Consulting Firms Should Be Worker Cooperatives

A Case For a Different Default Option

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It’s impossible to get through life questioning every assumption. We build on what came before – ideas, habits, systems – until they start to feel natural.

Business is no different.

Most people only know Capitalist companies, so they assume that’s just how businesses work. If we were designing a firm from scratch – one that values expertise, accountability, and long-term sustainability – would we really land on the partner/owner model?

Probably not.

If you’re starting a business – or thinking about converting one – it’s worth asking why worker ownership isn’t just the normal thing. Especially in consulting, where the entire value of a company is on their current payroll.

Assumption #1: Profit is “Enabled“ by the Owners

Depending on the industry, the difference between profit and surplus can get murky. Some businesses need massive capital or years of runway before seeing a dime.

But with consulting, it’s crystal clear. Consultants bill Y dollars and get paid X dollars.

Billable Revenue – Labor Cost = Surplus Value

In consulting, there’s no assets, inventory, or significant research and development. The value comes from skilled professionals whose knowledge is expensive and generally only needed for a short time.

Karl Marx’s theory of surplus value¹ gets more complicated in capital-heavy industries – where inventory, machines, and long timelines muddy the waters. But in labor-only businesses like consulting, the math is a lot simpler. You bill a client more than you pay the worker. That’s surplus. Or, in modern terms: gross margin.

The only real nuance is how long gross margins can go negative – how much cash you need up front, and how much risk you’re taking on. In consulting, there’s not much of either. The value comes straight from the people doing the work. So if the workers are the value, they should also own the place.

Consulting firms should be worker cooperatives because the limited resource – expert workers – should be allocated the surplus value.

Assumption #2: Firm Owners and Partners Make The Bestest Decisions

Everyone – including cooperative members – makes decisions in their own self-interest. It’s pretty illogical to expect otherwise.

But when workers’ interests diverge too far from owners’, the quality of service takes a hit.

Take billable hours². Workers want a sustainable workload and decent pay. Owners want to sell and bill as many hours as possible – while keeping labor costs low and turnover within “acceptable” limits.

It’s not hard to see how that plays out. Workers get pushed – directly and indirectly – to overwork or overbill. Clients don’t get consultants at their best. They get the tired, distracted, slightly dead-inside version.

Consulting firms should be worker cooperatives to provide the highest quality.

Assumption #3: Talent is Replaceable, Processes Are What Matter

A firm’s methodology, software, culture, and business strategy are all important. But I have bad news…

These are all table stakes.³

The difference between good and bad consulting firms is the consultants. Trust me. I recently worked with a “Senior Finance Consultant” from one of the big Dynamics firms. I have never in my career met someone whose advice should so consistently be ignored. She should’ve gone full “Opposite George.”

Talented consultants don’t just want a paycheck. They want ownership over their work, transparency in decisions, and to be surrounded by other people who give a damn. (They want the monies too.)

Consulting firms should be worker cooperatives if they want to attract and keep the people who actually make them valuable.

Assumption #4: Managers and Hierarchy are So Important

My job pre-Cooptimize was at Dynamic Consulting who was aquired by sa.global^{4 5}. sa.global already had some presence in the U.S. and Canada. Immediately after the acquisition, the first order of business was for all the Very Important Managers to get together and jockey for roles in the combined organization.

Then they gave a presentation about the amazing hierarchy and how they had revolutionized corporate structure. Meanwhile, all these yahoos were barely interested in – oh, I dunno – focusing on customers.

“We put the managers at the bottom of the organizational chart because we’re here to support you.”
-sa.global executive, unironically

Worker cooperatives are built on the idea of democracy at work. Decisions are made as an organization, not by some small group off in secret meetings. Democracy is hard. It’s sometimes messy. But in the end, it builds stronger collaboration and better buy-in to outcomes.

Workers also choose their managers (if managers are required), so the people in charge are actually accountable.

Consulting firms should be worker cooperatives because democratic structure improves consultants’ capabilities.

Assume I’m Also Wrong

Whatever. I’m just some dude on the internet. The point is to reflect on things you’ve personally experienced and ask yourself if you actually agree.

99% of society doing something the same way doesn’t make them right and you wrong.

Only 3% of people are actually business owners. So there aren’t that many practicing Capitalists out there. Let’s design systems that work better for the other 97%.

Footnotes

1. I’m not an economist and haven’t read “Das Capital”. My point is more these aren’t new ideas. ↩︎
2. Billable Hours are a bad idea in their own right, but that’s another rant. There definitely cases where hourly billing is the only option. But think through potential perverse incentives. ↩︎
3. Which is a fancy way of saying: the minimum required to play. In poker, it’s the total cash players put out before ever receiving cards. ↩︎
4. It’s a lowercase proper noun which bothers me more than it should. Pronounced “Es EH Global” not “SAG” or “sah Global”. ↩︎
5. Many thanks to bringing me and Eric back together to cofound Cooptimize! 😂 ↩︎