Travis Kalanick and Uber’s Fall
On June 21st, 2017, entrepreneurs, business critics, leaders, CEOs worldwide were either disappointed, shocked or pleased with a decision. The news was as turbulent as when Apple CEO Steve Jobs was removed from his position in the company. Travis Kalanick, founder of Uber, the world’s largest ride-sharing company was resigning and stepping down from his position as CEO. And it wasn’t a voluntary resignation. A revolt by the company’s shareholders forced him to step down as they believed he was a threat to the sustainability of the very company he founded. Imagine, having been removed from a company you created. As much as this sounds tragic, it is a lesson in startup history that will be used as the prime example of a failed leadership causing a globally reputed company to risk a rapid downfall.
2017 Was a Bad Year for Uber
In February 2017, Susan Fowler, an engineer who worked at Uber for over a year wrote a blog post detailing her struggles at the company. She reported of the institutionally backward culture of the company and most important of the excessive sexual harassment and gender discrimination she had to face during her tenure. The post also talked about how HR and the leadership hierarchy literally ignored her pleas, complaints and, ‘evidence,’ about the harassment. Disappointed, Fowler finally left the company after a year and wrote the blog post in an attempt to uncover the truth hidden behind the veil. Unfortunately for Uber though, this was a start to their debacle that ultimately drove the CEO to step down.
Following Fowler’s post, Uber began receiving attention and criticism for their aggressive workplace culture and categorical ignorance of sexual harassment. Gradually, employees began to make an exit. In the following months (March to May), Uber saw its most competitive executive teams leaving the company. After intense pressure from the media and an exodus of employees, Kalanick was forced to confront the negative workplace culture at Uber. He initiated an internal investigation and brought board member Arianna Huffington and the former attorney general Eric H. Holder Jr. to look into harassment issues and the human resources department.
If media reports are to be believed, Kalanick himself was responsible for this workplace culture. According to the NYT, ‘As chief executive, Mr. Kalanick has long set the tone for Uber. Under him, Uber has taken a pugnacious approach to business, flouting local laws and criticizing competitors in a race to expand as quickly as possible. Mr. Kalanick, 40, has made pointed displays of ego: In a GQ article in 2014, he referred to Uber as “Boob-er” because of how the company helped him attract women.’
It was not just sexual harassment that Uber had to deal with. In the months till his resignation, Kalanick had to deal multiple lawsuits of harassment from employees in other countries, a pissed off Apple CEO Tim Cook for intentionally violating Apple’s privacy policies with the Uber app and a leaked video (May) recording him abusing an Uber driver with whom he was riding. As if this wasn’t enough, Uber also had to deal with it’s Vice President Eric Alexander being sued for illegally obtaining medical records of an Indian girl who was brutally raped by an Uber driver. And now finally, in June 2017, Kalanick along with his other senior employees in the organization are either being removed or being considered for removal during an on-going investigation. Shareholders believe there should be a change in leadership and while Kalanick will still be on the board of directors, he will not be directly managing the company any longer. In a statement, Travis said, ‘I love Uber more than anything in the world and at this difficult moment in my personal life I have accepted the investors request to step aside so that Uber can go back to building rather than be distracted by another fight.’ It should be noted that the resignation follows a tragic time in Travis’s personal life as his mother died in a boating incident and his father suffering from serious injuries. A terrible year for Uber and for its founder.
From Glory to Resignation - What Kalanic Got Wrong
Kalanick started Uber in 2009 by the name of UberCab - a cab-hailing service using a smartphone. With your location on, you could book a cab right from the comfort of your couch. A few years later and Uber now operates in 58 countries with a $60bn value. Travis Kalanick is one of those people who tech history can never forget. He is strong-headed, stubborn, has an excellent entrepreneurial drive, works tirelessly to grow his product and most importantly holds it dear to his heart. But with such strength, vision and tenacity is also his inability to acknowledge his failings, to maintain a sustainable culture and to accept criticism. The leaked videos, the lawsuits, the blog posts, the critics all point to Kalanick’s flawed personality being a hindrance to the progress of his company.
Kalanick has been a serial entrepreneur launching Scour, a peer-to-peer file sharing service that resembled Napster that didn’t last. He started another peer-to-peer service called RedSwoosh which he later sold for $23 million. Finally, in 2008, he partnered up with Garrett Camp turning a simple black-car service into a full-fledged logistic service using a model that provided income to anyone who had a car. But as amazing as the idea was, it was a threat to existing taxi models in cities across the world. From Indonesia to Pakistan, China to India, Uber constantly had to face legal battles, spending up to $1 million a year in lawsuits. Not to mention it was banned and sued as drivers molested and raped women traveling in Uber driven cars. Rape cases made headlines and people questioned the safety protocols Uber used to check drivers. Kalanick’s pugnacious personality carried the company through it all. The battles, the bans, the lawsuits and the rules and regulations were molded, distorted or disrupted to help the company grow and remain sustainable.
In 2017, Kalanick was heavily criticized for joining President Trump’s team of business advisers. Users immediately resorted to a #BanUber campaign on social media because of his association with the President. Kalanick withdrew from the position two weeks later post the backlash. The last straw to the whole saga was Fowler’s blog post. It was this time that the investors had enough and called for Kalanick’s resignation reinstating the need to re-build Uber’s internal policies.
Kalanick is the ideal persona of a Silicon Valley leader. You can ignore sexual harassment, lawsuits, controversies etc until it directly affects your shareholder value. Startup leaders, however, fail to understand that being tenacious, pugnacious and charged is not enough to maintain sustainability. They forget the people. They forget the power people have. They are so engrossed in the technology, the company and the process itself that they do not understand the implication of public disapproval. When people start disapproving you, they disapprove your product and when that happens, your shares obviously go down. Ironically though, all of this would pass only if the company had been growing financially but when Uber lost the China deal, it wasn’t showing the numbers shareholders wanted to see.
One of Uber’s very vocal critics Sarah Lacy who was herself a victim of a million-dollar smear campaign in an interview with Vox reporter Hope Reese, states that, ‘If Uber was doing well financially, if they did not have the Waymo lawsuit hanging over them, I don’t think the board would have done anything. According to their own numbers, they’re not really growing that fast for a company that’s valued this high. They’re losing money. They lost China. I mean, of all the things they said justified that valuation over the years, none of those are really happening. I don’t think the moral stuff, the sexist stuff, was enough. It’s three years of scandals that, finally, investors had the luxury to care about because there were also issues with the business.’
In the light of this, will Uber change? Well, leaders and shareholders are trying to build the Uber 2.0 - a new image, improved services, and a better culture. The world is looking at it and we can only know what’s to happen to the company as new appointments take place and new values are instilled.