Some industry giants, no matter how seemingly innovative and successful, fall. And after a failed IPO and a disgraced CEO, WeWork (or rather the We Company) will likely go down in history as such.
It’s disappointing to see a company, branded as one of the “most innovative companies in the world”, unravel before our eyes. The We Company has been facing ongoing public scrutiny regarding a suite of issues including (but not limited to) executive misconduct, conflicts of interest and a massively inflated private valuation.
So, why will this particular case be talked about for years to come?
Businesses need to be believable from every angle. Our recent 'Belief in business: state of the nation' research indicates there are five key ‘triggers’ that make up audience’s overall believability in a business:
- Creating a rewarding workplace for happy employees
- Being open to questions and sharing information transparently
- Committing to ongoing self-improvement and leaving behind a better society
- Living and breathing a purpose that is deeply embedded throughout the business
- And, finally, a willingness to accept short-term setbacks in the pursuit of long-term benefits
As it turned out, WeWork went against all of the above.
An unbelievable brand
To the outside looking in, the We Company lived and breathed its lofty corporate purpose "to elevate the world's consciousness". We believed they were a fervently purpose-led, aspirational brand. But following its IPO announcement, it surfaced that CEO Adam Neumann prioritised his own personal gain at the whole company's expense.
According to The Wall Street Journal, Neumann has made millions of dollars by leasing properties to WeWork in which he has a personal ownership stake. Not only did this raise concerns of an obvious conflict of interest amongst investors, it was the beginning of a sharp spiral that led to his resignation.
While he was giving college commencements, hiring family members and collaborating with celebrity investor Ashton Kutcher he was building a reputation of an erratic leadership style and doing business behind closed doors.
WeWork's purpose was a superficial cover and Neumann gave little, if any, thought to the long-term consequences of his actions.
This simply doesn’t work for businesses that want to exist in years to come. A company purpose is not a quick fix, and companies must invest time and effort into it.
Not only that, but a well thought out and implemented purpose transforms companies into powerful, respected beacons of value that everyone wants to work for, partner with and buy from.
Blurring the work-life balance
WeWork had us fooled about its seemingly great corporate culture. Given the nature of the business as a co-working space whose mission is to "create a world where people make a life, not just a living", you’d think a great corporate culture would be a given.
According to Bloomberg, WeWork's culture was "shaped by the idea that personal and professional life should be indistinguishable."
Business Insider reported that "Neumann presided over a company in which mandatory parties, nepotism and over-the-top behaviour flourished.", while New York Magazine described WeWork employees feeling concerned that the company's name on their CV may do more harm than good.
Add this to reports that employees were mistreated, unfairly denied pay and misclassified during the company’s rapid expansion, it’s no wonder that after the IPO, employees came out of the shadows with something to say.
A Tweet from a former employee reads “I didn’t see anything of this firm comparable to a great company at all. Its toxic culture redefines ultra-hypocrisy and office politics.”
While activities planned outside of work may be a good way to bring employees together for occasional celebrations, there's more to a great company culture than summer concerts and free booze.
Keeping employees happy and properly rewarded for their work is crucial for believable business, and WeWork faltered in this department.
A tech unicorn without “tech”
WeWork had investors falsely believe they were a technology company. Marketing Week described the rapid rise of WeWork as a “socially-constructed idea that this is another big disruptive tech firm.”
With $10.4 billion from Softbank and Series G funding, most didn’t bat an eye at the label. When WeWork filed to go public, it was valued privately at around $47 billion (£38bn). This enormous figure, spotlighted by the public announcement, caused people to really start to question WeWork’s legitimacy. A month later, this had been slashed to $10 billion (£8.5 billion).
According to the Harvard Business Review, WeWork simply does not have the key characteristics that make a tech company: low variable costs, low capital investments, high volumes of customer data and expansive network benefits (think LinkedIn or Amazon), among others. They conclude that the We Company, despite its tremendous growth and disruptive effect within the real estate sector, doesn’t meet any of the requirements than enable modern tech companies to "achieve exponential growth" and have "winner take all profits."
Needless to say, this move goes directly against sharing information transparently and being open to questions; another key belief ‘trigger’. As we saw in the media, this move ended up backfiring because it set the stage for increased investor scepticism and probing around Neumann's behaviour.
What next for WeWork?
The public has been following the WeWork rollercoaster closely. We looked at the data to see just how close. On Twitter alone, the conversation peaks with every misstep. This goes to show even private businesses are on the public stage. People take notice when businesses give them reasons not to believe.
WeWork’s demise serves as a reminder that building belief is not a tick-box exercise.
Businesses have a crucial role to play in building a successful society and sadly, WeWork didn’t play their part. Will WeWork take heed of the behaviours of truly believed-in businesses, or is this the end for the company which was once hailed as “the future of the office”?
We’ll be watching this space.
By Samantha Shannon and Monica Arias
Sam is a digital, data and CX analyst at RY. Infinitely curious and with a keen eye for making information beautiful, she is a dab hand at blending her creative skills with data knowledge to bring it to life in a way which resonates with a multitude of audiences.
Monica is a member of the research team at RY. Her academic background lies in the politics and sociology realms, which she uses in her role exploring the world of communications and behaviour change campaigns.