Uber is an interesting company. While you might argue that their business model is based solely on ignoring the existing regulatory structure of the taxi industry, they certainly have brought innovation to a staid market. They have gotten a lot of attention for the surge pricing program but it is also worth noting that they are doing something novel on the capacity management side of things. Uber does not employ it drivers. Instead, it deals with drivers as independent contractors. In particular, it does not schedule drivers the way, say, a city bus service would. The bus service can tell drivers when and where they are working. Uber can’t do that. It has to offer an incentive for drivers to be available when demand will be high. At the same time, it basically promises its customers that they won’t have to wait long for a ride. Obviously, surge pricing is part of this. Uber takes a fixed percentage of the fare. So if the fare is consistently 50% higher at rush hour, there is a clear reason to be willing to drive at rush hour.
But more generally there is a question of what is it like to drive for Uber. That gets to an interview with John Pepper (What happened when Boloco founder John Pepper became an Uber driver, boston.com, Feb 7 — with a hat tip to my sister for sending this to me). Pepper was the CEO of Boloco, a regional burrito chain, until he had falling out with his board. He then starting driving for UberX. UberX is the Uber service more or less anyone can get into. It competes with Lyft and Sidecar and is premised on people driving their own, standard vehicles. (In contrast, other Uber offerings are for black car service and require a sufficiently lux vehicle and a commercial driver’s license.) Pepper may have quit his job but he doesn’t mean he has to be doing this to put food on the table. He talks about dropping his kids off at a private school and then picking an Uber customer in his Tesla. What makes this interesting is that he brings the perspective of a person who for many years ran a business that hired lots of lower wage workers. Here are some of his interesting observations.
Q. Did you sign up because you wanted to learn about Uber?
A. Whatever business I do next, there’s a lot to learn from their model. Wherever possible, they leverage skills we already have– people already know how to drive. They set very, very clear expectations as to what constitutes success, and then they follow through with the metrics. There are no stories [from drivers] — they don’t want to hear why this customer was wrong, or that customer was crazy. There are these things that are rigid and effective, but I think they could really effect the world of restaurants and retail. …
Q. You write a lot about the ratings that customers give drivers, and how they made you pretty anxious.
A. Right now, the review process of employees is pretty broken in corporate America. Most of us have read Jack Welch’s book about how GE was so diligent about ranking people. But it’s hard to give fair and just performance appraisal. At Uber, they’re not evaluating drivers in that way. The drivers are being evaluated by someone who sees the full experience from start to finish. There’s no conversation to have, no discussion. It’s very compelling. People know moment to moment that they’re being evaluated. It becomes a norm, not a stress point. The good people surface to the top, and the people who can’t deliver consistently good service don’t make it. But they definitely expect the customers to weed out the bad drivers. …
Q. Does it feel like it would be a good job?
A. It’s very free. You can do nine hours, and stop on your own time, and not work the next day. There’s value to that flexibility. They’re guaranteeing $20 an hour at times, and I happened to make about that even when there wasn’t a guaranteed rate. I worked when I wanted to, and didn’t work when I didn’t want to. That sounds pretty good compared to working at a fast food restaurant, making $10, and not being very in control of your life.
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