Of all the management mistakes that led to Uber’s culture and business crisis, Travis Kalanick’s biggest mistake was that he kept a tight inner circle of executives, for whom bad behavior appeared to have no consequences. The most egregious example of this anything-goes leadership culture was in 2014, when Emil Michael, then Uber’s senior vice president, suggested at a private dinner that Uber put a million dollars into hiring a team of opposition researchers and journalists to dig into the personal lives of the company’s critics.
Although Michael was made to apologize publicly, Kalanick didn’t fire him for his behavior. Post–public scandal there were no internal consequences. Michael’s continued tenure signaled that Kalanick would tolerate bad behavior, if not encourage it.
Which is why Uber CEO Dara Khosrowshahi is now faced with an impossible situation. Barney Harford is the operational and strategy whiz Khosrowshahi recruited last fall to help fix Uber. Last week, The New York Times reported that Uber employees had filed several informal and formal complaints to the company’s human resources department and its head of diversity, complaining about the way Harford talked about women and minorities. Harford responded in a statement to The Times, writing that he was “humbled and grateful for the feedback” and “totally committed to acting on it and improving.”
Several days later, speaking at Fortune’s tech conference in Aspen, Colorado, Khosrowshahi was asked whether Harford would remain at Uber. “It’s too soon to tell,” he said.
As Khosrowshahi nears the first anniversary of his appointment as CEO of Uber, he has made great progress in addressing the company’s business challenges and attempting to execute one of the most high-profile turnarounds in tech. But Uber’s cultural problems continue to linger. Last week, HR chief Liane Hornsey resigned amid reports she’d systematically dismissed complaints of racial discrimination. Then on Monday, it was revealed the company is under investigation by the United States Equal Employment Opportunity Commission for possible gender discrimination.
In light of this string of discouraging events, the way Khosrowshahi handles the investigations into complaints about Harford will be a critical turning point for his leadership success, both inside Uber, where employees will look to his leadership on the issue, and outside Uber, where a continuously curious audience of investors, potential drivers, and possibly customers are monitoring the company’s every move. Kalanick chose specifically not to fire people who acted badly. The situation is hardly identical, but whether Khosrowshahi makes a similar choice, forgoing serious reprimand for a slim public apology, will mean everything.
“There are much deeper stories behind the stories you are reading,” Khosrowshahi said in Aspen. “What’s coming out in the news is a symptom,” Khosrowshahi said, explaning that Uber’s rank and file were leaking information to journalists because employees don’t “really trust that we’re going to do the right thing—not only externally, but also internally.”
It’s crucial that Khosrowshahi make it clear to employees that he is taking the correct and decisive action necessary to address the complaints, even though they were lodged against someone he brought in—someone who is perceived to be integral to Uber’s business strategy. In other words, Khosrowshahi needs people to trust him, not just when things are going well and he’s steadily fixing an organization that others broke, but when things are going awfully. In short, this is the moment when he must take responsibility for his role.
At the company all-hands meeting on Monday, Bo Young Lee, the still somewhat new chief diversity and inclusion officer, announced the entire executive leadership team will go through training and coaching on how to be more inclusive leaders. She said leadership will start meeting more regularly with employee resource groups. In the next few weeks, Lee promised, she would present a full diversity and inclusion plan to the company.
These are smart things to do, but given Uber’s poor track record with discrimination and its previous cultural issues, it’s unclear why the company is just beginning them now. Nor is it evident that these efforts will be enough to convince employees to trust Khosrowshahi’s leadership enough to handle problems internally, especially now that they’ve realized that reporters are a helpful microphone for getting management to hear concerns.
This culture issue could quickly derail any of the business success that Khosrowshahi has obtained in his first year on the job. As he said in Aspen, “We took on all the external challenges, and in hindsight I didn’t work as much as I had to internally. Sometimes it takes a punch in the face to see things clearly.” The question before him now will be whether he can convince his employees that he sees things clearly, without asking for the resignation of his right-hand man.