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Yahoo Finance exclusive: IBM banned Uber for employees, but quickly reversed course

Yahoo Finance exclusive: IBM banned Uber for employees, but quickly reversed course
Yahoo Finance exclusive: IBM banned Uber for employees, but quickly reversed course

IBM (IBM) is a century-old tech giant with almost 400,000 employees, still struggling to find growth in an increasingly mobile and online business environment. Though the company's transformation is ongoing, signs of agility more befitting a tiny startup are beginning to emerge.

Both IBMs were on display in an incident earlier this year involving the hottest of hot startups, Uber. At the end of March, IBM's accounting department issued a new edict banning reimbursement for use of Uber and other ride-sharing services over safety and security concerns, Yahoo Finance has learned. But the decision was almost immediately reversed after a single 20-something IBM employee took to the company's internal social network, Connections, to petition for a change.

That employee -- Max Black, a 26-year-old global business consultant based in New York City -- may have been one of the earliest adopters of Uber at IBM. When he first started submitting expenses for using the smartphone-on-call car service more than a year ago, the accounting department asked for proof that the company existed. He satisfied the bean counters and went on using Uber as he traveled across the country doing consulting work.

The trouble started in April, when a colleague reading through an expense policy updated March 26 came across a troubling passage. Without any notice to employees, the obscure policy update said IBM would no longer reimburse employees for Uber and its competitors.

"Real-time ridesharing (such as Uber, Lyft, Sidecar and Haxi) is non-reimbursable and strongly discouraged by IBM for business travel due to safety considerations," the policy noted. Such services might carry inadequate insurance, fail to conduct background checks on drivers and were even illegal in some locations, the policy explained.

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Black says he couldn't believe what he was reading. And he knew the explanation for the ban wasn't accurate. "I don't think anyone even knew to stop expensing it," Black recalls. The policy was buried so deeply in the expense reporting system "it was like looking it up in the tax code," he says.

Unsure whether he could have any influence, Black decided to write a detailed blog post refuting the policy's justification and arguing that ordinary taxi services were even worse. He also deployed a consultant's favorite tactic: a concise, bulleted list of reasons backing his preferred approach, which included saving money, improving accountability and enhancing safety.

"We are being hypocritical," he wrote as his final point. "IBM is in the business of preaching mobility transformation to its clients, but we are effectively outlawing for our employees one of the best examples of mobile innovation out there."

With the headline "Global IBM petition to bring back ridesharing reimbursement," Black posted his missive to IBM Connections, the company's internal Facebook-like social network, on the night of April 8. He wasn't sure what to expect but, within hours, hundreds of co-workers had added comments to the post, virtually all in favor of undoing the ban. At one point, he noticed the post was the second-most popular on the system after one by IBM CEO Ginni Rometty, Black recalls.

"I was a little worried," he says. "Here I was fomenting this change. This wasn't a demonstrated way to do it. I was afraid I'd become the Che Guevara of all of this."

A ban reversed

It also quickly came to the attention of IBM's human resources department, which uses analytical software to follow the Connections network for rising issues that might need to be addressed (IBM sells similar software and analytics to clients). Head of HR and senior vice president Diane Gherson convened a meeting the next day to reconsider the ban. Although the policy had been written following concerns about an employee incident with a ride share in Europe, the blanket ban went much too far, the group decided. Uber and its ilk were reinstated for all locations where the services were permitted by law.

Gherson didn't start by issuing a company-wide email. She jumped onto Black's Connections post to share the good news. "It's one of the great things about social business that we can get perspectives so quickly," she wrote in a post about 16 hours after Black's petition went up. "Thank you for speaking up and sharing your views. It makes a difference."

The reversal drew even more comments from employees, this time in praise of the decision. In all, Black's post drew over 1,200 comments, an IBM spokesman says.

Black's efforts to overturn the ban and IBM's response, from Gherson on down, should also provide some guidance for companies with increasingly millennial work forces. Millennials are often accused of jumping over lines of authority at work when they seek changes, but that's not the most significant part of the story, says Jennifer Deal, senior research scientist at the Center for Creative Leadership in San Diego.

"Gen X was accused of that, so were baby boomers," Deal says.

It was IBM's reaction, taking seriously a rationale and well-researched post, that shows the way for other managers of millennials. "There are a lot of examples of people posting on blogs or Twitter about why they're unhappy at work and the usual response is to slap them down," Deal says. "It says something positive about the people in charge that they listened."

Uber's controversies

The incident is also telling for Uber, the fast-growing leader in the smartphone ride business, but also a company that has been dogged by controversy. India this week rejected applications from Uber and several competitors seeking to offer service in Delhi, part of the continuing fallout from rape allegations made against an Uber driver there in December. But the company also just won a battle against taxi owners in Nevada for the right to offer service in that state. CEO Travis Kalanick and other Uber executives have also stirred criticism with outspoken comments about rivals and journalists. Uber did not return several requests for comment.

Still, the controversies have done little to dim Uber's rock star status in corporate America. With backing from Google (GOOGL), VC firm Benchmark and Goldman Sachs (GS), among others, Uber is making huge gains as the transport of choice on corporate expense reports. Last year, the company rolled out Uber for Business, a centralized ride billing system for big companies. Initial customers included Deutsche Bank (DB) and Salesforce.com (CRM).

Uber accounted for almost half -- 46% -- of all paid car rides on average on the Certify expense management software platform in the first quarter of 2015, up from 15% a year earlier. Taxicabs, limos and shuttle buses accounted for 53% on average, down from 85% a year ago, Certify said.

The fast-growing car service, which operates under the slogan "everyone's private driver," is said to be looking for more capital at levels that would value the company at $50 billion or more. Only Facebook (FB) has ever topped $50 billion for the value of a venture-backed company, according to CB Insights.

IBM wasn't often mentioned in the same breath with Uber or Facebook until CEO Rometty struck a few partnerships recently. But it will happen a lot more if the once-staid corporation keeps making rapid moves like changing the Uber ban in less than a day thanks to one employee's viral blog post. "The fact that is was done in 16 hours was just absurd," says Black.

It's also just the kind of absurd IBM needs more of.

(This story was updated on June 3 to correct that Max Black is based in New York City, not Philadelphia)