Zappos rolls out Uber-like wage model

Discussion
Feb 02, 2015
Tom Ryan

Zappos has introduced a scheduling method for its call center employees similar to Uber’s surge-pricing model. Basically, hourly shifts with greater call volume pay out higher wages than less busy times.

Under the former system, call center workers filled in their preferred shifts on sheets of papers on a quarterly basis, a time-consuming process, according to Fortune. With preference for choice spots given to those with seniority, Zappos was also looking for a better way to incent employees to work when call needs were highest, aligning with its commitment to customer service.

Zappos, owned by Amazon, began testing an "Open Market" concept during the holidays with full-time call center employees. Employees were able request their time preferences based on likely wage rates that were estimated based on algorithms tied to forecasted call volume, past bidding on coveted shifts and emergency adjustments.

Built around historic hold time, caller demand was found to peak daily around dawn in Zappos’ Las Vegas offices, when customers on the East Coast were checking up on packages. A higher hourly rate was subsequently paid to those willing to come in early. By contrast, employees received less pay on weekends, when fewer calls arrived.

Zappos hasn’t completely figured out pay adjustments. Those working "surge" or busy hours over the holiday were compensated with merchandise-type rewards.

For employees, one big benefit promises to be flexibility in setting schedules around their lives while gauging opportunities for more or less pay. In the holiday rollout, each employee was given 10 percent flextime and the company plans to move to 100 percent flextime, Zappos said.

Danielle Kelly, scheduling coordinator, told Fortune, "People have been learning how it can be a benefit for themselves and for the company. They’re really excited to have the empowerment of [deciding] when they want to work and how long they want to work for."

Last week, New York Times columnist Farhad Manjoo wrote that Uber’s success is prompting other sectors to explore a wage model based around supply and demand, citing Instacart, TaskRabbit and Airbnb as other examples. But he also speculated on the tradeoff between flexibility and uncertainty around wages and shifts.

"The on-demand economy may be better than the alternative of software automating all our work," wrote Mr. Manjoo. "But that isn’t necessarily much of a cause for celebration."

Does an Uber-like surge-pricing wage model make sense for call center employees and perhaps hourly store associates? What are the pros and cons of a surge-driven model versus traditional scheduling and hourly wage rates?

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9 Comments on "Zappos rolls out Uber-like wage model"


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Mel Kleiman
Guest
4 years 11 months ago

Companies have used something like this in the past with success. But never got a lot of publicity. Now we have major organizations looking into the model. I predict you will see a major expansion of the idea. Based on four things. One, better data to project need. Two, the ability to provide better service to customers. Three, more freedom for workers. Four, better opportunities for companies and workers.

Max Goldberg
Guest
4 years 11 months ago

I’d say that the final results are still out. I can see benefits for some employees, those with fewer outside commitments and who have their own transportation to the call center, for example. Others may find this process to be frustrating. Someone who is bottom-line focused might not be able to work the peak hours, but might still be a top performer, might be stymied in his/her desire to bring home more money. Additional research and fine tuning will be necessary to see if the surge pricing model is effective for employers and their employees.

Bob Phibbs
Guest
4 years 11 months ago

It works if “anyone will do” is your philosophy in a retail store.

In a call center, which, let’s face it, is all Zappos is—it’s different. Read the screens, clear step-up of elevation of customer problems—it’s a closed universe.

Not so in a retail store. At least not anyone other than a mass merchant. The more you disconnect performance of selling the merchandise as a basis of reward and instead reward those who will show up, you are on a slippery slope to irrelevance. And the more you will be dependent on discounts over experience because of whoever will show up when it’s busy.

Gene Detroyer
Guest
4 years 11 months ago

Zappos is probably the most employee-centric company in the world. But in addition to that they are also the most customer focused. I like their hiring model. If after a round of interviews, they deem you to be a Zappos guy/gal and offer you the training program, they also offer you $2,000 not to accept the offer. If you want the money, they know you won’t fit. Similarly after the training program is complete, they offer you $4,000 not to take the job.

This Uber-like model is brilliant for any service/shift business. Call centers, retail stores, restaurants, hospitals, etc. Too often businesses forget that “time” is finite and the value of time changes with the demands of the business and desires of the employee. This system moves towards optimization for both. And the better it works for the employee and the employee’s lifestyle and personal needs, the better and longer-lasting employees the business will have.

Bill Hanifin
Guest
4 years 11 months ago

The flexible pay model makes sense for a generation of Millennials that really do want to pursue balance between life and work. Optimizing a system like this could allow an employee the ability to manage two jobs and/or fit lifestyle needs into job responsibilities.

Two things are in question for me:

1. Are “merchandise type rewards” enough to account for the “bonus” compensation? I think money is the only answer for this to work in the long run, unless a choice of money or merch could be offered to the employees.

2. How does a scheme like this impact annual employee performance reviews? Does an employee selecting all the high volume shifts gain intrinsic advantage over one choosing the lighter shifts, or can each person still be evaluated on their job efficiency regardless of the load they are willing to accept?

This is brilliant from the standpoint of innovative Human Resource practices.

JD Miller
Guest
JD Miller
4 years 11 months ago

Scheduling hourly workers is a hot topic lately, with retailers trying to match fluctuating demand to workers’ preferred hours. I’m not sure that wage fluctuation is necessary, but kudos to Zappos for inviting employees to collaborate on schedules.

I really liked Rick Moss’s RetailWire article on a similar topic earlier.

Ed Rosenbaum
Guest
4 years 11 months ago

There is no better company to test this model than Zappos. It makes sense from reading about it. Let’s see what the test results show. My guess is, this has some promise.

Craig Sundstrom
Guest
4 years 11 months ago

Wow! It sounds just like “shift differential” pay, which has been around since…before I could even spell those words (not everything in the world was developed by Amazon, nor even by “the New Economy”).

For retail, wherever sales associates have a commission-based compensation, they already HAVE a form of “surge pricing.”

Mark Price
Guest
Mark Price
4 years 11 months ago

An Uber-like surge pricing model may account for heavy traffic volumes, but is likely to result in poorer-performing (or newer) employees working the off hours together, which can result in less knowledge sharing and issue resolution than when the talent is spread around.

In addition, employees are scheduled to handle any call that comes in with no attention paid to routing the calls from the highest value customers to the most experienced agents, regardless of the time.

The Uber approach may solve the peak time period issue, but will not grow the business like a segmentation approach would do.

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