Time to focus more on strategy.

There's a disconnect between the way Uber, the ride-hailing company, is trying to transform itself and what it really needs to fix to become a sustainable business. Instead of reconsidering its business model and protecting itself against a regulatory backlash, it has decided to go politically correct.

Uber's Ex-Communications Chief on Kalanick Taking Leave

As a result of much highly public soul-searching, caused by accusations of mistreating women and fostering a testosterone-fueled internal culture, Uber nowhas no chief financial officer, chief operating officer, chief business officer or chief marketing officer, and its chief executive officer Travis Kalanick has gone on indefinite leave. But it's going to have achief diversity officer. That may be the first for a taxi company (which is ultimately what Uber is) and that's fine; but it won't address the root problem.

At a recentall-staff meeting, board member Ariana Huffington suggested that once a woman gets on a company's board, "there's a lot of data that shows" more women tend to follow. Fellow director David Bonderman retorted, "Actually, what it shows is that it's much more likely to be more talking." Predictably, this caused an outcry and Bonderman was forced to step down from the board. But he was right, not because women are more prone to idle talk than men -- they aren't -- but in the sense that the changes the company is making are about more vacuous talk than much else. The lasting image to illustrate it, supplied byHuffington herself, is Kalanick -- a driven macho who, in running Uber, has tried to bend every rule he encountered on his path -- headinginto a lactation room to meditate.

Thereporton the company's culture, written by former attorney general Eric Holder and Tammy Albarran, contains a set of standard corporate governance recommendations for startups that have lost their way: Less of a role for the founders, more seasoned executives, more independent directors, formal review, feedback and compensation-setting procedures, mandatory training for managers, a robust complaint process. But it also calls for reformulating Uber's 14 cultural values as set out by Kalanick. Uber, it says, should "eliminate those values which have been identified as redundant or as havingbeen used to justify poor behavior, including Let Builders Build, Always Be Hustlin',Meritocracy and Toe-Stepping, and Principled Confrontation."

The Sharing Economy

Uber is a company that sacrificed everything to super-fast expansion. It doubled its gross bookings -- the total amount passengers paid for its taxi service -- to $20 billion last year. "Always hustlin'" and "principled confrontation" is how that growth happened: Uberhas tried to steamroll over competitors and sidestep regulators, includingbydevioustechnicalmeans, to get where it is today. Its business model and its narrative to investors, who have made Uber the most highly valued startup in the world have depended upon that ruthless expansion.

It has beenarguedthat Uber's strategy in the urban transportation market has been to destroy the competition rather than simply muscle into hundreds of cities' low-margin taxi markets. If that hadn't been the plan, it would have made no sense for Uber to engage in debilitating price wars and subsidize rides, as it does in every city it enters.

In the process, of course, Uber lost$2.8 billionlast year, not counting the money spent trying (unsuccessfully) to conquer the Chinese market. That's more than any other startup has burned through in a year. But is putting in a mature company's corporate governance procedures and appointing a chief diversity officer the way to fix those losses?

If the company's business strategyremains the same -- growing the business at a breakneck pace to dominate every market -- then it's a mistake to reconsider the company's culture as radically as Uber appears poised to do with all the expensive consultants it's been hiring. Replacing a focus on achievement atany price with more meetings, meditation and new-age rhetoric while still trying to be aggressive can only lead to cognitive dissonance, flagging employee morale and more painful staff departures.

It would make far more sense to rethink the strategy first. Uber could focus on profitability rather than expansion. That would mean cutting costs, phasing out subsidies and perhaps leaving markets -- primarily European ones -- where the regulatory climate is only going to get tougher for "gig economy" companies. It could also mean doing the math in case Uber drivers are eventually recognized as employees, not independent contractors, in many markets. Fareincreases -- and not necessarily cleverly packagedones such as the current price differentiationplan-- would also be on the cards. The company could decide to spend more on its driverless car push rather than on trying to win dominance in specific cities: Gaining an edge in automated driving could differentiate Uber from competitors who now have pretty much the same technology as it does, from a customer's point of view.

Clear thinking from leading voices in business, economics, politics, foreign affairs, culture, and more.

Share the View

The internal culture would inevitably shift in line with a more prudent new strategy. Uber wouldno longer be a privateer running a black flag -- it would be a reasonably cautious player, attracting a different type of employee. Perhaps the new management team, when it's hired, will move in this direction -- but then the culture-altering moves should be left to that new team. Instead, Uber is tearing itself apart before it decides where it's going as a business. That's putting the horse ahead of the cart; culture change should be organic and constructive, and a highly public political correctness show definitely isn't.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story: Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor responsible for this story: Therese Raphael at traphael4@bloomberg.net

Read more from the original source:

Political Correctness Won't Fix Uber's Problems - Bloomberg