An Hour Measures Time, Not Productivity

It’s fun to talk about compensation. It’s taboo, for one. Secondly, it’s a game of measuring up — a game we’ve been taught to play since adolescence. So, let’s jump on the new hourly billing rates for ad execs, made available by Rupal Parekh at Ad Age.

One item that caught my eye is agencies in the 4A’s survey bill out their content directors at $355/hour. I was a content director for an agency not belonging to the esteemed 4A’s, and I believe they billed me out at a slightly lower rate than that. Now that I’m freelance, I work for a fraction of the 4A’s norm. This fact is not represented in the 4A’s survey, nor anyone else’s survey.

Parekh notes that the numbers provided represent “suggested retail price” established by the agencies, and that the hourly billing rates are “fully-loaded,” including overhead and other costs.

Yes, but that does nothing for the steepness. For example, New York-based chief creative officers bill out at $637 an hour. Which means the hour cab ride from Manhattan to JFK costs the client the same as the hour of actual concentration given to the marketing problem at hand. For this and other reasons, hourly billing simply isn’t the right model for the ad business. Hourly billing also will never accurately reflect the value of the hour billed. The cab ride to JFK may be the breakthrough moment that leads to massive sales and future earnings for the client, but that hour is indistinguishable from any other. The breakthrough hour might be worth a million dollars, or ten million. Whereas all the meetings, lunches, and other time sucks that a CCO logs is actually worth much less than $637/hour.

Speaking from experience, I also find it difficult to measure precisely just how many hours I work on a project. You have to be diligent and keep track everyday, but even then there’s so much gray area to cover. I like to make note of my most productive hours and put those down, but what about the non-productive hours that I spend on the client’s business? Those non-productive hours are important too, because they often lead to discoveries made later in the day.

Clearly, my preference is for project-based pricing, which comes with a built-in incentive to work efficiently — something totally lacking from the hourly model.