Since February, Uber's reputation has taken a pounding, with its share of rides slipping from 90 percent to 75 percent, according to consumer spending analytics firm TXN Solutions. Though the company reduced its operating loss from $991 million in the fourth quarter of 2016 to $708 million in the first quarter of 2017, it is more widely known for its toxic culture and controversial CEO than its innovative business model based on use of a driver’s own car, surge pricing, expansion into package delivery and global operations. Meanwhile, the market share of Lyft, its upstart rival, has increased from 21 percent to 25 percent in the same period.
The news of CEO Travis Kalanick’s decision to resign just after announcing he was to hand over day-to-day running of the company to 14 senior executives capped a tumultuous few weeks. In that time, 20 employees, including some senior managers, were dismissed, 230 company managers were directed to participate in mandatory training program, a longtime board member resigned after making inappropriate remarks and a report outlining 47 needed recommendations to improve the company’s corporate culture from former U.S. Attorney General Eric Holder’s law firm Covington and Burling was accepted by the company’s board.
Per the Morning Consult Brand Intelligence Survey, just 40 percent of U.S. adults have a favorable impression of Uber, its lowest level since October 2016. A cg42 survey found that 80 percent of its customers are aware of the company’s internal issues and those with negative views of the company have tripled to 27 percent from 9 percent as news coverage has painted the company’s reputation unfavorably.
What happened? It started long before the February incident in which a video of the CEO dressing down a driver went viral. The company’s culture was known to be cutthroat and its workforce deficient in diversity. The changes are the culmination of the board’s effort to correct well-documented workplace issues. As independent director Arianna Huffington told The Washington Post, “The goal is to enforce a zero-tolerance policy toward any kind of abusive behavior — whether it’s sexual harassment, discrimination, bullying or any kind of unprofessional behavior. And as I’ve said again and again, no brilliant jerks will be allowed, and no one will be protected because they are top performers.”
High-profile CEO changes at Yahoo, Ford and General Electric in the last two weeks have punctuated the precarious position boards face in assessing the performance of their CEOs and the workplace cultures they shape. The stakes are high. For boards, performance matters: Pursuing a growth strategy and achieving financial results are usually the grounds for why CEOs are hired and dismissed, and workplace culture contributes significantly to achieving those aims. That’s especially delicate in companies in which the CEO also serves as chairman, which is the case in three-quarters of S&P 1500 companies. The Wall Street Journal on June 13 called the trend “a troubling shift because companies governed this way are more likely to commit financial misconduct, generate lower profits and overpay their CEOs.”
In hospitals and health systems, we operate facilities that put patients and communities first. Financial results are key, but mission and purpose must be treated with parallel attentiveness. Our CEOs are highly regarded for the most part, even when the financial performance of their organization disappoints. In many cases, inadequate reimbursement, regulatory compliance and market forces complicate bottom-line results. But hospital boards vary widely in how they assess the performance of their CEOs and the culture they create. Conflict between disgruntled physicians and support staff and even rivalry in the C-suite are seen as byproducts of a hospital’s new normal, which can make our workplaces tough to manage.
There are two major lessons that might be drawn from Uber's story:
1. Don't underestimate the impact of the CEO
Uber’s success and turmoil are both the result of its hard-charging former CEO’s vision for the company. Kalanick and co-founder Garret Camp took a $200,000 investment eight years ago and created a juggernaut with 12,000 employees, operations in 570 cities and a purposeful willingness to challenge the status quo. They’ve raised almost $12 billion from lenders and investors who are betting they’re right. But a hard-charging, take-no-prisoners, my-way-or-the highway approach by a CEO given free rein by the board can have devastating implications for an organization. According to research published April 5 in the Harvard Business Review by University of Michigan Ross School of Business professor Jim Westphal and others, cultures in which adulation of the CEO is expected and repression of disagreement is the unwritten code for survival result in suboptimal strategy, costly turnover of talent and heightened awareness of the CEO’s self-centeredness via social media posts and peer-to-peer interactions: “CEOs who tend to receive high levels of flattery and agreement from their managers are particularly prone to being socially undermined by those very same individuals.” Such could be the case at Uber.
2. There are no secrets, especially in organizations with unealthy cultures
Social media exposes an organization’s culture. Despite anti-disparagement warnings in separation agreements intended to mute shop secrets from former employees, the proliferation of information sharing via social media and in sophisticated competitor intelligence gathering done by top-tier organizations makes keeping workplace secrets virtually impossible. And it’s especially important to manage relationships with employees who leave or are dismissed from an organization: Their impact on the organization’s performance and reputation is profound.
Hospitals are tough places in which to work. Highly talented and opinionated professionals work in settings where margins are shrinking and media attention is intense. Hospital boards must pay close attention to how CEOs behave; who they promote, keep or run off; and how our workplaces are affected.
Boards must broaden their CEO evaluation processes beyond usually perfunctory annual reviews tied to their compensation. They must gather objective data about the workplace culture from employee surveys and direct interaction with the human resources team. They must identify areas for improvement in hiring, performance measurement and cultural healthiness, directing these suggestions to CEOs and key senior managers. They must be vigilant about how their CEOs behave and be willing to make changes when they are known to bully or condescend in interactions with peers and subordinates.
The lessons from Uber are clear: Hospital boards must be attentive to the performance of CEOs and aware of the cultures they shape in our institutions. To do less is to jeopardize the mission and purpose for which our hospitals exist.
Paul H. Keckley, Ph.D. (firstname.lastname@example.org), does independent health research and policy analysis and is managing editor of The Keckley Report. He is a member of Speakers Express; for speaking opportunities, please contact Laura Woodburn. Marina Karp can be reached at email@example.com.
The opinions expressed by the authors do not necessarily reflect the policy of the American Hospital Association.