Uber: Hot New Company, Same Old Problem – Culture

Uber, the ride-sharing service that has been the darling of the upstart business world, recently suffered through a brutal series of reputational hits. By any standard, the list of miscues was a public relations nightmare: allegations of sexual harassment from a former engineer; firing of a new vice president for similar allegations at his former place of employment; a lawsuit alleging theft of driverless car technology; and an embarrassing video surfacing of Uber co-founder Travis Kalanick berating — get this — an Uber driver.

Did I mention a second vice president resigned just as questions of the company’s culture and business practices were being raised?

​It must have felt like a never-ending Monday.

Some might look at Uber’s unquestioned financial success and write off this series of calamities as a run of bad luck compressed into a short time frame, or as USA Today put it, “Uber’s terrible, horrible, no good, very bad week.” However, that would be a mistake. The events that unfolded are much more likely to be symptoms of a bigger problem — an unhealthy culture.

Regular readers of this blog know that I focus a great deal of time exploring and commenting on the impact of misaligned or toxic cultures on good governance. I have spoken around the world about how even the strongest companies can be severely damaged when culture goes awry. Indeed, just in the past two years, the list of corporate scandals tied to poor culture has grown to include FIFA, Volkswagen, Toshiba, Hertz, Wells Fargo, and others.

Uber’s high-profile run of bad news raises serious questions about the tone at the top. Kalanick apologized to his staff over the video, acknowledging that his behavior had to change and that he would seek leadership help. That was a rare and significant admission of fault from the C-suite.

Observers suggest the move could reflect maturing of the hard-driving, confrontational CEO. I see it as possibly a realization that a seasoned trusted advisor could steer the fast-moving company into a safer lane.

Growing pains are part of any organization, and it would be safe to assume they are magnified with upstarts that are wildly successful, such as Uber, Facebook, Apple, and others whose names are synonymous with success. We can also recall the names of other upstarts that didn’t get much past the growing pains, including Netscape, Commodore International, and People Express Airlines.

An important part of the growth process is the parallel development of good governance practices that support and help sustain a business and a corporate culture that complements the governance structure. Companies benefit when they have a strong board and CEO who are aligned on culture — “the way things ought to be done around here.” Companies, new and old, get into trouble when “the way things are done” deviates significantly from the “way things ought to be done.”

The Wall Street Journal reports that Uber’s culture reflects Kalanick’s in-your-face business approach, noting that the company lists “toe-stepping” and “hustlin’ ” as corporate values. The Journal asserts (paywall) that Uber’s aggressive business strategies have included diverting rival drivers from picking up fares, and something called Greyball, a program that identifies and blocks officials in areas where the service is resisted or banned from using Uber’s app.

On March 8, the Journal reported that Uber would stop using Greyball (paywall) and that the company would try to hire a chief operating officer (paywall) to assist Kalanick.

Just how much the practices reported in the Journal reflect poorly or not on Uber’s corporate culture is debatable. What is known is that a letter purportedly written by two investors publicly criticized Uber’s efforts to investigate sexual harassment claims and singles out the organization’s culture.

The letter, published on business news site NewCo Shift and attributed to early Uber investors Mitch and Freada Kapor, describes the company culture as “toxic” and “destructive.” The letter reads in part:

Uber’s outsize success in terms of growth of market share, revenues, and valuation are impressive, but can never excuse a culture plagued by disrespect, exclusionary cliques, lack of diversity, and toleranc​​​e for bullying and harassment of every form.

A word of advice to Kalanick and the Uber board: take steps to assess your corporate culture. Internal audit can and should play a role in assessing that culture and offering recommendations for improvements. If recent events serve as an accurate barometer of “how things get done” at Uber, you might consider taking these steps immediately.

As troubling as they are, case studies like Uber can be very instructional for internal auditors. While we all live amidst the culture of our companies, we do no one a favor by sitting by and watching the company’s culture damage its value and brand. We can’t be spectators. We must be willing to throw flags, if necessary.

As always, I welcome your comments.