Wooden dollars and internal billing

Wooden Cubes

Wooden dollars are a mechanism to recognise the value of service departments such as IT and HR. Implementation may not be as difficult as you might expect.

This article focuses on easy mechanisms to implement internal billing solutions for even the most grey of challenges.

  • Accounting Basics
  • Setup
  • Considerations

 

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Accounting basics

Assigning value

If you retain the services of a lawyer you most likely will be charged by the hour consequently the rate per hour multiplied by the number of hours adds up to the final bill.

For this very reason you tend to only use the bare minimum of time as you value the time.

Satisfaction is whether you get value for the time or not.  If you have a very good person who gives you great results then you feel your costs are justified.  Yet if you get poor service or product for your money you’re not going to be happy at all.

When a team provides their services for free that time is not considered as valuable.  Things received for free are often not as appreciated as those which are expensive.

The following talk by Esther Duflo on Ted in 2010 highlights some of the psychology in the field of world health.

A business is not world health, it is far more focused on making money.  So everything needs a value as a result.  Counting things (metrics) is the key starting point which are the experiments in the video.

Some of your basic metrics are:

  • What is the total cost of salaries this month to deliver our services?
  • How many hours this month have we done work for other departments?
  • Have we done work on behalf of external clients or customers?
  • How much was business required work vs. requested work?  Maintenance vs. service requests

 

A simple example

The HR department has a training team.  The training team need a new server with some eLearning software installed on it, let’s say Moodle (which is free).

The IT team have the skills to help.  So HR put a request into IT to set this service up.  IT deliver this in 16 hours of work.

The challenge is now that HR are not sure how Moodle work, so they ask IT for help.  IT being the helpful lot they are get articles and information from the Internet and even pay a few desk side visits.  The service gets up and running but who looks after the server to keep it ticking over and back it up.

The IT department take frequently requests from HR to look after the service.

 

In this example HR will get the praise for running a good eLearning service but they have used a large chunk of IT’s time.

IT realise they’re going to need someone in the business to look after the Moodle installation as it grows.  The employee will be in which department’s budget?

IT assume the bill as the person probably cannot work dedicatedly on Moodle.  As a result the IT department ends up costing more to run and needing IT to increase their budgets.

When senior management review the head count the picture will imply a big IT department rather than reflecting HRs drain.

 

Wooden dollars

Some very simple maths can give a very clear picture to management.  Quite simply take the combined salary amount of the staff in the department, bonus rates and all.  Calculate the total hours logged for that month, this is “people available to work” hours.   You have two metrics which gives rise a third.  Total Bill / Total Hours = Rate per hour.

Every business requires a department to deliver against two targets, internal maintenance work and providing service to other departments.  For ease of discussion we’ll call these maintenance and service for the rest of this article.

How many hours do IT split between maintenance and service?  The time required by IT to deliver the Moodle server and look after has a cost.  IT do not raise an actual invoice however IT establish the concept of payed service delivery.  This is the concept of wooden dollars.

As the concept is a notional metric rather than actual billing you can add profit margins and different rates to your wooden dollars.

 

Set up

Data capture

The simplest answer is a time sheet.  Write down where the time was spent.

Good time sheet software allows you to assign a monetary amount to the time logged.  Even notional billing using wooden dollars allows you to see where your costs are allocated.

This starting point allows you to review where the teams time is actually spent.

 

Coordination

The effect of big brother is watching is a massive change and quite difficult for people to understand so communication is key.  From my own experience getting people to log their hours is challenging for everyone involved.  We’re too busy.  We have too much on.  I don’t have time.

As a manager frequent reviewing of time with staff is key to getting accurate completion of the data.

The least in your face tool has traditionally been Excel spreadsheets but tools like Time Tracker in bxp software save a lot of time and money and come with excellent reporting.  https://www.bxpsoftware.com/wixi/index.php/Module_-_Time_Tracker

 

 

It is also possible to use automatic monitoring software such as Rescue Time https://www.rescuetime.com but this can make people feel a bit like big brother is watching.

Try it on yourself to begin with and speak from a position of understanding.  The option becomes please fill in your time sheet or we can use the automatic time recording solution which is only $9 per user per month.

You must always remember that people are not assets .

 

Training

The simplest way to reduce fear is to train people up on what’s going on and why.  This is not looking for a method to cut staff or find out who the slackers in the team are.  Managers direct efforts and consequently notional billing facilitates this ability to manage.

 

Adding value

Being able to report to other departments what have you have done for them and making other managers aware of how they’re drawing on your resources is beneficial not only to you but also to other managers to allow them to review their metrics and better understand how they are managing their teams.

 

Considerations

Reporting

I’ve done a number of articles on metrics and wooden dollars sit hand in hand with metrics.

Getting good reporting can actually help you to manage stress and helps to bolster your confidence.  You can have a read here.

The natural follow up reporting once basic metrics have been established it so quantify satisfaction levels.  Net Promoter Score and Customer Effectiveness Score can be applied internally as well as externally.

 

Fear

People object to being monitored or watched, wooden dollars or not.  Often this stems from not fear itself but the fear of shame.  As I have reviewed in another article there are ways of dealing with not only your own but your team’s fears.

This is understandable however this is also a business.  Your management style needs to let them understand you need the information to help the business not because you’re checking up on them or for nefarious reasons.

Communication is key and being able to demonstrate your own metrics first can go a long way to removing fear.

The process of doing this is optimisation of a business process and as such can benefit from a formal approach.  There is more information available on this here.

 

Introspection

Introspection is defined as the examination or observation of one’s own mental and emotional processes.

Being able to motivate yourself whilst also realising that the reporting of your numbers to yourself will help you recognise your successes.

 

If I can help in any way with any of the topics raised in this article please get in touch here or on social media.

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