Operations

Fast Horse ditches the billable hour, an industry staple

While Jörg Pierach worked for giant public relations firm Weber Shandwick for about 12 years, he learned about the industry standard in billing: clients were charged by the hour for projects, at different rates based on an elaborate hierarchy of staff.

When he started his own public relations company three years ago, Fast Horse Inc. of Minneapolis, he used the same standard. But this fall, after discussions with staff over the summer, he did away with billable hours and started billing clients mainly by the project instead, and with a flat rate rather than one that rises or falls depending on the title of the person doing the work.

“The main reason we’re doing it is billable hours are the biggest barrier to great client service. What happens is, agencies push work as far down to inexperienced staff members as they can,” Pierach says. “We’ve removed the barrier.”

The change in billing practice accompanies a change in firm structure, because the hierarchies demanded by the billable hour are no longer necessary.

“A firm will have many different layers and each of those layers has a billing rate attached to it,” Pierach explains. “When you don’t have billing rates, you don’t have to have these titles. We just said there are far too many titles.”

Pierach says a handful of other agencies nationally have also ditched the billable hour or otherwise changed their practices, and they’re generally independent firms. He says an advantage of being small and independent is flexibility.

“We didn’t start the agency saying everything we learned at big agencies was bad, but we started to see what worked well and what didn’t.”

Jörg Pierach, Fast Horse Inc.: 612.746.4611; jorgp@fasthorseinc.com; www.fasthorseinc.com