×

Uber should take Warren Buffett’s advice for finding a new CEO

  • Uber CEO Travis Kalanick leaves a mixed legacy in his wake after getting ousted from the company he founded.
  • It is possible to be both aggressive and ethical and succeed in business.
  • Kalanick would have done well to follow the sportsmanship and ethical behavior of highly successful athletes Kevin Durant and Wayne Gretzky as well as billionaire Warren Buffett.
  • The Uber board would we wise to follow Buffett's sage advice to find its next CEO.

Uber CEO Travis Kalanick resigned this week after a group of investors pressured him to step down. Kalanick co-founded Uber in 2009 and it is widely observed that the company and its aggressive culture were formed in his image. That, it turns out, was both a good and a bad thing.

On the positive side, under Kalanick's aggressive leadership Uber rapidly became one of the most highly-valued private companies in the world, with a valuation just under $70 billion. He deserves a lot of credit for that.

The company disrupted its industry by offering those of us who relied on taxicabs for years an alternative that is easier, less expensive, and cooler. Pushing a button on our smartphones is so much more convenient than hailing a taxicab and paying cash that most of us haven't braved the elements and crowded streets to hail a taxicab since becoming hooked on Uber.

On the negative side, a culture that tolerated widespread sexual harassment, mistreated employees, and ran roughshod over regulatory requirements grew in parallel with the tremendous economic growth of the company. That is why Mr. Kalanick's legacy is sadly and avoidably mixed.

His downfall demonstrates the way in which the very qualities that enable an executive to achieve great success have a shadow side and can become a detriment if not counterbalanced by other qualities. What Victor Hugo wrote in Les Misérables can be applied to Mr. Kalanick's recent flameout: "This light of history is pitiless; it… often casts a shadow just where we saw a radiance."

"...I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper – to be read by their spouses, children and friends – with the reporting done by an informed and critical reporter." -Warren Buffett

The qualities that enabled Kalanick to achieve success included an aggressiveness that would not be satisfied with slow and steady growth, and a pugnacity that would not shy away from a conflict with regulators. Those qualities propelled the impressive growth of Uber but became a detriment when they ran roughshod over ethical concerns and regulatory requirements. Mr. Kalanick's personal qualities also became a detriment when a leaked video showed him berating an Uber driver, thus tarnishing his leadership image and alienating drivers and the public.

Mr. Kalanick's emphasis on achieving rapid growth could have been counterbalanced by a concern also for creating a culture of respect and fairness in which sexual harassment would not be tolerated. That would have right as a matter of ethics and also smart as a matter of business.

Employees who are treated well work harder and longer with greater loyalty than employees who are mistreated. In the long run you cannot achieve lasting success in business if you are smart about numbers but stupid about people.

Can a company be as aggressive as Uber is and also be ethical? Absolutely. In fact, a company can be aggressive and downright admirable.

It is possible to be aggressive and ethical in business in the same way that it is possible to go for it within the rules of good sportsmanship in sports. Kevin Durant was recently named the NBA Finals MVP. Anyone who watched the NBA finals knows both that Durant was aggressively trying to win, and that he is a good sportsman.

Executives who want to be aggressive and ethical can also benefit from considering the example of Wayne Gretzky, who dominated the rough game of hockey while avoiding brawls and conducting himself with grace and class.

He led his teams to four Stanley Cup championships, was named the league MVP nine times, and was the league's leading points scorer for an amazing ten of the twenty seasons he played. But he also won the Lady Byng Trophy for sportsmanship five times.

In contemplating the decisions that led to his resignation, Mr. Kalanick would have done well to carefully consider Warren Buffett's "rule of thumb" as included in the Berkshire Hathaway Code of Business Ethics and Conduct:

"...I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper – to be read by their spouses, children and friends – with the reporting done by an informed and critical reporter."

The Uber board of directors would also do well to carefully consider the wisdom of Buffett in searching for a new CEO who can pursue growth aggressively while also reassuring investors and gaining the trust and respect of employees and customers.

Mr. Buffett offered the following hiring advice:

"We look for three things when we hire people. We look for intelligence, we look for initiative or energy, and we look for integrity. And if they don't have the latter, the first two will kill you, because if you're going to get someone without integrity, you want them lazy and dumb. I mean, you don't want a spark of energy out of them."

Here's hoping that Uber and its next CEO figure out how to go for it with intelligence, energy, and integrity in its next chapter. In setting the priorites for their next chapter, they would do well to consider the advice of Zappos CEO Tony Hsieh: "If you get the culture right, most of the other stuff will just take care of itself."

Commentary by Joseph Holt, a business ethics professor at the University of Notre Dame's Mendoza College of Business. Follow him on Twitter @busethicsdude.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

Watch: Uber's ability to retain talent a catalyst