Earlier this year, news broke that Zappos had begun experimenting with surge pay for its call center employees.
Adopting the idea from taxi service Uber, Zappos hopes the new compensation structure will incentivize employees to work when customer demand is highest, such as in the early hours of the weekdays on the east coast or during the early hours in Las Vegas, where Zappos is headquartered. Under the new system, more demanding shifts equal higher pay.
Fortune reports that Zappos CEO Tony Hsieh got the idea during a walk through of the call center, after noticing walls covered “floor to ceiling” in sheets of paper. It turns out those sheets were employee schedules for the quarter.
Adam Goldstein, a senior product manager at Zappos Lab, told Fortune “It was like how I signed up for college courses before I could do it on a computer… it was kind of a painful process, and [employees] were choosing when they’re going to work—it’s a big deal.” Equally unimpressed, Hsieh later asked the Labs team, “‘How do you feel about looking at something like Uber for the call center?’
When it was all said and done, pen and paper would be replaced by an online scheduling platform dubbed “Om” for “Open Market.”
Says Goldstein, “Employees earn an average of $14.50 a hour, and during the trial they received extra points during demand that could be redeemed for raffle tickets for prizes like gas cards, HDTVs and spa retreats.”
Zappos’ ultimate goal is to bring all customer center employees into the Open Market and pay them a range of hourly rates based on customer demand, but Goldstein admits there are some legal and benefit considerations to address first.
Meanwhile, the rest of us can chew on Zappos’ decision from a distance, pondering the lessons learned as well as the questions raised.
It’s all about the brand
Zappos has a reputation for being progressive, and this latest initiative reinforces that image. Even if the experiment fails (and apparently not all employees are fans—more about that later), Zappos’ branding is enhanced, and that’s a good thing.
Real-time data are needed to make real-time decisions
Fortune describes how Zappos built the Open Market by first studying the processes of the customer service center, specifically “how it forecast call volumes, which were the most important shifts to cover, how workers bid on shifts, and the processes used when emergencies, like a blizzard on the East Coast, cropped up.” In other words, Zappos used hard, real-time data to make its decision, versus relying on tradition, perception, or what members of leadership thought they knew.
This point is not to be taken lightly, because it’s all too common for organizations to make significant decisions—even compensation decisions—reactively or by gut. PayScale’s 2015 Compensation Best Practices Report found that only 41 percent of employers have a formal compensation strategy.
Worthy ideas can come from anywhere
Uber’s decision to institute surge pay for its drivers garnered a lot of press, and by all reports has worked well for the company. Still, it takes a special type of leader to acknowledge there’s an idea worth borrowing from an entirely different industry and then to implement that idea.
It’s important to look before you leap
Even after collecting mounds of data, Zappos didn’t dive head first into the Open Market. Instead, a pilot program was implemented, giving Zappos time to observe and correct any kinks before expanding. Pilot programs often are used to advantage in learning organizations such as Zappos.
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Will surge pay benefit workers?
In the comments section to the Fortune article, a reader who calls himself/herself “ZapposEmployee” wrote:
“First, $14.50 was an average they figured, which is pretty crappy compared to 75% of other call centers in our city. Secondly, amazing companies who value their long standing employees are able to be innovative without burdening the majority of their staff. Third, it presents fun opportunities for bachelors and bachlorettes (sic) with no children and who’s (sic) life revolves around Zappos to grow and learn. People with families and lives outside of Zappos who depend on their schedules and wages to get by do not benefit from this program. In fact, it is counter productive to many, most of which have been with Zappos for many years!”
This reader also implied that the real goal of surge pay is to keep call center wages low by replacing standard pay increases.
Is surge pay bad for company culture?
In “Will ‘Surge’ Pay at Zappos Decrease Employee Engagement and Kill Their Culture”? Paul Hebert asks, “Has Zappos inadvertently began a slow decline into a world where everything is transactional and mercenary?”
Consultant Ann Bares poses a similar question in “Are We Ready For the Uber-ification of Work, Performance and Pay?” She states:
“We want workers who keep their skills up-to-date and willingly pursue learning and development … [who’ll] take accountability for their own performance results, accept placing more of their compensation at risk via incentive pay, and maintain their bearings and contributions in the face of constant change and shifting priorities.
And we also want workers who will put company and work group interests above their own, protect our corporate brand at (nearly) all costs, and happily defer to the preferences of their organizational overlords.”
Bares then asks:
“But I wonder how well we’ve thought through the implications? Most of our business models rely deeply on people—aka, the talent—to deliver economic value. How does this work as we incrementally Uber-ify our own talent base?”
Can surge pay work?
There are more practical questions as well, such as whether surge pay provides enough incentive to motivate employees. HR Capitalist’s Kris Dunn writes:
“The willingness of a call center worker to take surge pay is directly related to a couple of factors. How much more will surge pay give them, and does it allow them to work a shift that fits with the rest of their life? They’ll take disruption to their life if they can, but only if the $$ makes sense. Otherwise, they’d rather be home for The Bachelor.”
Dunn also points out that if Zappos is unwilling to increase its overall money pot, there simply isn’t the wiggle room to provide enough of a differential to make surge pay feel like anything more than a plain old shift differential.
One thing is true. However Zappos’ surge pay experiment plays out, plenty of people are watching and will have plenty to say about it.