Uber leadership crisis puts Travis Kalanick in hot seat
SAN FRANCISCO — As far as ride-hailing companies go, it’s safe to say that the U in Uber stands for ubiquitous.
Over the past eight years, the startup has barged its way into more than 600 cities in dozens of countries, notching a valuation that approaches $69 billion.
But a lengthening list of events that have painted the company's corporate culture as sexist, aggressive and morally sketchy also suggest the U may stand for untenable, at least as far as its current management goes.
Uber's board on Sunday met and voted to approve all the recommendations from a four-month internal investigation into corporate culture and governance by former U.S. Attorney General Eric Holder and Covington & Burling attorney Tammy Albarrán that's slated to be released to employees Tuesday, according to a representative for the board who wasn't authorized to speak publicly.
Uber's board, which includes CEO Travis Kalanick, is considering a leave of absence for Kalanick, according to the Wall Street Journal. Also, one of Kalanick's top lieutenants and a key figure in some of Uber's grimmer moments, Emil Michael, may resign Monday, the newspaper said, fast on the heels of 20 firings last week. Uber declined to comment.
Big changes at the top are essential during a period of crisis, say chroniclers of the tech industry's great successes and flame-outs. They could help determine whether Uber becomes the next Facebook, dominant and immovable, or another MySpace, a forgotten firework sabotaged by mismanagement miscues.
“Roughly 85% of breakdowns of companies that seem to have it all were because of internal factors,” says Chris Zook, a Bain & Company partner and co-author with James Allen of The Founder’s Mentality: How to Overcome the Predictable Crises of Growth.
Uber on its heels since February
The company's current maelstrom started with a February blog post by former engineer Susan Fowler, who described an environment that ignored complaints of harassment when it came to favored employees and condoned a dog-eat-dog style of management that led to organizational chaos.
The bad news did not end there. The widow of one Uber engineer has sued the company, alleging that workplace stress was to blame for his suicide last summer. Federal investigators are looking into whether criminal charges should be brought after the company created technology to deceive regulators with a false app.
Another executive close to Kalanick, the former head of its Asia Pacific operations, was fired after obtaining and sharing medical records on the Indian rape victim of an Uber driver — but only after news outlet Recode raised attention to his activity. The woman's U.S. lawyer told USA TODAY that legal actions may follow.
Kalanick, who has been away since his mother's sudden death from a May 26 boating accident, has been central to it all. He gets much of the credit for elbowing Uber's way past opponents, from rivals like Lyft to taxi unions and reluctant city regulators, a globally recognized face of a Silicon Valley success story.
Uber went global almost virally, doubling its staff to 10,000 in 2016 alone. Investors threw money at the venture, a sum that exceeds $15 billion to date.
But Kalanick now also gets the blame for a toxic culture that's been leaked out in a series of brand-damaging headlines.
“It’s time for (Kalanick) to get back to basics, go with a big mea culpa, travel to all his offices, meet with drivers on the front line, and give the reins to someone who has really scaled a company,” says Zook. “A founder can still have value. But he has to purge the culture or lose the confidence of his staff. This is a major warning. A business can unravel when the human fabric unravels.”
A leadership vacuum and exodus
Kalanick was already in apology mode after the Fowler post. Kalanick appeared teary at company meetings, vowing to do better. Then, after a video surfaced in which he was shown berating an Uber driver who was critical of recent fare changes, he admitted he needed to grow up and get leadership help.
The company kicked off an ongoing hunt for a chief operating officer, and engaged Holder's law firm to embark on an investigation of Uber's culture and governance.
But while it's made some big hires, including board adviser Frances Frei, a Harvard University expert on corporate cultural transformations, and hired Apple marketing exec Bozoma Saint John to revamp Uber's tarnished image, the COO post has gone unfilled. Other top executives have left, including president Jeff Jones, considered an executive more in touch with Uber drivers. The onetime Target exec said he was leaving over differences in “beliefs and approach to leadership.” The company also is missing a CFO.
And reports that further cement the company's reputation for a frat-house culture haven't let up. As the week ended, Recode published a 2013 email to employees from Kalanick in which he reminded employees attending a Miami company party to make sure sexual partners were consenting and weren't part of their own chain of command. That meant, he lamented, he would go celibate on that trip.
“A big reputational hit just opens the door for a lot of bad things to happen,” says Bruce Blythe, founder of risk management advisory firm R3 Continuum and the author of Blindsided: A Manager’s Guide to Crisis Leadership.
Blythe says he counsels companies to have management crisis and CEO succession plans locked in place well before anything bad happens.
“It’s hard to start making those decisions in the heat of the battle,” he says. “Their management doesn’t seem as organized as it should be.”
Can Kalanick still lead Uber?
Unresolved organizational problems could also indefinitely put off an initial public offering, which is what many longtime Uber employees are banking on as a reward for putting up with long hours and often a thankless management.
In an interview with USA TODAY last month, new Uber human resources chief Liane Hornsey said that the top concerns she heard from employees after 200 listening sessions was not sexual harassment but morale and money.
If Kalanick steps aside, even temporarily, that would represent an about-face from recurring intimations by the board — which is controlled by Kalanick along with cofounder Garrett Camp and early employee Ryan Graves, and includes investors such as Bill Gurley and David Bonderman, and pro-Kalanick independent board member Arianna Huffington — that their CEO is still integral to the company's future success.
But if Kalanick stays on, some suggest that the man who helped vault Uber into startup history needs to lead a radically revamped leadership team. That could mean the exit of one of his top business execs, Michael. His past includes comments that Uber might hire opposition researchers to dig up dirt on reporters it did not like (Michael later apologized), and a trip to a South Korean karaoke bar that raised a human resources complaint by a female Uber staffer.
“If there’s one constant story in the history of Silicon Valley it’s the occasional inability of founders to grow as quickly as the demands of the company,” says longtime tech scene watcher and futurist Paul Saffo, who adds he's not an Uber user. “Travis seems chastened,” says Saffo. “One has to believe in redemption.”
Former Intel employee Robert Siegel, who now teaches management at Stanford University’s Graduate School of Business, offers a two-word answer when asked if Kalanick could execute a personal turnaround: Bill Gates.
“Gates was a famously horrific competitor, he was arrogant, cocky and dismissive," says Siegel, noting that the executive later tempered his tone, brought in executive help and went on "to become the greatest philanthropist on the planet. So yes, Travis has the ability to prove to the world that he can still run Uber at this scale. Or not. It’s up to him.”
Follow USA TODAY tech reporter Marco della Cava on Twitter.