A model for success.

Photographer: Diego Cervo/Getty Images

Happiness Can Be an On-Demand App

Katie Benner is a Bloomberg View columnist who writes about technology, innovation, and the cult and culture of Silicon Valley. She lives in San Francisco.
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I’ve been to two big gatherings of on-demand workers -- the service-providers available through the apps of companies such as Uber, Lyft, TaskRabbit and Homejoy.

At the first meeting, last spring, drivers assembled in San Francisco to protest their treatment by Uber. They said the ride-hailing company was exploiting them. Uber staff members struggled to appease the disgruntled contractors, and the conversations were heated and tense.

I attended a very different kind of session this winter at the headquarters of Managed by Q, a New York startup that matches workers with companies that need office cleaning.

These workers, called “operators” mingled with company founders, executives, engineers and sales staff at one of Q’s monthly operator assemblies. The conversations were loud at times, punctuated by hellos, hugs and high fives. They had gathered to express their concerns and problems and learn more about the company’s growth. Several operators told me they loved Q as well as the businesses they cleaned, which they referred to as their clients.

The tension at Uber and other big on-demand companies is the norm. The scene I witnessed at Q is an anomaly. What sets Q apart is that its operators are full-fledged employees who get benefits, including health care.

Most other on-demand startups regard their workers as contractors who aren’t necessarily eligible for the minimum wage, benefits or compensation for on-the-job injuries and other claims.

Contract workers have sued Uber, Lyft, Homejoy, Postmates and Instacart to be recognized as employees. You are unlikely to find them spending afternoons fraternizing at headquarters.

Q’s model is a direct response to many of the questions hanging over the freelance economy, which is growing by leaps and bounds thanks to on-demand service apps. For the most part, these startups want a steady, stable workforce, but don’t necessarily want to pay the cost. Can you create loyalty among your contractors without treating them like employees? Can you offer a consistently high-quality experience with a workforce that is temporary? How important are loyalty and consistency as companies expand?

Uber, for example, has reportedly used drivers that have assaulted and harassed passengers. The chances of getting a dangerous Uber driver are still vanishingly small. And that tiny risk probably doesn’t matter to an executive rushing to the airport. But it may matter a lot to people who think about using the app to pick up unaccompanied children or elderly relatives.

Other on-demand startups, such as the butler app Alfred and the food delivery app Munchery, are also treating employees as workers, not contractors. Hunter Walk, a seed investor in Q, believes that more on-demand companies will start to think about labor that way -- even if they don’t offer full-time jobs -- for two big reasons.

First, employment laws could change to account for the increase in companies that depend on contract workers and there will be a push to create a new worker category that is a hybrid of traditional full-time employment and contract labor. No one is sure what that might look like, but it could include some combination of benefits and insurance for people who work the equivalent of a full-time workweek.

Second, when labor markets are competitive -- which is increasingly the case in the on-demand sector -- workers will take company culture into account. To attract the best talent, companies will need to show they value drivers, handymen and housekeepers in the same way as, say, tech workers who write code.

“It will be a harder sell to create an environment where companies coddle tech talent and treat everyone else poorly,” Walk said.

Q has found a way to overturn the industry standard of turning workers into a cheap commodity: It offsets the lower margins on labor costs through the sale of higher-margin products and amenities.

The company charges $25 an hour for cleaning, with a four-hour minimum. Operator wages start at $12.50 an hour, plus benefits, with an opportunity for a performance-based raise every six months.

But Q’s operators do far more than just clean. They also deliver and manage a package of goods and services, just like the fictional Q in the James Bond movies.

Customers can buy Q’s cleaning supplies at a starting rate of $50 a month, and they can also purchase basics such as toilet paper and hand soap. The operator orders items when they run low and puts them away. They keep notes and take care of special requests. Q can also supply maintenance people when repairs are needed.

Over the past year, Q's clientele has grown to more than 200 from 15. Other startups, including Kickstarter, Oscar Health and Uber, account for 40 percent of the customer base. The one-and-a-half-year old company has raised more than $2.4 million in venture funding, and it will expand to Chicago this spring.

Q’s co-founders, Dan Teran and Saman Rahmanian, said the only way to provide consistently great service was to  have loyal, committed operators -- hence the operator assemblies, higher wages and the benefits.

They also say that treating employees with respect is the right thing to do, and you get the sense that they really mean it. All executives, marketers and engineers have to deep-clean an office to understand the core product and the lives of the operators. Q also allows the best operators to become supervisors or work their way up to other more lucrative jobs.

Semil Shah, an investor in Q, agrees that happy, successful operators are the best way to maintain the company's reputation and provide a superior experience at every office.

“When you order groceries with Instacart, a person comes to door, but doesn’t cross into your home,” Shah said. “Operators cross the threshold between public and private space, so there’s a greater need for the company to create a truly consistent experience no matter which operator cleans an office.”

Shah and Walk are right: Q is onto something big. Even if it doesn't become an Uber-size business, it is now becoming the standard-bearer for a new type of on-demand service company that values all of its workers. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the editor on this story:
Max Berley at mberley@bloomberg.net