Is Uber-style 'algorithmic management' bad for business?

Your boss could soon be replaced by a smartphone app.

by Jack Torrance
Last Updated: 02 Aug 2017

As ‘gig economy’ companies like Uber, Deliveroo and Taskrabbit grow and grow, workers increasingly find themselves answering not to a human manager, but to an app.

Gig workers receive jobs via their smartphones, as well as feedback on their performance and information about how much they’ve earned. Some companies don’t even provide a contact number, meaning workers with a problem can only contact their job provider via the app.

So what, you might think. Everything else is going online and being automated. If you don’t like your manager’s human failings then you might be glad of having an app to deal with instead.

But researchers at Warwick Business School and New York University claim such a system can be bad for business. To demonstrate its impact they looked at the way taxi app Uber’s drivers make use of its ‘surge pricing’ system.

For those unfamiliar with the app, surge pricing kicks in at times of high demand and low supply (such as during a downpour or after a big concert or sports game), pushing up prices. It makes perfect sense, suggests Uber, because it encourages more drivers to pick up from those busy locations, making sure more customers are able to get a ride.

But the research claims some drivers are dishonestly colluding to manipulate this process to bump up their pay – by simultaneously turning the app off until prices have soared and then flicking it back on and cashing in. The report cites a post on the Uberpeople.net forum in which one driver urges his colleagues to ‘stay logged off until surge...Less supply high demand = surge.’

The scale of the issue is unclear. Drivers on that same forum have had a mixed reaction to the report. ‘What do you mean secretly? We do it all the time,’ said one. ‘Drivers "colluding". AS ****ING IF,’ another. Uber says such behaviour is ‘neither widespread, nor permissible,’ but the researchers claim it demonstrates a problem with the company’s approach to management.

‘Uber uses software algorithms for oversight, governance and to control drivers, who are tracked and their performance constantly evaluated,’ says Warwick’s Dr Mareike Möhlmann. ‘In response, drivers have developed practices to regain control, even gaming the system. It shows that "algorithmic management" that Uber uses may not only be ethically questionable but may also hurt the company itself.’

In particular they seem concerned about the emotional distance this form of management puts between workers and their bosses. ‘The drivers have the feeling of working for a system rather than a company, and have little, if any interaction with an actual Uber employee,’ adds NYU’s Dr Lior Zalmanson. ‘This creates tension and resentment, especially when drivers can only email to resolve problems.’

The specific example in question may have more to do with the problem of perverse incentives than the gig economy. You’re probably familiar with the urban legend about the Soviet nail factory that, tasked with producing a tonne of nails, decided the most efficient way of doing so would be to create one, massive, one-tonne nail.

It’s not true of course, but it contains an important parable. Whether it’s revenue targets that encourage staff to cut corners and upset clients to close every possible sale or fiendishly complicated executive long-term incentive plans, rewarding people based on narrow metrics can have seriously adverse effects.

Nonetheless the research touches on a hugely important topic that will demand more attention in the not too distant future. As a greater proportion of the workforce slips into more flexible, mercenary and remote jobs, technology risks becoming a barrier between workers and their bosses/clients.

How important to employee effectiveness is a human sense of belonging and of loyalty to their company? Expect more studies like this attempting to answer that question in the coming years.

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