Case 6: When Strangers Meet in a World with No Background Checks
Most people growing up were probably told by their parents to “never accept a ride from a stranger.” In today’s age of ride-sharing apps, that advice probably seems quaint. Still, although quaint, it may also be tragically true. Ride-sharing companies exploded on the scene only very recently, and they quickly gained a major competitive advantage over traditional taxis and limousine services because of a number of factors, one of which is their hiring model. In traditional driver services employees had to undergo background checks that included fingerprint checks validated by state authorities. These checks are expensive and time consuming, sometimes taking over two weeks. By escaping this part of regulation practice, Uber was able to hire drivers cheaper, faster, and more flexibly relative to the competition. As one industry analyst noted, “Taxis and limos are still required to abide by the old more stringent rules, but with Uber, it’s a free-for-all. It’s become the Wild West.”
There are now questions as to whether this source of competitive advantage is going to be sustainable, however. Recent evidence suggests that Uber was routinely hiring convicted criminals and exposing its customers to risks that they could not possibly have imagined. For example, a simple search on the Internet (a technology we can assume Uber is aware of) would have revealed to the company that Talal Chammout should never have been hired. He had been convicted of shooting a person, hitting his wife with a crowbar, hiring a hitman, and even attempting to smuggle in a rocket launcher as part of a terrorist plot. The young woman who stepped into his car one night was blithely unaware of this, and was totally unprepared when he followed her into her apartment and sexually assaulted her.
Chammout won’t be driving for Uber for the next 25 years while he serves his sentence in a federal prison, but regrettably, he is not an isolated case. Investigations into Uber drivers have revealed that the company hired thousands of convicted felons. There have been over 100 cases in just the last four years where Uber drivers were arrested for murder, sexual assault, or first degree assault. Although the company has policies that bar drivers from carrying firearms in their vehicles, it is impossible for them to enforce that policy. In order to protect themselves from the total strangers they pick up, many Uber drivers are packing heat, in many cases unregistered firearms.
The only aspect of Uber’s selection practices that might be worse than their hiring standards and enforcement is their active lobbying of local governments to protect their competitive advantage in being not regulated. In many cases, state and city lawmakers would pass bills that were written with language provided by lobbyists for the ride-sharing industry. As Saika Chen, an attorney who specializes in ride-sharing laws, notes, “Lobbying is nothing new, but this is lobbying on steroids.”
The sustainability of this form of competitive advantage is now being challenged however, through lawsuits from both harmed passengers and state law enforcement agencies. Uber was recently fined over $25 million by the District Attorneys from San Francisco and Los Angeles. Colorado’s Public Utility Service fined Uber over $4 million for a “failure to protect public safety.” Many other local jurisdictions are considering similar actions against what they see as a vulnerable and deep-pocketed potential defendant. Time will tell if Uber can withstand all of this pressure and survive, but the verdict is already in on its CEO, Travis Kalanick. He was forced to leave the company he founded due to the hostile culture he tolerated when it came to both customers and, ironically, employees. At least with respect to employees, perhaps he knew what he was dealing with.
In your post, answer the following questions. Make sure to link your answer to the course material we cover. You must make your initial post by 11.59pm on Wednesday of the assigned week.
Once you make your initial post, you will be able to see what your teammates posted. Make sure to respond to at LEAST TWO of the posts made by your teammates.
What is/are the problem/s? (What is the issue that Uber is facing? Are other firms facing the same or similar issues?)
What are the causes? (Why is uber and/or other firms facing this issues? What reasons are behind them (they could be related to the firm itself, the people they are trying to recruit, the nature of the labour market etc.)).
What solutions do you propose? (How can you navigate these issues? What HR Policies/practices can you implement to overcome these problems?)
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