© Will Oliver, USA TODAY “The thing that made him and the company successful is now causing havoc,” Brad Stone, author of The Upstarts, which chronicles category-altering companies such as Uber and Airbnb, says of Uber CEO Travis Kalanick. SAN FRANCISCO — Want to run Uber? You’d better have a steel constitution for cleaning up cultural rot and the insight to make the leaky business profitable.
As the ride-hailing start-up gets set to replace co-founder and chief executive Travis Kalanick, who resigned late Tuesday after a group of investor firms pushed him to quit, it’s on the hunt for a change agent who can revamp a company that’s riddled with uncertainty and still hasn’t passed one of the biggest tests of a start-up — its IPO.
“The challenges they face as a business are as substantial as the recruiting challenges,” says Stephen Beck, founder of competitive strategy consultancy cg42. “There is a combination of factors that will create some significant pause for any qualified manager to come in.”
Among the issues:
— A host of new faces in both vacant senior positions as well as on the board. On Wednesday, Uber confirmed that TPG Capital’s David Bonderman, who stepped down after a sexist remark during the company’s all-hands on sexism and other matters, will be replaced by TPG’s David Trujillo. And Benchmark Capital confirmed that longtime Kalanick adviser turned skeptic Bill Gurley will be replaced by Benchmark’s Matt Cohler.
— Whether Kalanick, who remains on the board with powerful voting shares, is truly out of the picture. With this forceful personality still tinkering under Uber’s hood, some candidates might balk.
— How entrenched its cultural problems are. They range from a sexist work environment to strategic practices that sometimes skirt the law. Uber has many top positions to fill, including president, COO and CFO, meaning big leadership holes at a company with 12,000 employees.
— And perhaps most significantly is the tenuous ride-hailing business model. It relies heavily on raised capital to keep fares artificially low. Uber and Lyft both are ploughing money into self-driving cars, but it remains to be seen when that cost-saving tech will fully come on line.
Uber’s board has not made clear the extent of Kalanick’s removal from day-to-day operations, nor has it clearly signaled how it will snare a CEO at this pivotal time in the company’s history. Raising the urgency: its market share has slipped to rival Lyft and its brand image is tarnished with riders.
“It’s surprising how incomplete the messaging is from (Uber’s) board, ranging from Kalanick’s exact role to who they’re retained to conduct the CEO search,” says Jason Schloetzer, a corporate governance expert and professor at Georgetown University’s McDonough School of Business. “The fact that so much wasn’t said reveals the continued instability at the highest levels of Uber.”
Schloetzer says that if Kalanick stays involved in key Uber decisions, that might cause CEO candidates “to be cautious about throwing their hat in the ring.”
An Uber spokesperson wouldn’t elaborate on the board’s statement, which framed Kalanick’s departure as “a bold decision and a sign of his devotion and love for Uber,” while allowing the company “to fully embrace this new chapter in Uber’s history.”
Candidates for this challenging but potentially lucrative CEO post — Uber has been valued at upward of $70 billion — are at this point just rumored. They include names that were reported in past weeks as Uber searched for a chief operations officer to partner with Kalanick at the helm.
A Fox Business report citing unnamed sources mentioned two potential COO candidates, Thomas Staggs, the former Walt Disney COO, and Karenann Terrell, former chief information officer of Walmart. The names of YouTube CEO Susan Wojcicki and former Ford CEO Alan Mulally, credited with a turnaround and winning the hearts of employees, have also been thrown into the ring, reports tech site Recode.
Another buzzy Silicon Valley name is Facebook COO Sheryl Sandberg, whose operations acumen and cultural imprimatur could serve Uber well.
But Sandberg is unlikely to leave the social networking company if offered the role, according to sources close to Sandberg.
Although hiring a woman for the top Uber job would send a powerful signal that its egregious treatment of women might come to a swift end, the company must deal in concrete changes and not merely symbolic ones, says Barbara Annis, founder of Gender Intelligence Group and co-author with Richard Nesbitt of Results at the Top: Using Gender Intelligence to Create Breakthrough Growth.
“You can’t put the onus on one woman to fix that problem, you need to look at the whole leadership team,” says Annis. “There’s a whole cultural norm at Uber, an alpha-male culture that is part of its nature. So let’s put someone in who has a value system and can create an inclusive culture with a management team aligned on that. You don’t want the ‘poster woman’ in there.”
Then there’s the cult of the founder. The tech industry in particular has a fascination with the role a founder plays in driving the innovation that distinguishes one start-up in a field with another. That belief is persuasive enough to bring some ousted leaders back.
Consultant Beck cites two familiar examples of iconic brands that were saved when founders stepped back in, Apple (with Steve Jobs) and Starbucks (with Howard Schultz). “Some say, ‘founders can only take a company so far,’ but there are examples when professional management isn’t always the panacea you hope for.”
In fact, before Kalanick’s abrupt departure — as recently as last week, the CEO had decided to opt for an extended leave in part to grieve the death of his mother after a late May boating accident — board member Arianna Huffington had repeatedly mentioned how Kalanick was integral to Uber’s disruptive nature.
And new human resources chief Liane Hornsey told USA TODAY that her boss was “extraordinarily fair” and bent on changing the company while driving it forward on a global scale. With such testimonials, there could be a temptation to keep Kalanick involved, thereby limited the corrective powers of a new CEO.
But perhaps the biggest hurdle facing any new chief executive isn’t Uber’s cultural problems or its legal issues, which range from a federal investigation into its Greyball technology that fooled regulators to an ongoing lawsuit brought by Google’s self-driving car company Waymo over allegedly stolen trade secrets.
And that is Uber’s business model.
Despite heavy operational losses – Uber said it lost $708 million in the first three months of this year, narrower than Q4’s $991 million — the ride-hailing start-up’s market value has floated between $69 billion and $70 billion, making it the most-valued unicorn company.
But its public woes are causing Uber’s shares to take a hit on the secondary market among investors. Brokers told news site The Information that investors in recent months have paid 15% less for Uber stock, lowering its market value to $50 billion. At the same time, the site reported, some Uber shareholders have looked to offload their holdings.
Analysts have long been nervous about how both ride-hailing companies, Uber and Lyft, are spending some of the billions in cash on keeping fares artificially low in order to drive up ridership.
That model ultimately resolves itself in one of two ways if the company wants to turn to profitability, critical if Uber wants to push ahead with an initial public offering: getting consumers so reliant on the service that they don’t balk when prices are inevitably raised, or using self-driving technology to replace the costly human driver.
Uber’s next CEO will have to both fix a range of internal issues as well as convince investors that ultimately the company will become massively profitable, says Mike Ramsey, analyst with Gartner.
“I do think there’s an existential threat to this business model,” says Ramsey. “There are already cracks in it. Despite what analysts say about their exponential growth, there are things that need to be worked out (with the model) or this won’t work.”
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from Wanted: A new CEO to remake Uber