Its other cri­sis: Fix­ing it all with no one in the driver’s seat

The Washington Post Sunday - - BUSINESS - ON LEAD­ER­SHIP BY JENA MC­GRE­GOR

Uber founder and chief ex­ec­u­tive Travis Kalan­ick’s decision to take a leave of ab­sence from the ride-hail­ing firm after the death of his mother in a boat­ing ac­ci­dent and amid a vast over­haul of the com­pany’s hard-driv­ing cul­ture is, to say the least, un­usual. Man­age­ment ex­perts have been hard­pressed to think of any com­pa­nies of Uber’s size whose CEOs had tem­po­rar­ily stepped aside for rea­sons other than med­i­cal con­di­tions.

But per­haps even more un­usual is what Kalan­ick is leav­ing be­hind: a shell of a man­age­ment team that, as of Thurs­day morn­ing, had at least six va­cant se­nior

jobs, as well as no clear ex­ec­u­tive in charge at a com­pany where the CEO has long held a con­sol­i­dated level of power.

The board did not im­me­di­ately name an in­terim chief ex­ec­u­tive. There is no nat­u­ral sec­ond-in­com­mand who could take the reins. In­stead, the em­bat­tled com­pany said it will rely on a team of 12 ex­ec­u­tives to carry out one of the most chal­leng­ing makeovers in busi­ness to­day, man­ag­ing sprawl­ing crises with no clear leader at the helm.

“The sim­ple an­swer is, I’ve never seen this be­fore,” said David Yoffie, a pro­fes­sor at Har­vard Busi­ness School who is a board mem­ber at com­pa­nies that in­clude In­tel and HTC.

Typ­i­cally, he said, there’s an ob­vi­ous ex­ec­u­tive who can step in — a chief op­er­at­ing of­fi­cer, pres­i­dent or chief fi­nan­cial of­fi­cer — or the com­pany will name a mem­ber of the board with plenty of ex­ec­u­tive ex­pe­ri­ence to be in charge on a tem­po­rary ba­sis. But Uber has no COO — it has been search­ing for one since March. Its pres­i­dent left the same month. And it has va­can­cies in other key jobs, in­clud­ing CFO, gen­eral coun­sel, chief mar­ket­ing of­fi­cer, se­nior vice pres­i­dent of engi­neer­ing and chief di­ver­sity of­fi­cer.

“This is es­pe­cially prob­lem­atic for a com­pany that’s in cri­sis. It’s hard to see how any fun­da­men­tal decision can be made,” Yoffie said. “One would hope the board will reeval­u­ate what the ap­pro­pri­ate lead­er­ship struc­ture is, even on an in­terim ba­sis.”

The chal­lenges are ex­tra­or­di­nary. A blog post writ­ten by a former Uber en­gi­neer in Fe­bru­ary al­leged a sex­ist work­place with dys­func­tional man­age­ment over­sight, fur­ther cat­a­pult­ing the com­pany’s ag­gres­sive cul­ture into the spot­light. Soon after, a video sur­faced of Kalan­ick be­rat­ing one of Uber’s driv­ers, prompt­ing Kalan­ick to pub­licly ad­mit, “I need lead­er­ship help.” Former U.S. at­tor­ney gen­eral Eric H. Holder Jr. and the law firm Cov­ing­ton & Burl­ing were brought in to do a com­pre­hen­sive re­view and made 47 rec­om­men­da­tions to over­haul Uber’s cul­ture — many of them con­sist­ing of ba­sic man­age­ment tac­tics — all of which the com­pany’s board has said it will adopt.

But that’s just the start of the com­pany’s rough year. Ex­ec­u­tives have been head­ing for the ex­its, a fed­eral probe has been launched into Uber’s use of a se­cret soft­ware pro­gram, and the com­pany has been en­gaged in a le­gal bat­tle with the self-driv­ing car unit of Google’s par­ent com­pany, Al­pha­bet, over al­leged theft of in­tel­lec­tual prop­erty. Cap­ping it all was the sud­den res­ig­na­tion Tues­day of bil­lion­aire board mem­ber David Bon­der­man, who cracked a joke about how much women talk in the board­room at an Uber event de­signed to spot­light the changes the com­pany would be in­sti­tut­ing to make its cul­ture more in­clu­sive.

“They’re go­ing to go nuts if they don’t have a fi­nal ar­biter,” said Michael Useem, a pro­fes­sor at the Whar­ton School at the Univer­sity of Penn­syl­va­nia and di­rec­tor of the school’s Cen­ter for Lead­er­ship and Change Man­age­ment. “It’s like Man­age­ment 101 … Noth­ing runs without one per­son at the top. Na­ture ab­hors a power vac­uum.”

Asked about the lack of an in­terim leader, an Uber spokesman said in a state­ment that “we have a strong lead­er­ship team in­clud­ing veter­ans who helped make the busi­ness what it is to­day and new tal­ent who are help­ing to drive the changes we’re com­mit­ted to mak­ing. The en­tire team is ex­cited by the op­por­tu­ni­ties ahead of us.”

Rec­om­men­da­tions from the Holder re­port that the board has said it will adopt in­clude changes at the board level, such as ad­ding in­de­pen­dent mem­bers and an in­de­pen­dent chair, as well as re­al­lo­cat­ing some of Kalan­ick’s re­spon­si­bil­i­ties and look­ing for a COO with ex­pe­ri­ence re­hab­bing cor­po­rate cul­tures and a back­ground in di­ver­sity and in­clu­sion is­sues. Twelve ex­ec­u­tives will be run­ning the com­pany in Kalan­ick’s ab­sence — three who run the com­pany’s busi­ness in global re­gions; three prod­uct and engi­neer­ing lead­ers; four of­fi­cials on its le­gal, safety, pol­icy and com­mu­ni­ca­tions team; its now high-pro­file hu­man re­sources chief, former Google ex­ec­u­tive Liane Hornsey; and Frances Frei, a Har­vard Busi­ness School pro­fes­sor it has hired to be “se­nior vice pres­i­dent of lead­er­ship and strat­egy.”

In a re­cent in­ter­view with The Wash­ing­ton Post, Frei said of the COO search that “the can­di­dates that we are con­sid­er­ing and that want to be con­sid­ered for this role are vast.” And in re­sponse to ques­tions about the com­pany’s lead­er­ship vac­uum, Frei in­di­cated the many open seats could have a hid­den up­side. “I’m not sure I would en­tirely choose it, but we have an op­por­tu­nity that’s rare. We can bring in a set of peo­ple as op­posed to in­di­vid­u­als,” she said, peo­ple hand-picked as a team that can work to­gether well.

Still, man­age­ment ex­perts said, the mas­sive chal­lenges that lie ahead for the com­pany will be even more dif­fi­cult be­cause of the lack of a clear point per­son at the top. “This is a very odd sit­u­a­tion, with 12 peo­ple in a com­mit­tee run­ning a com­pany — that to me is a recipe for chaos,” said Peter Crist, chair­man of the ex­ec­u­tive search firm Crist Kolder As­so­ciates.

Bill Ge­orge, a mem­ber of the board at Gold­man Sachs who was a di­rec­tor when CEO Lloyd Blank­fein was un­der­go­ing treat­ment for can­cer, said that given the cir­cum­stances, it was a good idea for Kalan­ick to take a leave of ab­sence. “But the big sur­prise to me is they didn’t ap­point an in­terim CEO,” said Ge­orge, the former chief ex­ec­u­tive of Medtronic. “The idea that the team’s go­ing to han­dle it and ‘please call me on strate­gic sit­u­a­tions’ — if that’s re­ally what they’re go­ing to do, that’s not a good idea.”

In­deed, in a let­ter to em­ploy­ees Tues­day, Kalan­ick said he would be hand­ing man­age­ment to his team and be ac­ces­si­ble for high­level de­ci­sions. “Dur­ing this in­terim pe­riod, the lead­er­ship team, my di­rects, will be run­ning the com­pany,” he wrote. “I will be avail­able as needed for the most strate­gic de­ci­sions, but I will be em­pow­er­ing them to be bold and de­ci­sive in order to move the com­pany for­ward swiftly.”

The lack of clar­ity at the top could also make re­cruit­ing more dif­fi­cult, ex­ec­u­tive re­cruiters and man­age­ment ad­vis­ers said. Crist fre­quently sees top ex­ec­u­tives hes­i­tate to take key jobs even in sit­u­a­tions where a chief ex­ec­u­tive is near­ing re­tire­ment age and it is opaque who will lead the com­pany sev­eral years in the fu­ture. That dis­cus­sion could be even harder, he said, at a com­pany where the CEO has taken a leave of ab­sence and there is no in­terim named in his place. “Re­ally high-level, smart peo­ple don’t like risk,” Crist said.

Ge­orge agreed. “That’s a chal­leng­ing po­si­tion to re­cruit for,” he said. “You’re es­sen­tially ask­ing some­one to run the com­pany without the power.” The ope­nended na­ture of Kalan­ick’s leave could make it even more dif­fi­cult.

One thing work­ing in Uber’s fa­vor, said Yoffie, is that the com­pany’s busi­ness is grow­ing quickly and re­mains de­cen­tral­ized by re­gion. “So the ac­tual op­er­a­tion of the day-to-day busi­ness prob­a­bly can run more or less in­de­pen­dently,” he said. But even if there’s lit­tle dis­rup­tion in the ser­vice cus­tomers ex­pe­ri­ence, he said, the chal­lenges the com­pany faces will still be dif­fi­cult to solve without a clear leader at the helm. “Hugely prob­lem­atic would be the best way to de­scribe it.”

What­ever hap­pens at the top of Uber, there’s lit­tle ques­tion it will be watched and stud­ied very closely. “This is go­ing to be a clas­sic busi­ness school case study, there’s no ques­tion,” said Syd­ney Finkel­stein, a pro­fes­sor at Dart­mouth Univer­sity’s Tuck School of Busi­ness. “The only other or­ga­ni­za­tion I can think of that has that many un­filled po­si­tions at the top is the Trump ad­min­is­tra­tion.”

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