kalanick, travis

The lesson taught by Uber: Not all founders can take their company to the next level

Article originally published in the Philadelphia Business Journal on September 16, 2019

Visionaries have changed how we do our jobs and interact with each other. Think about the world before personal computers, cell phones, email, texting, apps, the internet, Instagram, Twitter and Facebook.

One such visionary is Travis Kalanick, co-founder and former CEO of Uber. He transformed the taxicab/ride-hailing transportation business by challenging paradigms through the use of information technology and hiring individuals who use their own vehicles to transport people who traditionally used taxis or other forms of transportation.

An entrepreneur with a great idea and the drive to start a new business is not necessarily the individual with the skills, values and temperament to run and grow the company over the long term.

I wrote an article on the downfall of Kalanick in June 2017. This is an update of that article.

Kalanick had been criticized for Uber’s unethical practices in evading municipal ride-share regulations, accusations of technology theft by Google and his disregard for the financial condition and treatment of Uber drivers who were the backbone of his business model. Kalanick was also criticized for his poor tone at the top and fraternity-like culture that ignored sexual harassment complaints from female employees, causing many to leave the company.

The culture within Uber was certainly not one that would be tolerated by public company investors. Any ethical misstep by the CEO or hint of a scandal has an immediate adverse impact on the company’s stock price.

His drive to win at nearly all costs by pushing ethical and legal boundaries to the limit damaged the company’s reputation and adversely affected its market share.

In February 2017, Uber’s board hired former U.S. Attorney General Eric Holder and his law firm to investigate and make recommendations on how to fix the culture within the company. After the report was issued in June 2017, questions were raised whether Kalanick was the right CEO to oversee the cultural changes that were needed within the then-private company.

In a recent article in Vanity Fair, columnist Mike Isaac chronicles the February 2017 meeting during which the senior leadership team at Uber forced Kalanick to hear the brutal facts of reality, “that he was poisoning the company’s brand.” Isaac writes, “Uber didn’t have an image problem. Uber had a Travis problem.”

It is rare for a CEO who is so identified with a toxic tone at the top and culture to successfully implement change, so it was only a matter of time before it became apparent that Kalanick had to go.

Kalanick stepped down as CEO of Uber on June 18, 2017 but remained on the board. The New York Times reported on June 21, 2017 that Kalanick had been presented a letter from five major investors demanding that he resign. Why didn’t the board of Uber demand his resignation? That’s their job.

Yahoo Finance reported that former eBay and PayPal executive Stephanie Tilenius commented, “Travis’ management style and poor choices are now a case study for every startup that sexual harassment and bad ethics will never be tolerated, regardless of how successful or fast a company grows.”

Trip.com CEO Travis Katz, in the same article, commented, “There has always been a sense that in Silicon Valley, growth is the only thing that matters. Kalanick’s resignation sends a message that we have entered a new era, where growth, without a fundamental sense of decency, is simply not good enough.”

A fundamental sense of decency is always required for the long-term success of any enterprise. Not only is it the right thing to do, but the public demands it.

The board hired Dara Khosrowshahi as the new CEO of Uber. Khosrowshahi, the former CEO of travel group Expedia, is an experienced business leader who is changing the culture at the company. Uber went public on May 10, 2019. It is hard to imagine a successful IPO if Kalanick had remained as the CEO.

The boards of startup companies usually consist of colleagues of the CEO, investors or other stakeholders and, as a result, may not in a practical sense be independent. Nevertheless, the board has the responsibility to ensure the CEO espouses the right tone at the top and nurtures the right culture. It took too long for the board of Uber to launch the outside investigation by Eric Holder.

Boards also have the responsibility to know when it is time to transition the leadership to an individual with the background and experience needed to take the company to the next level, even though that might be a difficult decision for them to make and for the founding CEO to hear. In Uber’s case, it was outside investors who demanded that Kalanick resign. However, it was really the board’s job to do so.

A lesson for all boards: Not all founders will have the skills to take the company to the next level. If the founder CEO isn’t cutting it regarding tone, ethics and culture, make a change before change is forced upon you by the company’s investors.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, adviser and nationally syndicated columnist on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.

360 degree feedback

360-degree input: The most effective way of assessing employee effectiveness

Article originally published in the American City Business Journals on September 4, 2019

As CEO, how do you determine whether the individuals who report to you are
effective with the people they deal with? Have you ever been concerned about the
people reporting to your direct reports? Some individuals manage up very well, but
their peers and subordinates may find them untrustworthy or very difficult to work
with.

A major responsibility of every boss is to assess the performance of the individuals
who report to them and provide feedback on strengths and areas for improvement.
This includes boards providing feedback to CEOs.

A more complete picture of an employee’s performance

The best way to understand how a direct report performs is to obtain 360-degree
input from the people they deal with. A 360-degree anonymous input process can
provide a more complete picture of an employee’s performance. Information is
collected by interviewing the employee’s direct reports and peers to get a sense of
their effectiveness and how well the employee works with others in the organization.
Interviews can be conducted by the individual’s boss or by an outside firm,
depending on the culture of the company.

In my role as a coach and counselor, I am periodically told of leaders within
organizations who are ineffective at what they do, lack the trust of those they deal
with or are tyrants. Those who deal with these people question why the ineffective
individuals remain in their roles or aren’t given feedback to improve. They ask, why
don’t their bosses know about how poorly they are viewed by the organization and if
they know, why don’t they do anything about it?

I often hear frustration from those who I coach and counsel about their bosses who
are terrible leaders. Because that individual’s boss may not be aware of how
ineffective these direct reports are, I would add an additional feature to the 360-
degree interview process.

Ask how effective their leaders are in their roles

360-degree interviewees should be asked if they would like to share anything about
the effectiveness of any of the direct reports of the individual under review. This
would help alleviate frustration because there would be a way to make their views
known about the ineffectiveness of that direct report.

In a perfect world, this should not be necessary. In the real world, it only indicates
the degree to which tyrants and those who do not engender trust are tolerated. The
employee hotline to the audit committee of the board is a way to report a tyrant if
senior management takes no action. In some cases, it’s the CEO who is a tyrant or
does not engender trust of the organization. If the CEO is not coached to improve
their style, it reflects poorly on the board. When the company starts losing good
employees to competitors, perhaps the board will take action.

From personal experience, 360 degree feedback was the most valuable performance feedback

My personal experience working for a tyrant was prior to the introduction of
whistleblower hotlines and the 360-degree input process. I was promoted to be the
tyrant’s peer, and then promoted to be his boss. He continued to create an atmosphere
of fear and intimidation, so I fired him. While working for the tyrant, I was very
close to leaving the company. Had I left, the company would have been deprived of a
future CEO.

As chief operating officer of PQ Corporation, I introduced the practice of 360-degree
assessments to the organization. When I became CEO, I asked my board to conduct
annual 360-degree assessments of me. It was the most valuable performance
feedback I have received during my business career.

What to do if the process is politicalized?

There are those who believe that the results of the 360-degree input process should
only be shared with the employee as a developmental tool. Even if an outside firm
conducts the interviews, I believe the boss should also receive the report to
understand how the employee is interacting with their direct reports and their peers.
The 360-degree process can be politicalized, and feedback could be tainted.
Inconsistent, one-off politicalized comments can be readily identified and screened
out.

Be sure to provide performance feedback periodically to your employees. Done
properly, it is the best way to help your employees grow, develop and improve their
leadership effectiveness.


Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist on leadership, entrepreneurship and
corporate governance. Silverman earned a Bachelor of Science degree in chemical
engineering and an MBA degree from Drexel University. He is also an alumnus of
the Advanced Management Program at the Harvard Business School. He can be
reached at Stan@SilvermanLeadership.com.