Can Uber really change?

SAN FRANCISCO — Uber now has 47 detailed recommendations from an exhaustive internal investigation on how to overhaul its company culture, from making its board more independent to keeping records of human resources complaints.

Now comes the hard part.

Most change management experts agree that a corporate make-over is impossible without an impassioned chief executive who lives and breathes the values the company wants to embody.

But Uber must implement sweeping changes with a CEO, Travis Kalanick, who not only is taking an indefinite leave of absence, but also embodied the company’s sharp-elbowed ethos.

Adding to that big hurdle, Uber now will be run by a leadership team that is an alphabet soup of 14 different corporate titles — from U.S. general manager Rachel Holt to CTO Thuan Pham — who occasionally will take direction from their boss. Kalanick said Monday he would step back from day-to-day duties to grieve his recently deceased mother, and “to reflect, to work on myself, and to focus on building out a world-class leadership team.”

That team includes many chairs that are collecting dust.

Those include the roles of president (former Target exec Jeff Jones quit in March, citing values differences), chief financial officer (that position has been vacant for two years), chief operating officer (Kalanick has been searching since March), and vice president of engineering (Amit Singhal resigned in February after failing to disclose a sexual harassment complaint against him during his time at Google).

A porous and multi-headed leadership team that reports to a CEO on leave does not sound like a recipe for a credible cultural about-face, especially for a company that may have mere months to enact change or risk market share losses, says Micah Alpern, who consults on culture strategy for A.T. Kearney.

“You can change your company’s policies, but without new leadership your culture won’t change because the policies and the people won’t be aligned,” says Alpern. Uber has 100 days to prove it’s getting back on track, in his view.

“At the very least, they need a new COO, a CFO and some sort of acting CEO, fast,” he says.

 

An Uber spokesperson declined to comment for this report.

Once employees believe the shift is real, the invaluable ripple effect should help the ride-hailing company attract top talent and lure loyal consumers, both of which remain in jeopardy following an explosive February blog post by former Uber engineer Susan Fowler that described sexual harassment by a boss that was ignored by human resources because the manager was considered too valuable.

A number of surveys show that rival Lyft has made strong gains in the wake of Uber’s woes. A review of credit card receipts by TXN Solutions for USA TODAY shows that Uber’s share of rides has dropped from 90% to 75% in the past two years, with a 3 percentage point  drop in the past few months alone.

The internal investigation Uber initiated in February, which was led by former U.S. Attorney General Eric Holder and whose findings were released Tuesday, also suggests that Uber curtail Kalanick’s power as CEO, hold managers more accountable for employee morale, and elevate the importance of having a diverse workforce.

‘The basic price of entry’

For a global company valued at around $70 billion, those baseline recommendations are akin to making sure the car you’re buying has tires, says Justin Wasserman, managing director of Kotter International, a strategic execution and change management firm.

“All (the Holder report) recommendations do is make them come up to par with any reputable company. They’re the basic price of entry,” says Wasserman. “They make a company good, but they don’t move a company from good to great.”

For Uber, “they almost have to create a whole new face of leadership. If you want to even assume that Kalanick can change, that’s something that will happen over years, not months.”

Uber may not have years to play with. Although the company has raised around $15 billion and has 12,000 employees who are likely to stick around for a lucrative and inevitable initial public offering, ride hailing’s business model depends heavily on a near monopoly that would allow the dominant player to eventually raise prices from their current subsidized rate.

 

Lyft could continue to make gains while Uber tries to fix itself. “It’s really a matter of how much can Lyft seize the opportunity,” Wasserman says. The company managed to add 100 new cities — for a total of 300 — in the first quarter when it had initially expected to do so by the end of 2017.

Lyft’s advantage could grow if Uber fails to attract new, diverse talent. One key Holder recommendation was the hiring of a CEO-facing chief diversity officer, which may not be the company’s current diversity and inclusion chief, Bernard Coleman III.

But that title won’t guarantee Uber’s ability to shed its image as a largely white, male bastion of cut-throat days and frat-like nights, says Fern Mandelbaum, whose Vista Venture Partners firm invests in companies with a commitment to inclusivity.

“Women and underrepresented minorities are not going to go work at Uber until the company can demonstrate they have an inclusive culture with a sense of belonging,” says Mandelbaum, who also teaches entrepreneurship at Stanford University. “This isn’t just about having a chief diversity officer on board. It’s about have a CEO who breathes inclusion. Ideally, the CDO and CEO are one and the same.”

 

One promising sign, she says, was director David Bonderman’s immediate resignation Tuesday evening from the Uber board after making a sexist remark. The TPG Capital Chairman had made a comment during Uber’s all-hands meeting that day, interrupting board member Arianna Huffington, who was touting having more women on the board, to say that more women meant “more talking.”

Another Holder suggestion was to have Uber implement the NFL’s Rooney Rule to attract more women and minorities, a practice that requires any job search to include candidates from those groups. In the NFL that has led to more African-American coaches.

‘This isn’t rocket science’

Bonnie Crater, CEO of tech marketing company Full Circle Insights, instituted the Rooney Rule from her company’s inception and says such measures need to be ingrained in a company’s DNA from the outset.

“These recommendations they got, they’re table stakes, they’re not something you do and go brag about,” she says. “Sexual harassment and other such issues should just be subject to immediate termination. This isn’t rocket science. But you have to mean it.”

A likely lynchpin in Uber’s transformation will be Frances Frei, a Harvard Business School expert on corporate culture who went from adviser to Uber employee last week.

“First thing to know about Frances is that she’s a straight shooter,” says Max Eliscu, founder of invoicing and payments company Viewpost, on whose board Frei sits. “With guidance and tough love from Frances, the Uber team will make tough choices throughout the organization, and they’ll do it with new understanding that each of those choices will be measured against its impact on customer experience.”

Helping focus on that consumer-facing effort will be another recent hire, former Apple exec Bozoma Saint John, who joins the company as chief branding officer.

One big Uber weak point remains its relationship with drivers, which Target veteran Jones had been hired explicitly to overhaul, without success. Drivers have protested pay and pursued lawsuits against the company over their status as independent contractors.

The Uber-driver relationship reached a nadir after a dashcam video surfaced in late February showing Kalanick berating the driver.

Ultimately, Uber’s predicament is self-made, anchored to a start-up mindset that didn’t mature as the company grew. But in its favor is something simple and invaluable: a service that, bad publicity aside, many riders around the world have come to depend on.

“Uber will be taught as a business case for so long as the company that had it all,” Stanford’s Mandelbaum says. “If they come out of this, they’ll be the poster child for a turnaround. Think about it. If Uber can become a truly inclusive environment, then you’d like to think anyone can.”

 

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