Explaining the Pool to the People In It
Overhead recovery is resented because it is invisible. What to show, to whom, and what changes when the list is published.
Overhead recovery is resented in almost every organisation, and the reason is that it is invisible: a number appears on a job, it is large, and nobody can say what it is for. The resentment is reasonable and it is cured by publishing the list.
The calculation in “Explaining the Pool to the People In It” depends on reliable source records as well as a documented accounting rule. For organisations researching employee time clock records, a structured way to handle employee time clock records can supply consistent time and project context, while the allocation basis and financial interpretation remain decisions for the organisation and its advisers.
Showing the pool line by line to the people whose work carries it is the single most effective thing available, and it is almost never done.
As an outside benchmark for “Explaining the Pool to the People In It”, see Chartered Accountants Ireland resources. Keep the source record, calculation rule, approval and resulting decision visible as separate steps.
What to show
The pool, by line, with amounts. The base and the rate. What the rate costs a typical job. And who owns each line.
- The pool, line by line, with amounts.
- The base and the rate per unit of it.
- What that rate costs a typical job.
- Who owns each line.
Four things, one page, once a year.
Why the line-by-line matters
Because an aggregate of £420,000 is an abstraction and a list of thirty named costs is a set of facts. People can argue with facts and they can only resent abstractions.
The arguments that follow are usually productive and occasionally expensive for the pool.
Who should see it
Everybody who books time to jobs. Not only managers: the resentment lives with the people whose hours carry the recovery.
It is also the population most likely to spot a cost that stopped two years ago.
What happens when it is published
Three things, reliably. Somebody identifies a cost that has ended. Somebody identifies a cost that should be traced directly. And the general suspicion that overhead is a tax dissolves into specific questions about specific lines.
All three are improvements.
The uncomfortable part
Some lines are hard to defend out loud. A central charge nobody can explain, a function whose value is contested, a cost everybody thinks is too high.
Publishing does not resolve those. It makes them discussable, which is what the organisation was avoiding.
What not to do
Publish it as a defence. A presentation arguing that the overhead is justified produces the opposite of what is wanted.
The right framing is: here is what is in it, here is how it reaches your job, tell us what looks wrong.
The job-level translation
"At our rate, a 60-hour job carries £3,840 of overhead." That sentence does more than the pool total, because it connects to work people recognise.
It also makes the overhead comparable with the direct cost in people's heads, which is where the arguments actually happen.
Showing what the pool buys
Alongside each line, one phrase: what it is for. "Scheduling: the function that books jobs and sequences work." Not a justification, a description.
Several lines in most pools have no agreed description, which is itself a finding.
When somebody challenges a line
Take it seriously, in public, and report what happened. A challenge that is investigated and answered builds more confidence than any amount of explanation.
A challenge that disappears confirms every suspicion.
Frequency
Annually, at the rate rebuild. More often is noise; less often means the list goes stale and the resentment rebuilds.
What it does to behaviour
People who know what overhead is for stop treating it as a deduction and start treating it as a cost of operating, which it is.
More usefully, they start noticing when a pooled service is not delivering, which is information that otherwise never reaches anybody who could act on it.
Publishing it to customers
In cost-plus and open-book arrangements this is contractual, and the build-up has to survive external scrutiny line by line.
Operations that publish internally first find the external review much easier, because the awkward questions have already been asked by their own people and answered.
What to do with the questions you cannot answer
Write them down and come back. A pool line nobody can explain is a genuine finding, and saying so is more credible than improvising a justification that will not survive the follow-up.
In practice one or two lines in every pool have no living explanation, and finding them is a legitimate outcome of the exercise rather than an embarrassment.
The format that works
A single page, printed, with the lines in descending order of size. Not a system report and not a presentation.
People read a page and interrogate it. They sit through a presentation and remember the total, which is the one number that tells them nothing they can act on.
The underlying point
Overhead allocation is an estimate presented as a number, and estimates presented without their workings get rejected. The workings are a single page, and withholding them is what makes the whole mechanism feel arbitrary.