How 100% self-allocated time might work at a software consultancy

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I was recently listening to a podcast about The Sweet Spot Between Privacy and Transparency, on The HBR Channel. The interviewee, Ethan Bernstein, briefly mentioned that Valve Software allow their employees to "self-allocate 100% of their time". This got me thinking of the implications such an approach could have on a software consultancy or agency. More specifically, the metrics and incentives required to make such a system work.

How does this work at Valve?

It's easier to envision a system like this succeeding at a product company that can pursue or park projects as it desires. The added benefit for Valve is their industry - from my experience, people who build video games tend to be ridiculously passionate.

In essence, Valve focus on having a completely flat organisational structure (no managers) and rely entirely on peer-reviews and peer-ranking for performance management. Employees assess one-another based on four metrics:

  1. Skill level and technical ability
  2. Productivity and output
  3. Group contribution
  4. Product contribution

On day one, Valve employees are encouraged to find a project to work on (i.e. self-allocate their time) and hire the best people they know (talent attracts talent) - ideas reiterated by Aaron Dignan in Digital Isn't Software, It's a Mindset.

If you're interested in the detail, I'd highly recommend reading their (public) Handbook for New Employees.

How could this work at a consultancy?

By nature of its operating model, a consultancy or software agency cannot choose to shelve projects as easily. This is made especially difficult by the fact that a lot of work is won through relationships and as a result of being trusted advisers.

However, having an environment where your delivery teams self-allocate their time, enforces a sense of focus for the company's leadership and business development teams - a sense of focus that is bottom-up, rather than one set by (potentially disconnected) managers.

In order to have this work at a consultancy, I would add two metrics to Valve's aforementioned four:

1...4. as defined by Valve, listed above. These ensure employee performance is maintained and that everyone contributes to the projects that they're on.
  1. Employees must have at least 85% of their working time (i.e. excludes training days, administrative time and leave) self-allocated onto a project. This gives people some slack between projects. It also means that in times when work is sparse, people will be incentivised to re-skill and get onto new projects.
  2. Employees responsible for bidding for work, are also directly responsible for securing (or internally recruiting) a team to deliver the project. This means that employees are incentivised to sell work, which they are confident they can recruit for internally. In other words, they will only sell work that they know people want to do. As a side effect, it will also ensure that work is well-scoped.

Consultancies can choose what type of projects to pursue, and if brave enough, can choose to forgo work that their teams are not keen to deliver. Allowing a consultancy's employees to self-allocate their time, will certainly lead to happier and committed employees, who work on projects that genuinely excite them.

I acknowledge that it would be a lot easier to see this happen in an organisation, whose sole purpose is to ensure employee happiness and work-satisfaction. The direct commercial practicality of this model is a bit trickier for businesses primarily focused on revenue and company growth.

The case for co-working spaces

A quick mention should be made of co-working spaces, which tend to house a diverse range of freelancers. By default, freelancers self-allocate their time. A co-working space could put together a team of freelancers and start bidding for work.

That would be a very natural way of applying this approach to the same end, and have it be naturally governed by market dynamics (the best freelancers are recruited onto the next bid, freelancers can always opt-out etc...).