Harry here. So it finally happened – Uber CEO Travis Kalanick is “taking a leave of absence” for an undetermined amount of time. On one hand, this makes sense, as Travis recently suffered a devastating loss. On the other hand, what does Travis’ departure mean for Uber, and can Uber overcome these public setbacks? Today, senior RSG contributor John Ince covers Travis’ leave, what experts say about the future of Uber, and how Uber maybe hasn’t learned a single thing from all of these public embarrassments.
Uber CEO to Take Leave, Diminished Role After Workplace Scandals [Bloomberg]
Sum and Substance: Uber Technologies Inc. Chief Executive Officer Travis Kalanick told staff he plans to take a leave of absence, without disclosing a return date. The company will strip him of some duties and appoint an independent chair to limit his influence after a slew of scandals, according to an advance copy of a report prepared for the board.
At a staff meeting Tuesday, the company began conveying the results of a probe conducted by Eric Holder, the former U.S. attorney general who Uber hired to look into allegations of harassment, discrimination and an aggressive culture. The 47 recommendations include creating a board oversight committee, rewriting Uber’s cultural values, reducing alcohol use at work events, and prohibiting intimate relationships between employees and their bosses.
Uber’s board met Sunday to review a detailed version of the report and voted unanimously to approve the recommendations. Afterward, the San Francisco-based company ousted Emil Michael, Uber’s head of business.
Upon Kalanick’s return, the board will move to diminish his role by giving some of the CEO’s job responsibilities to a chief operating officer — a position Uber has been actively recruiting for but has yet to fill. This person would “act as a full partner with the CEO but focus on day-to-day operations, culture and institutions within Uber,” the report said.
Uber lost or removed much of its management team in recent months as scandal after scandal emerged. The 14,000-plus workforce lacks a clear No. 2 who could run things in Kalanick’s stead. Uber has started taking steps to fill out Kalanick’s bench. Last week, it hired Harvard Business School’s Frances Frei as senior vice president of leadership and strategy, and will add Nestle SA’s Wan Ling Martello as an independent director.
Despite recent turmoil, Uber’s business is growing. Revenue increased to $3.4 billion in the first quarter, while losses narrowed — though they remain substantial at $708 million. But Lyft Inc. has stolen some market share in the U.S., and Uber’s internal strife could open opportunities for competitors globally to lure partners, raise funds or poach talent.
Executives at Uber had looked to the Holder report as a likely turning point in their efforts to put the company’s past indiscretions behind them and provide a road map for the future. Holder, an attorney at law firm Covington & Burling LLP, interviewed employees as part of a 14-week probe he conducted with his colleague Tammy Albarran. A separate examination by Perkins Coie LLP is reviewing 215 HR claims. More than 20 people have been fired as a result of that inquiry….
However, anyone hoping that the report would name names or call out problematic incidents at the company will be disappointed. The report offers no such details. No new dismissals are expected Tuesday, but the other probe by Perkins Coie is ongoing.
Several of Uber’s planned changes are symbolic. For example, a conference room known as the War Room will be renamed the Peace Room. The company also plans to scrap many of its cultural values, notably “Let Builders Build, Always Be Hustlin’, Meritocracy and Toe-Stepping, and Principled Confrontation,” which the Holder report described as being “used to justify poor behavior.”
Uber will also create stricter guidelines for what’s acceptable in the office. Several rules outlined in the report deal with alcohol, controlled substances and sexual relationships. “Uber should consider limiting the budget available to managers for alcohol purchases,” according to one recommendation in the report.
My Take: Where do we begin to sort out all that has been going down for Uber? Let’s start with the Travis’ decision to step back for awhile. It’s really not that much of a change from the status quo, since according to multiple reports, Travis has been spending most of his time with his father, who was critically injured in the boating accident that also killed his mother.
Travis hasn’t been in the office for some time, and even after this decision he’ll be available to advise, consult and direct – albeit from a distance. I don’t think anyone will take him to task for wanting some time to grieve and sort out everything that has been happening in his life. Hopefully he will return stronger and wiser.
In terms of power at Uber, he still has the votes to control his own fate. Apparently, Garrett Camp, his co-founder, is still solidly behind him. As employees sell their shares back to the company to liquidate their positions, Kalanick’s position only grows stronger. The biggest questions now are whether those shares will ultimately have any value and how badly the Uber brand has been damaged (see next article).
Travis Kalanick’s temporary leave of absence won’t save Uber’s brand, experts say [Business Insider]
Sum and Substance: It’s been a rough couple of months for Uber, and there may be no respite in sight. On Tuesday, Uber released the results of an intensive monthslong investigation into its corporate culture to its employees, including recommendations for how the company could fix its image problems…. But the company’s response may be too little too late, branding experts say, and Uber’s spate of crises over the past few months — including allegations of sexual harassment and discrimination, concerns about privacy and data, and a leadership overhaul — may have permanently dented its brand.
• Experts say Uber’s brand has been severely damaged.
• The company’s attempt to shake up its management culture has not gone far enough to move consumers.
• Brand consultants are urging the ride-hailing firm to replace its CEO, Travis Kalanick.
“Reporting is one thing, making real change is another — Uber really has to blow itself up and start over if it has any shot at being a respectable brand that consumers trust and feel good about using,” said Chris Allieri, the founder and principal of the public relations firm Mulberry & Astor. “Kalanick on an indefinite leave of absence is a start, but termination would’ve sent a stronger signal that they’re truly serious about making real changes.”
… “Their brand perception is absolutely terrible,” said Cindy Gallop, the former chairwoman of the ad agency BBH and the founder and CEO of Make Love Not Porn. “Consumers today do not tolerate outrageously egregious behavior by brands just because the product delivers.” …
All this has taken a toll on the brand, while ride-hailing rival Lyft has gained. Consumer perception researcher YouGov BrandIndex gives Lyft a score of 4, its highest rating ever. Uber currently has a score of 1. Not only has Lyft overtaken Uber in terms of perception, but it has also gained an awareness boost…. “All of this has been distracting the board from the real challenges they have, which is the competition and profitability,” he said. “They have been left paralyzed.”
My Take: The first thing to remember about brand experts is they can be and have been wrong. So I wouldn’t necessarily trust what a few experts, especially if they’re not closely involved with Uber, say about Uber’s brand being permanently damaged. Most of the passengers I’ve asked about all the bad press about Uber respond with something like, “what bad press?” Information overload today is certainly working in Uber’s favor.
What’s working against Uber is the fact that the people who are informed are the key players in the Uber ecosystem – investors, lawyers, employees, potential employees and the press. Winning them back will be a herculean task. The real reckoning will come when Uber starts running out of cash and has to start anew with their fundraising efforts. That’s when things will really start to get interesting. Can’t wait to hear what their pitch will be. No investor in their right mind will put money into this company at its current valuation – much less put money in at higher valuations.
Uber has lost market share to Lyft during crisis [USA Today]
Sum and Substance: Uber’s U.S. market share and brand image have slipped in the tumultuous months following a former engineer’s blog post that blasted the ride-hailing company for its sexist work environment, according to three recent surveys of credit card spending and consumers’ attitudes.
Over the past two years, Uber’s share of rides has dropped to 75% from 90%, according to TXN Solutions, a company that creates sales estimates based on credit card receipts. The last 3 point slip — to 75.3% from 78.8% —happened between Susan Fowler’s mid-February blog post and the first week in June, according to the data compiled for USA TODAY.
The market share of rival Lyft rose to 24.7% from 21.2% over this period, one marked by an unrelenting stream of revelations about the company’s business practices and workplace culture, from its use of a fake version of its app to dupe municipal regulators to more recently, a senior executive’s sharing of medical records of an Uber driver’s rape victim….
Two separate surveys — one from management consultancy cg42 and a second from Morning Consult Brand Intelligence survey — found consumers’ view of the company has dropped over this time.
“The demand for [Uber’s] product is not Teflon, and competitors are really smelling blood in the water,” says Jeremy Robinson-Leon, principal at corporate communications firm Group Gordon.
Uber did not respond to a request for comment on TXN’s data. In late May, Uber confirmed a Wall Street Journal report that indicated business was improving for the privately held company at the start of the year, notwithstanding a string of public black eyes. The start-up, which has been valued at around $70 billion, narrowed its quarterly losses to $708 million in the first quarter from $991 million in the fourth quarter of 2016.
Despite that quarterly improvement, Uber has reason to worry that its problems could trickle down to its pocketbook. Uber has faced backlash since January, when controversial pricing during protests over the Trump Administration’s attempted travel ban sparked a #deleteuber campaign. Rival Lyft has seen market share gains over the period, and it’s rapidly expanding its presence in U.S. cities.
In a recent survey of consumer attitudes, consultancy cg42 found that 80% of Uber customers are aware of Uber’s recent scandals and those with negative views of the company have jumped to 27% from 9% since the news began to tarnish the company’s reputation. “26% of Uber’s customers claim they are actively exploring alternatives and will use Uber less frequently, but only 4% have actually made the decision to switch services as a result of the negative news,” the cg42 report says. “This is a low switch rate, specially when considering barriers to doing so are low.”
My Take: These really are the figures that matter most to Uber and Lyft. While they show some movement, it’s hardly a titanic shift for Uber, so the ship is definitely not sinking – yet. Remember Uber still has a cash hoard that’s pretty powerful. That cash can be deployed strategically to blunt the impact of recent corporate and PR blunders. The real question is, does Uber know how to make money? Until they can demonstrate that to potential investors, all the other questions are moot.
The Uber board member who made a sexist remark during a staff meeting has resigned [Recode]
Sum and Substance: David Bonderman, an Uber board member and founding partner at TPG Capital, stepped down from the company’s board after he made a sexist remark at the company’s all-staff meeting today. The meeting was prompted by an investigation into accounts of sexism and sexual harassment at the company. … Fellow board member Arianna Huffington was addressing the staff during the meeting and said, “There’s a lot of data that shows when there’s one woman on a board it’s much more likely that there will be a second woman on the board.”
Bonderman responded: “Actually, what it shows is that it’s much more likely to be more talking.”
Here’s his statement in full: “Today at Uber’s all-hands meeting, I directed a comment to my colleague and friend Arianna Huffington that was careless, inappropriate, and inexcusable. The comment came across in a way that was the opposite of what I intended, but I understand the destructive effect it had, and I take full responsibility for that. Having worked with the company for the last few months on the Holder report, I recognize the importance of implementing the requirements of the report. Uber is examining the issues with its culture, and making significant changes and working to right what has been done wrong, which is extremely important for the future of the company. I do not want my comments to create distraction as Uber works to build a culture of which we can be proud. I need to hold myself to the same standards that we’re asking Uber to adopt. Therefore, I have decided to resign from Uber’s board of directors, effective tomorrow morning. …”
My Take: You just can’t make this stuff up. Remember David Bonderman, the offending board member, was supposed to be implementing the recommendations on combatting sexism contained in the Holder report? Talk about bad timing for a joke… At another board meeting at another time in another company in Silicon Valley, some members of the old boy network might have laughed at this. But nobody is laughing inside Uber these days. This is a pretty clear sign that sensitivities have become stretched to the breaking point at Uber corporate. And it begs the question: has anyone at Uber learned from their mistakes?
Readers, what do you think of this week’s round up? Will Uber stick around and battle it out, or will the vast majority of riders not really care about Uber’s troubles unless it starts costing them more money?
-John @ RSG
