Uber’s Kalanick faces crisis over ‘baller’ culture

(USA Today via CNBC) – Uber’s “baller” culture may have reached the end of the road.

CEO Travis Kalanick’s controversial history of flouting regulations and aggressively fighting the competition has in a mere eight years pushed the company to a $70 billion valuation, about $15 billion more than General Motors.

But now he is facing what may be his biggest crisis yet: Accusations of sexism that compound years of indications that an unchecked, hyper-alpha culture made Uber an uncomfortable place for many women to work.

On the heels of the #DeleteUber customer backlash for its initial cooperation with the Trump administration and response to the immigration ban, the startup that aims to remake transportation is taking fire from investors and the public over explosive allegations of sexist and discriminatory behavior.

Among the charges leveled in a detailed February 19 blog post by former engineer Susan Fowler: That Uber’s human resources department refused to discipline Fowler’s manager after he made sexual advances, even though he had harassed other women, and that Fowler was told to expect a poor performance review if she stayed on the team.

Fowler left Uber in December to join digital payments company Stripe. But her troubles may not be over. On Friday, Fowler asked her Twitter followers not to disclose any personal information about her if contacted, saying a smear campaign appeared to be underway.

“Uber is in no way involved. This behavior is wrong,” the company said in a statement.

But the charge has echoes of comments made by high-ranking Uber executive, Emil Michael, who stirred outrage in 2014 when he suggested Uber should investigate journalists who did not write favorably about the company.

Chest bumps and push-up contests

The question facing Kalanick, 40, is whether he can remake his company’s maverick culture without losing the surging momentum crucial for ongoing expansion and an eventual initial public offering.

“Uber’s response to this particular crisis will be defining for the company, so the stakes are high to get it right,” Uber investors Mitch and Freada Kapor wrote in an open letter to Kalanick this week, which hammered the company for its “destructive” and “toxic” atmosphere.

If any organization’s tone is set at the top, Uber’s cued off a boss whose judgment often erred on the side of callous or boorish.

There is the genesis story that says Uber wasn’t about solving transportation issues but getting Kalanick and his fellow “ballers” (slang for pro athletes living large) town-car rides with a screen tap. Or the time the company deflected responsibility when an Uber driver hit and killed a 6-year-old girl between fares. And the now famous Kalanick joke the company’s nickname was “Boober” for the female attention it generated.

Several former Uber employees who spoke with USA TODAY under condition of anonymity described a bellicose, almost frat-house environment where milestones were often celebrated with chest bumps and men held push-up contests nightly at their desks.

While such a setting might alienate women, it is not criminal. But that atmosphere ultimately generated a culture that indeed sometimes went too far.

A notorious Uber party held in Las Vegas in 2015, where Beyonce performed for a rumored $6 million fee, featured a variety of outrageous incidents, according to two former employees who asked that USA TODAY not use their names for fear of retribution. They include a general manager groping a fellow employee and another staffer who brought a prostitute to his hotel room then called police when she stole from him. Both were fired, according to the former employees. Company representatives declined to comment.

Opinions differ on whether Uber will be blown off course by this storm.

“This is only a small bump in the road. (Uber) has become an essential habit in so many peoples’ lives. Business will go on as usual, and people have short-term memories,” says Manny Fernandez, CEO of angel investment firm DreamFunded.com.

Other observers beg to differ. Roger McNamee, founding partner at venture capital firm Elevation Partners, questions Uber’s huge capital raises — $15 billion despite lingering uncertainly about per-ride profitability — and its limited financial disclosures.

“Now the company’s horrific culture has been exposed in terms that may cause an acceleration in the #DeleteUber campaign,” he says.

Upset CEO faces angry employees

By many accounts, the Fowler affair could well be a turning point for a company that had in the past been accused of reacting brusquely, if at all, to criticism. While women have been raising a red flag for decades about their treatment in the tech industry, this salvo hit its target.

“What was reflected in that blog post happens in plenty of other places,” says Elizabeth Ames of the Anita Borg Institute, a non-profit trying to advance women in technology. “Everyone in the valley seems to have a friend or a friend of a friend who has had a similar experience. It’s three degrees of separation.”

Fowler describes female colleagues leaving the company due to “organizational chaos, and there was also the sexism within the organization.” When she raised the issue at an all-hands meeting, she was told “the women of Uber just needed to step up and be better engineers.”

At the staff meeting on Tuesday, a visibly upset Kalanick acknowledged breakdowns in the company’s system and owned up to his mistakes in overlooking in-house issues.

For an hour, he discussed accountability and fielded questions from employees angered by Uber’s missteps, according to a person who attended the meeting but is not authorized to speak publicly about it.

Then on Thursday, Kalanick met with more than 100 female engineers for an hour during which they urged him to begin “listening to your own people,” according to BuzzFeed News.

“Everyone who’s in these rooms now … believes that there is a systemic problem here,” one engineer told Kalanick, according to the article.

Kalanick responded that he wanted to “get at the people who are making this place a bad place. And you have my commitment.”

Uber Chief Technology Officer Thuan Pham also held a soul-searching meeting with staffers. One of them, software engineer Henry Lin, tweeted on Thursday that his boss was crying and said he was willing to leave the company if the climate did not improve in six months.

The CTO lamented a culture that “measures output, but not peer collaboration, and this creates an aggressive environment,” wrote Lin. He added that Pham said “I’ve always hear (sic) people say ‘We want to hire more women. But we won’t lower the bar for them.’ I want to change the narrative.”

Uber has launched an internal investigation. Uber board member Arianna Huffington wrote that she would “hold (the) leadership team’s feet to the fire.” The probe is being led by former US attorney general Eric Holder, who Uber hired back in June to help with other regulatory issues, along with help from Huffington and Uber chief human resources officer Liane Hornsey.

But that inquiry may not put the bad times in Uber’s rearview mirror. The Kapors are skeptical that change will come from a probe headed by “a team of insiders” with a vested interest in not upsetting the private juggernaut’s eventual road to a lucrative initial public offering.

Holder and his law firm partner Tammy Albarran responded to the Kapors’ letter with a statement saying they intended to be “thorough, impartial and objective.”

CEO’s MO: bulldoze forward

Traditionally, Kalanick has tackled obstacles with the same approach: ignore and proceed.

When he started Uber with a few friends in 2009, the idea was to create an app that would give town car drivers extra fares during their down time. It was less about starting a world-changing business and more about helping his friends get cool upscale rides.

But as the concept caught on, Kalanick had to face off against irate taxi commissions and politicians, groups that had managed to derail past tech startups hoping to get in the transportation game.

“This industry required a certain personality to change it, someone willing to stand up to regulators and change laws or make new ones,” says Brad Stone, author of The Upstarts, which chronicles category-altering companies such as Uber and Airbnb. “So, the thing that made him and the company successful is now causing havoc.”

That “thing” would be a take-no-prisoners approach to business that pervaded the culture inside the startup, attracting a sharp-elbowed lot: Goldman Sachs bankers, Amazon engineers, Google policy veterans. And it worked. In a mere five years, Uber would raise $1.2 billion.

For Kalanick, that “baller” lifestyle was less about the world of rapper Jay-Z and more about taking on the world with everyone lined up against you, says Chris Messina, who was Uber’s developer experience lead and left last month.

“I got the feeling that early people at Uber have a sense of pride for their ‘ballerness,’ the willingness to go out and do (stuff),” Messina said.

But the havoc along the way would be a range of withering incidents that followed as Uber grew exponentially from Bay Area sensation to global force.

In December 2013, 6-year-old Sofia Liu was killed in San Francisco after being struck by the vehicle of Uber driver Syed Muzaffar. Uber’s blunt reaction was to say that Muzaffar “was not providing services on the Uber system during the time of the accident,” and it cancelled his account.

In February 2014, GQ published an article about Uber in which Kalanick was interviewed by Pitch Perfect author Mickey Rapkin. Calling Kalanick a “bro-y alpha nerd,” he teased him “about his skyrocketing desirability, (which) he deflects with a wisecrack about women on demand: Yeah, we call that Boob-er.”

In October 2014, Uber’s French operations had to quickly pull down an online promotional offer that appeared to be targeting male riders by promising “incredibly hot women” as drivers.

Among those writing about that incident was Sarah Lacy of Silicon Valley-focused website Pando Daily. Lacy blasted Uber and Kalanick and deleted her app.

A month later, at an off the record dinner party with journalists, senior exec Michael grumbled that Uber should hire opposition researchers to dig up dirt on reporters it did not like, and mentioned Lacy. Buzzfeed published the comments. Michael apologized but was not fired.

A public softening before recent disaster

What makes the most recent explosion all the more significant is that relatively speaking, Kalanick had managed to stay free of foot-in-mouth disease for the past 14 months.

Most of the news the company made was for its ever-larger fundraising efforts and mushrooming valuation, as well as its bold venture into self-driving cars and trucks.

On the occasions that USA TODAY sat down with Kalanick to discuss such announcements, the CEO was measured and not inclined to lob the kind of grenades that made him infamous.

“For the last few years, they’ve been trying to roll out a humbler more optimistic Travis,” says author Stone. “It’s challenging for him.”

Stone notes that other young CEOs have faced similarly tough transitions from their younger punky selves to displaying the traits of a company leader. He cites Facebook founder Mark Zuckerberg, who has gone from the cutting college kid made infamous in The Social Network to a father and philanthropist.

“The question is how do you give people that sense of purpose and mission while not allowing (your) negative proclivities?” Messina says.

Kalanick could well still make a big personal pivot. But the need for Uber’s leader to either shape up or even potentially ship out — following the footsteps of countless tech founders who brought in so-called adult leadership, such as when Google duo Sergey Brin and Larry Page asked Eric Schmidt to step in as CEO in 2001 — could be especially acute.

Consumers love Uber’s product, but they are connected by social media and can turn easily, as evidenced by #DeleteUber. Uber’s main US rival Lyft has vowed to dominate the US market, and recently added 54 more cities to its roster. What’s more, Ford and Google both have made noises about launching new ride-sharing alternatives.

And while Uber sits on pile of money to pursue its global ambitions, an inevitable cash-returning IPO looms and investors could be turned off by a curdled corporate culture that repels top talent.

“We are dangerously close to a turning point,” says Stone. “The Uber brand has taken a hit with worrying frequency over the last couple of weeks. They need to make sure they can straighten things out.”


Top: An Uber sign is a prominently posted near the doorway. Photo: Justin Sullivan / Getty Images via USA Today and CNBC



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