Lyft Staff Pressed Founders for Change as Uber Pulled Ahead

On Monday, Lyft said the founders would be stepping down from day-to-day management. The company tapped as its CEO a board member with experience working at big tech companies and nonprofits.

In recent meetings and Slack messages, employees had questioned whether Messrs. Green and Zimmer were still the right people to lead the business, according to attendees and messages described to The Wall Street Journal. The board found out about employees’ concerns and discussed the issue, people familiar with the discussions said.

At an all-hands meeting in February, employees asked whether there was accountability from the co-founders, particularly as Uber fared much better, attendees said. That echoed concerns raised at previous meetings, they said.

In November, after the company laid off 13% of its staff, one employee asked the co-founders why they weren’t stepping down, attendees said. Lyft’s co-founders responded that they were learning and growing from their mistakes and moving quickly, attendees said.

“Not the time to learn from mistakes. Time for professional leadership,” an employee wrote on an internal Slack channel at the time.

“It seems new leadership may be needed at a higher level. Why are we always 10 steps behind our competitors?” another employee wrote.

While the co-founders had built a scrappy startup into a household name, Lyft lately has struggled with challenges, new CEO David Risher said in an interview.

“It’s not like we’re in a position of immense strength in the market. I wish I could say we were,” said Mr. Risher, who joined Lyft’s board in 2021.

The co-founders said in interviews that they were stepping back for personal reasons. Mr. Green said he wanted to give priority to spending more time with his wife and four children, and that he approached the board about finding a new leader late last year.

Uber has long outpaced its younger, crosstown rival Lyft, and its lead has been widening in recent years. Lyft’s market share has fallen and its market value, nearly $22 billion two years ago, now sits at less than $3.5 billion, an 85% erosion. Uber’s stock price fell around 40% in the same period.

Along with the layoffs late last year, Lyft scaled back on other businesses, such as renting cars to customers, as it looked to weather a possible recession. Uber hasn’t had to be as aggressive with cost-cutting and layoffs.

While Lyft in February reported record revenue for the fourth quarter, investors have been worried about its prospects. Its shares tumbled more than 35% after those results because they included a weaker-than-expected revenue outlook.

Lyft’s “execution has been wildly inconsistent versus Uber,” said Jeremy Abelson, the founder of Irving Investors, which owns shares in both companies. Change was needed at Lyft, he said.

The change was necessary “to begin rebuilding investor trust,” Gordon Haskett Research Advisors analyst Robert Mollins wrote in a note to clients this week. He added that “addressing management’s past failures are a significant undertaking that will likely take time.”

Four years ago, many on Wall Street saw Lyft as a safer bet than Uber. Uber’s food-delivery business hadn’t proved itself, and its ride-share business was facing regulatory challenges overseas. Lyft looked to some like it was in a better position because it stuck to transportation and limited its business to the U.S. and Canada.

Then the pandemic hit both companies, Lyft much harder.

Uber’s food-delivery business boomed during lockdown. Uber later tapped its pool of active delivery drivers to deal with a driver shortage that crippled the ride-share industry as the economy reopened from the Covid-19 lockdowns.

Lyft experimented with delivering goods for businesses during the health crisis but shelved that idea this year. The company generally stuck to its roots of transporting people, but some of its bets didn’t pan out. For instance, Lyft built quick service stations for drivers and a car-rental business for riders. It scaled back on both of those businesses late last year.

“There’s always things we could have done differently or better,” co-founder Mr. Zimmer said in an interview this week. The other co-founder, Mr. Green, added that he regretted not taking Lyft global.

Whether the company’s new CEO, Mr. Risher, will be able to help the company’s share price, market share and employee confidence rebound remains to be seen. He has an optimism and competitiveness that could be the right fit for the company right now, said

Dave Stephenson,

who sits on Lyft’s board and once reported to Mr. Risher when the two men worked at

Amazon.com Inc.

“It’s clearly at a challenging point in the business,” said Mr. Stephenson, who is the chief financial officer of

Airbnb Inc.

“He’s ready to compete,” he said.

Mr. Risher said he took the position to help the company grow, and that boosting employee morale is a priority. He also wants to overhaul the customer and driver experience on Lyft.

In his first companywide address to staff, on Tuesday, Mr. Risher said he encouraged employees to help him build the company that they envisioned.

“We’re going to figure out a way to do this together,” he said.

Write to Preetika Rana at [email protected] and Emily Glazer at [email protected]