What the rate cannot decide
A rate is an average. Used for pricing, make-or-buy or cutting, it answers questions it was never built to answer.
A Rate Is an Average
Every labour rate is an average over people, over time and over work. What each averaging hides, and when the hidden part changes the answer.
Pricing From a Cost Rate
A cost rate is a floor, not a price. What cost-plus pricing assumes, where it breaks, and what the rate is actually for in a pricing conversation.
Make or Buy, Decided on the Wrong Number
Outsourcing decisions taken on a full absorbed rate are systematically biased toward buying. The arithmetic that corrects it.
Cutting Cost That Does Not Fall
A reduction in hours is not a reduction in cost unless something is actually stopped. The four ways savings fail to appear, and the test before claiming one.
The Marginal Hour
The cost of one more hour from people already employed. When it is the right number, when using it is dangerous, and how to use it without habit setting in.
When the Rate Should Not Be Used
Six questions a labour rate cannot answer, what to use instead for each, and the two lines on the rate card that prevent most misuse.
Where the Hour Finally Lands
The assembled answer: every paid hour ends somewhere, and a costing system is the record of where. What a complete account looks like.