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Uber UK Introduction to Human Resource Management

CONTENTS Introduction

3

Best fit / Contingency

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Psychological Contract

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Gig Economy

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Conclusion

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References

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Appendix

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Introduction Uber is an efficient private hire company with a valuation of over $60 billion - which works through a user-friendly app - was founded in March 2009 by Travis Kalanick and Garrett Camp. Stationed in California, Uber is currently operating in over 633 countries around the globe. With a single tap of a button, customers can locate a driver nearby and hire them for a fee, defeating traditional taxi services. Uber allows a seamless connection with their customers and their drivers with efficiency due to the speed of service and lower fares, paying on arrival using a card payment, or with further technology like Paypal. Customer comfort is the number one priority of Uber as this allows them to be rated more and will gain more customers due to their rankings. Uber drivers use their own vehicles and pay twenty-five percent of their earnings to Uber with high earning potential and a flexible work schedule. The advantage of quick and fast respondence makes Uber change the target market’s expectations and changes the relative to its competitors. In this, we discuss and analyse the process of Human Resource Management and how it integrates into a business such as Uber in account of the Contingency and how the organisation meets the demands of its consumers; the Psychological contract between drivers and employers, and the Gig Economy where it separates from the traditional job market procedures and sees drivers for Uber more of independent workers rather than employees.

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Best Fit / Contingency Referred to as ‘Vertical Integration’ or Contingency; Uber extends its organisation with a Human Resource Strategy which fits the demand of the company wherein drivers need income and the customers need transport. Uber offers a modernised service for customers where drivers and riders are connected seamlessly through a user-friendly app, with a fair set for the destination. On one hand, this is efficient as riders are currently aware how long their drivers will take, and the route taken. However, when it comes to pricing, riders are directly debited from their bank cards after the journey which technology advances traditional taxi service or methods such as Paypal can be used instead of cash in hand; yet on the other hand, as surge pricing – where the fares are much higher during peak times – can put riders off from booking a car, will entice the riders less, resulting the drivers with little to no customers. Despite this, success of Uber has been said was due to the convenience offered by the modernised service compared to the traditional cab service (Sundararajan, 2014). It is also asserted hat due to changes in technology lead to an increase in productivity as it is simple and effective. Furthermore, Contingency or Best Fit, is a set of internally consistent policies and regulations which are in turn, developed and implemented and guarantees that the human capital will then add to the success of the business objectives. As a pioneer of being the first web-based transportation service, Uber has been able to surpass competition and moved forward with advances in technology. Studies (Greve & Seidel, 2014) have shown that being a first-mover has played in the overall success of an organisation where it has typically an advantage over rivals, regardless of an inferior product or service because they have learned from mistakes and have developed and adapted to external factors – social, technological and political – over the years. Furthermore, with Uber an ever-growing brand, its reputation of enhancing customer experience has been recognised globally where their priority is to make riders feel at ease and comfortable. This in turn results in higher revenue. With a dual rating system, this improves user confidence and satisfaction. It encourages riders to use the service as strategies such as getting your very first ride for free has enticed users to share and spread the offer to family, friends as it is excellent value for money. This in turn creates customer loyalty, where they ride with Uber as they know what to expect from the drivers and the service. This success is asserted by Wallsten (2015) using the theory of quality – value – loyalty.

Figure 1. 1: Wallsten (2015) – Quality, Value, Loyalty chain

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Seen on Figure 1.1, factors such as Quality, Value, Price develop over the years and in turn, has created a culture of customer loyalty towards Uber. Among these elements, it is very easy to replicate by competitor – for example, Lyft, a similar service to Uber - however it has been stated that service quality is very difficult to imitate which shows the real success of Uber (Edward, George and Sarkar, 2010). Because of this, quality of service has an honed in practice the role in creating great value of service which results to loyalty to the organisation. Wallsten (2015) suggests that the superior service quality of Uber has helped the company in in developing loyal customer base in taxi industry. It can be taken from this that the one of the main factors for its success was its ability to offer convenience and efficiency along with great customer service.

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Psychological Contract An organisation’s ultimate power is the relationship is between an employee and an employer. The Psychological Contract is the unwritten set of agreement between the two parties. It is the expectations of each side when the process of selection and recruitment begin; Denise Rousseau (1995) states that: “The psychological contract refers to individual beliefs shaped by the organisation regarding the terms of an exchange agreement between individuals and their organisation.” This differs to traditional employment as back in the lifestyle of Generation X, lifelong employment was expected when working with organisations which meant a job for life until retirement. Expected to work for an employer for a certain number of years meant loyalty to the organisation, no job-hopping which results in job security and a pension. As for Uber UK, to comply with company rules, drivers are expected to apply for several things such as a Private Hire licence, pass tophogrical skills tests, medical checks (Uber, 2016). They also require an enhanced Criminal Record Bureau check; with of course a full Driving licence and their own vehicle to use. Drivers are expected to give 25% of their earning to Uber and the rest of the income to themselves. However, they are also aware that overhead costs such as maintenance, petrol and insurance are their own expenses and Uber does not carry or reimburse them for these. Furthermore, drivers for Uber are not seen as employees, but as independent workers. Different to Zero-Hour contracts, drivers can choose their working hours, which differentiates from traditional servitude as it is not a fixed term employment and are driving to meet demands of their income. Psychological contracts fluctuate and adapt over time depending on employee and organisational needs, for example, changes in policies and licence laws in the UK. Recently, London have lost and appealed their licence to operate and work to practice due to “lack of corporate responsibility” (The Guardian, 2017) This puts a huge dent in the operations of the company, where as the head boss of Uber in the UK has resigned, forcing them to appoint someone more fitting due to external factors such as the London ban. The correlation between this and Human Resource strategy is that her face fitted the previous regime in the gestation of the company. Now faced with the threat of losing their licence completely, the organisation must be practical as 40,000 drivers and 3.5 million Londoners are relying on them for demand on transport and income. (The Guardian, 2015). Furthermore, investors are becoming as it is unravelling in the public eye which impacts profit and resulting in a lower turnover. These amendments to the psychological contract – as breached due to the TfL ban, (CIPD, 2009) creates a lower morale, a cause jump ship between the drivers, disloyalty towards the company. (Torrington, 2014)

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Gig Economy First raised in the 1980’s, a labour market which is characterised by a short-term contract as opposed to a permanent job is known as a ‘Gig Economy’ which took up 70% of services. Stemming a huge decline in manufacturing and traditional heavy industries, this forced the people to move to more temporary work where it is more free-lance and increased flexibility to manage your own career was made possible and fluctuation was needed to manage workforce effectively. As aforementioned, Uber drivers are not seen as employees, not zero-hour contract workers but contracted independent workers and self-employed where they are flexible enough to choose their own working hours, albeit two hours a day or a traditional nine to five working day. Earning 75% of the total income (where 25% goes to Uber), Uber drivers can make less than minimum wage on a slow day – and for those drivers that drive for Uber full time, would need to work over 68 hours a week to earn only above £20,000 (The Independent, 2016). Even with the surge pricing, increasing the rate of pay at peak times, this still does not amount to a good wage level for the drivers however much they are attracted to areas offering higher rates. This narrows the initial pool of passengers based on how much they value a ride, allowing Uber to segment their customers and satisfy and prioritise those users who need their service the most which creates a leaner brand image as customers will then associate Uber with getting where they need to go in the times when convenience and efficiency were most necessary. Gig economy can benefit part time lookers, such as students or parents that require extra income as they can be flexible and choose their own paths. This creates a larger pull of drivers, creating more revenue for the business. "It's a very flexible arrangement, meaning employers only pay when the work is available and don't incur expensive staff costs when the demand is not there." (BBC Newsbeat, 2016) On the other hand, drivers have no protection against unfair dismissal, no holidays, or sick pay and no right to redundancy payments as they are not seen as employees but independent contractors. This is unlawful as a fixed employment benefits through their organisation, which supports employee voice as they can be involved and influence what happens in the organisation. (Torrington, 2014) This correlates to the psychological contract as it is an effective way of exercising employee influence (Guest and Conway, 1998). As discussed, drivers are found to be ‘workers’ by a London employment tribunal which means they are within the meaning of the Employment Rights Act 1996. As “workers”, the Uber drivers are entitled to the protections under the Working Time Regulations, including the right to paid annual leave, the right to the National Minimum Wage and protection against discrimination. As for Uber, the tribunal concluded that the level of control exercised by Uber was such that it was unrealistic to view the drivers as genuinely self-employed. They considered the fact that organisation held interviews and recruits its drivers, requires drivers to accept and not

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to cancel trips, fixes the fare, handles passenger complaints and subjects drivers to performance reviews via a customer rating system – as to following certain regulations, just like any employee in a workplace. On another level, however, this can be viewed as a significant step by the UK courts to get to grips with the issues being thrown up by the expansion of the ‘gig’ economy. One of the main issues is that the definitions of ‘employees’ and ‘workers’ in UK legislation were drafted some time ago, and envisage most individuals in a traditional working environment; hence the confusion over who qualifies for which rights. As the law struggles to catch up with the realities of the gig economy, legislators at last have caught on to the implications for employers and employees. The UK Government has recently launched an inquiry into the future of work, focusing on the status and rights of agency workers, the self-employed, and those in the gig economy.

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Conclusion To conclude after analysing Uber’s Human Resource practices, we see that the seamless symbiosis between driver and rider have been connected throughout the years and practices such as prioritising engaging in customer comfort and satisfaction. It has resulted in organisation growth with more and more drivers signing up to meet the demand of transportation and income simultaneously. We have also seen that drivers know what to expect when starting off in the company, but are now raising unease to how they are seen in the workplace. To add to that, major concerns have also risen due to recent external factors, where we can see the organisation has had to adapt and fluctuate to operate. We conclude, ultimately that Uber in the United Kingdom have a good Human Resource work method, with more to consider and change to benefit their large pool of drivers to help create more loyalty and trust towards the organisation and to keep providing better transport service than traditional taxi cabs.

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References Uber: A Winning Strategy – Technology and Operations Management. (2017). Rctom.hbs.org. Retrieved 24th October 2017, from https://rctom.hbs.org/submission/uber-a-winning-strategy/ Andrew Gilligan. (2017). Fears over‘excessive and unsafe’ 65-hour weeks for Uber cabdrivers. The Telegraph. Retrieved 29 October 2017, from http://www.telegraph.co.uk/news/2016/04/30/fearsoverexcessive-and-unsafe-65-hour-weeks-for-uber-cabdrivers/ Sundararajan, A. (2014). Peer-to-Peer Businesses and the Sharing (Collaborative) Economy: Overview, Economic Effects and Regulatory Issues. Smallbusiness.house.gov. Retrieved 24 October 2017, from https://smallbusiness.house.gov/uploadedfiles/1-152014_revised_sundararajan_testimony.pdf Wallsten, S. (2015). The Competitive Effects of the Sharing Economy: How is Uber Changing Taxis?. Technology Policy Institute. Retrieved from https://www.ftc.gov/system/files/documents/public_comments/2015/06/01912-96334.pdf Torrington, D., Hall, L., Taylor, S., & Atkinson, C. (2014). Human Resource Management (9th ed.). Edinburgh Gate: Pearson Education Limited. Rousseau, D. (1995). Psychological contracts in organizations. Thousand Oaks: SAGE Publications. Deliveroo and Uber: What is the 'gig' economy?. (2017). Bbc.co.uk. Retrieved 27 October 2017, from http://www.bbc.co.uk/newsbeat/article/37908263/deliveroo-and-uber-what-is-the-gig-economy Wells, M. (2009). Managing the Psychological Contract. Www2.cipd.co.uk. Retrieved 24 October 2017, from http://www2.cipd.co.uk/NR/rdonlyres/64609E39-A9E0-4CED-B130902087380B8E/0/ManagingthePsychologicalContract Topham, G. (2017). Uber's London licence renewed for only four months. the Guardian. Retrieved 25 October 2017, from https://www.theguardian.com/technology/2017/may/26/ubers-london-licencerenewed-for-only-four-months

Osborne, H. (2017). Uber loses right to classify UK drivers as self-employed. the Guardian. Retrieved 18 October 2017, from https://www.theguardian.com/technology/2016/oct/28/uber-uk-tribunal-self-employedstatus

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Appendix Figure 1.1 Source: Wallsten 2015

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