Culture results from the CEO’s choices about a company’s values and how those values are used — in deciding whom to hire, whom to manage out of the company, and how to motivate and reward or punish employees to take action.
A company culture can be good, evil or a combination. What’s more, some companies — like Uber — are using the latest in behavioral economics to shape their culture.
Using “hundreds of social and data scientists, Uber has experimented with video game techniques, graphics and non-cash rewards of little value that can prod drivers into working longer and harder — and sometimes at hours and locations that are less lucrative for them.”
The result of these “brain hacks” is to lower Uber’s costs which frees up money that it can invest in new growth opportunities.
It all comes down to creating a so-called choice architecture for its non-employee drivers that takes advantage of several specific heuristics that people use to make snap decisions — rather than engaging in relatively painful cost/benefit analysis prior to taking action.
Uber saves 25% on its costs per passenger trip by using contractors. And by using these brain hacks on its contractors, Uber is seeking to achieve sufficient scale to create a virtuous cycle in which “the risk of understaffing drops with a big enough pool of workers, and the cost savings of using contractors begins to outweigh the inefficiencies. This in turn frees up money to enter new markets and acquire new customers, which makes the contractor model still more efficient, and throws off still more savings,” according to the Times.
But in order to reach this scale, Uber — which gets 25% of each fare — has had to balance its desire to have a big enough pool of drivers to make sure customers get served within five minutes of requesting a driver against drivers’ wish to have a bigger earning opportunity — given car leases that require them to work 60 hours a week to earn a profit — all while reducing the high turnover that threaten to limit Uber’s growth.
Here are five brain hacks that propel Uber’s growth.
1. Set defaults to steer desired actions
People are lazy. If you give them a default setting, say, that automatically enrolls them in a retirement savings plan, they will most likely not make the effort to un-enroll.
Netflix exploited this tendency to create a feature that automatically loads the next program, which many experts believe encourages binge-watching. In Uber’s case, this means sending drivers their next fare opportunity before their current ride is even over.
According to the Times, “Many drivers appear to enjoy the forward-dispatch feature, which can increase earnings by keeping them busier. But it can also work against their interests by increasing the number of drivers on the road and defusing fare surges.”
2. Loss Aversion
People hate losing more than they like winning.
Uber rival Lyft did an experiment that demonstrated how to use loss aversion to boost driver’s willingness to drive more hours.
Lyft let drivers voluntarily sign up in advance for shifts. One group of inexperienced drivers were shown that they could make $15 more an hour if they moved from a slow period such as Tuesday morning to a busy time like Friday night. The other group was shown how much money the lost out on by sticking with Tuesdays — and this was the group whose drivers increase their hours during busy periods.
Uber uses loss aversion. Michael Amodeo, an Uber spokesman told the Times, “We show drivers areas of high demand or incentivize them to drive more. But any driver can stop work literally at the tap of a button — the decision whether or not to drive is 100 percent theirs.”
3. Income targeting
People who set their own hours set a goal — such as making $100 per day — and they knock off work when they hit that target. Uber sets such income targets for its drivers and then urges them on with text messages so they keep driving.
One Uber driver, Josh Streeter, told the Times that as he tried to log off at 7:13 a.m. on New Year’s Day 2016, he received a message on the company’s driver app with the headline “Make it to $330.” The text then explained: “You’re $10 away from making $330 in net earnings. Are you sure you want to go offline?” Below were two prompts: “Go offline” and “Keep driving.” The latter was already highlighted.
Uber also used such income targeting — issuing texts along the lines of ‘You’re almost halfway there, congratulations!’ — to encourage drivers to complete 25 hours of driving so they could earn a signing bonus. This was great for Uber because it encouraged more drivers to reach the 25 hour threshold after which the driver attrition rate declined.
4. Motivation through intangible rewards
People like intangible awards.
That’s true on video game platforms like Xbox, PlayStation and Pogo. And it’s also true on Uber where drivers can earn badges for achievements like “Above and Beyond (denoted on the app by a cartoon of a rocket blasting off), Excellent Service (marked by a picture of a sparkling diamond) and Entertaining Drive (a pair of Groucho Marx glasses with nose and eyebrows),” according to the Times.
Scott Weber kept driving on Uber and Lyft most weeks in 2016 despite making less than than $20,000 before expenses like gas and maintenance. He was losing money and getting by on payday loans. What kept him going was the badges. As he told the Times in March 2017, “I’ve got currently 12 excellent-service and nine great-conversation badges. It tells me where I’m at.”
Will you use these four brain hacks to motivate your people?