Uber's Problems Are Silicon Valley's Problems

Updated: Jun 13, 2017 8:47 PM ET | Originally published: Jun 12, 2017

For months, the media has been waiting for “the Uber report” like townspeople waiting to see whether there would be an execution or a pardon in the public square. Former attorney general Eric Holder’s law firm was engaged to investigate the company’s practices after allegations of sexism, bias and mismanagement were made by a former female software engineer in February. What has happened during the waiting period for those findings, expected to be released on Tuesday, suggest the results of Holder's investigation are not only explosive but capable of throwing the scandal-plagued startup into further turmoil.

A torrent of leaks have suggested that the company's board is weighing a leave of absence for CEO Travis Kalanick, following the recent departures of several top executives and the firing of more than 20 employees in relation to claims of sexual harassment and discrimination, as well as other transgressions. This comes after months of speculation about the future of the company, valued at $69 billion, as one mess followed another. Beyond work environment issues, these ranged from a legal fight over self-driving technology to a damaging dashcam video of Kalanick dressing down an Uber driver.

The world's most valuable venture-backed company is no doubt in crisis. And the story of Uber, in its extreme success and what may turn out to be extreme failures, is in some ways singular. But it also hits on issues in the technology industry that are far bigger than one company.

Silicon Valley has struggled for years with diversity and inclusion, as critics have wondered whether the industry can achieve its grand self-image: a bunch of brilliant minds set on making the world a better place, for whom no problem is too tough to solve, no status quo too established to upend. Despite whistle-blowing at other companies about hostile office cultures and widespread acknowledgement that the industry needs to “do better” when it comes to hiring and retaining women and people of color, those problems have persisted.

The fact that Uber, the brightest product of the Silicon Valley ecosystem of the past several years, could become such an influential global powerhouse while seemingly neglecting its own workplace speaks to some of the reasons that broader progress, as many see it, has been slow. The pressure for startups to grow fast — and the prospect of profits or an enriching "exit" for investors — can be blinding. Taking time to think about unsexy HR practices often feels antithetical to hard-charging disruption. Company culture and bias can be hard things to see, much less change, especially if the people at the top believe they’re running a meritocracy. And when an industry has been wildly successful by doing things one way, it can be difficult to convince people to overhaul practices – or that there are even flaws in the system – until, perhaps, a blowup.

“If you look at how the big companies are trying to change, it’s just not happening,” says Ellen Pao, a partner at Kapor Capital who famously sued her previous venture firm Kleiner Perkins for gender discrimination and lost. “Most people believe that diversity and inclusion and an open, fair culture are good for business. The problem is that some people believe their practices and companies are diverse and inclusive when they’re not.”

Though it is becoming commonplace for big tech companies to divulge the demographics of their employees, it wasn’t that long ago that some of the best known names in the Valley were fighting to keep the race and gender of their workforces a secret. A turning point came when Google sent an executive onto the evening news in 2014 to talk about why the company was making the decision to publicly share data about its employees for the first time. “To be honest, we kind of felt like we had to. We hadn’t shared the information in the past, because we were afraid of how it would look,” said Laszlo Bock, then Google’s vice president of people operations. “We knew we wouldn’t look good.” (Google declined to comment for this story.)

Pressure to publish such numbers has come from voices inside and outside the industry who say that airing them will allow for disparities to be illustrated rather than alleged – and for progress to be measured rather than simply promised. This is, after all, the land of data-driven decisions. Though companies from Apple to Twitter soon followed Google’s lead, Uber did not release its first diversity report until this March. According to a Recode report, Kalanick had previously suggested that “racial or gender diversity weren’t useful metrics for the company.”

While the Holder report will likely show the extent of problems that women and people of color have encountered at Uber, Kalanick described the March release as signal that the company cares, calling it a “first step in showing that diversity and inclusion is a priority” and saying the company had been “too slow in publishing our numbers.” And the report showed many of the same gaps other companies have struggled to close among workforces that skew white and male.

While women make up about half of America’s work force, they might make up about one-third of the workforce at a tech company and typically hold much smaller proportions of leadership positions and crucial tech jobs (respectively 22% and 15% at Uber). Black and Hispanic workers account for similar proportions. Google’s latest report, for example, showed that those two demographics held a combined 5% of U.S. jobs at the company and 3% of leadership positions despite accounting for about a quarter of the labor force.

The transparency from tech companies, with one report leading to the next like dominoes, has arguably invited more scrutiny and criticism than other industries are forced to endure. But people also care more about those numbers because of the world-changing promises of the tech industry. “As the technology industry — the most innovative and revolutionary economic engine – drives the world into the future, women, people of color cannot be left behind,” Jesse Jackson wrote in January, while calling on Uber to release a diversity report.

It also feels reasonable to expect transparency and fairness from tech companies that describe their missions in noble, universal terms like making the world “more open.” Jeffrey Siminoff, a former diversity director for Twitter and Apple, says that standards can be like “corporate responsibility on steroids in a way, because the work that’s being done by many of these companies has such an impact on society,” as well as consumers and the economy and future jobs.

The numbers matter on the ground, experts say, because the makeup of a workforce is related to what it feels like to work at a company, who gets hired, who sticks around, who gets ahead. Women and people of color both report encountering unfairness and stereotyping in the tech industry, and one study found that women leave at more than twice the rate of men. Susan Fowler, the engineer who who penned the Uber expose, described the female workforce around her dwindling as she encountered problems like being denied transfer requests because it made a manager “look good” to have a woman on his team. Her experiences range from being sexually propositioned by a male manager – who was allegedly never disciplined because he was a “high performer” – to being told that the men on her team would be getting leather jackets as a perk but not the women, because there weren’t enough ladies to justify an order. She quit after less than two years on the job. (Kalanick responded to Fowler's essay by condemning the behavior she described and promising an investigation in a series of tweets.)

Pao, who now runs a diversity-promoting effort called Project Include, suggests that the issues that companies like Uber are trying to untangle are part of a legacy that will have big implications for the future if the cycle doesn’t change. “We started as a very homogenous group and invested in a homogenous set of founders, who hired very homogenous teams,” she says. “All of a sudden your employees all look the same and it’s really hard for people who are from outside that demographic to get in and become successful and then go out and found their own companies and invest in companies.”

Venture capitalists, who make decisions about funding that can determine which companies thrive or die, have been criticized for being too homogenous themselves. Among the top venture capital firms, about 7% of partners are women. And in 2016, just over 350 companies founded by women got VC funding, compared to nearly 6,000 founded by men. “The default situation,” says Sylvia Ann Hewlett, an economist who has studied the isolation and harassment that women experience in STEM jobs, “is that an established group of white, straight male leaders merely replicate themselves.”

Those advocating for change also say that this is not just a question of fairness or avoiding PR nightmares like the one Uber has been trapped in for months: There is a growing body of research that shows a business case for being serious about diversity and inclusion from early days.

For example, when employees are worried about whether they belong in competitive, stressful workplaces — as Uber's has been described — they waste a ton of cognitive resources trying to figure that out instead of being engaged in their work. Diverse teams are better at innovating and thinking creatively, studies have found, and better at identifying opportunities in the marketplace. Companies with more women in leadership financially outperform those with fewer. Young workers are more likely to be diverse and attracted to companies that reflect their generation. And, on the flip side, there are huge costs to turnover if employees leave because they don’t feel welcome or don’t feel treated fairly. A study from the Kapor Center for Social Impact estimated those costs for tech firms to be $16 billion per year — and that's not counting reputational blows.

If a company is making a product that its founders want people around the world to use, as most of the top tech companies are, it also helps to have people building it who understand an array of perspectives. “The world is a very, very diverse place,” says Maxine Williams, global head of diversity for Facebook, noting that 80% of its users live outside North America. “The diversity is so intense that if we have a homogenous team working on anything, we know we’re not going to see the right angles, we’re going to be vulnerable.”

In some ways, releasing numbers and acknowledging that gaps exist is the easy part. Just ask Uber’s head of diversity, Bernard Coleman, who joined the company in January after doing the same job for Hillary Clinton’s presidential campaign. Such posts have become more common in Silicon Valley in recent years, and people in that role are often responsible for closing the gaps, as well as “influencing others to be more inclusive in the day to day decisions they make about workforce,” as one expert puts it.

Speaking with TIME in late May, Coleman declined to discuss what might turn up in the Holder report but did give his take on the company after several months of doing his own assessments. He thinks that critics don’t do enough to acknowledge “how difficult it is to even maintain your diversity numbers, let alone increase them” once a company is the size of Uber, which has 12,000 full-time employees. In his view, allegations that Uber’s workplace is plagued by “toxic” practices are overblown: “I don’t think it could get this big or survive if it were so toxic. It would destroy itself.” He says that the company looks worse in the media than it does from the inside and emphasizes that he’s been flooded with resources and support from “TK” (referring to Kalanick) since Uber has had what Coleman describes as an “aha moment.”

Part of that revelation is that both Uber and Silicon Valley can “do better,” he says. (A company spokesperson emphasizes that the company has acknowledged that parts of its culture are "broken" and that fixing it is a priority.) And Coleman believes it makes sense for people to expect more from both those quarters when it comes to representation and equality in the workplace. “You have these talented and smart people and they’re solving all these other things and creating these wonderful innovations,” he says. “You would think they could solve for this, if they put some of their effort into it.”

There are certainly signs of effort in Silicon Valley. There is a flood of talk about unconscious bias. There are diversity-themed conferences. Companies are spending millions with the hopes of getting more women and people of color into STEM at an early age. Yet experts in the field say there are plenty of companies still half-heartedly checking the box when it comes to workplace issues – or failing to really take a hard look at themselves – rather than summoning the same seriousness and skill they do when it comes to fixing bugs in their products.

It can be an uncomfortable and seemingly opaque process. “Once you’ve been in a company for a while, it’s like water,” says Judy Gilbert, who heads HR for biotech startup Zymergen. “Fish don’t know what water is because they’re just in water and don’t know anything else.”

Experts in the field also say that in the past too many companies have been satisfied by simply spending money on fixing the “pipeline problem” or hosting trainings and calling it a day. Joelle Emerson, who runs a diversity consulting firm called Paradigm, emphasizes that every company will have different “pain points.” While some firms might fail to recruit a diverse pool of candidates, other companies might do fine on recruiting but have biased performance reviews or promotion processes, for example. Yet she’s encountered many companies that will institute programs that sound like they might help without actually analyzing their own data, designing pilots and figuring out how to measure whether a change is helping. “It’s very, very common to see companies make big changes,” Emerson says, “without a sense of what it is they’re trying to influence.”

It’s also common for companies to believe that the tech industry is meritocratic. That has been a cultural pillar at Uber, for one. The fact that companies tend to have higher-than-average numbers of Asian-American employees can reinforce that belief (though Pao argues that there’s still a “bamboo ceiling”). So can the fact that a “rock star” employee might be a nerdy introvert who could see less success in other contexts. And so can the fact that immigrants are so welcome in the valley. But Emerson emphasizes that bias still creeps in and points to studies that have found simply believing a workplace is meritocratic can make employees act in more biased ways. “Once you believe that, really any disparity you see can be written off as fair,” says Emerson. “And of course anyone who has gained success in a particular context wants to believe the environment that produced their success was fundamentally based on merit.”

It can all seem like too much to handle when startup employees are working around the clock just to see that their company survives. But experts emphasize that these issues are much easier to handle if a company starts at the point where there are 12 employees rather than 12,000 — being thoughtful from the first about who they hire, about whether the culture is being built around a handful of people who all think the same way. It’s a common failure for startups to wait until a company has already grown to hundreds of employees and is “hiring an HR person to get out of trouble,” says Kelli Dragovich, who runs HR at an employment startup called Hired.

Uber, founded in 2009, hired its first official HR executive in 2014. “It’s like a bike chain just snagging when you hit a certain stage of growth,” Dragovich says, “and then you have to kind of start over.”

She, along with many others in the field, are sympathetic to the fact that enormous pressure can cause “myopia” at a startup. The focus is on the product, the company grows, as does the pressure, and workplace issues get put off. It can feel like there’s a no time to find a diverse pool of candidates when posts need to be filled yesterday: So why not just let that great engineer down the hall refer his friend? Uber’s representatives have put at least part of the blame for its current travails on the "superfast" growth the company experienced over recent years. The number of full-time employees doubled in 2016.

“You think of it as, 'I’ll get to that, I’ll get to that,'” says Coleman, Uber's diversity head. “And next thing you know, it’s a much bigger thing than you could have anticipated.”

The importance of the CEO, and the tone he or she sets, always comes up as part of the required recipe. That commitment is important, experts say, because there will be hard moments like needing to make an example out of a star engineer who makes lewd comments or simply slowing down the rate of hiring with the bigger picture in mind. “CEOs have to understand there are sometimes going to be tradeoffs,” says Emerson, “and decide how important this diversity-and-inclusion thing really is.”

While Kalanick may have once joked that the company should be called “Boober” because it has helped him be successful with women, Coleman says the CEO is “totally committed” now. “I’ve worked in other places where people are like, ‘I don’t understand diversity’ or ‘Why is this important?’ I have not encountered that here,” he says. “That was something that I was happily surprised about.”

When asked to name projects he’s concentrating on as of late May, Coleman doesn’t mention anything revolutionary: hosting workshops on “why D and I” matters, empowering employee resource groups (that might be collections of black or LGBT workers), making efforts to recruit from new places and spending $3 million to “help bring more kids into STEM.” But he says the company is also working on crunching numbers, more actively using data, so that Uber can be more “surgical” about making sure all employees feel “safe, supported and respected.”

How long that will take, or if it’s even possible, is unclear. Even when things are going well, the work of diversity is continuous and complicated. While Facebook's head of diversity acknowledges that an engineer might say otherwise, she believes that dealing with issues like inclusion is a bigger challenge for that company than converting to mobile was. “People issues are more gnarly than product issues, because you can’t control for as much as you can control for when you’re building a product,” Williams says. “You can put a 30-day timeline on this and at the end of the 30 days, we’re going to ship a product… People spend generations unlearning bad habits.”

It's possible that in the long arc of Silicon Valley history, Uber's crisis will turn out to be a blip. While that might be good for a big clump of workers and investors, it could also prove that these types of problems are not existential, that money matters as much as morals in one of America's most powerful corridors. And that could in turn lead young companies to make the same mistakes.

For now, there is hope that the time surrounding "the Uber report" will prove to be a big teaching moment, a cautionary tale that the next generation of startups learns early on – so that words like diversity and inclusion don’t get ignored or treated like mere ornaments for a mission statement. “It’s going to make more companies realize certain behaviors are not acceptable,” says Pao, “and realize if we don’t start addressing issues sooner than later, it gets that much harder to solve.”

Correction: The original version of this story misstated the organization that conducted a study about the costs of employee turnover. It was the Kapor Center for Social Impact, not Project Include.

All products and services featured are based solely on editorial selection. TIME may receive compensation for some links to products and services on this website.