Culture

Can a New CEO Fix Dysfunctional Uber?

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Combine a totally dysfunctional company with a smart new CEO and what do you get? Either a company on the mend or a CEO overwhelmed by the tasks he faces. That’s the situation awaiting Dara Khosrowshahi, who is about to take the job as Uber’s CEO. Khosrowshahi, the CEO of the travel company Expedia, has been successful in creating a travel behemoth around the Expedia brand that originated with Microsoft. The company now owns Hotels.com, Hotwire.com, Trivago, Venere.com, Travelocity, Orbitz, and HomeAway.

Why in the world would he want to leave to leave Expedia and take a job with Uber? Because he calls it a once in a lifetime opportunity, meaning the chance to make a huge impact, as well as the possibility to make a huge fortune.

But it’s impossible for him to know at this juncture what lies ahead. He will have an opportunity to make a substantial impact, particularly on improving morale, establishing basic norms of behavior, and addressing many of the issues around driver satisfaction. After all, things can only improve, right?

Not necessarily. Uber is in such dire conditions that he may find he’s spending all his time putting out fires rather than accomplishing anything positive. Uber is embroiled in numerous lawsuits involving one of its board members and investors and the former CEO, Travis Kalanick. The board itself is dysfunctional and in turmoil. They couldn’t even appoint the new CEO correctly. While they said Khosrowshahi was offered the job, they’re still in negotiations and can say no more.

When a highly visible job is offered such as this one, it’s hard for even the most skilled candidate to know what lies ahead, and it’s even harder to make a considered decision while in the limelight. He’s likely excited about the opportunity, he’s being courted by the board of directors, and probably believes he can take on the company’s biggest challenges. He reads about being selected over other formidable candidates and sees his name in dozens of news stories. He likely feels invincible.

Yet Uber is not like any company. It’s been run more like a criminal enterprise than a Silicon Valley tech company, with management behaving immorally and breaking dozens of laws, ranging from sexually harassing employees and putting their customers at risk, to stealing confidential information, to being accused of bribing foreign governments.  It’s hard to think of any company that has been involved in so many criminal activities since Enron.

Many of these issues will not go away with a new CEO. They will continue to grow into company-threatening events, making it difficult to turn the company around. In particular, a lawsuit by Google for stealing their confidential information on self-driving car technology looms large.

The opportunity for this new CEO position is the result of a messed up, poorly run and managed enterprise. The new CEO needs to bring in new management and create an entirely new organizational climate, shedding the one created by founder Kalanick.

But that will be difficult, because Kalanick has refused to move on, even after the scathing findings conducted by former Attorney General Eric Holder. Kalanick wants to make a comeback, remains on the board, and has injected himself into the CEO search. One indication of Khosrowshahi’s skills and his likelihood for success will be what he does with Kalanick. If he provides an important role for him, look for continuing trouble. After all, Kalanick single-handedly was responsible for this timeline of events.

Putting aside all the dysfunction and legal troubles, there’s still the question of whether Uber has a sound business model. Yes, it’s a great idea, but can it make money? Uber lost $3.8 billion last year, including its China business. It lost money on every ride it gave. Uber has banked on moving to self-driving cars to eventually provide profitability, but that’s a pipe dream. The technology is years away and the company would need to replace low-cost drivers with expensive automobiles.

One thing is for certain. Uber will continue to provide continuing entertainment to the business press and followers and we’ll learn of more revelations of misbehavior. But for this new CEO, it is the biggest challenge he’ll ever have, and many will be rooting for him success.