In the pop-culture zeitgeist of the moment, we love to see behind the scenes of corporate crisis. WeCrashed, The Dropout, Inventing Anna – learning from the inner-workings of a failed business can be the best way to understand how to help yours succeed.
Lessons learned from WeWork in crisis communication:
WeWork moved from being a flashy, young startup that was changing the way people worked to a corporate fable of how to lose money and fall far short of public and investor expectations (read the full WeWork and the Supernova CEO case study). At its core, the purpose of crisis communication is to minimise reputational and financial fallout after bad publicity, scandals, or operational and financial blunders. The rise and fall of WeWork’s reputation and financial state is a fascinating crisis communication case study demonstrating how communication practices when executed poorly, can spell the downfall of one of the largest start-ups of the 2010s.
Lesson 1: Don’t ignore impending financial threats.
Miguel McKelvey and CEO Adam Neumann founded WeWork in 2010, their vision was to innovate and transform office coworking and office spaces to usher in a trendy new-age work environment and community. The slick new office amenities included beer on tap, glass meeting rooms, games, and hammocks – and the social environment was that of “the community of an entrepreneurial fraternity house” (Kate O’Dell).
Unfortunately, the financial viability of leasing exorbitantly expensive real estate first and finding enough independent workers to fill these offices second was not sustainable. Despite this fatal operational flaw, the company presented an image to the public depicting a thriving business that was ready to go public.
By ignoring the financial realities of the company, crisis communicators at WeWork were put on the back foot and unable to get ahead of the unfolding crisis.
Lesson 2: Don’t make irrational decisions
After WeWork company’s filing prospectus (a disclosure document that describes a financial security for potential buyers) went public as part of WeWork’s IPO, financial analysts and journalists alike immediately realised the unicorn of the coworking industry was all smoke and mirrors, an expensive production without any adult supervision to ensure the financial viability of the glamorous company.
In the first half of 2019, the corporation lost $900 million and it was exposed that SoftBank invested billions of dollars to artificially inflate WeWork’s valuation. WeWork’s stock price and the company’s reputation began to crash and burn.
Instead of addressing the issues that were made public, WeWork doubled down and denied the claims and attempted to continue with business as usual instead of establishing a crisis response strategy.
Lesson 3: Don’t seem uncaring towards internal or external stakeholders.
While all this was happening, 12,500 WeWork employees had no idea of their future at the company due to a complete lack of internal crisis communication with any of WeWork’s stakeholders.
With a failed IPO and the dwindling confidence in founder Adam Neumann’s leadership, employee and investor confidence was draining rapidly, yet the company chose to deny and downplay the operational and financial failings and avoid any honesty or accountability in their internal and external communications, even after Adam Neumann resigned (with a $1.7 billion payout).
2,400 employees were laid off, with plans for more redundancies, and for those who remained, the company culture they’d originally signed up for had been reigned back.
Lesson 4: Respond quickly and improve your crisis communication strategy
What could have been done? An effective crisis communicator has the following skills:
· Integrity
· Strategic thinking
· Strong communication skills
· Persuasion
· Decisiveness
By engaging with these skills, you get ahead of the PR crisis and develop an action plan to make rational decisions that indicate the company cares about their stakeholders.
At this stage, it remains to be seen whether WeWork’s PR team will be able to effectively use operational and communication tools to recover investor confidence and media/public respect. By utilising crisis management best practices, and not repeating the same mistakes – it's possible that WeWork could stage a come-back.
Ready to add crisis communication to your list of professional skills and achievements? Enrol now into Managing Crisis Communication short course.
