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Uber’s biggest failure: contract management

October 1, 2017

One of my colleagues recently met a marketing executive from Uber at an airport. While talking, my colleague observed:’Uber is really a giant contract management company’. His comment was met with a puzzled look, followed by the reply: ‘I’ve never really thought about contracts’.

Ten years ago, there was the financial collapse. Before that, Enron; and since then, a multitude of highly publicized cases of major public sector waste and, in some cases, corruption. The common factor in each of these? All of them were running operations that relied on integrity in their contracts and contracting practices, yet with senior management that either didn’t know or didn’t care about the underlying lack of visibility and operational discipline.

So what about Uber?

Contracts – and the way they are formed and managed – is the core of Uber’s business. They establish contracts with their drivers; users of the Uber app accept its terms and conditions; regulators require contracts as part of the license to operate. It is the commercial design and interconnections between these contracts that should provide the source of the company’s overall integrity.

So what should Uber be doing differently? I’m certainly not suggesting that there has been any form of corruption. The issue is more to do with alignment. Good contracts and effective contract management are based on thorough stakeholder analysis and reconciliation of different (sometimes conflicting) stakeholder interests. In its race for growth, Uber appears too often to ignore or disregard key stakeholders, or to ensure compatibility between the various relationships it establishes. It has operated with an arrogance or ignorance – I don’t know which – that is now bringing inevitable repercussions, in particular massive damage to its brand.

Uber is not alone in failing to use a disciplined contracting process to drive operational performance and standards. In a recent IACCM survey, the role of contracts in supporting corporate values and brand image came in bottom place. Yet in my view, it should always be top. Contracts should test, validate and reflect the brand. You cannot, in an age of growing transparency and heightened consumer expectations, get away with marketing one thing and contracting for another.

The fact that a senior marketing executive could be so dismissive perhaps offers a further clue to the problems Uber faces – but also suggests a path through which it might find redemption. Analyse your contracts, understand their interdependencies, test their integrity and alignment with corporate goals and values. Through this approach, businesses can rapidly identify and address many of their commercial weaknesses and failings. It is something IACCM member companies are fast recognizing and is one of the core values the Association provides through its annual process reviews and benchmarks.

It’s time for Uber to take a corporate membership!

 

 

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