Impact of Management Changes at Uber
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Forcing a CEO to resign is certainly an audacious step, but that alone may not be enough. To reclaim Uber’s reputation and public standing, the organisation will need to increase its investment in training and initiatives that will change and reinforce the new values, accepted behaviours, and expectations required.
The need to appoint or hire people who align with these new values and have the ability to implement big changes that can influence the culture is of the utmost importance. It is believed that by removing Travis Kalanick as chief executive officer, amid the numerous scandals will instil a sense of stability and era of change for the organisation.
Although the removal of the CEO is a good sign for the community, this does not removed the problem. The need for a change in organisational culture is something that will require an exceptional leader to implement.
Kalanick is still a member of the board and still has influence as the founder of the organisation. The need for change will need the full backing of the board to remove the issues of toxic culture in the organisation.
This report is to inform the board of significant changes that effect its operations and the community perspective of the organisation.
Forcing a CEO to resign is certainly a courageous step toward change, but that alone won’t be enough. To salvage Uber’s reputation and community standing, will require constant investment and training for initiatives that will reinforce the company’s new values, accepted behaviours, and expectations. There will be a need to hire people who align with these new values, to expand budgets to help build better teams and implement big changes that can influence the culture.
Management will also need to implement ongoing methods of measuring progress and investigating any new problems. Without these continuing efforts, eventually old habits will kick in and everyone will go back to their same old behaviour, new CEO or not (White 2017).
It is important that management effect real change throughout the organisation and this can only be done by changing the current organisational culture. The Shared values are the pinnacle of any organisation, they form the underpinning culture, strategy, effectiveness and performance.
The Uber culture is one that currently has a game-of-thrones like war raging within the ranks. Managers are not only fighting with their peers but also their direct reports in an attempt to undermine them and take their position within the organisation. This culture is self-defeating and dangerous to the ongoing wellbeing of the organisation. This can clearly be shown by the contempt the ousted CEO had for one of the independent contractors when an issue was raised at the end of a trip whilst transporting the CEO.
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The removal of a founder/chief executive officer is a significant event for any business. However social capital perspective suggests that the exit of a founder/chief executive officer can be more disruptive for new businesses due to the perceived critical role the founder/chief executive officer plays in the organisation and the higher potential chance for failure of the new venture (Bamford, Bruton and Hinson, 2006, pp 207). It is believed that by removing Travis Kalanick as chief executive officer, amid a number of internal scandals that have plagued the company, this will instil a sense of stability and era of change for the organisation.
Kalanick will stay on Uber’s board of directors. Recently Kalanick has faced strong opposition from Uber stakeholders, which ultimately has forced him to step down. It has been reported that a number of Uber’s major investors necessitated the process that forced the chief executive to resign immediately. It is believed that the investors contacted Kalanick informing him that he must immediately leave and that the company needed a change in leadership, change is impossible unless the head of an organisation is an active supporter (Kotter, 1995, pp 62). Removing the chief executive office may just be a Public Relations manoeuvre to move public attention on to something else and away from the mounting myriad of scandals.
There may be a degree of uncertainty during the change of organisational culture, but this is linked to an individual’s inability to predict an outcome accurately. This could be from a lack of information or ambiguous and contradictory information, with a change of leadership there is bound to be this feeling of uncertainty, however with clear direction from the operational management this can be alleviated (Hobman et al. 2004, pp 508).
So how many sexual assault scandals should it take before the culture is changed? Ideally, one should be enough to effect real changes. However in recent times there have been an increase in the claims of sexual assault by drivers, (3) three in the Brisbane area since July, Who’s Driving You has aggregated more than (283) two hundred and eighty three sexual assault scandals with rideshare drivers, most of them committed by Uber contractors (Taxicab n.d.)
This does not take in to account the claims of Sexual Harassment. The whistleblowing claims of ex-Uber engineer Susan Fowler got the most attention. Particularly the many ways the company’s female employees face a hostile workplace. Then there is the incident where Kalanick took top executives to an escort bar where women wore numbers for men to choose them. In a 2014 GQ interview, Kalanick claimed his job got him so much action that he nicknamed the company “Boob-er”.
Kalanick was even videotaped be-rating a driver on Super Bowl Sunday 05th February 2017, in the video Kalanick curses out the driver, this was made public by the driver. The only reason this came to light was because the CEO could not recognize that dashboard cam was present in the car.
Social media is still bussing with the trending term #DeleteUber and this has also prompted action against Kalanick. Uber’s not irreplaceable—it’s a massive logistics company that largely sells commodities. And a recent consumer boycott proved it, the company’s many controversies, from its arrogance of customer safety to its use of surge pricing, the recent boycott in America over the Trump travel bans show that it is far from the first time the company had been excoriated on social media.
Social media is a phenomenon that has transformed the interaction and communication of people the world over. Social media has impacted many aspects of human communication and therefore also impacts businesses. Social networking has become daily practice in most of our lives (Edosomwan et al. 2011, pp 1). This style of communication is the primary aspect of the Uber model, and thus the easiest way to lose business is to be vilified on social media by its consumers.
Current significant issues
Now that the CEO has stepped down, this does not removed the problem. The need for a change in organisational culture is something that will require an exceptional leader to implement. Kalanick is still a member of the board and still has influence as the founder of the organisation. The need for change will need the full backing of the board to remove the issues of toxic culture in the organisation.
Most cultural reform initiatives assume significant capacity development on the part of individuals, as well as whole organisations. Transformational approaches to leadership have long been advocated as productive under conditions fundamentally the same as those faced by Uber (Leithwood & Jantzi 2000, pp 112). Leaders who facilitate knowledge sharing and engender trust contribute to team effectiveness and performance (Lee et al. 2010, pp 473). Culture is not something an organisation has, but something an organisation is and management cannot control culture because management is a part of that culture, thus the need for a leader that will effect real change (Lee et al. 2010, pp 63-64).
The conflict with Uber drivers over whether they should be considered employees or contractors is a colossal financial drain for Uber. Many drivers think they should be fully-employed by the company, which would be tremendously expensive. In 2016 Uber drivers in the UK won a key employment case with the ruling by the London employment tribunal, which would mean that they are entitled to holiday pay, paid rest breaks and a minimum wage. The tribunal’s decision “may have an impact on how Uber operates in other countries.
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Not removing Kalanick from the CEO position would increase the distrust of the organisation and thus increase such movements as #DeleteUber. Increasing an ideology that portrays a culture that enlightens workers to deliver their potential will only benefit the organisation in the long term (Sinclair 2005, pp viii). Crucial aspects of leadership performance are associated with the macho way of doing things. Women executives are now widely recognized as critical engines of national, regional, and global growth, and increasing their presence in the executive management and even in the board will diminish the “Boys Club” mentality (Cirera & Qasim 2014, pp 17).
Current taxi customers are often frustrated because of high prices and long waiting time. Which leave an opportunity for the ridesharing organisation to undercut them, and as there is no limit to the number of partner drivers that can operate, unlike taxis that are so heavily regulated, the ride sharing organisation can swoop in and increase their customer base. Ride sharing organisation can tap into growing markets in rural areas where taxi services are not available. The increase in the number of Ride sharing drivers will reduce the estimated time of the drivers’ arrival to pick up. This will make Uber more liked. Thus Uber will get more revenue and drivers will be profited as well. Utilising these methods Uber can increase its valuation, increasing its appeal to more investors. As a result, Uber will have more capital to operate.
Cheap electric cars or hybrid cars can be used which will reduce the cost and increase the driver’s profit margin. Uber is even researching driverless cars, currently unsuccessfully as numerous have run red lights etc. As part of Uber’s diversification in the transport market it can also offer additional services like transporting older patients to hospital, transporting children to school and transporting pets to the vet.
Drivers are increasingly becoming more upset about their diminishing profit margins, as Uber increases its percentage of each ride, from 20% to 25%. This is likely to lead to further bad publicity, as driver take to social media or even demonstrate.
Increasing competition will ultimately lead to decreased prices. This will discourage drivers from joining Uber in newer markets, as driver don’t earn as much. This will result in loss of customers, as they swap to cheaper models. Uber’s revenues will decline. As new markets and drivers are joining, fraud and scandals are also increasing. It is damaging for the brand.
Not only is Google developing Self-driving cars, which will eliminate the need for Uber, but it is also suing Uber for allegedly using illegally obtained technical documents for its autonomous vehicle project. A project that is crucial to Uber’s long term future.
Porter’s Five Forces Analysis on Uber
Uber is growing in the public transportation industry with an increasingly commanding presence. Within a just eight years the operation has grown to a global entity and has commanded a large customer loyalty from its users. This rapid expansion increased the provision of better ride-sharing services.
A Threat of Potential Market Entrants
Uber lacks security from new entrants in to the ride sharing market that can charge less for the same distance. Uber offers their software for free to willing customers. The user can therefore swap services at zero cost, but this is also being followed by new entrants. As cost increase with in Uber’s operations the need to offset these costs becomes imminent, Uber is not immune to having to raise its rates, thus making it easier for additional firms to infiltrate the industry.
Supplier Bargaining Power
Uber owns no vehicle among its fleets, except the driverless vehicles in development. Currently the company’s business model is highly dependent on drivers and partners owning their own rides. Uber use of an outsourcing strategy for its labour and assets to the driver partners is one of the reasons the company has been so successful to date. Ride Share drivers have an increased amount of freedom to choose between the different ride sharing organization, and competitors can negotiate for a larger slice of the company’s resources, it’s drivers. Therefore, it is undeniable that the suppliers have an upper hand in impacting Uber’s performance.
Buyer Bargaining Power
Customers do not necessarily require Uber services on a regular basis. In fact, only specific circumstances like lateness for work or a scheduled event make the customers to order its services. Customers can freely choose between Uber, GoCatch, or other emerging ride-sharing entities. The switching cost is extremely low because most organisations offer free software, and the only demands are customer registration. Ride Share customers are sensitive to price changes given the presence of alternatives and competitors. In light of these factors, the buyers’ immense power can limit the amount of revenue for the company, hence solidifying it as a strong force.
The threat of Substitutes
A Substitute is a common force in competitive business environments. The Public Transportation Industry is a market in which numerous organizations can substitute Uber. Taxi’s, for instance, is the closest rival and a potential substitute. Taxis are the original public transportation service in most cities and as such their abundance is enough to restrict Uber from massively increase its service rates. It is noteworthy that a slight increase of rates can result in consumers embracing rivals and substitutes. Besides, public means of transport that offer similar services at a cheaper cost can threaten Uber’s existence or operations. A constant threat of substitutes is currently a weak force in the case of Uber.
Rivalry with other Competitors
GoCatch is one of the newest competitors for Uber in Australia. The company has an almost identical business model and operations, however it incorporates the use of existing taxis through its “GoCatch – Taxi & Passenger” passenger app. Not only are the two firms competing for market share but also the suppliers. Uber is a dominant force in the ride-sharing industry. However, there is a constant need for improvement and innovative strategies to maintain its competitive advantage. The Public Transport industry in Australia has many substitutes and competing entities. To survive, it is imperative to lower the cost of operation to avoid raising customer charges (Anon 2016).
Any business or firm should be clear with its objectives and purpose why it was formed. The more it contributes to the existing needs of the people or specific target market, the more it will create an impact to the market. These extrinsic key issues have to be the drivers for strategy (Johnson et al., 2014, pp 701).
As an organisation, Uber has been very aggressive in their expansion into multiple different markets and areas globally. In Uber’s’ early development, they weren’t afraid to take risks and to stick on their plan, to expand their market share and make their name known internationally. This strategy’s only purpose is to attract more customers and investors. Uber’s global strategy is to disrupt the current transportation market and take over. To disrupt the existing competition, Uber uses advance technologies to reach a large customer base.
Unfortunately, when dealing with a board that has externally driven reforms that are ineffectual when it comes to improving managerial oversight. Boards suffer from a “one size fits all” mentality. Improving oversight involves something more than imposing a structure, it can mean a total overhaul of the operational management team (Parsons & Feigen 2014, pp 99-100).
Uber uses a very specific PR strategy, this strategy centres on making enemies as much as making friends. This form of strategy is not without risk. The long term risk of this kind of strategy is that your brand becomes tarnished by your lust for conflict.
In every new location in which Uber it sets up, it starts by being extremely friendly to the local influencers: it offers free rides, cuddling puppies, or even ice cream. These influencers are often people with huge followings on social media like Twitter, Facebook and Instagram.
The company then has meetings with regulators. Although it is clear that the company did not want to enter into the lengthy process of seeking to change existing regulation before launching, a process unlikely to occur quickly. Not only did they have no plans to apply for appropriate licenses under existing regulations, they make sure everyone knows about their refusal to apply for it. Such conflict becomes a self-fulfilling prophecy, as journalists probe regulators and existing companies about the reaction towards this disruptive organisation that flaunts its disrespect for the laws and regulations.
The result is that all of a sudden, Uber is everywhere, in the midst of a debate about government regulation, innovation, the rudeness of taxi drivers, the sharing economy, you name it.
It is imperative that a recruitment drive be initiated that will attract the sort of transformational leader to change and monitor the organisational culture. This person will need impeccable skills and a proven track record for not just organisational culture improvements but also operational improvements. This can only be achieve with full backing of the board.
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Cirera, X. & Qasim, Q., 2014. Supporting Growth-Oriented Women Entrepreneurs: A Review of the Evidence and Key Challenges. Innovation, Technology & Entrepreneurship Policy Note, (5). Available at: http://documents.worldbank.org/curated/en/301891468327585460/pdf/92210-REPLACEMENT-Supporting-Growth-Oriented-Women-Entrepreneurs-A-Review-of-the-Evidence-and-Key-Challenge.pdf [Accessed August 10, 2017].
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Sinclair, A., 2005. Doing leadership differently : gender, power and sexuality in a changing business culture, Melbourne University Press. Available at: https://books.google.com.au/books?hl=en&lr=&id=lDrTAdxwS5kC&oi=fnd&pg=PR2&dq=aggressive+macho+business+culture&ots=lQ4p-SVQm7&sig=9gs02218EvsT6w7LCZgroTd6zYQ#v=onepage&q=aggressive macho business culture&f=false [Accessed August 10, 2017].
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