Uber has a lot of growing up on its agenda
Can companies change? Uber’s months of turmoil and scandal, capped by its steps last week to reform its cutthroat corporate culture, bring that question front and center.
The beleaguered ride-hailing company said Tuesday it will implement 47 sweeping recommendations from former U.S. Attorney General Eric Holder, whom it hired to investigate allegations of sexism, bullying, retaliation and other workplace issues.
Holder’s report acknowledged the catalyst: a blockbuster blog post from former engineer Susan Fowler in February detailing hostility toward women at Uber’s San Francisco headquarters — and her futile attempts to get managers to respond. Since then, Uber has been mired in other controversies: a trade-secrets lawsuit, a program to evade law enforcement, a video of its CEO berating a driver.
“Uber will change because they can,” said political strategist Bradley Tusk, an early adviser to and investor in the company, adding that it would behoove Uber to release quarterly reports on what steps it takes. “There’s nothing in the recommendations that’s impossible to do. They just have to put in the work.”
That work starts at the top, with CEO and co-founder Travis Kalanick yielding some power to whoever takes the new position of chief operating officer. That can’t happen in a substantive way until Kalanick returns from a leave to grieve his late mother and, as he said in a company-wide email, work on “Uber 2.0” and “Travis 2.0.”
That raises another question: What might a revamped Uber look like?
“Uber 2.0 should have checks and balances; have an HR function that really works for the best interest of the employees and company; realize that complaints need to get investigated and escalated,” said Brooke Schneider, a New York employment and litigation attorney.
“It won’t be the entrepreneurial cowboy culture that’s worked so well for them in the past,” said Evan Rawley, a professor of management at Columbia University. “It will be more bureaucratic, with more written procedures for things like compensation and promotion.”
While that might sacrifice some of the breakneck growth that’s turned Uber into a $69 billion powerhouse, “it’s about time for them to act like a regular business anyway,” Rawley said.
In fact, he said, the hedge funds that have invested in Uber and hold board seats hope the turmoil will force Kalanick to change some practices that have long rankled them, such as an aggressive price war with Lyft that causes Uber to hemorrhage cash. Uber said in April that it lost $2.8 billion last year on net revenue of $6.5 billion.
Some company critics — such as former employees and Fowler herself — saw the reforms as superficial. A few remedies, in fact, were literal window dressing, such as renaming the “War Room” the “Peace Room,” and jettisoning corporate principles like “principled confrontation.”
“Some of the recommendations were a joke,” said one former employee, who asked not to be named. “For an 8year-old company to need an outside company to say that alcohol and drugs should be prohibited during work hours? They should have known that already.”
Others were cautiously optimistic.
“The recommendations are good, but the question is how they will be implemented and propagated throughout the organization,” said Chris Messina, who left a developerrelations job at Uber early this year. He described its environment as “stark and stoic” in marked contrast to the “colorful and playful” workplace of Google, where he previously worked.
Uber’s structure is unusually decentralized with semiautonomous city teams, which might make it harder to spread change company-wide, Messina and others said.
“Uber has been arrogant for a long time,” said Ira Kalb, a marketing professor at the University of Southern California. “But a company can always make changes in its culture.”
In fact, he sees it taking the necessary steps to repair a tattered image: admitting the problem and apologizing; explaining how the scope is limited; and proposing a solution so it won’t happen again.
What impact has all the tumult had on Uber’s core constituents, its 40 million riders and 1.5 million drivers worldwide?
Even though consumers now see Uber in a more negative light, “most users of ridehailing services believe they’re all basically the same,” said Stephen Beck, managing partner of consulting firm CG42, which surveyed 1,500 Americans about their perceptions of Uber in the midst of the string of scandals. “The likelihood that they will switch is relatively low.”
Credit-card data show Uber continuing to enjoy robust year-over-year revenue growth, albeit slightly less strong in February and March at the height of the controversies. After all, experts said, the vast majority of Americans have never even used ridehailing apps, leaving a huge untapped market for both Uber and Lyft, even if some customers jump ship.
Drivers will stick with the company as long as it continues to provide them with passengers. “Uber drivers are not switching to Lyft ... since, for the most part, Uber’s product hasn’t been affected by any of this turmoil,” wrote Harry Campbell, a Los Angeles driver who runs the Rideshare Guy blog.
Jeffrey Sonnenfeld, a management professor and senior associate dean for leadership studies at Yale, said he felt Holder’s report fell short by ignoring many of Uber’s earlier controversies, such as its dodging of regulatory oversights and issues with driver compensation.
He’s concerned about the leadership vacuum with an array of top-level posts left vacant — chief operating officer, chief financial officer, general counsel, chief marketing officer — many due to a recent executive exodus. The company’s plan to have the 14 executives who report to Kalanick run Uber in the interim sounds unwieldy, he said.
He, like others, sees Uber reflecting Silicon Valley’s deeprooted problems of sexism, ageism and lack of diversity.
Underscoring just how pervasive those issues can be, an Uber board member made a joke about women talking too much at the very meeting Tuesday where Uber sought to reassure employees it would stamp out sexism. That board member, David Bonderman, apologized and resigned the same day.
More established companies “have worked to correct those problems by putting in systems and learning not to believe blindly in the religion of meritocracy,” Sonnenfeld said.
Uber’s controversies garnered it another distinction last week. It’s featured on the cover of Time magazine as exemplifying “a wake-up call for Silicon Valley.”
“It won’t be the entrepreneurial cowboy culture that’s worked so well for them in the past. It will be more bureaucratic, with more written procedures for things like compensation and promotion.” Evan Rawley, professor of management at Columbia University