I have been wondering if you could make it work in Silicon Valley for a small firm. Take 2-10 people that could be founders and give them the alternative of being the Nth partner. They’d need to bring in 1/N of the profit to earn their keep. I think it’s doable.
As you point out, the challenge is always around revenue sharing. From what I have seen, they last maybe 5 years and then break up when people feel like they are putting in more than they are getting out.
The productive difference between the top and bottom half of the N needs to be less than the extra efficiency the coop provides the top half of N. This isn't easy.
Eg top performer brings in 150k revenue, receives 100k salary, but can only make <100k without the coop.
Others have brought up this issue when I’ve discussed it with them. I wonder if there’s a solution. Perhaps something in game theory? When productivity is more easily measured then there’s little debate - like making commission on sales.
There are a lot of solutions, each with different tradeoffs. By far the most common solution seen is limited Partnerships, where those individuals with enough Revenue and Leverage become the co-owners, and those that are replaceable are not co-owners but receives the salary based on Market rates.
I'm sure commission works well in companies where individual basically Works in isolation, but it is notoriously difficult to quantify productivity in teams and larger organizations. How much value does a engineer at Google create? Does a janitor at Google create? Of course you can divide the company profit by headcount, but that number is largely meaningless. Some people will be far higher some people will provide negative value.
For a co-ops, I think the game theory solution quickly converges on something that looks like a traditional company. You pay employees a market salary, and then split the corporate dividend proportional to salary. To account for differences in performance, the employees hire management too fire workers and give out raises. This works well for large co-ops, but obviously can lead to a lot of drama for a 10-person company
I have long suspected a model like this, borrowing from lawyer shops and worker co-ops, could be pretty good for software. Since software is sort of inherently project based, could have a mix of product and contracting, and could have wins both on the co-op side and whoever the co-op is doing work for/selling product to
