Is an ethical pathway to a technology-driven future of work possible?
We had the opportunity to sit down with Zenjob Co-Founder and Managing Director Frederik Fahning to discuss platform dynamics in the temp work business, changes in the employment market, and challenges to scale across Europe.
Gig work is one of the most controversially debated aspects of the platform economy. The pandemic, which led to a stronger reliance on and therefore visibility of gig workers, has certainly amplified discussions around the social, legal, material and political factors that come with the job. As a digital temp work platform, Zenjob wants to stand for a more reliable environment, while also believing in a technology-driven future of work. Through this, Zenjob aims to meet the need for flexibility on both sides of their market, meaning companies as well as workers, which Zenjob calls talents.
Frederik Fahning is one of the Co-Founders and Managing Director of Zenjob – a German technology-driven temp work scale up. Fahning studied law and worked for Atlantic, a VC company, before co-founding Zenjob in 2015. HIIG researcher Tina Krell and Knowledge Transfer Coordinator Asal Dardan met up with him at the Zenjob headquarters in Berlin.
An interview with the German digital temp work platform Zenjob
Tina Krell: You operate a two-sided market. How do you define the two sides? Who are the service users, and who are the temp workers?
Frederik Fahning: Until April this year our talents on the B2C side were all students. This made sense for our product because they are digital natives, easy to adapt to a new product and good with a smartphone. The product was never made for students only, it depends more on what situation you are in your life. We don’t want to replace long term engagement or anything like that. We see that there’s an increasing demand for flexible work. On the B2B side, we started out with smaller companies. Now it’s a broad variety of, let’s say, mid-sized to large-sized companies in fields of retail, gastronomy and hospitality. They can be smaller start-ups as well, logistics companies, e-commerce, and so they are fairly broad.
TK: The work people find through you, is it entirely indifferent to their field of expertise?
FF: We always try to understand how we can ensure everything is technology-driven. So how much can we automate from the process behind it? That’s why we started with very standardised jobs, also in terms of the requirements. In tech, things need to be standardised so we can automate them, and we want to do it slowly. So yes, the majority of the jobs are still low to unskilled work, but we are constantly working on professionalizing it and adding higher-skilled jobs.
TK: So basically, when using your app, I can log on and see where I’m physically located. Then I see all the companies offering temp work in my current area. Is that how it works?
FF: It’s not explorative, we match. We asked ourselves in the beginning whether we want to have a marketplace where you choose what you do, or if we do it the other way around. To have an algorithm, which ensures that we know exactly what you did, what you would love to do, what you want to earn, when you can work, and so on. We have many hard and soft parameters, which then ensure that we provide the talents with a list of jobs that we believe they will like. If we offer too many jobs to a talent, then it just gets confusing. Nobody wants to see 30 different kinds of jobs.
“It’s going to be an employee-driven market. It got way more intense now in the last one and a half years to recruit people.”
TK: To my knowledge, it is not difficult to match, but to match well. How are you able to attract the right tech talent internally for the required jobs?
FF: That is one of the biggest challenges. To be honest, it does no longer only affect the product and engineering side but the entire company. That’s what we are getting mirrored by other companies, not just start-ups. It is incredibly difficult nowadays to recruit people.
TK: Why is it difficult?
FF: I think because it’s going to be an employee-driven market. It got way more intense now in the last one and a half years to recruit people. And we don’t know why, to be honest. Coming back to the problem, the engineering part, this was intense before, and this got even more intense now. And so we are in competition worldwide. We offer those two to three days at the office and three days at home, but we are not so much in favour of fully remote work. But we need to see if this is even possible for us to do or not because if other companies are offering it, then you’re already out of the game if you don’t. We recruit more or less worldwide. We have over 35-40 nations at Zenjob, and lots of different nations are also at the product engineering department.
AD: Can one work with Zenjob as a talent without ever getting in touch with anyone? When are the contact points and how do you vet companies you work with? How do you ensure that these people don’t get into bad working environments through you?
FF: Initially, we’ve always had talents come to an onboarding at the office. Right before Covid hit we turned it around to a remote onboarding process. We realised it doesn’t make that much sense anymore, especially from the talents’ point of view. So now we work with a questionnaire, and you need to enter your personal data and the data the tax authorities need. Then you get on board and can work if everything runs smoothly. On the company’s side, we as a temp business are obliged to control how the working environment is. That’s why we have the so-called “Arbeitsplatzbesichtigung” [workplace inspection]. To thoroughly make sure how the conditions are at the workplace. Over the years also the vetting of the companies was increased because we need to ensure intrinsically that the product makes sense, and that talents are happy, too.
“It’s not just about high volume to ensure it makes sense, but rather to look at the processes to understand where we can make operations efficient”
TK: You mentioned the change towards an employee-driven market. How do you ensure your talent pool always offers enough people to keep everything running? You can rely on historical data but there must still be high volatility?
FF: Yes, that is the magic question and the toughest part right now. For us, fulfilment rates by talents are a challenge, because there are not enough talents right now. But yes, we do have the historical data. We roughly know how it works and when we need more talents, but it also depends a lot on the acquired talents and how much they work. At times it does not matter how many new talents we need to acquire, but rather to understand how we can ensure that the talents are working regularly. And that again depends on our product, and, of course, on how much money they need and are looking for. There are a few different parameters we can play with to understand how we can ensure that there is a sufficient pool of talents. But it’s always a challenge.
TK: It also may affect your network effects, right? Is your model high volume, low margin?
FF: High volume, low margin, I wouldn’t say. The margins are not too low. And for us, it’s also not just about having a gigantic high volume to somehow ensure that this makes sense, but it’s rather to look at the processes to understand where we can make operations efficient without just needing to have this very high volume. I mean, we’re not profitable yet, but we can see on every level of the contribution margin what the impact is, and how to control it. So first is the B2B price, then there is the B2C talent, what we pay out, then there are talent-related costs and both payroll and so on. All of those different things we can control and we can keep it as a healthy P&L. So for us, it’s really about where to focus, but not that we need those high volumes of scalability massively to ensure that this model can have a return at some point.
TK: I wanted to ask about the competition. Are these regular temp agencies, or tech companies?
FF: There is a range, but there are really not that many. Why? Well, I think we believe it’s because it’s incredibly complicated. We could have done something much simpler in the beginning by being a recruiting-ish kind of thing where we ought to do some sort of matching. But we deliberately didn’t do this because we have those two sides and they were both saying the same thing: flexibility and not wanting to deal with anything. And so we went into this highly regulatory business. The federal agency came once per year for the first couple of years until we received an unlimited licence and they still come every three to five years. I think that is why you don’t really find that many start-ups globally doing what we are doing. They’re often differentiators, either they don’t have the same legal set up or they don’t have as much technology in place. But in Germany, I would say there’s no one doing exactly what we are doing.
“For us it is not about thinking every day, how can there be more profit? Because we are still in the phase of understanding how we can build the best product in the world.”
TK: How do you approach expansion then?
FF: It’s very difficult and that means harmonisation in Europe. Labour and social security law is a pain in the arse. When we try to understand which country makes sense to expand to, we have a legal point of view, financial point of view, commercial point of view and maybe even a bit of tech. We would like to always find the right balance between the commercial upside and the regulatory challenges – if you want. That’s how we decided to expand to the Netherlands.
But the biggest threat to startups like ours is that we are always talking about the European market and that we need to be in competition with the US and China. But we can’t. If you have a simpler business model than ours, then it might be a bit easier. But even then, it’s not the same. We are a European startup, but it’s not that we could expand easily like this. It costs time, it costs money, lawyers, tax advisers and people on the ground. So expansion is really something which is, I think, a huge challenge, especially if you have a regulatory heavy business model like ours.
TK: It sounds like a tension; on the one hand, you’re building kind of a moat around your business because you’re going into this highly regulated market. So it’s not easily replicable for other players out there. At the same time, it also prohibits you from expanding rapidly, which might be easier in a more unregulated scenario.
FF: If you completely forget about politics and look at employment just from an economic point of view: You want to employ someone in Europe, but the company is in Germany, that person works in Spain. That is already quite a challenge, especially if they work for more than four weeks, then you already have the social conditions. Then you want to say that person is not moving within the EU somewhere else to work for a bit. If we think about working from home, remote work, all of those things now with Covid, it’s basically just from a regulatory point of view, not possible. And we are talking about something, which is relevant to all companies. It’s not just a Zenjob specific thing, it is about the internal employees, how and where they can work. So I think maybe in some regards, the EU made some steps forward, but there is still so much to achieve.
AD: If you look at your business from a European angle, have you been facing things where you thought, okay, I could do this, but I’m not because I find it unethical or less sustainable?
FF: I think we can always make small decisions by basically saying, ok, that is a company we could still make some profit with, but because of the stories we learnt from X, Y and Z, we decided not to collaborate. That is more in small steps, where we can see that we can do something. And you know, one of our values is honesty. I don’t want to tell you now that it’s not about also making this company and this business profitable and ultimately very profitable. But for us it is not about thinking every day, how can there be more profit? Because we are still in the phase of understanding how we can build the best product.
“They believe we destroy the jobs because they would say there is one job and you cut it in parts and that’s unfair.”
AD: We are working on a strategic guide for responsible platform business. Is self-regulation important to you?
FF: Very important. We believe we are very close to our talents. We have a really amazing talent care team as well. So, there is already quite a good mechanism in place that we understand what’s good and what’s not good. But of course, you never know, right? That’s why the collaboration with the Fair Work Foundation is also so important to us. That’s why we also think, why not have this normative for platforms and to have some sort of a control mechanism? Because again, we already get this through the federal agency, but on top of that, if you have something like that for every platform, why not? Right now in those conversations, especially when we talkto political stakeholders, they can’t believe that people are really looking for flexible work. They just see it as exploitation that destroys Gen Z.
AD: Interesting. So they see it as exploitation?
FF: Yes, most of them. They believe we destroy jobs because they would say there is one job and you cut it in parts and that’s unfair. What we actually don’t really do because those kinds of jobs are not relevant at all. Also Gen Z, on the other hand, is diverse. Some are really looking for stability and others are more easy-going. The popularity of civil service jobs, I believe, is a bit higher among them than among millennials. But again, this showcases that there is a demand for more flexibility and deciding when to do what among this generation. I think this needs to be understood from a regulatory point of view, it’s really coming but it needs to be two-sided and that’s why we are talking about it. Then it’s fair. Then you see it as a relief, then you like it, then you enjoy it.
Key Takeaways (tl;dr)
The Covid pandemic accelerated the push towards an employee-driven market. To stay competitive, platform companies need to adjust their incentive structures, in their internal hiring as well as on the gig market side.
Not all digital platforms need to scale to high volume in order for their business model to make sense. Zenjob’s strategic reasoning is that getting operational efficiencies and processes right will eventually lead to profitability.
Purposely entering a highly regulated market ensures less competition, as technical solutions need to be tailor-made for the specific conditions. Yet, scaling through expansion – even within Europe alone – is a major challenge.
This post represents the view of the author and does not necessarily represent the view of the institute itself. For more information about the topics of these articles and associated research projects, please contact firstname.lastname@example.org.
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