…are you on crack? Do you really believe it’s a business model that works?
Rock Capitalist Gene Simmons of Kiss made that comment when Radiohead released In Rainbows on a “pay what’s fair” basis way back in 2007. Some eight years later, the idea of “paying what it’s worth” is an approach that still courts mixed opinion, but one I’ve been lucky enough to experiment with for The Work Project.
One reason I wanted to experiment with this, was the idea that a supplier could do a day’s work for a set amount – let’s say £400. In a small company, that day’s work could create £1,000 of financial value to the company, while also having a truly business-changing impact. The same day’s work delivered in a department of a global corporation could create £1,000,000 of financial value to the organisation, which in terms of impact would be nothing more than a drop in the sea – barely a ripple.
The way value is created by and assigned to a single piece of work like this is not necessarily a straightforward thing, so it seems strange that we perpetuate a very straightforward, transactional approach to it. Could it be that approaching it differently might be better for everyone?
Around a month ago, a piece by Anna Baddeley on The Guardian website was brought to my attention. Focused on an online bookshop OpenBooks.com, which sells eBooks on a “pay what you want” basis, it was an analysis of how expecting people to pay for goods like books on the basis of what they perceive to be the value of that item, just doesn’t work.
A stream of comments follows Anna’s article from authors who have earned next to nothing after making their books available via OpenBooks or similar platforms and it’s no surprise. In the internet age, we have access to so much free digital content that we come to expect it. Music, film, literature – it’s all out there legally and illegally to access freely. The Spotify generation expects to stream the latest music for nothing, so why would they download an album and pay £10 into a virtual honesty box for it?
Restaurants seem to have had more success with this approach, over a considerable period of time. As this article (also from The Guardian back in 2010) highlights, people expect to pay for food and drink. The perception of value makes it a sustainable model for this tangible service. Not so for less tangible, digital items like books or music.
It seems strange to me that the focus of the “pay what it’s worth” movement has been around the sale of goods, particularly digital ones, in industries that have been ravaged by file sharing and piracy. When we purchase a book, we don’t see (or benefit from) the hours and efforts of the author, we just enjoy consuming the result. There’s no relationship, or two-way exchange, just the consumption of a product that can be carried on a thumb drive.
In the service industry though, things are different. It was fitting that just two days after Anna’s article was published online, I found myself doing my first ever piece of “pay what it’s worth work” (unless you count Scout Job Week in 1991). I waited to see how the entire process panned out before collecting thoughts on my experiences.
Let’s cut to the chase. The payment I received for the work I did was close to four times what I would have put forward. I was genuinely staggered and would never have dared to value myself that highly and still expect to get work.
The creation and assignation of value is so much more measurable when a service is provided that perhaps working this way could actually be far more prudent for everyone involved. To succeed, both sides require a heightened level of trust, which only comes from communication and building an honest working relationship. For me to work with no guarantee of payment, I need to trust that you’ll pay me what I’m worth based on the value I create for you, which I’m fully motivated to create.
Groundwork needs to be done and the match between supplier and customer needs to be right for both parties. The openness required to have the conversation around how payment might work is huge – and quite liberating.
I know so many freelancers and contractors who, out of desperation to pay the bills, have taken on work just for the money, ignoring the gut feeling that something isn’t right. More often than not, they have lived to regret it. Payment based on value creation depends on a clear, open and honest relationship between two well-matched parties, which is the basis of any successful work.
Value-based payment is payment on impact and impact can be measured, once both sides agree what it looks like for a specific piece of work. How much would Management Consultants really be paid per day if the rate was retrospectively based on the value or impact they created for the customer? How much harder would they work, or more focused would they be?
“Pay what it’s worth” doesn’t allow for standardised process, it requires the right work being done for the right customer for the right reasons, in the right way. Being paid on the value you create makes a supplier necessarily motivated to deliver above and beyond what is expected, performing to the absolute best of their ability. Even if you end up being paid no more than your standard day rate, you know you’ve done amazing work – that in itself is rewarding. It makes work far more interesting.
One thing I didn’t expect was that this loyalty and trust worked both ways. My customer took responsibility for paying me on time and really considered how much that would be. The assurances of quality and value for money that this approach provided, in turn reinforced the trusting relationship.
- As a customer, they were guaranteed impactful work or they didn’t have to pay.
- As a supplier, I needed to create impact and deliver value or I might not get paid.
It all comes down to relationships – and relationships are based on conversation. Unlike the sale of goods, in the service industry there is a necessary interaction between supplier and customer. This payment model puts the relationship ahead of the transaction and makes for better work with better results.
Because, unless there’s trust, openness and well-defined expectations, the relationship is not going to work. Both parties benefit where it does work, so what emerges is the right people working together, on the right things, for the right reasons. What else does there need to be?
It might take a rethink of the transactional, impersonal way we do business, but it’s worth it.
This is the start of my experiments with assigning value and looking at different approaches to payment. Next up, I’m hoping to be paid in goods instead of money and look at the logic behind and obstacles to doing this. My TV’s breaking, so if you have a contact at an electronics manufacturer who might be interested in exchanging my time and efforts for a television set, please put me in touch!