We Can All Learn From Travis Kalanick’s Troubles And Willingness To Change
I hear a rising wave of criticism against Uber CEO Travis Kalanick in the media, for example, this week’s Marketplace “Make Me Smart” podcast (3/1/2017). The tension is remarkable: the founder/CEO of the world’s most successful start-up faces questions about his ability to lead and manage. In the podcast, Kai Ryssdal and Molly Wood question whether he can, and will, continue to lead Uber as it becomes a public company. Two days ago Kalanick made a very public apology, owned up to errors, and promised to “grow up” and seek help with his management style.
The Uber situation is an ultra-high-profile example of a common problem. Successful growth companies often start with a tight team of talented and driven people led by a strong personality. The kernel of the team often has a common history. Their mission is disruptive: to show the world a better way and topple established competitors. The external challenge is huge: to make the product work, overcome obstacles, change minds, acquire customers, raise money, and achieve cash flow before investors’ faith runs out. At the start, the company often has one principal competitive advantage which it exploits relentlessly to grow. Results are (almost) everything. It’s not unusual at this stage for the culture to be aggressive, one-dimensional (little diversity), and inflexible: “numbers talk and no whining”.
I was at Boston Consulting Group (BCG) in its early years, when it had many of these characteristics. The staff was almost all brainy, driven white males. Its value proposition aimed to disrupt the established competitors, like McKinsey. The consultants received a monthly quantitative score card to which their pay was linked by formula. BCG’s founder was brilliantly innovative and driven, but also a difficult personality and a one-dimensional manager.
As companies grow and become important in their market, the management dynamic needs to change. Part of this is internal: the company’s products and go-to-market strategies become multi-faceted, causing need for a more diverse set of skills to operate. More talent must be recruited, which drives hiring a more diverse group of employees, many of whom turn out to be quite valuable but don’t fit the original culture. The original value proposition loses lustre, requiring continued innovation, which a rigid culture and homogeneous management team obstruct. Roughshod management builds up anger and stress in the organization that causes big problems, particularly when success reduces the external threat and allows employees to consider how they feel about life at work.
External pressure drives part of the change. The company now has an ecosystem and needs to manage and nurture relationships with customers, opinion leaders, distributors, employees/contractors, suppliers, and investors. And the company will have come to the attention of the public and media at some level. It may have impacted some markets. Journalists, industry luminaries, and even politicians start to judge the company’s behavior.
BCG and a couple of its competitors drew fire from leading business schools for their aggressive MBA recruiting tactics in the 1980s. They eventually worked out a set of ground rules and give-backs to the ecosystem that led to a positive relationship. Three decades on, BCG is at the top of the consulting industry and is considered both a well-managed firm and a great place to work.
Small businesses face similar challenges. Founders usually have strong personalities that dominate the company culture. As the business becomes established, it needs to become more diverse and manage its external relationships. The proprietor of a specialty food store in my town was a great cook and merchant and built a nice business, until he became known for abusing and harassing his female staff. Word got around and people stayed away. The entrepreneur is now “retired”.
Investors almost always want founders to stay at the top and build their companies to greatness. They note that a large fraction of the great start-up success stories feature a founder who went the distance with some coaching along the way: Andy Grove, Bill Gates, Steve Jobs, Jeff Bezos, Larry Page, and most recently Mark Zuckerberg. And investors want the next great entrepreneur to seek them out. But they know that going the distance requires a large degree of growth and change in the founder’s skill sets, management style, and leadership of company culture. Not every founder of a juggernaut start-up can make this transition, and those that do not need to step aside. Travis Kalanick took a brave step when he stated publicly that he needs to change. That makes me hopeful that he can meet the challenge and continue to lead the remarkable business that he has built.
First posted at blogs.forbes.com/toddhixon on March 3, 2017.
