Uber’s business now depends on three millennials from Bain

Uber, Uber business, Uber Technologies, Bain, Bain & Co, industry, Travis Kalanick As Uber Technologies Inc. tries to move past an array of scandals without its founding leader, running the core business falls to a trio of 30-somethings who had no experience managing anything of this scale before joining the startup. (Reuters)

As Uber Technologies Inc. tries to move past an array of scandals without its founding leader, running the core business falls to a trio of 30-somethings who had no experience managing anything of this scale before joining the startup. Officially, Uber will be managed by a 14-person committee until the return of Chief Executive Officer Travis Kalanick, who’s on leave after a pair of workplace probes found dozens of mishandled human-resources claims during his tenure. But thanks to a corporate structure he set up in 2013, three people in that committee will be in charge of Uber’s main operations. Their work accounts for nearly all revenue the company generates.

The managers of Uber’s three regions were all consulting associates at Bain & Co. within a few years of jumping aboard the young ride-hailing startup. Rachel Holt joined in 2011 to help put the first cars on the road in Washington, D.C., Uber’s sixth city. The next year, Andrew Macdonald was hired to do the same in Toronto, while Pierre-Dimitri Gore-Coty oversaw France.

Holt, 34, now runs Uber’s business in the U.S. and Canada, which last year generated about $10 billion in gross bookings and was, for a short time, profitable. Macdonald, 33, oversees Asia and Latin America, the fastest-growing markets. Gore-Coty, 32, has Europe, the Middle East and Africa.

Each regional manager operates with significant autonomy. They help determine prices in their cities and expenses for recruiting drivers. Regions have their own marketing departments and customer service representatives. Managers have final say in many of the legal and product decisions affecting their territories.

Despite recent turbulence, Uber’s business appears to remain on course. Bookings grew 8.7 percent to $7.5 billion last quarter, while losses narrowed. However, it can’t go on autopilot. Turmoil opens opportunities for competitors to raise money, recruit and chip away at the global ride-hailing leader’s market share.

The empty CEO chair could lead to challenges. Kalanick sometimes encouraged conflict between his fiefdoms and immortalized his philosophy in a series of company values, including “meritocracy and toe-stepping” and “principled confrontation.” As Uber works on rewriting its flawed value system, old habits could emerge in the new management structure. There’s continued tension between Kalanick loyalists and those who would like to see him step aside, according to two people familiar with the matter, who asked not to be identified discussing internal matters.

Ruling by committee isn’t a strategy favored by many management experts. “You need somebody who is taking the reins,” said Cindy Schipani, a professor at the University of Michigan’s business school. “I don’t think it’s sustainable. It’s a too-many-cooks-in-the-kitchen model.”

Hal Gregersen, executive director of the MIT Leadership Center, is more optimistic. He drew parallels to a decision-making approach at Walt Disney Co.’s Pixar, where he said senior leaders ruthlessly seek truth. “Everyone coming into the room has an obligation to speak with candor and clarity of what’s working or isn’t,” Gregersen said. “A committee could work, but it requires a rock-solid foundation of trust and competency for a good first attempt to get out of the starting gate.”

Uber hires frequently from top consulting firms for operational jobs, who bring with them the training necessary for figuring out solutions to a hodgepodge of local problems, like how to win over city council members and where to advertise for drivers. Holt signed on at Uber six years ago because she thought it would give her the opportunity to be “CEO of a city,” she told Bloomberg’s Brad Stone for his book, The Upstarts.

The balance of power at Uber has swung over the years from city managers to headquarters and more recently to regional chiefs. The company tightened its grip over cities in 2014 after the team in Lyon, France, ran a promotion for customers to ride with “sexy girls.”

But the region-based system isn’t perfect. Last year, Macdonald advocated for adding cash as a payment option in Latin America to compete with taxis and other local competitors. He argued there weren’t data to support the idea that carrying cash put drivers at greater risk of getting robbed. “If they’re worried, it’s a bit emotional,” Macdonald told Bloomberg at the time. After a string of Uber drivers were murdered in Brazil, Macdonald apologized for his comment and started giving drivers the option to decline paper money.

Jeff Jones, former chief marketing officer at Target Corp., stepped in to oversee all regions in September. As president of ridesharing and Kalanick’s No. 2, he quickly came to believe Uber had too many problems to fix, and clashed with the CEO and his loyalists, who thought he didn’t move quickly enough, people familiar with the matter have said. His tenure lasted six months. After Jones’s departure, Kalanick became the regional managers’ boss again.

Uber has been actively searching for a chief operating officer since March who can serve as a partner to Kalanick when he returns. This person will take over much of the day-to-day management of the company, leaving more strategic decisions to the 40-year-old CEO. Uber is also looking for a chief marketing officer, chief financial officer, general counsel and board chair.

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Kalanick, who has been grieving over the death of his mother, struggled to define his role at a time of intense internal strife. Kalanick was still hammering out the details of a possible leave of absence within 24 hours of the planned announcement, said a person familiar with the matter.

With the core business now in the hands of three executives, it’s up to Frances Frei, the new senior vice president for strategy and leadership, to wrangle them and the 10 others on the committee. The heads of product, HR, policy and legal also sit in the group. Before starting full-time at Uber this month, Frei helped create a more functional, inclusive environment at Harvard Business School. Frei will shepherd the committee process at Uber, acting as a guru rather than a stand-in CEO, one of the people said.

However, it’s not clear who, if anyone, will step up to make bigger decisions in a company that’s historically been an autocracy. Employees are still reeling from Uber’s investigation by U.S. Attorney General Eric Holder into cultural failings and other indiscretions, and must work on implementing the fixes he recommended. The company is spending lavishly on money-losing endeavors into food delivery and self-driving cars. Such projects extend beyond any one geography. In his memo, Kalanick suggested he may weigh in on these decisions.

“During this interim period, the leadership team, my directs, will be running the company,” Kalanick wrote to staff Tuesday. “I will be available as needed for the most strategic decisions, but I will be empowering them to be bold and decisive in order to move the company forward swiftly.”

The San Francisco-based company’s board is also set to take a bigger role in Kalanick’s absence. Arianna Huffington, Bill Gurley and David Bonderman all spoke at a Tuesday staff meeting to discuss sexism and other personnel issues. At that meeting, Bonderman made a sexist remark and resigned later that day.

Meanwhile, the business faces major threats around the world. Holt’s purview accounts for about half of Uber’s bookings, but she’s had to make compromises between reaching for profit and defending against the prime U.S. competitor, Lyft Inc. At eight years old, Uber is facing pressure to staunch losses.

Gore-Coty grapples with the prospect of the European Union dealing a devastating blow to his business there. An adviser to the top court there said in May that Uber should be treated like a transportation company, not a technology firm as Uber had argued. The change would open it up to myriad regulatory risks.

For Macdonald, the latest crisis is in India. This year, Uber dialed back costly incentives paid to drivers. The nation’s Uber workforce is mostly poor and increasingly unhappy. The decision sparked a public-relations problem nationally and an ethical debate inside Uber.

Making matters worse, the country has been rocked in the last week by allegations of Uber’s misconduct in a 2014 India rape case. The incident contributed to the removal of at least two executives. The victim sued, and Uber issued an apology on Thursday. As the blunder demonstrates, regional operators aren’t immune to the problems at Uber’s core, no matter how much autonomy they’re given.