Last week, I fielded an inquiry from a New York Times reporter asking if I would like to

comment on the apparent change of heart (and strategy) underway at Uber. You know, the new

“kinder, gentler” Uber — the Uber that is eager to collaborate with local governments, and to

calculate its contribution to sustainability and to getting cars off the road, the one that is serious

about beefing up its safeguards on access to rider data. At first blush, this was a highly unlikely

subject for me to weigh in on: I am just about the only person I know who is not gaga over the

Uber experience. Nor am I a fan of its pugnacious approach even to regulations as outdated as

those governing the taxi industry — what CEO Travis Kalanick has called Uber’s stance of

“principled confrontation.”

While I was an unlikely commentator from one perspective, I was well-suited from another. I am

a firm believer that companies need society’s permission to grow, and it would appear that Mr.

Kalanick and the management team at Uber are coming to this realization as well. This notion of

“permission to grow” did not originate with me. I first picked it up in correspondence I was

fortunate enough to have carried on with Alfred Chandler (yes, that Alfred Chandler) almost 20

years ago, in the course of writing a book. This was a good old-fashioned exchange of

typewritten, snail-mailed letters — Dr. Chandler’s preferred medium. He and I were discussing

Wal-Mart’s prospects, as I recall, and whether the company could succeed in resetting our

collective understanding of the size that a retailer could attain. So what were the limits to its

growth: Adequate labor pool? Attractive retail locations? Sizable acquisition targets? Proximity

of adjacent planets? He wrote in one of those letters (How I wish I’d kept it!), “Companies need

society’s permission to grow.” Mind you, this was well before Wal-Mart management rolled out

its kinder, gentler vision (“Save money. Live better.”).

Companies need society’s permission to grow. We see this demonstrated both in the antitrust

courts and in the courts of public opinion. The most extreme proof of this axiom is, of course,

our reaction to “unreasonable” monopoly, as expressed in the breakup of the Standard Oil group

in the first decades of the last century. There are abundant examples across the intervening years:

following World War II, Dow was forced to share its proprietary processes for manufacture of

magnesium and synthetic rubber, setting the company back a decade in the view of company

officials. DuPont was forced to dissolve its patent-pooling arrangements with foreign chemical

firms and disgorge its cross-holdings in GM stock, devastating both its top and bottom lines. And

in more recent experience, of course, we have witnessed the seemingly never-ending antitrust

battles of Microsoft and the constant, uneasy attentiveness of Facebook management to the data

privacy concerns of its users. The management teams of all of these companies became aware—

sooner or later—of a simple, compelling truth: When society withdraws its permission for a

company to grow, that growth can stop dead in its tracks.

Today we call the withdrawal of this permission “reputation risk” — how favorably a company’s

motives, impact, and agency are regarded by important external constituencies. A good

reputation can lead to a whole host of benefits; a bad reputation, on the other hand, can lead to a

loss of customers, disengaged and unmotivated employees, and shareholder dissatisfaction.

Whatever form Uber’s risk management dashboard takes, it is clear that the reputation risk

hazard lights have been flashing red for some time now. Conflicts with government, here and

abroad; legitimate, frightening concerns over rider safety; data privacy violations — these are the

kinds of risks that Dr. Chandler was warning us about, risks that by their nature flare up

suddenly, unexpectedly and painfully. At the very least, they pose a huge distraction to

management.

And on this issue of management distraction, and organizational maturity, it is instructive to

remember that Uber is impossibly young for all it has achieved. The company is only five years

old (only five years old!), with thousands of employees, tens of thousands of drivers, a $40

billion valuation and global growth ambitions. The company is like an adult in an adolescent’s

body, and so it is unsurprising that they should be suffering these growing pains. They have a lot

of growing up to do — and in a hurry.

It seems fairly clear from the recent shift in strategy that this young management team has

concluded that the last thing it needs is rearguard battles with regulators and customers when the

road ahead presents such enormous challenges. And make no mistake, the immediate future for

Uber promises to be much, much harder than the recent past. Their business model is in full

view, ready to be copied; they have spawned a whole host of aspiring disruptors coming up

underneath and seeking to topple them; and the investors who have bestowed such a rich

valuation on the company will be incredibly sensitive to any bumps in its growth performance.

Oh, and their employees — particularly their most valued employees — have ample alternative

employment options. Given the choice, would you work for a pariah?

If Uber were a case study, it would fit perfectly in the course we teach at HBS, called “Building

and Sustaining a Successful Enterprise,” because we are watching in real time as the

management team digests a lesson that has been learned time and again by successful enterprises

before them. If you had to distill our teaching down to a couple of sentences, they would read as

follows: In order to build a successful enterprise, you need to have a remarkably well-integrated

business model and capability set, focused on an important job that your customers are trying to

get done. In order to sustain that success, however, you need the wisdom and humility to adapt

when the capabilities and behaviors that earned you your initial success will no longer take you

where you need to go. Calling that turn is the lonely, necessary lot of the leader.

So has Uber management spotted the inflection point early enough? My guess is that they have,

and here’s my reasoning: We’d know it was too late if the question weren’t so engaging—if

we’d all moved on to Lyft or Sidecar or any one of the dozens of similar upstarts. The fact that

we’re all somewhat surprised by this new conciliatory stance of theirs—even wondering if it was

really necessary—suggests that they’ve likely gotten the timing about right. If the Uber

management team truly understands that they’ve outgrown the behaviors that served them well

as an upstart, and they’re able to develop a new set of skills and behaviors more suited to the

requirements of their current scale and future ambitions, then they might still have the ability to

surprise us with how fully they have earned the permission that we have granted them, and with

the impact that they can have on the world.

How Uber Changed The Way They Hire

With a little introspection and fine-tuning of the interview process, Uber found the right people

to accelerate its growth.

By Gwen Moran

As Uber worked on disrupting the transportation market with its technology-based approach to

catching a ride, the company needed good people fast.

So, the management team did what most companies do. They recruited through various channels,

found suitable candidates, and interviewed them. Three to five interviews and a series of typical

behavioral questions later, they’d make a hiring decision.

But soon, head of global operations Ryan Graves, who was overseeing much of the personnel

growth, found this approach wasn’t cutting it. He wasn’t getting candidates who had the best

combination of skills needed to contribute to Uber’s growth in an "intense" work environment.

At the same time, the company was rolling out a lean growth model and getting a better

understanding of the skills needed to find the best talent. It was time to tinker with the process to

get the right people.

Creating a team model

As Uber grew, the team relied on a three-pronged leadership model in each new city. A general

manager heads up the team and is in charge of the business’s growth there. Graves saw that his

most successful market heads were entrepreneurial, agile, and knowledgeable about the culture

and quirks of their regions. The GMs are supported by a community manager that handles

marketing, social media, and local business development, and a driver operations manager

oversees driver relations and ensure that they’re on the road where and when they need to be.

Instead of asking fluffy tell-me-a-time-when kinds of questions, we just put people in scenarios that will most closely resemble the job that they will do.

From there, teams are built out based on the needs of the city. The Los Angeles team might need

more people focusing on media, movie and television partnerships that you wouldn’t find in

Minneapolis, Graves says. This model also gives teams more clarity in hiring because they’re

looking for specific skills and regional knowledge.

"Most of our teams are from the cities where they work," Graves says. "It’s not just, ‘Let’s

evaluate this as a customer,’ but it’s more like, ‘These are my people, this is where I’m from,

[they are] like my family and friends.’ So there’s a cool mirror about the city team cultures

relative to the city that they serve," Graves says.

Changing the interview

Charisma, humor, and charm can go a long way in an interview, but at its core, Uber is an

engineering company fueled by data, Graves says. The team needed people who were

comfortable with analyzing the multiple data points that the company pulls from various sources,

including its apps and software platforms. These range from driver utilization and efficiency to

supply levels and underserved city regions.

"Use your imagination. We’re probably measuring everything," he says.

Successful Uber employees also have a very strong work ethic and thrive in high-pressure,

dynamic situations. Graves realized they would have to dig deeper to make sure candidates had

personalities that could handle the pressure instead of "tweaking out in that environment," he

says. With those realizations, the interview process started to change.

discount people’s previous experience but put a heavy premium on their ability to solve the problems that your business has.

"Instead of asking fluffy tell-me-a-time-when kinds of questions, we just put people in scenarios

that will most closely [resemble the] job that they will do and then create a real-world and real-

time conversation that gives us an insight to their ability to handle problems on the fly," Graves

says.

While the Uber team won’t disclose specifics about the exercises, they do put candidates in real-

world situations by using exercises and tests that gauge both creativity and analytical thinking.

The exercises can be highly quantitative in nature, and make candidates think through real-world

business problems.

Graves says these changes has upped its hiring game and helped them zero in on exactly the right

people to fuel its growth because they have the skills to solve the challenges Uber faces. That has

helped the company grow to more than 600 employees in 80 cities in 30 countries. Graves says

that when it comes to finding the right people, the key is to find your own hiring process instead

of following someone else’s.

"In our business, we have a combination of creative and analytical. It’s very hard to find those

people who have a mix of kind of left and right brain but plenty of businesses need different skill

sets. I would say discount people’s previous experience but put a heavy premium on their ability

to prove to you in the interview process that they have the right skill sets to solve the problems

that your business has," he says.