What would it look like to be paid for the impact of your work, rather than your time?
In the freelance and consulting world that I now move in as a fractional CTO, this idea is gaining more and more traction, but it has greater implications across the tech industry and beyond.
It’s often referred to as ‘value-based pricing’. Proponents such as Alan Weiss and Jonathan Stark argue that time-based work is not only a poor way of measuring the value that you might bring as an advisor or consultant to a company, but that it’s also borderline unethical. Incentives matter, and if you’re incentivised to bill for time, that’s what you will end up doing: regardless of whether that time is impactful for the business paying you.
If you deliver a feature worth 100k to a company, and you charge 10k for delivering it within an agreed timeframe, does it matter if it takes you 1 hour or 2 weeks? If the outcome is the same, why should the value of what you offer change depending on how much time it takes you, especially if you’re leveraging your expertise?
In the age of AI, this trend will be accelerated. If an engineer writes a prompt that solves their problem in minutes rather than hours, that’s a huge value gain. But who banks the value? If they’re a full-time employee, then, their employer. Even before AI, I’ve heard of countless examples of engineers who have saved their companies tens if not hundreds of thousands of dollars as they’ve reduced their cloud compute spend, and then been rejected for a 5k pay increase. This kind of situation will only last so long before something breaks.
So what are the alternatives?
Engineers could become consultants and freelancers. This comes with its own risks and concerns, but as the value of what they provide becomes increasingly obvious and mismatched with what their employers offer, it may become increasingly tempting.
The other is for employers to incentivise their employees effectively. Give value-stream teams visibility into and responsibility for Profit and Loss sheets for their product or service, and then give them a slice of the profits. I’ve seen this kind of incentive in action first-hand, and the results are transformative.
So what can you do today to incentivise your people’s impact, not pay for their time?
> I’ve seen this kind of incentive in action first-hand, and the results are transformative.
I would love to learn more about this. What was the context? What was the starting state? What was the change? What was the end state? How long did the transformation take? Was there any resistance that had to be overcome?