Why Travis Kalanick's Ouster Is an Uber Disaster
Pushing out the founding CEO in the midst of an existential crisis is a huge misstep.
Uber, the poster child for Silicon Valley bro culture that once seemed impervious to all manner of scandals, lawsuits and boycotts, now finds itself leaderless and in disarray: Travis Kalanick has agreed to step down as CEO, leaving the world’s most valuable startup in the hands of a committee of executives and the board of directors.
The question is: Was the board’s insistence that he resign immediately while in exile to “work on Travis 2.0,” “become the leader that this company needs” and mourn the tragic death of his mother, what’s best for Uber?
In my view, it’s an enormous misstep. The right move would have been to insist that he stay on and help clean up the mess he created while the board searches for a new chief executive. There’s a very good reason why there is no precedent for a big corporation to be essentially headless during an existential crisis: You can’t run a corporation that way. It’s a recipe for disaster.
By any measure, Uber has had a wild ride. Founded just eight years ago by Kalanick and Garrett Camp, the ride hailing company now has 12,000 employees, $6.5 billion in revenue, operates in 82 countries, has raised $12.9 billion in funding and is worth $68 billion. Nobody “cabs it” anymore; we all just “grab an Uber.”
But here’s the thing. In the wake of former engineer Susan Fowler’s explosive blog post alleging widespread gender bias, sexual harassment and management mayhem, the company has lost much of its top brass, including the heads of strategy, finance, engineering, ride sharing and marketing. All those CEO direct reports need to be replaced, and pronto.
In addition, the board of directors just unanimously voted to adopt a laundry list of recommendations from a 13-page report by former chief justice Eric Holder’s legal team, including the need to overhaul Kalanick’s 14 corporate values and recruit a chief operating officer to serve as a full partner to the CEO.
Now none of that is going to happen until the company finds a new chief, which could take many months. Which means that Uber is essentially in strategic and operating limbo. That would be problematic enough if everything was hunky dory, but everything is so not hunky dory it isn’t funny. The company is in the midst of an epic crisis, and its Yahoo-like brain drain may just be the tip of the iceberg.
Uber is one of the fastest-growing companies in tech history, which means that recruiting and retaining talent are among its most critical functions. That’s going to be tough with its company culture under siege and its reputation in tatters. And a leaked audio file has HR chief Liane Hornsey telling employees “I know that you’re polishing your resumes” and imploring them to stick around.
It’s no secret that the San Francisco-based company burns enormous amounts of capital to fund its uber-growth. The company reportedly blew through $2.8 billion last year alone. While I’m sure it has plenty of money in the bank, Uber can’t go very long without raising funds, and that might be problematic with virtually every C-level function twisting in the wind.
Even if it does raise capital, Uber might be pressured into a down round. While not a big deal for early stage VCs like Benchmark and Menlo Ventures, who actually forced Kalanick’s ouster, that could potentially hurt investors that came in late in the game at higher valuations, such as BlackRock, Citigroup, Goldman Sachs, Kleiner Perkins, Microsoft, New Enterprise Associates and Morgan Stanley. That would also affect employee morale, no doubt.
There is, however, another possible explanation for the board to force Kalanick’s resignation. This is just conjecture, mind you, but I suppose they felt the need for a demonstration of extreme contrition from a man who created what the media has portrayed and Holder’s report all-but-confirmed as a wayward, depraved culture that puts growth and meritocracy above human dignity and diversity. The goal, of course, would be to stem the bleeding and accelerate the heeling of Uber’s stricken brand.
Don’t get me wrong. I don’t see Uber as the evil empire it’s been made out to be. Nor do I think it makes sense for any CEO to turn over his company’s culture to a team of lawyers, consultants and outside board directors, especially considering that Kalanick and Camp together control voting rights. And the notion of leaving a company in crisis in limbo is just as senseless. In my view, it’s either a big mistake or a calculated move. Either way, I think it’s incredibly ill-conceived.
Steve Tobak is a management consultant, columnist, former senior executive, and author of Real Leaders Don’t Follow: Being Extraordinary in the Age of the Entrepreneur (Entrepreneur Press, October 2015). Tobak runs Silicon Valley-based Invisor Consulting and blogs at stevetobak.com, where you can contact him and learn more.