Few were surprised this morning to learn of the resignation of Travis Kalanick from being the CEO of Uber. The company has endured scandal after scandal, many of which trace back to Kalanick in one way or the other, whether directly as a result of his behavior or his business choices, or less directly as a result of the allegedly toxic and discriminatory culture he helped to create as Uber’s founder. It was easy to see why Kalanick had to go. By removing him, investors and the board are undoubtedly hoping to curtail the onslaught of negative attention and return the company to grow and raise money in peace. But at this point, rebuilding and rebranding Uber will take more than pushing out its leader.
For Uber’s investors and directors, a leadership change is a way of showing that Uber is serious about taking a new direction, and protecting the company’s reported $70 billion valuation in the process. “Uber’s clearly in a situation where small changes, simple policy adjustments, those sorts of things, weren’t going to satisfy the investor community, the customer base, and the employee base,” says Brian Kropp, the head of the human-resources practice at Gartner, a research and consulting firm.
But though Uber’s troubles tended to trace back to Kalanick in some way, they also went beyond him: Last week, at the same meeting that it was announced that Kalanick would be going on a (then-temporary) leave, a different board member made a sexist comment that resulted in his own resignation soon after. “Uber has demonstrated that its problem is not only about a single figure—a reputational cancer that could have been cut away—but that the cancer has infected the rest of the body,” says Audra Diers-Lawson, a professor of public relations strategy at Leeds Beckett University. “Because the bad behaviors have extended beyond just the CEO, a new negative expectation is probably being formed and this is fundamentally damaging to the company.”
According to Diers-Lawson, Kalanick’s ouster was absolutely the right decision for the company, but it would have been better if it had done so when problems were nascent. “In 2015, the company had the opportunity to genuinely mitigate the damage of his influence on the corporate culture and the company’s reputation as the first wave of this crisis hit the public eye,” she said.
Uber certainly isn’t the only, or first, tech startup with the problem of a young, brash CEO who creates a unique and disruptive product, but cannot seem to make the leap to successful management. A New York Times article from April dubbed this phenomenon the “bro CEO,” citing examples such as Quirky, a gadget-pedaling platform that raised $185 million before being undone by the questionable behavior of its 20-something CEO and founder, and an HR startup called Zenefits, which was once valued at $4.5 billion but ousted its young male CEO amid both criticisms about the company’s frat-like culture and allegations that the company had engaged in cheating on licensing courses. While the company still exists, it is severely diminished and only a fraction of its former size.
But though CEO problems are somewhat common, Uber is a special case. The company, though it’s never actually turned a profit, is flush with investor cash and wildly popular. But beyond that, the timing of Uber’s drama hits right when the public and investors are more engaged than ever in a conversation about the role of corporate culture in the health of a company and the economy more widely. According to Kropp, in 2010, fewer than 40 percent of company earnings calls took the time to discuss issues such as talent or corporate culture; now that figure has climbed to more than 60 percent. That’s because more people today believe that culture is a critical factor in whether a company can attract the right employees and turn a profit.
Now that Kalanick’s gone, there are still some significant structural challenges for the company to overcome. First, there’s the question of what happens to the upper echelons of Uber’s management. The company has long been without a chief operating officer, a vacancy that many experts, and the Holder report, have suggested desperately needs to be filled. As Quartz reported, some tech startups have filled this role with someone who is all the things that the CEO is not. Facebook’s hiring of Sheryl Sandberg in 2008, for example, is widely seen as a brilliant and effective hire that complemented the company’s CEO Mark Zuckerberg, with Sandberg’s experience and corporate diplomacy tempering Zuckerberg’s relative inexperience and sometimes tough management style. But hiring for the COO role, particularly one who will work as a part of a management team, might be difficult without a CEO.
Replacing any CEO, especially one who is pushed out amidst controversy, is a significant task. Whoever Uber hires or promotes to fill the role could drastically alter operations, or continue to proliferate the same problems. Kropp says that replacing a founder-CEO is often an especially tricky task. In cases where the company is doing well and the CEO is well-loved, it makes sense to promote internally, someone who could potentially continue the current path. For established companies with CEO problems, it can serve to change tacks completely, bringing in an outsider. But for a startup such as Uber, a fairly young company with a CEO who left under very public and difficult circumstances, neither might be quite right. An internal hire may be seen as having accepted and contributed to the existing problems. An outsider may have a difficult time acclimating and understanding which factors make Uber special and unique, and are worth retaining. An outsider may also want to make their mark by completely changing the brand, and that can create corporate and cultural destruction in a different way. The sweet spot, Kropp says, would be someone who has worked at the company before, but then left and was successful elsewhere. And that’s not easy to come by.
In order to create real and lasting change, Uber will need to spend money, Kropp says, not just try to implement one-time changes. “A lot of companies try to talk themselves out of these sorts of cultural challenges. They’ll write memos, send notes, make presentations, saying things need to change. But at the end of the day, if you’re not spending money to try to change the problem, they likelihood that you’re actually able to change the culture is incredibly low.” Forcing the CEO out is certainly a bold step toward change, but Kropp says that alone won’t be enough. Instead, salvaging Uber will require constant investment and training for initiatives that will constantly reinforce the company’s new values, accepted behaviors, and expectations. They’ll need to hire people who align with the new values, and create new roles, such as the one Frances Frei, the new senior vice president of leadership and strategy, inhabits. They’ll also need to expand their budgets to help the people in those new roles build teams and implement big changes that can influence the culture. And they’ll have to implement ongoing methods of measuring progress and sussing out new problems. Without those continuing efforts, eventually muscle memory will kick in and everyone will go back to their same old behavior, new CEO or not.