How can this possibly work?
It works in one form right now -- you just have to write it down. A good exercise would be to have everyone on a tenure/tenure track line or term line in your department write down what percentage of their time they spend on teaching, research, and service. Look to your 7.12 statement to find out what is encompassed in each category. For instance, teaching may include advising, assessment of student learning outcomes, class prep, and grading (and may vary depending on the size of the class, TA assistance, lab or studio sections, etc). This becomes the baseline for your department and should cover everything the department is doing now.
From there, the Department Head can work with the faculty to decide different distributions if desired. The most simplistic way to think of this is by trading the red teaching blocks I have on the draft AWM. In reality, you can compress or expand the total number of teaching blocks for the department by understanding that the blocks don't represent only credits or in-class contact hours, but rather all that is encompassed in your 7.12 section on teaching. The same course taught by someone for the first time (or in a new delivery method) will take a different amount of time than it would for someone who has taught the same course many times. The flexibility could extend beyond course related activities into areas such as advising (IF your college and dept is comfortable with doing so). Some faculty members who are excellent advisers and enjoy it could take more advisees and this would be represented in their AWM.
Once the teaching responsibilities are covered, then service needs and research should be incorporated as appropriate for the individual. If the department has a very large service commitment at the University level or is producing a large amount of research, there are opportunities for the Department Heads to request additional course access from the Deans (who in turn ask the EVCAA). From the economic side, if a large amount of sustainable funded research is being generated in the department, there is an ICR return that can potentially go to fund additional faculty lines from the EVCAA. This is the same concept as the "course buyout model" used at some of the large research universities that enables very research active faculty to have smaller teaching loads. At those universities, this may be taken to the extreme with the faculty member doing very little teaching. At UMD, our faculty would still have a strong focus on teaching, so the teaching blocks should not disappear for even the most active researchers.
It's important to understand that the AWM can provide flexibility, but there are constraints. For instance, all of the faculty in a department could not decide that they want minimum teaching and service and have the majority of their blocks in research. The department as a whole must still meet the educational demands. There is potential in the future for departments (and even colleges) to move out of their strict silos to meet the overall education demands in the same way (making cross listing of courses and other interdisciplinary ideas potentially easier to handle).