Summary
Uber, also known as Uber technologies Inc. is a technical startup that involves providing ride sharing services through a high level facilitation of linking between independent drivers (contractors) and riders through an app. Uber Inc. operations have expanded to 58 countries all around the globe and with its worth estimated around &41 billion. In few years, because the cost of taking Uber is less compared to taking a normal taxi, Uber might take over the taxi industry as most people prefer to ride on their services. Uber Technologies Inc. has enjoyed success in the past two years and the company is looking forward to expand its operations both within the United States and Internationally (American Express Company 2015).
However, the rapid success for Uber has continued to create challenges in the form of social, legal, regulatory and technical difficulties. For instance, the Taxi industry has argued that Uber Inc. has had an unfair advantage because the company does not have to face the same licensing requirements that other taxis within the business do. Uber Inc. has been accused of not hiring licensed drivers or rather vetting their drivers this creating potential unsafe conditions for their riders. The leadership within Uber has been highly challenged after a rape case in India that has brought the issue of safety to light. Most cites have banned the ride sharing services not necessarily developed by Uber but by other companies because of the issue of safety and other various concerns linked to the leadership. To add onto the issue of safety, the leadership at Uber has also faced several serious law suits with the inclusion of the independent contractors lawsuits filed against them. The presence of Uber Technologies in the taxi market has also had some influence on lawmakers to develop other new industrial regulations to govern ‘app-driven’ business within the industry particularly the system of ride sharing (Auchard and Steitz 2015).
Even amidst these challenges, Uber Inc. has received lots of praises for presenting independent contractors with an opportunity to still earn money for as long as they are in possession of a car while at the same time providing its customers with convenient ways to move around at lower prices. The surge pricing techniques has also been criticized for charging higher than usual during popular times but has also becomes an opportunity to certain companies such as Zappos to compensate their employees at the call centers. The biggest issue that is challenging to the management of Uber is legal actions since their drivers are not licensed, driver and rider safety, security and protection of the customers as well as driver information and lastly the lack of adequate coverage with reference to insurance. However, the main challenge facing Uber can be summarized into the concept of social costs.
Uber Background information
Travis Kalanick together with Garrett Camp discovered a smartphone application that has the ability to make drivers connect with customers needing rides to various destinations in the city in 2009. Previous founded by a privately owned company (UberCab Inc.), this innovative service was later renamed as Uber Technologies after one year. The developers of this app have initially developed it for Android and iPhone smartphone users through a high level integration of the GPS system. Most customers like the app particularly because it is convenient and of course easy to use. Once customers have downloaded the Uber app onto their phones, they are able to pare for the rides through third party network known as the Transportation Network Company with the use of UberX platforms that has the ability to scan and send pictures of the credit cards with a smart camera. Uber has no automobile inventory for their drivers like limousines or a fleet of taxicabs.
In fact, each driver at Uber is on his own in providing supplies for his personal automobile, insurance, maintenance and gas for his car. Drivers can also drive their own cars to where they want whenever they want because Uber Inc. provides them with relevant freedom in running other small business without restrictions (Huet 2015). The surge model is used in times of high demand. While Uber has initially charged its drivers a 20% commission, the company later on introduced a new tiered system in most cities that indicted special rates of commission depending with the number of hours drivers worked. For example an Uber driver at San Francisco would be liable to pay 30 percent commission for every 30 rides in the first week, 25 percent in the next 20 rides and the rest of the rides of the month pay 20 percent. Because of the increased demand for rides in the industry if ride-for-hire, Uber estimates $ 10 billion revenue with an approximate of $40 billion.
Recently, Uber has moved its headquarters in San Francisco, building space for about 700 employees (Kristen 2014). Looking at the future plans of Uber technologies, their leadership have plans to expand their business into two ten story building, increase their sum of square feet office space and utilize more than 700, 000 square feet. The company provides their services to more than 250 countries worldwide maintaining its offices and presence in the United States with its major operations revolving around San Francisco, New York, Los Angeles, Boston, Chicago and Washington DC. The company has also improves their present navigation service to Apple and Google with the use of deCarta Mapping Company. The new mapping system fortunately has continued to improve Uber navigation and their location technologies but the question of their success points fingers to the ethical problem of social costs within their leadership structures.
The Social cost of Uber problem
The problem
The ride-sharing corporation has continued to be polarizing in the last year. Venture corporations have in fact fallen in love with Uber prospects which is reflected in their recent approximation of $40 billion valuation. However, the company has seemed to separate everyone else in their operations as taxi drivers have termed Uber as a rapacious and unsafe competitor causing lawmakers to shut down numerous markets (Huet 2015). It is unfortunate that public debate that surrounds Uber has produced more heat than light and revealed little about the net impact of the company on public values and goods. The launching of Uber has come as a distraction to the taxi industry and became an instant hit because of the simple fact that they have provided its passengers with an effortless ride while drivers have been presented with the opportunity to earn more.
Uber Business Model
The business model at Uber works similar to that of a middleman connecting other people looking for taxi services and a cab driver in search for a rider. In a statement by Uber spokesman, Uber has provided insurance coverage to every driver, but every driver must have their own insurance for commercial purposes (Huet 2015). Adding to insurance, Uber drivers spend their money on rental, vehicle installment payment, fuel, toll, vehicle, fuel and maintenance. As these drivers do not belong to Uber, they have to cater for tax payment thus bringing lots of issues to taxi drivers, taxi industry and the Uber business itself.
Ethical Issues at Uber
Uber leadership is accused of unscrupulous tactics in recruitment (BBC 2014). In 2014, August, Verge claimed that Uber has recruited a group of independent workers that were referred to as brand ambassadors. This group of individuals used credit cards and burner phones to build accounts with company’s competitors particularly with its major competitor Lyft in order to lure its drivers. A contractor was pain a sum of $750 commission for success recruitment of a new driver with Uber. Uber termed this program as ‘Supplying Long Term Operations Growth’. This operation was termed unethical for Uber because the leadership at Uber would have come up with their ways of recruiting individuals and not steals individuals from their companies. Because of poor hiring systems, Uber had so many drivers all around the globe that they were unable to conduct successful background checks for these drivers. Looking at the organization’s website, it is quoted that ‘All Uber ridesharing and livery partners must be taken through a rigorous background check. The three-step screening process has been developed across the United States with inclusion of multi state checks and county federal new standards. These check trace back to 7 years of industrial check. This process involves prospective and regular driver checks, motor vehicle records, and driver partners to ensure safe driving. Unlike the taxi and driving industry, background checks process at Uber are consistent across the U.S and most times rigorous that what is required to operate taxi businesses? (Huet 2015)’
From this statement, it is evident that Uber does not operate from this statement. Uber does not observe industrial demands of conducting background checks for the purpose of customer safety. What about taxi drivers who operate away from the United States? The company has been accused of not conducting efficient background checks on drivers and in fact fails to conduct any background checks on distant drivers working for the company (Brustein 2013). Lack of background checks from Uber has resulted to issues of privacy and safety issues. As indicated earlier, the rape case in India has revealed how issues of safety are part of the operations at Uber. There are many instances where the drivers at Uber have been reported to threaten riders. In many other instances, Uber rider have exclaimed that Uber partners threaten them during rides and especially female riders are at a higher trend of threats. In 2014 July, one Uber passenger around Philadelphia purported that a driver partner for Uber company punched her face and went ahead to puncture her neck (Huet 2015). Later on the passenger filed a court case of 0.5 million dollar lawsuit against the driver. Adding to this, similar cases have reported in seven different countries where Uber passengers have been allegedly abused, sexually assaulted and raped among other threats from Uber partners. These incidents have been reported till date from all over United States.
The surge pricing issue is equally another ethical issue that faces the leadership at Uber (Decker and Saitto 2014). Most economists across the governmental spectrum have supported surge pricing. However, most Uber riders in many countries have been against the idea of surging and most of them have required that respective governments develop price controls on Uber and other companies of similar positioning. Kibardin Roland a 19 year old student at Pace University claimed ‘I am sure that yellow cabs are much more affordable minus the idea of surging and that the city should intervene so that Uber cabs should at least operate within some sort of cap’. However, Uber has come up with a justification of their surge pricing and said that it has been of help to both its driver-partners and riders (Huet 2015). Riders particularly have benefited as they are able to get vehicles with less delays particularly every time whether conditions are not good. Surge pricing Uber has claimed has helped get the vehicle of very high demand because most Uber drivers have mentioned that the surge pricing has also enabled them to work late at night. However, surge pricing is unethical to the whole industry particularly when other taxi business successes are jeopardized.
Apart from the surge pricing issues, the management at Uber has also been accused of numerous regulatory issues in most countries of operations. These countries have demanded that Uber Company as registered under Taxi Company should adhere to industrial norms. Uber however has seen itself as a technology company and not under taxi servicing company. Adding more drivers into its network has provided these same drivers with an opportunity to become their own boss and earn more than other taxi drivers. Retaining that they are a technology company and not in the taxi business industry has been claimed by many drivers, attorneys and labor leaders that it is a marketing gimmick to make Uber evade the norms that should be observed within taxi industry. Despite the ethical problems that have been addressed towards Uber Inc., there are several managerial ethics concepts that can examine the dilemma at Uber Technologies.
Managerial ethics concepts
The stakeholder theory in managerial ethics is formed around the traditional definition of a stakeholder being an individual or any group that is affected or has an effect on organizational objectives according to Friedman &Miles (2006). The concept behind the stakeholder approach is that the organization itself should be grouped with the needs, viewpoints and interests of the organization. That is to say, this group is solely for fulfilling the purpose of the organization. On one hand, the organization should manage the business for the benefit of these groups (stakeholders) and ensure their participations in discussions and rights while on the other hand the management must also act as stakeholder’s agent to ensure the business survives to safeguard long term goals of both groups. The dilemma at Uber can perfectly be understood from the stakeholder theory of managerial ethics that demands every corporation operates within the benefits of its stakeholders and the benefit of the business. The surge pricing according to Uber drivers is beneficial to them because it enables them make the most out of their rides and because business partners are making high incomes, commissions given to the business also are in an increasing measure. It is just right that Uber Inc. evades being part of the taxi industry maybe with the thoughts that these norms might cripple their returns and thus being registered under the technology industry. In a nutshell, these groups are significant for the survival of the business (Freeman 2004). That is to stay, once managers and stakeholders have a view of the benefits they need for the organization, they are actually fulfilling and behaving according to business norms and thus an explanations to the surge pricing at Uber.
The rational decision making theory is equally another theory in organizational ethics that helps managers make a multi-step procedure through from problem solving to solution identification and making sound and logical decisions. The rational decision making theory and approach has favor on objective data and analysis of a formal process over intuition and subjectivity. This model of rational decision making is based on the assumption that the decision makers have perfect or full data about alternatives that can be used in the business. This theory also assumes that leaders have resources, cognitive ability and the time to equally make evaluation of every choice the business makes. Management under this model at the same time also assumes that people are able to make the right choices that will maximize of the benefits for all stakeholders and minimize costs. Looking at the operations performed at Uber, Uber has its stakeholders (driver-partners) working on their own to secure insurance, maintenance of their vehicles and all other costs that pertain to taxi business with minimal operations from their management. The rational decision making process theory reveals that as long as the business is working towards minimizing costs and meeting the demands of their stakeholders then the business is on the right track.
However, the rational decision making theory does not have regard for industrial norms thus I think both the stakeholder and rational decision making theories are faulty in bringing managers to exceptional leadership. There are still ways in which the management at Uber can organizational decisions is performed on ethical platforms.
Steps to ethical leadership
A strategy to building an ethical company is by employing moral and upstanding leaders; it starts with having ethical leadership because ethical influential have an incredible consequence on what stakeholders in the organization achieve and how they behave. The very first step to have an effective leadership at Uber is to face the complexity in the business and make ethical decisions. The management at Uber should openly make discussion of the ethical issues of conducting backgrounds checks on their drivers and ensure that their drivers have certificates and can maintain customer security. Secondly, it is impossible to separate ethics from day to day business (Jones & George 2011). The management at Uber must have clarity to their employees with regard to what is acceptable and what is expected. Ethics should involve; how we operate, how to carry out what activities at what time, driver-rider conversations and all other discussions about ethics. Effective leaders should not permit negative interpersonal behaviors to come in the way of the client trust that they have taken long to achieve.
Uber should train their drivers even if it means training with the use of a manual to always have respect for their clients and conduct checks to ensure that the respect that should be accorded to clients is practiced. There should be a cultivation of a respectful environment at Uber particularly when clients are involves and further an environment where it is possible for people to speak about ethics and together share the ethical responsibility through open communication, building trust and sharing the ownership of organizational values (Jones & George 2011). Lastly, Uber should not think about ethics as a way of simply following regulations and laws. Leaders should take actions and show stakeholders and their customers that they are actively involved in matters of ethics. The leadership at Uber should recognize the influence of ethics of customers, the reasons why customers buy from them and further demonstrate how regulations and laws go beyond commitment and compliance.
