Zappos’ ‘Open Market’ surge pricing for call center workers
Zappos has been in the spotlight a number of times in recent months, most noticeably for adopting Holocracy — the non-hierarchical management approach — but that is not the only unusual change being implemented at the company.
As reported by Clair Zillman, Tony Hsieh, the founder and CEO, was surprised by the decidely old school approach the company was using to schedule can center workers. The workers would submit their desired schedule for a three month period on paper, and scheduling staff would try to work through all those requests, balancing all the requests.
Zappos is customer obsessed: the company aims to answer 80% of customer calls in 20 seconds or less. So getting the right number of workers on the phone is critical.
The company’s innovation labs — called Zappos Lab — came up with an alternative, one that draws on Uber-style surge pricing so that more workers are available during the times of highest call volume. As Zillman explains,
Employees decided when to work with the help of Open Market’s real-time customer service center metrics algorithm and historical data that showed customer demand, as measured by the wait time of the longest-holding customer, and the accompanying compensation rates. The longer the hold time, the higher the customer demand, the more the employees working that shift would get paid.
Demand is especially high in the early hours of weekdays, when customers on the East Coast are placing calls before starting their workdays. Those calls and online inquiries land in Zappos’ Las Vegas call center before dawn, when few workers want to be on the clock. Employees manning the customer service center during those hours will earn a higher hourly rate. By contrast, workers will receive less pay if they work on the weekends, when Zappos receives fewer customer inquiries.
I think this is a great example of a fair discipline, and the sensible application of data and human psychology. The Las Vegas-based workers who are willing to get up early to work the early morning shift are paid more for those peak hours, and those that would rather work a conventional 9-to-5 shift can do so, but are paid less.
Because of ‘legal and benefits kinks’ the Open Market program has not been implemented in the obvious way: with higher per hour pay for surge hours. As a temporary expedient, those working during busier time are given ‘points’ which can be converted to raffle tickets for prizes like gas cards, headphones, TVs and other goods and services. A stopgap, but one that should give way to a direct surge pricing scheme.
This flies in the face of traditional payment schemes, and upsets notions of seniority, and older premises of what’s fair. For some workers, this may be demotivating instead of an attractive alternative. Personally, if I were getting up to work a 5am shift in Las Vegas, I’d be happier that I was getting paid more for those surge hours than just accepting the schedule shift. At least I’d be paid extra for the hassle.