Organization Design

Internal Markets and Charging for Shared Resources

Decide whether a shared team inside your company should be free, budgeted, or priced, and if priced, at what price, so that the charge rations demand instead of merely relocating an argument onto a different spreadsheet.

  • Advanced
  • 15 min total
  • 14 chapters

What decision this helps you make: Whether to charge internal users for a shared resource, what to charge, whether they may refuse to buy, and what happens to the money when they do buy, plus how you will know within two quarters whether the mechanism is working or being gamed.

What this topic is

An internal market is one of three ways a company can ration a shared resource that more people want than it can serve. The first is a queue: whoever asks first, waits. The second is authority: a committee ranks the requests. The third is a price: the using team pays out of its own budget, and the price does the rationing without anyone having to adjudicate. Charging for shared resources means choosing the third mechanism, and the design work is almost entirely in the price, not in the billing.

Why it matters

Every company with a platform team, a data warehouse, an in-house studio, a legal function or a shared factory line is rationing something. Most do it by queue and call it fairness, or by committee and call it prioritisation. Both hide the cost of the request from the person making it, which means the requests keep coming and the team keeps asking for headcount. A price is the only mechanism that puts the cost in front of the requester at the moment they decide.

Who should learn it

Executives who own a shared function and are tired of arguing about its roadmap; finance leaders designing chargeback or showback; and general managers who are being billed for something they did not order and want to know whether the number is meaningful.

What you will understand

  • Why the price you charge should usually not be the cost you incurred
  • The full-cost death spiral, and the arithmetic that produces it
  • Why the right to refuse is the load-bearing part of an internal market, not the invoice
  • When a queue or a committee genuinely beats a price, and how to tell

Prerequisites

Common misconception

"We charge business units for the shared team, so we have an internal market." Charging is the accounting; the market is the ability to say no. If a unit is billed a share of the platform team's cost regardless of what it consumes, cannot decline, cannot buy less, and cannot buy the same thing outside, then the charge changes nothing about behaviour. It only changes which manager's profit line absorbs a number they do not control. That is not a market, it is a tax with extra reporting, and it produces the one behaviour you did not want: a full year of energy spent negotiating the allocation formula rather than reducing the consumption.