Stakeholders of uber

Uber Stakeholder Analysis

“The word is stakeholding. The style is integrity. The profession is business.”

–Anita Roddick OBE, Founder and Chief Executive of The Body Shop

The invention of the smart phone and its innovative software platforms have dramatically changed the way we live our lives. In fact, it’s fair to say that most people cannot imagine going through an average day without the use of a multitude of phone applications that provide us with assistance in various tasks and with social fulfillment. Tech innovators have capitalized on our mobile addictions to create phone applications for just about everything you can imagine. Their goal? An optimist may say: “to make our lives easier.” A cynic would most certainly say: “to make money.” And whether you agree or disagree with either of these points of view, let us just be pragmatic. The data shows that the public has in fact become heavily reliant on technology in their everyday lives and companies who continue to roll out these technologies are raking in revenues by the billions.

But as innovation builds at rapid speeds and the number of application users grows at exponential rates, some companies competing in the “wild west” world of mobile tech are finding out that popularity only gets you so far. And once you begin to hit it big, all eyes are on you, for better or for worse. Managing a big brand in a world where media is now omnipresent and the public ever-engaged can be much more challenging than one may realize. One company facing such a challenge is Uber. The Uber rideshare app was created to provide a more efficient, more economical, and more pleasing alternative to using a taxi service to get from point A to point B. Since its humble beginnings, Uber now services more than 40 million active users every month in over 450 major cities around the world. To put that in perspective, Uber’s main competition, the Lyft app, services just over 3 million active users a month in 65 major cities. Looking at the numbers, one may think that Uber must be doing everything right when it comes to building its company and its brand. But Uber has in fact been in the news lately for reasons which it surely would like to forget: Riders being assaulted by drivers, poor wages making some drivers homeless, predatory lending practices to drivers, and even sexual harassment and hostile treatment within its own ranks. The list goes on and on. After unsuccessful attempts to recover from the fallout, Travis Kalanick, the app creator, stepped down as CEO. Dara Khosrowshahi was hired to take Kalanick’s place behind the wheel of Uber’s leadership to get the company back on the road to success.

As the former CEO of online travel giant Expedia, Khosrowshahi will no doubt reevaluate the corporate culture of Uber and reassess its many stakeholders in the process of revamping the tainted brand. New strategies on how to deal with different stakeholders and to proactively address their concerns will ultimately determine success or failure for Khosrowshahi and for the company which he will oversee. After performing research of Uber’s current business model and analyzing the company’s current situation, I have created a chart (see Figure 1) listing Uber’s top ten stakeholders, their stakes and attributes, and the strategies that will, in my opinion, most likely yield the best results in repairing the company’s image. Although Uber must take all its stakeholders into consideration, it should focus most of its attention on its top five stakeholders: riders, investors, drivers, mobile operating systems providers, and its employees.

Figure 1: Uber’s Stakeholder Analysis Chart

#1: Riders

Stakes: An interest and a right

Uber must consider its riders as its top priority and number one stakeholder. Without its riders, the app would not be used and its revenue stream would cease to exist. Riders have expectations and demand a certain level of service from the application to fulfill their needs. Many riders rely on Uber as their main mode of transport. In cities without adequate public transportation, Uber is a common mainstay for commuters traveling to and from work. As such, riders have a genuine interest in Uber’s abilities to solve their transportation problems. And as Uber’s paying customers and main source of revenue, riders have the right to receive satisfactory service in exchange for the fee they pay. Riders want a safe, efficient, and inexpensive way to get where they need to go.

Attributes: Legitimacy, urgency, and dare I say power?

Uber’s riders are, without a doubt, a legitimate stakeholder to the company. Riders utilize the Uber app to get themselves where they need to be. Although there is competition from others including traditional taxi services and the rival rideshare app Lyft, many riders live in areas where those other options are either unavailable or unreliable. There are also many riders who do not use the app daily, but instead make use of Uber services when going out on the town to have a few drinks with friends to avoid the unnecessary risks of driving while under the influence of alcohol and other controlled substances. Riders’ needs for safe and reliable transit must certainly be considered urgent, regardless if they use the services regularly to get to and from work or occasionally to be personally responsible. Whether riders possess power as stakeholders could be debated. A single rider’s power to influence the company is most likely very limited outside the capacity to sue in the event of legal infractions, however riders’ power as a total population cannot be dismissed especially with the dominance of social media.

Responsibilities to the stakeholder: Ethical and Legal

Uber has both ethical and legal obligations that it must meet for its riders. Because the company’s competition is limited and controls a heavy majority of the market share, the world will expect Uber to set the standard for ridesharing, and the company has a moral obligation to customers to ensure they are being treated fairly and safely. There have been instances where riders have been assaulted, raped, and even murdered by Uber drivers in recent years. Although these instances may be extremely isolated and the statistics comparable to taxi service and Lyft, Uber still has an ethical and legal responsibility to its riders to thoroughly investigate every claim of assault, cooperate openly with the proper authorities, and continuously monitor and improve its safety protocols to prevent similar incidents from happening again.

In 2014, a rider in India was raped by a driver and the driver was put on trial for sexual assault along with other charges. Indian officials also came down on Uber for the incident, claiming the company’s lax background check procedures for new drivers contributed to the crime. The government barred Uber from operating in certain areas of the country for over a year. An Uber executive sought to discredit the victim in the crime and went so far as to obtain her private medical records searching for proof that her details of the rape were fabricated. The executive was quickly dismissed, but the scar remained. Actions like this are reprehensible and serve no purpose but to deny the stakeholder of their moral and legal rights and permanently damage the image of the company. Such behavior cannot be acceptable if Uber’s reputation is to recover.

Strategy – Collaboration with stakeholder

Riders pose a considerable risk to Uber, but they also have a high desire to cooperate since they are so dependent on the service which the app provides. This scenario creates the perfect opportunity for healthy collaboration between the company and its customers, both happy and unhappy. With new leadership at the helm, Uber should seize the moment to have a more in-depth conversation with its riders about their expectations and how the service can be improved to better serve them. This is a mutually beneficial partnership that will create a better rider experience which will in turn drive revenue in the right direction.

#2: Investors

Stakes: An interest, a right, and above all, ownership

Investors are certainly an essential stakeholder to Uber. Without the capital they infuse into the business, Uber would never be the company it is today. And although Uber is so successful, it’s still investing massive sums of cash to expand into new markets and modern technologies like autonomous vehicles (more on that later). Because of these large reinvestments, Uber is still operating at a net loss. That means that it is even more dependent on outside capital from its investors to keep the tires spinning on its operation. Investors may provide the cash and other assets to build the company, but they don’t give up their money just to be nice. Investors inject cash into Uber in exchange for partial ownership in the company or in the form of debt. They in turn have an interest in the success of the business and a right that the company and its executives will make the proper decisions to make a healthy profit in the short term and to do what’s best for the bottom line in the long run.

Attributes: Legitimacy, urgency, lots of power!

Individuals and companies that invest their capital in Uber have a legitimate interest in the success of the business. Their return on investment is dependent on the performance of the operation. As of June 2016, Uber had amassed over $15 billion in outside funding in the form equity and debt. That money represents a lot of people who are going to want it back… and then some. These sums of capital invested certainly warrant urgency on behalf of those who placed that cash into Uber’s accounts. The huge cash amounts also buy lots of power, albeit not absolute. Even though many investors may not be able to force company policy and decisions directly, Uber’s constant need for more injected capital puts the company somewhat at the mercy of their investors’ wishes. If investors don’t feel their money is being spent wisely, they may refuse to invest further, or worse yet, they may pull out altogether. An action like that could cause a ripple effect like a run on a bank. In this respect, investors hold much more power than most stakeholders.

Responsibilities to the stakeholder: Economic, ethical, and legal

Uber has economic and legal obligations to investors in the form of mutually agreed upon and legally binding ownership contracts and lending agreements that must be fulfilled by the terms of those agreements. The company has a fiduciary responsibility to investors to turn a profit for the company. Uber’s executives also have an ethical responsibility to investors to provide them regularly with accurate earnings reports showing the true state of the company so those invested can make informed decisions regarding their stakes in Uber. If unethical behavior is suspected on behalf of the company and investors’ trust is breached, investors are likely to pursue legal action to retrieve monies owed to them. That said, it is imperative to the operations of the company for executives to always remain honest with investors, even when times may be tough.

Strategy – Involve the stakeholder

Investors in Uber absolutely have the desire to cooperate with the company and its directors. Their main motives of investing are to see a return on their investment provided through company profits. And although their cash is integral in insuring the company’s success, they pose a relatively negligible risk assuming the company behaves in an ethical manor. After all, they wouldn’t work against their own interests. As they are supportive stakeholders to Uber, it would be in the company’s best interest to utilize investors to their maximum potential in the running of the business. Most investors are highly successful businesspeople with a wealth of knowledge that they can bring to the table. Uber may know the ridesharing industry like the back of their hand, but in business it’s equally important to know what you don’t know. By involving investors with a proven business acumen, Uber will not only insure its spending its cash where it will see the best return, but it will also create a healthy relationship where its investors feel they can be a part of the process. Investors who feel their advice and calls for change are not being heard can grow frustrated and set off alarm bells in the financial community. This was seen in February 2017, when investors Freada and Mitch Kapor wrote a letter to Uber’s other investors and to its board of directors expressing their frustrations over the company ignoring continuous efforts on their part to make critical changes to the company’s culture. Khosrowshahi and his new leadership should be proactively engaging investors for their ideas to avoid such mishaps from occurring in the future.

#3: Drivers

Stakes: An interest and a right

The cars that pickup riders and deliver them to their desired destinations are like the machines that print the company’s cash. Those cars (for now at least) can only print that money through the operators that steer them on their course. Drivers are an essential stakeholder of Uber. They are the supply while riders are the demand, and as it stands now there is no decline in demand in sight. That said, a steady supply of drivers is needed to keep the money machines running. Many of these drivers are part-time, signing on to drive in their spare time to earn extra cash. There are also many drivers, however, that depend on the app as their main source of income. In either scenario, they have an interest in Uber as their income, at least in part, depends on it. As such, drivers also have the right to a fair wage and to regular, timely payments.

Attributes: Legitimacy and urgency

Drivers have a legitimate stake in Uber as they make at least part of their living through the app. The app helps them pay for rents, car payments, utility bills, groceries, and even child care. Because this income is needed to cover expenses, the stake is also an urgent one. Drivers need to be paid on time and in an efficient manner. There are other ways of making money so if Uber fails in providing its drivers with a beneficial work platform, drivers may simply search for work elsewhere.

Responsibilities to the stakeholder: Economic, ethical, and legal

In theory, drivers should be granted a fair wage and basic contributory benefits. However, Uber’s structure is set up in a way that it does not hire drivers as employees, rather, instead it hires drivers as self-employed, independent contractors. Drivers simply log on when they want to drive and log off when they decide to call it quits for the day. Make as much money as you want, and work when you want to work. As a prospective driver the concept sounds fantastic, but there are potential problems that can arise from such a scenario. For example, since drivers are not employees, they receive no benefits outside of the wages they earn while driving. There is no healthcare, no 401k, and no paid time off. That’s not to mention the gas and maintenance expenses incurred when a vehicle is being driven so frequently. These increasing expenses, paired with decreasing fare rates, can put a heavy strain on drivers’ finances and cause significant emotional and mental stress. Some drivers were even reported recently to have become homeless, driving by day and living out of their vehicles by night. Many of those vehicles, by the way, were financed to the drivers through questionable high-interest loans issued by Uber itself. Legally and economically, Uber is only responsible to pay drivers for their performed trips, but I believe ethically it owes them at the very least a “little more.” After all, the company has built its astronomical value of almost $70 billion on the backs of its drivers. That said, it remains to be discussed or determined what that “little more” can and should be.