HRM Assignment Analysing & Critiquing Deliveroo’s Approach to HR
ASSIGNMENT CASE STUDY: DELIVEROO
Deliveroo is a UK based start-up company which began as a dream at co-founders Will Shu and Greg Orlowski office desks in 2013. It is a delivery service application (app) that operates with restaurant partners to deliver meals to customers via its riders. The customer orders a meal via the Deliveroo app, that is accepted by the restaurant partner. Riders are able to view incoming order requests by customers in their area, which they can accept or decline, once accepted the driver is responsible for picking up and subsequently delivering the order, all managed via the app. With the tagline “Order high-quality takeaway online from top Singapore restaurants, fast delivery straight to your home or office.” (Deliveroo, 2019). Deliveroo pride itself on the flexibility it offers both customers and riders and reiterates the choice on behalf of the rider.
The company has faced a number of issues during its growth period where it has expanded into over 500 cities in 14 countries across the world. Following significant funding from Amazon in 2019 the company intends to continue growing.
Deliveroo is one company who work within the ‘gig economy’ (Kalleberg and Dunn, 2016) in that its riders are not classified as ‘employees’ of the company. Rather, Deliveroo treats its employees as ‘contractors’ meaning that they are essentially self-employed. Deliveroo refers to their riders as ‘independent contractors’ as they are paid by the job.
Healy, Nicholson and Pekarek (2017) suggest that although gig economy working is a minor feature of the current labour market, “discussions of the ‘future of work’ – how much work will be available, how it will be arrange and the impacts of technological change – frequently refer to the gig economy” (p.233). O’Connor (2016) discusses the realities of this working pattern within gig economy organisations by exploring the algorithmic management that it utilises to manage employees via the app. Although the use of algorithms to manage workers seems new it is actually founded in theory from over a century ago when organisations hoped to manage the tasks and time people took to complete these tasks (known as scientific management). However as Rosenblat (2016) argues that although the use of algorithms influences perceptions surrounding management “Uber’s model clearly raises new challenges for companies that aim to produce scalable, standardized services for consumers through the automation of worker-employer relationships.”
Many other companies (such as Deliveroo) have followed this example, using a system of contracting instead of hiring workers as employees. In addition, many companies in other industries (such as software development, manufacturing and even education) increasingly use contractors rather than employing people on a permanent basis.
Since inception, the company have faced many issues predominantly surrounding workers’ rights for their freelance riders. However being the first rider and still undertaking deliveries when he can, co-founder and current CEO Shu was able to explore challenges the drivers would face and firmly stresses the most important element for everyone involved is flexibility. Additionally Shu shares that in his experience the riders will often ‘work’ with a number of delivery services and will fluctuate between them based on demand (i.e. between Uber Eats, JustEat and Deliveroo), therefore flexibility is key for the riders. In November 2017, Deliveroo won its UK based legal fight and the right to not call it’s riders employees and rather continue to classify them as freelance contractors, unlike rivals Uber. Regardless of this, between May and August 2018, Deliveroo focuses on additional perks surrounding riders welfare by providing accident cover, first aid training and medical insurance across the world.
Using independent contractors is an attractive option for many employers because they are not entitled to the same rights and benefits as fulltime employees (UK Govt., 2017; Torrington, Hall, Taylor and Atkinson, 2014). Key differences between the different types of employees are for example, they do not need to be paid holiday pay or sick pay and they do not need to be provided with the tools to do the job (e.g. a bike in the case of Deliveroo although riders are required to have one). However, this classification of workers has attracted criticism from commentators and politicians throughout the world, including the UK (The Guardian, 2015). Although Deliveroo stress the idea of flexibility is core for everyone involved but most importantly for the riders who come from a wide array of backgrounds with Shu arguing that “…riders do the job because it’s flexible” and believes if the job becomes inflexible then less people will want to do the job. This corresponds with evidence of the psychological contract of riders who left reviews on Glassdoor (2019) who commented on the “very healthy attitude towards working from home and flexible working hours”. Further, they commented on the friendly working environment with good communication with the management, with perks such as good pay rates and perks are strongly valued. However some reviewers on Glassdoor (2019) did comment aspects of uncertainty could have a negative impact on their experiences. These areas can include if a rider has an injury, if their bike is stolen, if the weather is bad or if there is no demand for deliveries this can negatively impact the riders. These reviews demonstrate realities of the gig economy on workers.
In Singapore, you are invited to apply to become a driver with ‘a 5 minute application’ and informed you only need 3 things. These include; 1) Singapore citizenship or permanent resident status; 2) A motorbike (with a valid Class 2/2A/2B license) or bicycle, compliant with legal requirements; 3) A smartphone – iPhone (iOS 10 and above) or Android (5.0 and above) (Deliveroo, 2019). There are numerous driver testimonials detailing the great work life balance and a focus on flexibility the expectations of freedom and flexible working are evident from the outset.
Recently Deliveroo have began to expand in ‘Deliveroo Editions’ which provide an ‘outpost’ of restaurants where the restaurant partners will provide all resources (e.g. staff as well as ingredients). In Singapore, they are also branching out from just deliveries with ‘food markets’, the largest of which opened Alice@Mediapolis in one-north in March 2019. This large 40 seater ‘futuristic’ dining experience offers a fully-automated experience with “no need to interact with human servers at all” (Lim, 2019). You order via a kiosk and collect via a ‘cubbie’ which details the name you have inserted upon ordering. However this requires staff to be in the kitchen ensuring the food is available and notifying the system when it is ready to collect.
This branching out of services is just one way Deliveroo is attempting to keep up with its competitors. In 2019 they have also received $575 million investment from Amazon and have shared plans to grow it’s tech team, develop new technologies, reach more customers all whilst offering additional support to its restaurant partners and riders. This plan of additional support for riders stems from a recognition of backlash the ‘gig economy’ has received due to the fact companies such as Deliveroo are treating workers as independent contractors rather than employees which incurs less cost for the company. And after winning their UK legal battle Deliveroo continues to class riders as contractors, however it has invested in perks for its riders by providing them with cost-free insurance and free access to hundreds of online courses. Also, unlike competitor ‘DoorDash’ Deliveroo have confirmed 100% of tips provided by customers go straight to their riders.
In addition, by utilising this system, employers of independent contractors can more quickly and easily change the size of their workforce in response to changes in demand. This means that using contractors can offer advantages in both cost and flexibility for employers by adapting between numerical, temporal and functional types of flexibility (as Atkinson’s, 1984, model suggests as a comprehensive treatment for organisational flexibility). It also means that their overarching business strategy and model hugely affects the people management within the organisation and in pursuit of the highest level of flexibility there have been loses for many workers; particularly in terms of their employment security and added benefits from the company (Healy, Nicolson and Pekarek, 2017). To ensure that Deliveroo are able to respond to the local regions they will be based within they opt to introduce Business Intelligence Units to understand and respond to local demands. For example Klara (2018) comments “The unit, operating out of Deliveroo Singapore’s corporate office in Tanjong Pagar, will be tasked with the following functions; to deepen understanding of the region – local food trends, tastes and restaurant markets; to enhance performance for riders, restaurants and customers; and to look for expansion opportunities in existing countries and new markets.” Further, Deliveroo will aim to ensure that they can match the riders to the demand of the area, which will help clarify expectations of both the riders and Deliveroo. This level of local consideration demonstrates Deliveroo’s commitment to adapt and respond their business model to the local context they are based within.
In researching your answer, you should be using recommended textbooks, journal articles, Deliveroo publications and articles about Deliveroo and its business practices. Here are some references specific to the case study to get you started with your research on Deliveroo and the rise of contractors (also called ‘the gig economy’), but we do expect you to find and add in your own resources, particularly from academic sources
HRM Assignment Details
Analyse and critique Deliveroo’s approach to HR using 2 of the following HR topics/models/debates; - Universalist versus Contingency (p.50-54*)
- Business Strategy fit with HR (p.46-49*)
- Atkinson’s flexible firm model (p.98-100*)
- The psychological contract (p.164-166*)
- Reward strategies (p.416-421*)
*Page numbers refer to the online version of Torrington, Hall, Taylor and Atkinson’s (2014) textbook (9th ed.), which can be accessed through the library
In your report, you should refer to Deliveroo’s HR practices and additional contextual factors such as the labour market characteristics facing Deliveroo in Singapore, the regulatory environment, the business strategy and growth profile of Delieroo Singapore, and the HR practices of competitors.
We expect you to evidence the following skills in your report:
- Application of theoretical models to understand the reasons behind and potential consequences of HR practices at Deliveroo
- Critical analysis of the strengths and weaknesses of Deliveroo’s approach to HR, based on application of models/topics
- Understanding of the inherent tensions in HR (e.g. synchronising with business strategy and promoting good employee relations)
This particular HRM assignment provides a clear overview of the theoretical aspects of HRM-related to the functioning of Deliveroo. The issues related to the gig economy and the rights of employees related to HR contracts are considered the potential areas to focus on the company operations of Singapore. The report has been created by using two HRM models like psychological contract and Atkinson’s flexible firm model which can be incorporated into the HR practices and approaches of Deliveroo Singapore operations as mentioned in the case study (Ranosa, 2019). The potential strengths and weaknesses of the HR approach of Deliveroo Singapore and the inherent tensions synchronized with business strategies have also been highlighted in the report which significantly helps in promoting good employee relations within the organizational context of Deliveroo.
2. Psychological contract and Atkinson’s flexible firm model
2.1 Psychological contract model
The psychological contract model refers to the individual's expectations and beliefs as perceived by the employer. The ambitions and obligations of the employees related to employers and employees are also included in the psychological contract model which is considered one of the core aspects of HRM. This model or approach was developed in the 1960s to obtain a better and clear understanding of employment relationships consisting primarily of employer and employee relationships. This concept or approach was developed by research works conducted by Denise Rousseau who was a management scholar. The mutual beliefs and perceptions among an employer and employee are the main component of this particular model which is applied in HRM functions globally (Avgoustaki & Bessa, 2019). This model also refers to the intangible and unwritten agreement between an employee and employer which describes the expectations and understandings of the informal commitments within the HRM functions of an organization.
The transactional exchange of labor with rewards and benefits is also considered among the prime aspects of the psychological employment contract. This model or approach is important and relevant for the organizations because it helps in maintaining a proper positive employment relationship which is created by mutual agreement of a series of ground rules and regulations within the HRM frame in various organizations. Psychological contracts also significantly help employees to view and value their roles and responsibilities towards organizational goals and objectives. This model also helps employers and employees avoid unrealistic expectations from each other and allow the amendment and rectification of contract terms by ensuring proper communication channels and methods (Avgoustaki & Bessa, 2019). The development of psychological contract between the employees and employers are primarily dependent on proper communication factors that involve verbal agreements and promises over promotions and salary increments.
This particular model or approach can be related to the HR practices and policies of Deliveroo related to their operations in Singapore. The workers and employees of Deliveroo are primarily hired based on independent contractors instead of the traditional system of employees. This type of hiring practice is known as the gig economy and it is a rising trend in HRM practices that provides employees with the tag of being self-employed. The riders of Deliveroo who provide the services are known as independent contractors. However, the company had faced some issues related to HRM functioning and employee rights in Singapore operations since the very beginning. The riders of Deliveroo faced issues related to demands in the delivery services that significantly contributed to a reduction in flexibility for freelancing (Bal & Izak, 2020). The workers were paid but in short spells which provided certain uncertainty in the job security prospects of employees or the contractors. The instability and the exploitation elements of gig economy working gradually began to take a toll on the riders or independent contractors.
There were limitations in the commitments and job responsibilities for the workers by the employers which significantly contributed towards the amount of uncertainty and insecurity in professionalism for the employees. The gig economy primarily provided access to the contractors who had limited professional experience and expertise which also helped provide jobs and employment to many students studying abroad. There were tensions among the workers of Gig economy and agitations in rival companies like Uber Eats for the unionization of riders to get access to normal operational pay packages (Bal & Izak, 2020). They also wanted additional payments related to the maintenance of bikes and mobile data connections. There has been a steady clash with the Gig working economic policies and the rights of contractors who wanted to be treated as employees and receive their due benefits and allowances. The theory of Gig platforms provides the short-term or contractual relationship with an employee and the company and the riders of Uber of the company mentioned Deliveroo have deliberately joined the company knowing the operational and HRM practices and procedures.
Therefore it is unjustified for the contractors or riders to classify or categorize themselves as employees and receive the benefits (Savarimuthu et al., 2017). The claims made by the contractual workers or riders are also baseless as there is no potential relation between the functionalities, roles, and responsibilities of a regular employee and independent contractor of a firm. However, after Deliveroo had won the legal fight based in the UK which was related to the classification of the employees and riders as independent contractors, the company revised the HRM functions and policies as much as possible for the psychological and materialistic benefits of the contractors and riders (Bamel & Stokes, 2016). The company needed a flexible work environment for the employees as they were not provided with the benefits that a regular employee is provided with. The company does not allow special allowances related to workers like paid holidays and sick paid leaves to the independent contractors which are considered integral aspects of HRM functioning. The riders are also not provided the usual benefits and entitlement rights related to regular employees in the internal; HRM environment of Deliveroo. The company has been focusing on the additional perks and incentives provided to the riders and the first aid training and medical insurance coverage related to accidents and injuries.
These aspects are considered the potential links and relations to the model or approach of the psychological contract mentioned earlier in the report (Berkery et al., 2020). Presently the company has evolved from the previous scenario as they carry a very healthy working environment and atmosphere for the riders and other employees and allow work from home options for the office workers providing flexible shifting duties. The employees nowadays display a very healthy relationship with the HRM and have good communication with the management. The company also provides good pay rates and perks for the employees along with providing them additional benefits. The company cannot formally change the rules and regulations of gig workers or contractual workers so they informally made certain alterations in the benefits provided to the individual contractors that display the relation with the psychological contract method or approach of HRM adopted by the company (Boon et al., 2019).
2.2 Atkinson’s flexible firm model
The flexible firm model of HRM operations was proposed by John Atkinson in 1984, who was a psychologist in the Institute of manpower studies. The model or approach suggests that the organizational structures require elasticity in fluctuating markets and they are generally unpredictable in a competitive market environment. It is a management technique that is used to optimize the HRM functions of various organizations. The implementation of flexible employee arrangements is considered one of the most important aspects of managing market volatility (Botha & Steyn, 2020). Atkinson identified the requirement of organizations to distinguish the various levels of employment-related to certain groups and teams to generate workforce flexibility and a clear overview of the importance of hierarchy. This particular model focuses on the organizational HRM to be proactive and decisive instead of reacting to the differences between a dysfunctional and flexible operational model of organizations. There are a few key principles of this model and approach as suggested by John Atkinson (Herrera & De Las Heras-Rosas, 2021).
This particular model suggests that the workforce should be designed proactively to meet the business needs within a fluctuating and competitive market. The approach also suggests that HRM implement strategies for integrating the flexible conditions within the functional operations of the organizations to respond to market competitiveness in terms of goal achievement. However, the model also states that the creation of a flexible workforce can reduce the organizational abilities to deal with unforeseen issues. There are two groups of this approach namely the core and peripheral group (Meijerink et al., 2021). The core group consists of employees who are difficult to replace owing to their high levels of skills whereas the peripheral group is the group that consists of secondary workers who are mostly less skilled and experienced.
This particular case study of Deliveroo focuses on the peripheral group of workers which can be theoretically related to the flexible firm model of Atkinson. Financial flexibility is the broader term that can be related to the case study of Deliveroo that has been facing issues in the HRM policies and practices of the company. It deals with the pay price aspects of the organization that is related to Gig economy workers who are also considered the contractors of Deliveroo. As a start-up venture, the company recruits contractual employees who are called contractor riders for delivering the food products from the eateries to the various consumer set destinations (O’Donohue et al., 2017). During a high demand of consumers especially during festivities and vacations, the order demand significantly rises. The company, therefore, hires contractual workers who are independently self-employed. The purpose of meeting the elements of Atkinson's flexible firm model is sustained by the company as they recruit contractual employees who are also considered as freelance riders for delivering the food during high demands.
The construction of a strong peripheral employee network significantly increases the competitive advantage of Deliveroo in the food delivery market in comparison to rivals like Uber Eats and Swiggy. This model or approach has been compromised for a short time due to the protests and claims related to the pay benefits of contractual employees. However, after the success of the UK litigation court case in favour of Deliveroo, the company planned to revise the benefits and facilities of the contactors and riders who claimed that they did not get any kind of additional benefits similar to core employees (Ranosa, 2019). The company has also introduced the two core aspects or dimensions in financial flexibility that is the flexibility in employment and work. The company has applied strategies to make the size and composition of the workforce more flexible by introducing contracting, subcontracting for the peripheral workers, and remote location working for the core employees. Flexibility in work is also achieved by the company as it has implemented flexible work timings and group work allocation in office work settings which can ensure a more flexible operational position.
The innovative and modern work structures and schedules allow employees to respond quickly to the market transitions and alterations (Rodríguez-Sánchez et al., 2020) The Company faced strong criticism related to the treatment of peripheral workers as contractual employees and has not provided them with additional benefits. Despite a huge sum of 575 million dollars being invested by Amazon, the company still wants to maintain the contractual peripheral workforce system within the HRM functions. Therefore, the company is planning to support the gig workers by providing them with cost-free insurance and free access to various online courses. The company management is advised to understand the cultural, traditional, and food preferences before expansion and distribution in the Singapore market which can be achieved through proper utilization and training of the workforce and their response to various market demands (Rodríguez-Sánchez et al., 2020). Flexibility in HRM management can also be achieved by the company by the implementation of the flexible model firm approach of Atkinson.
The UK-based start-up company previously had some issues related to the claims of contractual workers as they demanded a pay package similar to the full-time employees of the organization and they also claimed flexibility in their work procedure. As per the gig economy, contractual workers are not subject to payment norms that are similar to regular full-time office-based employees. The lack of knowledge and expertise has significantly maintained the distinction between the core and peripheral employees of Deliveroo and other companies and this factor is directly related to the theoretical approach of HRM named Atkinson's flexible firm model. The psychological contract model is also applicable in the case study of Deliveroo as the company has changed and rectified the special provisions for the contractors by providing them free insurance and easy access to various online course materials for the knowledge enhancement and development of contractual or peripheral employees.
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