My company is marking up way too much. I know it, but I can't change it

[StayTuned]

I am starting to have a huge moral dilemma with my employer.

Basically, my job isn't really something you can put a hard number behind it, and then sell it to a client. Instead, my work is calculated on top of what the rest of the team estimates that any particular task will take.

Normally, my performance is efficient enough that I can manage my job with 5% to a max of ~15% of time on top of the total estimation of the work. It depends on the complexity of the task and the team size.

This is also what I communicate to our account managers and how we've historically formulated our offers.

We have had a recent change in how we calculate and sell projects. My job isn't mentioned anymore, instead we started selling at a fixed price instead of time and material. The base calculation for my task, internally, is now 30%. That's DOUBLE the time I would at most need to perform my job.


I compare this now to the following situation:

Imagine your car is broken. You take it to a repair shop, but you really don't know jack shit about cars. The repair shop knows this, and they sell you 8 hours for something they only need 4 hours for to fix. The invoice only reads "fixing your car".

Now, we're not working with the little guy. My clients are the world's biggest corporations, no joke. They can afford and accept almost every cost quote you send their way. Regardless of the fact, I don't think this is right.

I have told my supervisor about this, but their opinion is that with the additional funding, we can now afford better conditions at the company. Increased yearly budgets for training, more time to do internal improvements and projects, etc. etc.

Since I am not stupid, I know that the primary reason was of course the fact that our bottom line was struggling for a couple of years now already.

I am honestly considering switching my employer. What is your take on this?

[Amerissis]

The bottom line was struggling? So that means the company was not making enough money? Seems to me that it's a good idea to raise prices. Also, the customers are companies that can easily afford the new prices, so what's the problem?

I think you're looking for problems where there are none, but if it bothers you so much, go find a new job.

[Twdft]

Ask for double pay to even it out. Obviously.

[StayTuned]

The bottom line was struggling? So that means the company was not making enough money? Seems to me that it's a good idea to raise prices. Also, the customers are companies that can easily afford the new prices, so what's the problem?

I think you're looking for problems where there are none, but if it bothers you so much, go find a new job.

In my opinion, the bottom line was struggling because mistakes were made in terms of what kind of projects we accepted. There was way too much technological diversity with too little actual expert knowledge to finish them in time, quality and budget. Often we had to complement our workforce with expensive externals who brought the knowledge in, and left with it after the project. Plus, we aggressively undercut the competition by cutting away risk and overhead factors, which have historically always caused us issues.

This was the account management's fault. My team and I are professionals who honestly estimate the effort for any singular task according to our best knowledge and integrity.

If my employer wants to raise my daily rate, I am fine with it. But we're actively lying about the time I need to finish my work for monetary gain, because once a client is with us, it's hard for them to gauge whether or not competition is cheaper and quicker in my department. I am doing IT project management.

To me this is a question of integrity, honestly.

It just feels ridiculous to sell 3 hours of my work for a task that takes 10 hours total for the team, when all I do is actually ~30 minutes of briefing and Jira work. The company's bottom line should be properly included in my daily rate.

[Temp name]

So the official reasoning is to have better conditions at the company
The unofficial reasoning is that your company was struggling financially
The downside is that you're charging your clients more. Clients who you say don't care


What's the problem here..?

[Daedius]

If the client is paying it without question then I see no issue as long as it's privately paid for.

If it's the tax payers money then I'd take issue as it's all too common in construction and such where incompetent politicians throws millions at a project that would've cost a fraction of that.

[StayTuned]

So the official reasoning is to have better conditions at the company
The unofficial reasoning is that your company was struggling financially
The downside is that you're charging your clients more. Clients who you say don't care


What's the problem here..?

Morals. There is no transparency and we're actively and purposefully inflating our offers in my department. Tbh not only mine, but in most other departments as well by now.

To me the right way would be to officially raise our daily rate, but that's not something we want, because then we're officially "too expensive".

[kamuimac]

I am starting to have a huge moral dilemma with my employer.

Basically, my job isn't really something you can put a hard number behind it, and then sell it to a client. Instead, my work is calculated on top of what the rest of the team estimates that any particular task will take.

Normally, my performance is efficient enough that I can manage my job with 5% to a max of ~15% of time on top of the total estimation of the work. It depends on the complexity of the task and the team size.

This is also what I communicate to our account managers and how we've historically formulated our offers.

We have had a recent change in how we calculate and sell projects. My job isn't mentioned anymore, instead we started selling at a fixed price instead of time and material. The base calculation for my task, internally, is now 30%. That's DOUBLE the time I would at most need to perform my job.


I compare this now to the following situation:

Imagine your car is broken. You take it to a repair shop, but you really don't know jack shit about cars. The repair shop knows this, and they sell you 8 hours for something they only need 4 hours for to fix. The invoice only reads "fixing your car".

Now, we're not working with the little guy. My clients are the world's biggest corporations, no joke. They can afford and accept almost every cost quote you send their way. Regardless of the fact, I don't think this is right.

I have told my supervisor about this, but their opinion is that with the additional funding, we can now afford better conditions at the company. Increased yearly budgets for training, more time to do internal improvements and projects, etc. etc.

Since I am not stupid, I know that the primary reason was of course the fact that our bottom line was struggling for a couple of years now already.

I am honestly considering switching my employer. What is your take on this?

my take is its not your business what profit marigins your company has unless you are in charge of setting them .

want to be noble hero ? resign - but reality is every single company in the world is profit driven .

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Morals. There is no transparency and we're actively and purposefully inflating our offers in my department. Tbh not only mine, but in most other departments as well by now.

To me the right way would be to officially raise our daily rate, but that's not something we want, because then we're officially "too expensive".

there are no morals in business. its nothign but PR nonsense that for some reason people belive.

it is videly known that sociopaths and people with sociopathic tendencies make best managers and CEO/CFOs . and there is a reason for that

as employee you are nothign but hired contractor.

you can always start your own company and sell servies / products with much lower margins.

[StayTuned]

very interesting that you guys have such a different take on it.

As long as they can financially handle it, milk them? Wouldn't that also be possible with transparently increasing the daily rate?

[tikcol]

very interesting that you guys have such a different take on it.

As long as they can financially handle it, milk them? Wouldn't that also be possible with transparently increasing the daily rate?

Isn't that how businesses work? I mean, I reckon you have competition from other companies. If your prices are too high wouldn't your clients switch? Even big companies cut their expenses of they can get cheaper services elsewhere.

[Temp name]

Morals. There is no transparency and we're actively and purposefully inflating our offers in my department. Tbh not only mine, but in most other departments as well by now.

To me the right way would be to officially raise our daily rate, but that's not something we want, because then we're officially "too expensive".

I can understand the lack of transparency, but that's something your clients have to decide if they're okay with.
If you can milk them harder and they don't complain that's on them. Business isn't really a place for morals to survive.

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very interesting that you guys have such a different take on it.

As long as they can financially handle it, milk them? Wouldn't that also be possible with transparently increasing the daily rate?

Yes, it would be. But it's very much about optics. There's a difference in saying "we're going to charge you 15% more" and "we're swapping from an hourly pay to a daily pay, this is the new rate", even if the end result is the same

[Cracked]

If the companies are paying the price, clearly it's worth at least that much to them. If there was someone else doing it equally well for cheaper and had a good reputation, it wouldn't take long for them to switch. So what's the issue?

[StayTuned]

I can understand the lack of transparency, but that's something your clients have to decide if they're okay with.
If you can milk them harder and they don't complain that's on them. Business isn't really a place for morals to survive.

Yes, it would be. But it's very much about optics. There's a difference in saying "we're going to charge you 15% more" and "we're swapping from an hourly pay to a daily pay, this is the new rate", even if the end result is the same

I wonder if my clients would be as understanding if they knew what we're doing. Obviously I am not going to ask them since I have no interest in shitting where I eat. But I feel like there is an unspoken rule that you shouldn't pretend to need longer than you actually do to perform a task. I might even argue that it's probably not legal.

If you're a good account manager, you can find and sell good reasons for increased rates, and continue to communicate honest estimations, with open risk and overhead buffers, which are in return based on scientific methodologies. If I was a client, I would highly appreciate it.

Because ultimately, it's the same result, just a different message as you say.

[Amerissis]

But I feel like there is an unspoken rule that you shouldn't pretend to need longer than you actually do to perform a task.

I have yet to find a company with that rule. How do you handle it if you say it'll take 3 hours and it takes 6? We'd always say it takes 6 and when it does take 3, well, profit, and if it takes 6, no harm done. And when it takes 12, that's our loss. You might happen to be in a line of work where you can accurately estimate how much time you need for a project, but that's really rare.

Seriously, this is how businesses work. If you don't like that, you have no choice but to resign. Maybe you'll find the unicorn that doesn't work like that, or maybe you should start your own business and not work like that.

[Pann]

Maybe I've misunderstood what is going on but from what I can tell the OP works for a company that was struggling to make a profit, as a result it has raised its prices and clients seem happy to pay the new increased prices.

It that's the case it seems as if the business was previously undervaluing its services/products and I am not sure what the problem is.

[StayTuned]

Maybe I've misunderstood what is going on but from what I can tell the OP works for a company that was struggling to make a profit, as a result it has raised its prices and clients seem happy to pay the new increased prices.

It that's the case it seems as if the business was previously undervaluing its services/products and I am not sure what the problem is.

No, we have kept the prices but inflated our estimations.

If it was as you described, I would have absolutely no problems at all.

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I have yet to find a company with that rule. How do you handle it if you say it'll take 3 hours and it takes 6? We'd always say it takes 6 and when it does take 3, well, profit, and if it takes 6, no harm done. And when it takes 12, that's our loss. You might happen to be in a line of work where you can accurately estimate how much time you need for a project, but that's really rare.

Seriously, this is how businesses work. If you don't like that, you have no choice but to resign. Maybe you'll find the unicorn that doesn't work like that, or maybe you should start your own business and not work like that.

I handle it with honesty. I am quite good at managing risks, and I communicate these to the client openly, so that they can make informed decisions. This is my duty as the project manager. I have at all times multiple solutions to most risks that my team and I foresee which allow to counter time issues in exchange for budget, scope or quality of the product.

If a task takes longer than you estimated and you couldn't foresee it, and you have no plan against it, you did a bad job. I cannot give my developers, or even myself, extra time on paper that I shouldn't need, because that hits my efficiency and ultimately also my long term resource planning. But the guys who made those decisions don't care, since they don't have to make these kind of plannings.

So I have trouble properly planning, because I now continuously need to question sold efforts vs. real efforts (developers sitting idle only cost money), while continuing to pretend towards my client that I need longer than I actually do.

Just feels weird man.

[Pann]

No, we have kept the prices but inflated our estimations.

If it was as you described, I would have absolutely no problems at all.

I'm even more in the dark now - so there has been no increase in cost to the customer?

[StayTuned]

I'm even more in the dark now - so there has been no increase in cost to the customer?

Well, passively. We could offer our services cheaper, because we don't really need as long as we say we do. Since it's now mostly fixed price, even if we finish sooner than "expected", the client has to pay the full sum. Basically the client is lead into believing that what they're paying for is justified because of assumed complexity, which sometimes really isn't present at all.

The client would pay the same if we increased our rates, but were honest about the actual estimations. Alas, we don't want that transparency.

Ultimately, I know from some other projects that they actually struggled towards the end with an empty backlog, because the account manager wasn't quick enough to generate follow up business, but they were out of tasks.

I just don't see any healthy business practice in this no matter how you look at it, other than that it might generate short term gains in exchange for reputation if it ever came to light.

[Pann]

Well, passively. We could offer our services cheaper, because we don't really need as long as we say we do. Since it's now mostly fixed price, even if we finish sooner than "expected", the client has to pay the full sum. Basically the client is lead into believing that what they're paying for is justified because of assumed complexity, which sometimes really isn't present at all.

The client would pay the same if we increased our rates, but were honest about the actual estimations. Alas, we don't want that transparency.

Ultimately, I know from some other projects that they actually struggled towards the end with an empty backlog, because the account manager wasn't quick enough to generate follow up business, but they were out of tasks.

I just don't see any healthy business practice in this no matter how you look at it, other than that it might generate short term gains in exchange for reputation if it ever came to light.

Honestly, I can't see what the problem is.

I doubt your customers are all that concerned with your employer's internal staff management are instead focussed on whether or not your business can a provide the service(s) it advertises to good standard at a reasonable price.

To be honest it comes across more like you have a problem with the new system and the internal management within your company.

[Twdft]

Maybe I've misunderstood what is going on but from what I can tell the OP works for a company that was struggling to make a profit, as a result it has raised its prices and clients seem happy to pay the new increased prices.

It that's the case it seems as if the business was previously undervaluing its services/products and I am not sure what the problem is.

OPs problem is his company is lying to its customers. Noone has a problem with jacking up prices as such, but when your boss tells the customer my dude works 6 hours on your problem while full well knowing his dude will always be donein 3 that's sketchy. It's all fun and games until a customer finds that out and kills your company by telling other customers about the dishonesty.