Uber: Relationship with Drivers | In Practise

Uber: Relationship with Drivers

Former Strategy & Operations Manager at Uber

Learning outcomes

  • If you were Uber CEO, would you make drivers employees or contractors?
  • As CEO of a ride-hailing company, would you treat all drivers in the same way or split them into groups? If so, how would you group drivers?
  • How would you pay drivers?
  • Do you think drivers are an important asset for ride-hailers? If so, how would you lock drivers down as CEO of Uber?
  • How would you balance utilization and take rate, leading Uber in a large city?
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Executive Bio

Cornelius Schmahl

Former Strategy & Operations Manager at Uber

Cornelius joined Uber in 2013 and ran various launched the service in various different countries across Europe and Africa for five years. He was responsible for launching Uber Germany and led driver acquisition and marketing across both B2B and B2C channels in the region. In 2016, he then launched Uber in South Africa and managed teams rolling out Uber in Uganda, Ghana, and across various other regions in Africa. Cornelius then moved to Moscow as Interim COO of Uber in Russia where he had full ownership of the region’s P&L before leading the $3.7bn merger with Yandex Taxi in 2018. Read more

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What are some of the key strategies you would use to on-board new drivers?

I think that’s extremely dependent on the regulatory framework. If you have very strict regulations, you need to build up partners that hire drivers. If the regulations are very lax, you can just blast Facebook and get people to join, so it’s very different.

You mean partners, as in other businesses that have access to drivers?

Yes. In Germany, where you have a very strict framework, if the process is six months to become an operator, you can’t send Facebook ads out. You have to speak with business owners, people who are willing to invest, who are maybe already in that business, to encourage them to build fleets and hire drivers. Then on the other side you’re building up a school of people to become drivers, for the drivers to become entrepreneurs themselves.

They can refer other drivers and get a fee and I assume they get a cash incentive upfront or a lower take rate for this?

That depends. The referral also depends heavily on your legal framework. If it takes six months to become a partner and refer, it’s not efficient. The best referral tends to be if the economics work extremely well, or well enough. That is better for this kind of market. Whereas for peer-to-peer markets, referrals work extremely well. People can live off referrals.

So, if there’s a very lax regulatory framework and you can allow drivers to refer each other, you can scale quickly and use referrals for drivers. But in Germany, for example, it’s just too difficult.

Exactly, if it costs you 3K to set up a business and get this whole thing running in six months and some training, 500 bucks per referral, it just won’t work.

What was your experience working with German regulators and their approach to Uber and ride-hailing in that region?

Our approach was to fully comply with the law. Then we decided to launch an app, a non-compliant product, which was very quickly shut down by the regulators. Then we became legal again, the old thing again, with cheaper cars. Uber operates in a very slightly grey area and regulators are being heavily lobbied by the taxi industry to shut down whatever is left to shut down from Uber. So, to make these grey areas blacker, ideally.

Clearly, Germany is a heavily unionized country, which makes anything difficult around employees or scaling quickly. What were the grey areas and how did Uber navigate them?

There’s a law that says a driver has to return to base after every single trip and they have to be there when the next trip comes in. For the last 50 years, they have to sit in their garage and wait for their phone or computer to give them new business. So, we set up a taxi dispatcher company that would then be allowed to do that. Uber only operates as a limousine company dispatcher business in Germany. There’s someone there, pressing a button to route the trips to drivers.

So, that complies with the law because the driver has received it at the base?

Exactly, they received it at the base, so that’s okay, but you can still complain about it if you want.

MyTaxi is a public, Uber-like competitor in Berlin. How does that work?

They just have taxis, so it was fine. And now, as Uber is big enough and kind of legal, they’re just competing with it and dealing with the rules the same way.

The biggest question now, across the US and globally is, should Uber be treating drivers as full-time employees or independent contractors? What is your opinion on that?

I’m really surprised people are still talking about this. The drivers don’t want to be employees, most of them. A lot of them quit whatever old job they had to be an entrepreneur. It’s financially not bad to be an entrepreneur, in most countries. There are a lot of tax benefits. You can build something. Very few drivers complain about it, but the motives behind it are often quite dubious, I feel.

So, you think it’s a small proportion of drivers that are trying to claim holiday pay and sick benefits?

Of course, they would like it. If someone said, “You want 50% more money?” of course you’d take it, but I think they only talk about one side of it. The other side is, you have freedom to drive whenever you want, to do whatever you want. The freedom to buy more cars, have a bigger business, you can take some time off. You’re an entrepreneur. You can work with different apps.

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Uber: Relationship with Drivers

November 23, 2019

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