned income level over the same window next to these shares, which this tile does not carry.

   It is deliberately last, and that is the part worth keeping even while it cannot be answered here. Selling more into a delivery problem adds work at the same margin and uses the capacity that would have fixed it, so this question is the one to reach for after the six above and not before them.