The Washington Post Sunday

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

- 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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