Organisation parameters

A list of some example parameters that could be used within a contributionist organisation

The following operating and startup parameters could be useful for setting up a contributionist organisation. Most of these parameters are being used in the data modelling examples to demonstrate how these parameters could influence financial outcomes for different types of organisations.

Startup parameters

Risk

Suggestion: Scored out of 10

A risk score looks to quantify how risky it is to start an organisation and what probability it has to fail. A number of questions could help with justifying a risk score. Has this organisation been tried before? If so, how often have those organisations been successful? How many organisations still exist that are doing what this new organisation is intending to do? What are the costs involved in setting up and operating the organisation? Does the organisation have high capital requirements? How long could the organisation survive without having any consumer purchases or donations? Is the business model already well regulated or are their regulatory risks and concerns? Is the work that people perform safe? Does the product or service already have proven demand in the market? Does the organisation already have the talent required to execute the product or service as intended? What external factors could make the organisation less viable?

Complexity

Suggestion: Scored out of 10

A complexity score looks to quantify how difficult it would be to start and operate an organisation. A number of questions could help with justifying a complexity score. What skills and expertise are required to start this organisation? How many people realistically have these skills and expertise? How hard is it for people to attain the skills and expertise required to operate this organisation? How many people will need to have these skills and expertise for the organisation to function effectively? How complex is the product or service that is going to be provided? Will this complexity likely decrease or increase over time? What other external complexities will the organisation need to handle such as regulation, supply chains or any reliances on third party providers? Is the product or service being offered novel or not well understood? Does the organisation require a large number of people for it to be operated effectively over the long term?

Minimum reward multiplier duration

Suggestion: 3 years

The purpose of having a minimum reward multiplier duration is so that there is always a reward given to people who start a new organisation regardless of when it becomes break-even.

Multiplier reward duration

Suggestion: Largest number out of minimum reward multiplier duration

Sometimes an organisation can take longer to break-even than the minimum reward multiplier duration value. In these events the contributors who join at this stage are taking a risk that the organisation does not break-even and become sustainable in the near future. Due to this it makes sense to reward the contributors who are involved up until the organisation achieves break-even. Either the break-even year or the minimum reward multiplier duration should be used, whichever value is greater. A default suggestion would be that the startup reward multiplier would be reduced proportionally each year that it is applied.

Startup paid income reward multiplier

Suggestion: Scored out of 4, calculated by taking the risk + complexity values and multiplying by 0.2.

The startup paid income reward multiplier takes the risk and complexity scores and takes the average of those two scores to generate a final reward multiplier value. This multiplier value will then be used to reward the paid contributions for starting the organisation.

Startup unpaid income reward multiplier

Suggestion: Scored out of 10, calculated by taking the risk + complexity values and multiplying by 0.5.

The startup unpaid income multiplier is used for the same reasons as the paid income multiplier, however the value is increased to account for the higher risk that contributors take on when they aren’t paid by the organisation in the early stages. This is the riskiest time for someone to contribute to an organisation and not be paid as it is more likely at this stage that they never get paid for their contribution.

Organisation parameters

Break-even year

The break-even year is the year that the organisation's revenue is equal to or greater than the total expenses and outgoings of the organisation. Break-even will mean that contributors should be receiving their agreed rate on average through a combination of the salaries and bonuses.

Contribution dividend to bonus ratio

Suggestion: 2:1

The dividend to bonus ratio is used to ensure that historical contribution efforts are rewarded. If an organisation wants to reward contributions in the current year with bonuses it should also need to distribute rewards to historical contributions that helped get the organisation to where it is today. The dividend to bonus ratio should only apply for any amounts that are distributed above the agreed rates.

Unpaid income multiplier

Suggestion: 1.1

A general unpaid income multiplier can help to ensure that anyone who doesn’t receive full compensation for their contributions would be awarded with a larger amount of compensation in the future. The multiplier could be applied once or yearly. The multiplier amount could be determined in a number of ways such as using a simple percentage amount or based on the current market rates for lending and borrowing capital.

Non dilutive governance & incentive rights duration

Suggestion: 3-10 years

Impact that is generated by someone's contributions can take time to be fully understood and realised. It is not enough to just reward someone within the same year they make contributions as at the start of an organisation a lot of the growth and reward from those efforts can come years in the future. Contributions also need to have a finite amount of time that they have governance and incentive rights as if this is infinite you end up with a similar capitalist type of structure where perpetual governance and incentives are based on who owns the most historical contributions. Organisations might use a lower duration for dilution protection if it is not expected that worker contributions will have much impact in the future. A service based business such as a group of electricians could be an example where the impact of their work is realised more immediately. For organisations that take a longer time to realise the full value of the earlier contributions they may decide to use a much longer duration. An electronics product startup that is creating something novel and new that has never been seen before could be an example of a situation where contributions could take a longer time frame to generate the intended impact. Only then could those contributions be rewarded more accurately.

Contribution dividend distribution formula

Suggestion (formula): If the sum of all cumulative income and dividends distributed is less than the cumulative contribution value then divide each person's cumulative unpaid contribution value with the cumulative total unpaid contribution value and proportionally reward those contributors with the dividend. Otherwise divide each person's total contribution value with everyone's cumulative total contribution value and reward each contributor based on their percentage of the contribution.

Dividends are used to reward historical contributions. After unpaid income repayments have been made the dividend is then used to reward peoples contribution efforts. The first responsibility of the dividend is to reward any contributors that have not been paid the value of their contributions yet. After everyone has received the value of their contributions the next responsibility is to proportionally distribute the dividend based on the proportional value of each person's contributions. A contribution dividend helps to ensure that historical contributions that helped an organisation achieve its current success are fully rewarded over time.