Uber has had a rough time in the news recently—and much of it is for good reason, apparently. The New York Times published an article on Sunday, April 2, that focused on how Uber was trying to motivate its drivers to work longer hours, during peak times or in areas where demand was exceeding supply. The ways in which Uber is trying to accomplish these goals are based, in many ways, on the principles of behavioral economics. ZS has done a lot of work in this space, and we’ve written about the ways that behavioral economics can be used to shape, influence and understand the actions of the sales force.
While the New York Times article is an interesting read that describes the myriad ways in which Uber is attempting to motivate drivers, it also has a subtly negative tone to it. Even the article’s title—“How Uber Uses Psychological Tricks to Push Drivers’ Buttons”—refers to Uber’s tactics as “psychological tricks,” suggesting that the tactics are deceptive in nature. Consider some of the other phrasing in the article:
- “experiment … to manipulate [drivers]”
- “manipulation that literally affects people’s income”
- “exploit psychological weaknesses”
- “getting you to internalize the company’s goals”
The article notes that part of the issue is that a contracted workforce lacks some of the legal protections and benefits of company employees: “Uber and the like may be taking the economy back toward a pre-New Deal era when businesses had enormous power over workers and few checks on their ability to exploit it.”
But are Uber’s tactics necessarily bad? With a sales force, contracted or not, companies are often looking for ways to motivate their employees. A sales compensation plan is one mechanism to do this, but I’ve been in several meetings with sales leaders who, when confronted with motivational issues with the sales force, want to pull on the lever of “more money.” In some cases, that may work—for example, if the sales force is significantly underpaid relative to market norms—but in many cases, it’s a short-term fix. In fact, a Harvard Business Review study found that the correlation between pay levels and job satisfaction—which we can use as a proxy for motivation—is just 0.14. If we assume, therefore, that sales incentives are a great mechanism for rewarding performance but less effective for ongoing motivation, then perhaps we should be considering other ways to engage our sales force—much like Uber is doing to motivate its drivers.
Many of the techniques that Uber is employing will sound familiar to those in the sales compensation space. For example, we provide (or aspire to provide) near-real-time reports that show how far salespeople are from their targets; we provide predictive information through plan calculators to show people how much they could earn; and we create contests that reward salespeople through recognition rather than monetary rewards.
None of these approaches are necessarily problematic: The intent is to provide additional motivation and direction to the sales force (or the Uber drivers) in a way that benefits both the company and the worker. Moreover, these approaches are likely a precursor to the incentive plans of the future, where companies seek to leverage more than cash compensation to motivate and direct behaviors or reward performance.
The future of sales incentives increasingly will leverage findings from behavioral economics, and will be much broader than traditional cash compensation. Plans likely will include more game play, non-monetary rewards, choice and personalization.
Whatever your opinion of Uber might be, the company may be providing an early perspective into what managing performance may look like in the future.