The ridesharing phenonium Uber, has grown faster than any comparable startup. Unfortunately, this incredible growth has been overshadowed by a series of scandals. Sexual harassment cases, stealing intellectual property, evading authorities are a few prime examples of the issues arising at Uber. Many of these scandals seem to be related to the leadership of its founder and the culture he represented and instilled throughout the company. The initial reactions to Uber’s shortcomings was that its culture was greatly flawed and a change in that culture was needed as soon as possible. Uber’s success is directly related to its culture; neither can be examined independently of the other.
Leadership is defined as the use of power or influence to direct a group towards obtaining a specific goal (Colquitt). The end goal is to gain large profits and be a successful company, but at what cost? Previous Uber CEO, Travis Kalanick, had questionable methods and ideologies. His leadership style has been under major scrutiny for quite some time. Especially after a video of him was released arguing with an Uber driver. He has also publicly stated dehumanizing comments about women, igniting even more fuel to the fire. Kalanick also had a hard time claiming responsibility if one his drivers placed a customer is harm’s way. He would act as if these life threatening incidents were not even real. These are just a few examples to exemplify the personality of the CEO of a major tech company. All of these examples show strong traits of a tyrant and less of an exemplary leader. Kalanick used his power as CEO to control his workers and to just brush things under the rug. Power can be seen as the ability to resist the influence attempts of others, which is exactly what Kalanick was doing (Colquitt). It should not to be a surprise as to why Uber’s leadership and culture have been struggling. Leadership starts at the top and trickles down. If the top executives are not behaving accordingly, then how can they expect their lower level employees to do act like noble citizens.
The historical development of Uber needs to be considered in looking at strategic planning. Companies do not spring out of nowhere; they spring out of founders and leaders who have a set of values and a way of doing things. Uber is a ride sharing platform that allows riders to use their smartphones to find drivers to get them to their destinations, all it takes is a click of a button. Uber’s culture sprang from the tech start up bubble of 2009-10. Its culture was personified by its founder Travis Kalanick. He drove his strategies which resulted in Uber taking steps forward in its quest for world domination. Uber went from a zero valuation at its founding in 2009-10 to a valuation in the billions in a few short years.
Kalanick was once hailed as an inspirational leader in Silicon Valley. He was the genius mind behind possibly one of the fastest growing startups in history. His hyper localized strategy was innovative and upended the transportation industry. In 2013, Fortune magazine described him as “Silicon Valley’s rebel-hero,” characterizing his leadership as “confident, cocky, disruptive – and effective.” He was cited as the primary source for Uber’s success, back in 2013. Uber had grown to 42 cities in 18 countries with a valuation of $3.4 billion (Hempel, 2013). Unfortunately, by 2015 Uber’s culture was being denounced all of the world. Silicon Valley investor Peter Thiel called Uber, “the most ethically challenged company in Silicon Valley.” Travis Kalanick was described as ruthless and predatory. His leadership strategy was described as invasive and abusive (Chafkin, 2015) Even with Uber’s valuation swollen to $70 billion, Uber’s investors demanded Kalanick resign as the company’s CEO after the constant broadcast of public scandals. Uber became a prime example of Silicon Valley start-up culture gone wrong.
While Uber had a valuation of $70 billion in 2017, this valuation was subjective and not market driven. Uber was, and is as of this article, privately held. The “big” money for the investors is in the planned Initial Public Offering (IPO). The criticism of Kalanick’s leadership, strategy and culture threatened this public offering. Further, at least one prominent expert opined that the potential expenses associated with operating in the evolving regulatory market for ride hailing mandated a valuation of less than half of the $70 million (Verhage, 2016). This lower valuation is directly related to the independent contractor versus employee problem faced by the entire “gig economy” and Uber in particular, discussed in detail below. Incoming CEO Dara Khosroshahi, formerly of Expedia, pledged to maintain the aggressiveness of Uber but vowed to change its toxic culture. “This company has to change. What got us here is not what’s going to get us to the next level” (Cava, 2017). The company has since embarked on a process to change its culture and at the same time, vowed to go public within 18 to 36 months from August of 2017 (Cava, 2017).
Uber is part of the gig economy, the booming trend of hiring independent contractors and short-term workers who supply their own tools or products for customers as opposed to hiring employees and supplying them with tools, products and/or a place to work. Like Airbnb does not own its own bed and breakfast properties, Uber does not own a fleet of vehicles. Uber drivers provide their own vehicles and are independent contractors. Brad Smith, the CEO of Intuit, the owner of TurboTax, in May of 2017 estimated that the gig economy represents about 34% of the workplace and is expected to be 43% by the year 2020.” According to Intuit, there were about 4 million classic gig workers in the spring of 2017, which was expected to grow to 7.7 million by 2020 (Gillespie, 2017).
Uber is a leader in this gig economy. According to Uber it has had 75 million riders and 3 million drivers through 2017. Its drivers have completed 4 billion trips. Uber exists in 78 countries and over 600 cities worldwide and it completes 15 million trips each day. While it has millions of independent contractor drivers, it also has 15,000 employees as of 2017. These employees are not drivers; they do every other task required, but do not provide Uber’s essential service (Uber, 2018). Because the workers delivering Uber’s core service are independent contractors, Uber maintains tremendous flexibility and saves an incredible amount of money associated with hiring employees. The independent contractor classification “limits these workers’ access to traditional employment benefits such as minimum wage and overtime pay, protection against discrimination, workplace safety regulations, payroll tax contributions, unemployment insurance, social security, disability insurance, Medicare, workers compensation insurance, health insurance, and retirement savings plans” (Atmore, 2017). The expenses of providing these benefits are incurred by the drivers and not the company. The company also has tremendous flexibility in moving people in and out of the company. Significantly, they also do not have to provide their workers with a place to work or tools (in Uber’s case, vehicles) (Atmore, 2017). The legal basis for this classification in the case of Uber is tenuous and hotly litigated: Gig companies often declare their workers to be independent contractors due to their high level of flexibility and autonomy over their work, while gig workers, desiring the rights and benefits of employment, seek to be classified as employees. In asserting their respective positions, both sides of the debate rely on the central factors in existing classification tests: control and independence. (Atmore, 2017)
For example, Uber drivers in recent litigation have argued that Uber has control over them because of Uber’s detailed requirements which include “rules regarding their conduct with customers, the cleanliness of their vehicles, their timeliness in picking up customers and taking them to their destination, what they are allowed to say to customers, etc” (O’Connor v. Uber Technologies). Failure to follow these rules leads to termination. Uber’s defense in this case is instructive as in understanding exactly how Uber sees itself: Uber defended its classification of drivers as independent contractors by reasoning that Uber is not an employer of drivers but simply provides a platform that facilitates an independent business arrangement between driver and customer. Consequently, Uber denied having meaningful control over drivers’ time, place, and manner of work.