Three Lessons from the Uber Mess

Yesterday, we learned that venture capital investors forced the resignation of Uber CEO Travis Kalanick.  The company has undergone a tumultuous year, including a massive sexual harassment scandal as well as accusations about stolen files from Google.  What can we learn from the challenges that the company has faced?  There are many lessons; here are three big ones:

1.  We have to be very, very cautious about situations in which investors place seemingly blind faith in a charismatic, successful CEO who is succeeding by challenging conventional wisdom and "breaking all the rules."  Where was the Board when clear warning signs had emerged about improper behavior quite some time ago?

2.  Startups cannot simply ignore human resources rules, policies, and procedures.  They matter.  You have to have guidelines for employee conduct.  There's a point where you stifle people with too much bureaucracy.  However, Uber seems to have gone too far in the other direction.

3.  Culture eats strategy for breakfast, lunch, and dinner.  Uber might have an amazing strategy that has catapulted it to remarkable success in a short period of time.  However, a rotten culture has taken down its CEO and many other top executives, caused lost market share to Lyft, and could be the downfall of the firm.  You have get culture right.   Values matter more than strategy.

Can Uber Recover?

By now, everyone has read about the serious problems at Uber.  On February 19, former Uber engineer Susan Fowler published a blog post in which she described serious transgressions by managers at the firm, including sexual harassment.  Soon, newspaper accounts documented a culture that appeared to be out of control.   CEO Travis Kalanick has tried to address the situation, though his early moves have been met with criticism.  He appointed a panel to investigate the situation, but people have objected by noting that all three members are essentially "insiders" at the firm.  Kalanick himself has been criticized for comments in the past that have contributed to the dysfunctional culture.   

Can Uber recover from this fiasco?  Will there be lasting damage?  I see several potential long term negative consequences for Uber.  First, Uber will have a challenging time attracting top talent moving forward, particularly highly successful female engineers and managers.   Why would they wish to work for a firm with this reputation?  Talent acquisition and retention will be a problem for Uber, no matter the promise of financial rewards that they may offer.  Second, investors may begin to scrutinize Uber more closely.  Will they tolerate the huge losses and be as patient as they have been while Uber forsakes profits for aggressive growth?  Third, will corporate governance change?  Will the Board members begin to recognize their own vulnerability here, and will they start asking tougher questions?  Management could face a very different environment in future Board meetings.  

How can Uber recover?  They have to address multiple issues very quickly.  First, they have to insure that the outside review truly is objective.  Perception is reality.  If people perceive the current appointees as insiders who cannot be objective, it will be difficult to persuade people that the conclusions of the review are valid.  Second, they must confront and remove employees who engaged in unethical or even illegal behavior immediately.  Now is not the time for second and third chances.  People have to be held accountable.  Third, Uber must address how it evaluates and rewards employees.  Excusing the inappropriate behavior of brilliant jerks must end.  People must be evaluated and rewarded not simply on the results they achieve, but how they go about achieving them.  Fourth, Kalanick must address his own behavior and past comments.  He has to acknowledge his own culpability in molding and shaping this dysfunctional culture.  Moreover, he has to be very transparent as the review is conducted and changes are made.   Next, the company must address various informal rituals (the push-ups, for example) that have evolved over the years at the firm.  Are these rituals productive?  Should they be stopped? What new rituals should emerge?  Finally, Uber has to redefine the core values for which it stands.  The company is known for its 14 cultural values.  The company has to take a hard look at those values.  Are they the right values?  Have the current values enabled some unintended, but dangerous, behaviors and attitudes?   The company needs to think hard about the message that each value sends... and recognize the ways in which it has enabled bad behavior on the part of many managers. 

Who Drives for Uber and Why?

Jonathan Hall and Alan Krueger have published a new National Bureau of Economic Research working paper about Uber.  They explore the backgrounds and motivations of Uber drivers.   Many people have been critical of Uber, arguing that it is wrong for Uber not to treat their drivers as employees (they treat them as independent contractors).  Others have been debating the impact of the so-called "gig economy" - does it help or hurt the average worker?  For these and other reasons, the scholars found it interesting to explore survey data from 2014-2015 about Uber drivers.  The findings are fascinating.  Here are selected excerpts from the paper.  You can read more here.

Uber's driver-partners are highly educated. Nearly half of Uber's driver-partners (48 percent) have a college degree or higher, considerably greater than the corresponding percentage for taxi drivers and chauffeurs (18 percent), and above that for the workforce as a whole as well (41 percent).

In addition, most driver-partners do not appear to turn to Uber out of desperation or because they face an absence of other opportunities in the job market—only eight percent were unemployed just before they started working on the Uber platform—but rather because the nature of the work, the flexibility, and the compensation appeals to them compared with other available options.

Around 80 percent of driver-partners reported that they were working full- or part-time hours just before they started driving on the Uber platform. Only eight percent of driverpartners in 2014 (and 10 percent in 2015) said they were unemployed just prior to partnering with Uber. This low percentage is notable given that, for the economy overall, about 25 percent of new hires came from unemployment and 70 percent came from nonemployment in 2014 and 2015.13 The large share of drivers who partnered with Uber while they had another job suggests the role that Uber plays in supplementing individuals’ income from other sources.

In 2015, 52 percent of driver-partners worked full-time on another job, 14 percent of driver-partners had a part-time job apart from partnering with Uber, and 33 percent of driver-partners had no other job.

Nearly half of driver-partners view income earned on the Uber platform as a supplement to their income but not a significant source (48 percent).

Jimmy Kimmel on Uber's New Late Fee

Jimmy Kimmel, the Uber Driver

Uber has to love this free publicity.   Jimmy Kimmel became an Uber driver for one afternoon.  Check it out!

On-Demand Ice Cream Trucks?

Please don't tell my kids about this service!