[NA] Pay by the job or by the hour?

ArrowFlyer86

ArrowFlyer86

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The Little Arrow That Could
TLDR:
I got contracted to do fintech work for a financial firm from my past life. They actually will pay LESS for the job if you can get it done faster (the same job, no less quality). So even though I've done all the work and put a bow on it, I can't help them and deliver it sooner without getting paid substantially less. Question at bottom.

EXTENDED EDITION:
While building a biz in a new field, I got an opportunity last week from people in my past professional life to come back and do an important project for them that is integral to their upcoming investor pitches for funding. It's essentially a new product for them to offer in the financial space that's back in-vogue. I've got a lot of experience in the field and have essentially zero risk of not being able to deliver, so we agreed to work together and then settled upon a price (it's for the full completed work, not contracted by hour).

But then a funny thing happened. We started talking timing - our contract is that I have to deliver it by 3/31 and I get a bonus if I can deliver by 3/15 and an extra kicker if by 2/29. OK, good right? But then I asked - "hey, hypothetically, what if I could get it done next week?" thinking it'd be mind-blowing to them in a positive way. But the mood of the convo changed entirely. Paraphrasing, their messaging was "if you really think it's that easy to do, we've gotta revisit price, the board won't be comfortable spending that much for so little work". Now... It's not an easy problem, it's just that I've done it maybe 10x in the last 10 years and I'm pretty familiar with how to solve it. A newcomer would probably eat up half of that timeline doing whitepaper research before they even wrote a lick of code.

I was baffled. I asked two more times in different ways just to clarify: for the same price you'd actually feel better about the value if it was delivered slower?... And while they wouldn't say it in those words, YES, in their eyes, if I was able to get the job done faster then it must be less effort and thus deserving of less pay.

So here I am, sitting on a pile of thoroughly-tested, working code that I built in 3 days over the weekend (3 very long days, to be sure), that won't be delivered until the end of next month all because they value work-hours more than work-product. They're going into over 25 investor pitches during that time with only a promise of a future product rather than the product itself. I'm a little frustrated by this because it's so silly, but I also feel zero guilt. I gave them multiple opportunities to change their mind and they didn't.

QUESTION:
It made me think about others work and aviation maintenance work specifically.
Assuming you get quotes and "know the market" options, would you rather pay by the job or by the hour? If there's an experienced individual who can get it done 5x faster, do you really think they deserve less money for that experience relative to the mkt?
 
By the job and no. My dad made his living as a trim carpenter. He charged basically by the job. He was able to do quality work faster than the competitors. He made the same amount per job as his competitors but could do more jobs in the same amount of time.
 
Your example is an inexperienced C-suite/board at the fintech and they will be fleeced -- if not by you, by your replacement. Optimize the problem (like you are, from the sound of it) to maximize billing. If the fintech relies heavily on the TECH, they are doomed. Refuse any equity offers :)

For the aviation parallel, I am increasingly aware that there is a time-cost component to outside work right now, and I am starting to look for ways to control the, say, 12-week annual or 6-month avionics job before I suffer it. Fortunately, my vendors seem to ALSO be aware of it and are just 2X'ing their quotes/bids/ballparks right now... so everyone loses? :D
 
schmookeeg said:
Your example is an inexperienced C-suite/board at the fintech and they will be fleeced -- if not by you, by your replacement. Optimize the problem (like you are, from the sound of it) to maximize billing. If the fintech relies heavily on the TECH, they are doomed. Refuse any equity offers :)

For the aviation parallel, I am increasingly aware that there is a time-cost component to outside work right now, and I am starting to look for ways to control the, say, 12-week annual or 6-month avionics job before I suffer it. Fortunately, my vendors seem to ALSO be aware of it and are just 2X'ing their quotes/bids/ballparks right now... so everyone loses? :D
Click to expand...
You're one step ahead of me in guessing the equity comp! That was the first way they wanted to pay to reduce the cash bill, pitching it as a sort of "unlimited upside" deal for me esp as they go into their next series of funding (it was a completely miniscule share and would tether me to their company future so I politely declined...).

As for the aviation side of things... I think Bell206 and handful of others gave me the best advice to make sure I've just thoroughly agreed to the service that's being provided before I begin. Let them know my expectations and have them sign off on that. But I know for sure if they get things done ahead of schedule, I won't be paying them less or thinking less of their effort.
 
If you're doing consulting or contracting work like that (they need a specific job done, rather than X hours per week for Y weeks or months) then I would do it by the job, not the hour. It's all about the value you provide, not the amount of labor you put into it. In other words -- they're not paying you to write code, they're paying you to solve their problem. If they offer a premium for delivery by a certain date, then make that date or a day before to maximize your revenue.

If they told the board they needed to hire it out and you knock it out in a weekend, they're going to look like idiots -- "This guy can do it in a weekend, why did you have to go outside for help?"

People running fintechs can be... interesting. Just make sure you get a well-defined spec and make sure they understand that alterations that aren't included in that spec will be not be free.
 
DaleB said:
If they told the board they needed to hire it out and you knock it out in a weekend, they're going to look like idiots -- "This guy can do it in a weekend, why did you have to go outside for help?"
Click to expand...
You're probably right about that motivation. Perhaps I could have told them: "you're in luck, I already have much of that pre-built over the last 12 months of work", which gives them a quick delivery while also providing cover to them for why I was able to turn it around so quickly. Like feeling better about buying something pre-built off the shelf rather than just developed quickly.

But frankly it's not like they even need cover. They're high ranking dudes that form a sale team, not a quant team. They know this ain't their wheelhouse. Hiring someone to do this internally was never an option unless their time frame was 1+ years (most people get shafted with non-competes).

As for tech-specs: we're good here. I've used those systems almost everyday for the last 10 years. This is going to be as close to plug-n-play as they can get.
 
On the business side, there’s ego at risk and budgets have been discussed. Now you’ve inadvertently bruised the ego of estimating complexity and cost.

Kind of hard to unring that bell. Good luck.
 
TCABM said:
On the business side, there’s ego at risk and budgets have been discussed. Now you’ve inadvertently bruised the ego of estimating complexity and cost.

Kind of hard to unring that bell. Good luck.
Click to expand...
There were no egos bruised, just eyebrows a little raised at the hypothetical prospect of getting it done far ahead of schedule.
We still ended the deal talks on very positive terms. Now I just have to sit and wait about a month before I give it to them. It feels silly.
 
Next time mention that you maintain a crack team of ringers who could jump on such a task if time was genuinely of the essence and helpful to their cause. :D
 
ArrowFlyer86 said:
do you really think they deserve less money for that experience relative to the mkt?
Click to expand...
While I’ve not seen a financial penalty assessed for getting a job done early on the aviation side, I have seen where’s a person’s idea of how long a job should take to be completely off base to include people very familiar with the process. So perhaps your fintech guys were clueless such possibilities even existed?

For example, at the old day job we had a steady stream of new hire but experienced pilots and if their helicopter had a scheduled engine change the 1st thing out their mouth was how many days it would be before he could fly again.

However, it caught quite a few off-guard when we told them they would be flying the test flight at first light the next day and back on the job after that. Most could not fathom an engine change taking only one night and measured in hours.
 
We are consultants, and we get paid by the hour. But not really.

We know what it takes to do the job. Usually. Sometimes we don't. But in any case, our proposals are time and materials with a not to exceed fee cap without prior written authorization.

Which is a lump sum, really. If we can get the project done within the budget, you're damn straight we are billing the full amount. If we can't, we have to make a value decision on whether it is worth it to pursue out of scope changes, or not. Sometimes it is the client's demands that pushes work out of scope and out of budget. Other times, it's our own inefficiency.

No, the client shouldn't have to pay for our inefficiencies, but estimating a consulting job is not an exact science. It's an art, involving black magic and satanic rituals, but short of that, what are our competitors pricing their scopes at? That usually caps the limit for us. Sorry for ending a sentence with a preposition. Some jobs we struggle with, and some jobs we glide on. We lose money on the jobs we struggle with. We make money on the jobs we glide on. Nothing ethically wrong with that. It's just how it is.
 
I was a consultant in a former life. Clients getting paid for results vs time and materials started to be a thing. We'll pay X% of whatever cost savings we realize as part of your work. The phrase was "skin in the game". I could usually come up with a back of the napkin number of savings from the initial conversations and outside research. Clients used to use that as part of the vetting process. I would say sure, are you willing to write a check for $XX millions for a project we'll do for a fraction of that? That usually ended it.

Sounds similar to OP. Superior or Board asking subordinate or CEO, you paid how much for that? and it only took a few days? Are you nuts?
 
An oldie but still true:

The Graybeard engineer retired and a few weeks later the Big Machine broke down, which was essential to the company’s revenue.​
The Manager couldn’t get the machine to work again so the company called in Graybeard as an independent consultant.​
Graybeard agrees. He walks into the factory, takes a look at the Big Machine, grabs a sledge hammer, and whacks the machine once whereupon the machine starts right up.​
Graybeard leaves and the company is making money again.​
The next day Manager receives a bill from Graybeard for $5,000.​
Manager is furious at the price and refuses to pay.​
Graybeard assures him that it’s a fair price.​
Manager retorts that if it’s a fair price Graybeard won’t mind itemizing the bill.​
Graybeard agrees that this is a fair request and complies.​
The new, itemized bill reads….​
One blow with hammer: $5 Knowing where to hit the machine with hammer: $4995​
 
If I was to charge for my consulting services purely by the hour, I would be poor. 80% of my consulting is rinse and repeat things I've done, taught, or built 100 times in the past. I can do most of those in my sleep. A newby wouldn't be able to though. He/she wouldn't have the experience and repetition I have. So, I do "value billing" like most consultants, lawyers, accountants, etc. I know. I bill for the value to the client/employer, not for the actual hours I spend on a task.

To answer your question: I personally don't care if I officially pay by the hour or project. When it comes to let's say an annual inspection on the plane, which normally takes about 2 weeks, if someone can get it done in a day, that would be worth a premium to me, if I needed my plane, as long as I can be 100% sure the quality of the inspection is the same and not pencil whipped. I guess that's where experience comes into play as well - I know an annual inspection can't be done in 3 hours, simply impossible due to the nature of the work. But, building code - yeah, that can be done fairly fast by someone who has the experience and probably built something similar in the past, in which case I would be paying for your knowledge/experience rather than your labor.
 
When I was a consultant (engineering) I usually billed by the hour, with an estimate. Safer, especially when the requirements change. Occasionally a new customer would want a firm price, in which case I quoted double my estimate... and told them so. In many cases they'd decide hourly was fine. Then my biggest customer made me an attractive offer to work for them full time salary and I got used to getting paid the same amount on the same day every week. :)

When I retire in a year or two I will likely go back and do some part time work for extra cash as a contractor for my current employer, as other engineers there have done. That will be hourly, at a rate commensurate with "knowing where to hit the machine with the hammer".
 
“By the job” allows the customer to budget. Thats why we ask for quotes for so many things and solicit estimates, even if they are non-binding. “By the hour” mostly protects the service provider when conditions are variable.

Even in traditional hourly billing professions like law, the movement has been toward value billing for many of the reasons @Chrisgoesflying mentioned.
 
my perception is that perception is often more important than reality.

At my last job, the company got rid of the airplane because the stockholders thought it was too expensive. Their travel expenses went up 10% when they started putting everyone on the airlines, but the stockholders were happy.
 
MauleSkinner said:
my perception is that perception is often more important than reality.

At my last job, the company got rid of the airplane because the stockholders thought it was too expensive. Their travel expenses went up 10% when they started putting everyone on the airlines, but the stockholders were happy.
Click to expand...
I worked at a company under similar pressure to cut costs. The new CEO, to great fanfare of his own making, trumpeted loudly that he was selling the company jet!

You had to be an insider to know that the company had two jets, one of which wasn't on the block.
 
GaryM said:
I worked at a company under similar pressure to cut costs. The new CEO, to great fanfare of his own making, trumpeted loudly that he was selling the company jet!

You had to be an insider to know that the company had two jets, one of which wasn't on the block.
Click to expand...

Unintended consequences.

Once upon a time, my company required travel approval to come from a manager or senior manager. To control travel expense, corporate decreed that all travel had to be approved by a VP. The VPs, not wanting to be bothered with a ton of travel approvals every day, delegated it to their secretaries. So instead of a manager, who knew what the travel was for and was responsible for maintaining the budget, approving a trip, a secretary who had no clue what it was about and no budget responsibilities just rubber-stamped all the requests.

After a couple of years, it reverted back to approvals being made by the cost account managers.
 
It's all a matter of who assumes the risk. In a "fixed-price" contract, the risk is on the provider of the service. With a "cost-plus" contract, the risk is on the buyer. When buyers want a "fixed-price" contract the price increases to account for the added risk on the provider.
 
Slightly off-topic, but it's like pulling teeth to get a time-estimate. Look, I won't care if you say an hour and it takes 1:05, at least I know I'm dealing with hours and not days. Or minutes.

"We'll call you back." When? I need to know if you're calling back within the hour, before the day is done, or if I shouldn't raise hell until next week. Getting those (very general) estimates is a nightmare sometimes.
 
Come in here, dear boy, have a cigar, you're gonna go far...
 
Thanks for everyone's responses. It was good to have a sanity check.
I ended up delivering the product early and just telling them the job was faster than expected b/c I was able to reuse some old stuff. It was smiles all around. No harm done.

In the future I'll probably plan for this case a little more proactively.
 
Greg Bockelman said:
By the job and no. My dad made his living as a trim carpenter. He charged basically by the job. He was able to do quality work faster than the competitors. He made the same amount per job as his competitors but could do more jobs in the same amount of time.
Click to expand...

My niece's current boyfriend is a finished carpenter - a nice kid with a good head on his shoulders

Anyway, the kid is busy... Asked if he could come to swap a few exterior doors and add some chair rails around the living and dining rooms... pulled out his appointment book and said the soonest he could come is June...

He quoted by the job... I asked him how long.. he said a day and a half... $2K for 12 hours of work... oye!!!!
 
ArrowFlyer86 said:
TLDR:
I got contracted to do fintech work for a financial firm from my past life. They actually will pay LESS for the job if you can get it done faster (the same job, no less quality). So even though I've done all the work and put a bow on it, I can't help them and deliver it sooner without getting paid substantially less. Question at bottom.

EXTENDED EDITION:
While building a biz in a new field, I got an opportunity last week from people in my past professional life to come back and do an important project for them that is integral to their upcoming investor pitches for funding. It's essentially a new product for them to offer in the financial space that's back in-vogue. I've got a lot of experience in the field and have essentially zero risk of not being able to deliver, so we agreed to work together and then settled upon a price (it's for the full completed work, not contracted by hour).

But then a funny thing happened. We started talking timing - our contract is that I have to deliver it by 3/31 and I get a bonus if I can deliver by 3/15 and an extra kicker if by 2/29. OK, good right? But then I asked - "hey, hypothetically, what if I could get it done next week?" thinking it'd be mind-blowing to them in a positive way. But the mood of the convo changed entirely. Paraphrasing, their messaging was "if you really think it's that easy to do, we've gotta revisit price, the board won't be comfortable spending that much for so little work". Now... It's not an easy problem, it's just that I've done it maybe 10x in the last 10 years and I'm pretty familiar with how to solve it. A newcomer would probably eat up half of that timeline doing whitepaper research before they even wrote a lick of code.

I was baffled. I asked two more times in different ways just to clarify: for the same price you'd actually feel better about the value if it was delivered slower?... And while they wouldn't say it in those words, YES, in their eyes, if I was able to get the job done faster then it must be less effort and thus deserving of less pay.

So here I am, sitting on a pile of thoroughly-tested, working code that I built in 3 days over the weekend (3 very long days, to be sure), that won't be delivered until the end of next month all because they value work-hours more than work-product. They're going into over 25 investor pitches during that time with only a promise of a future product rather than the product itself. I'm a little frustrated by this because it's so silly, but I also feel zero guilt. I gave them multiple opportunities to change their mind and they didn't.

QUESTION:
It made me think about others work and aviation maintenance work specifically.
Assuming you get quotes and "know the market" options, would you rather pay by the job or by the hour? If there's an experienced individual who can get it done 5x faster, do you really think they deserve less money for that experience relative to the mkt?
Click to expand...

Just having fun... but your dilemma screams Dilbert... I hope you see the humor...


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ArrowFlyer86 said:
Thanks for everyone's responses. It was good to have a sanity check.
I ended up delivering the product early and just telling them the job was faster than expected b/c I was able to reuse some old stuff. It was smiles all around. No harm done.

In the future I'll probably plan for this case a little more proactively.
Click to expand...
Glad to hear it worked out. I suspect delivering early makes you look like genius and will put your name top of mind for the next project. I hope you told them you worked tirelessly because you knew they needed it yesterday. I'm reminded of the "Scotty Factor"...

 
A licensed plumber or electrician will cost around $1000 to $1200 per day (sometimes more)

And don’t forget the time required to get the materials
 
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