WeWork — Leadership lessons from a wounded unicorn
Why do so many leaders fail? This week’s breaking news about WeWork gives us insight into the need for deeper leadership qualities and values.
In the past week the co-working giant, WeWork, has experienced crazy upheaval as it tried to move from a private company to a public one. WeWork valued itself as a tech company worth over $47 billion, but when Wall Street started looking into the company, it didn’t see a tech company worth $47 million. It saw a real estate company which has now been estimated to be valued at as little as $15 billion, a two-thirds drop in value.
But, that’s not the biggest news. WeWork’s co-founder and CEO, Adam Neumann, has been asked to resign from his position and he announced this week that he would be stepping down. He will still be around, but only in a limited capacity.
WeWork’s CEO failed for a handful of reasons, but first, we should talk about what went right. How did this startup grow so quickly and see so much initial success? Its current valuation may not be $47 billion, but it has still seen major growth, opening locations all over the world. It takes incredible savvy to make that happen.
What were Mr. Neumann’s strengths?
Charisma — One of Neumann’s top assets is his charisma. He has the energy and charisma to turn work into a party space where people work hard and then play hard. It was exciting and people who worked there loved the environment and energy that felt more like a tech company then coworking space. Neumann was so charismatic that investors would decide to invest in his work within minutes of meeting him.
Vision — He lives in a future reality in such a way that people believe everything he was says will come true. Investors were compelled, his team was compelled, and he painted a picture of the future so clearly that within minutes of meeting him people were fully convinced of his vision.
Early-Trend Setter- Coworking was a relatively new idea when WeWork launched in 2010 in New York City, which made it niche already. But, Neumann had the idea to design a space that felt more like a tech company than shared real estate. It was open format, full of energy and meetups, and offered free beer on tap. He took coworking to a new level.
Messaging — The way that WeWork was talked about shared some of the same verbiages as tech companies. Neumann described the space as a new kind of space, “a public social network.” The messaging also tapped into the values that are demonstrated in a fast-paced tech company and called people to really “find their purpose” while making an impact. It also described the focus of WeWork, to create a community so that the community would fulfill the dreams of the “We” and change the world. Who wouldn’t want to be part of that?
All of these things contributed to a very convincing leader who gave the perception that he had identified a niche market that never existed and that bolstered FOMO amongst investors from the Bay Area to Japan. WeWork looked like it was going to be only the third company ever to lunch at a valuation of over $40 billion. It hoped that by making the company public WeWork would be able to multiply their reach and impact.
But this week, Mr. Neumann will be forced out by his board and given a token seat that is definitely not as an executive.
So what went wrong?
Too much emphasis was given to a few leadership traits to the exclusion of others…primarily though, in this case,it comes down to character. Character, who Mr. Neumann was at his core, didn’t align with what WeWork believed at its core — helping people identify their purpose and creating impact together. Here are some character issues that Mr. Neumann demonstrated.
He failed to create a stable culture — Mr. Neumann at one point had to lay off nearly 7% of the WeWork team. That is not unusual in the startup community, but what is unusual is at the meeting two weeks later where he announced how sad he was to see them go, he then had people come out with tequila shots and kicked off a party.
Now that the company is in such turmoil, it has also been reported that WeWork will have to lay off nearly 5000 employees. Mr. Nuemann’s wife is reported as having fired employees upon meeting them, just because she didn’t like them. That certainly isn’t the type of together, “We”, community that people had believed the company to be. Those things create an environment of instability and mistrust.
He was money-hungry — Mr. Neumann was apparently quite driven to be wealthy. That’s completely fine unless the lines start to get blurred between the company and the person, which is exactly what happened at WeWork. For instance, Neumann personally trademarked the “We” brand and then sold it back to the We company for 6 million dollars. From a personal standpoint, brilliant. From the standpoint of an executive of the company, greedy at best. He also personally purchased real estate that he would then lease back to the WeWork company. Again, absolutely brilliant, but this has to cross ethical boundaries as a definite conflict of interest. All this for the sake of lining his own coffers.
He gave himself ultimate authority in the company — Mr. Neumann set up the organization so that his shares would allow 20 times the voting power of everyone else. This creates an unbridled and unchecked leader at the helm who could do away with anyone who disagreed with his actions. That means no questioning, no correcting, no redirection from the board or from the stakeholders who have invested so much.
What can leaders learn?
I guess the question is, would you be any different in his position? Would I? As the quote goes “absolute power corrupts absolutely.” I don’t think that’s fully true though. I think a better statement is, absolute power reveals our own corruptionabsolutely. That is why we need each other and why we need to focus on holistic leadership. I have three suggestions that could’ve saved Neumann from his ultimate downfall:
Servant leadership — Okay, so you want to have all the power, who doesn’t want more control and more power? This causes trouble though. If you are at the zenith of the spire and have no support, you’ll find yourself in a precarious position indeed. Many times dictatorial personalities load the deck so that they will win whatever decision has to be made. In this case, Mr. Neumann had 20 times the voting power of his board (even now, after cutting his voting power to 3-to-1 he still has the controlling power). With that much power, he could make decisions that weren’t in the best interest of the company or the thousands of people how are employed or work out of WeWork, but instead, he made decisions that were in hisbest interest. Completely unencumbered. That kind of leadership will eventually catch up to you.
What if he saw his role as servant to the entire WeWork enterprise? If he worked as the base of a spire and used everything he had to push others higher? He would still be CEO. He would still be making millions. He could leave a legacy and ultimately, he would accomplish the huge impact that WeWork wants to have in the world. If he were serving the community instead of using the community, with his charisma, vision, and passion, he really would’ve changed the world.
Greater assessment — Before investors invest or control is given, there should be better assessments to determine all aspects of a leaders capacity. It’s easy to want to bet on a charismatic leader and believe the best, but it’s better to invest in a leader or a leadership team that demonstrates realleadership. This includes many factors - the capacity to lead, develop, and care for those around them, discipline, systemic thinking to build the infrastructure of forward progress to name a few. Often though, awareness of potential internal risks of a leader to a company are overlooked. It’s usually not the external skills that kill a company, it’s the internal character of leaders that can devastate.
Realizing that his primary strengths were wrapped up in the skillset of a charismatic leader (which at the level he demonstrated were absolutely incredible and extremely rare) an organization could put in support roles to move the company forward in a sustained and scalable way for a lasting, impactful company. You must have the driver to forge ahead into the future, but should counterbalance with a strategist to backfill as progress is made.
Vulnerability — This ties in slightly to the first and second points, but needs to be mentioned independently. He wouldn’t be in this spot if he had had people in his life that could’ve pointed out the obvious things that looked corrupt or slanted. The best leaders demonstrate a humility to invite in a team of people that really know them and who genuinely care about the company so that the blindspots of a leader are revealed. Leaders who lead aloof and alone are dangerous both to themselves and to the companies they lead. Either Mr. Neumann ignored or he didn’t have people that were helping him see the real valuation of WeWork and unethical habits that have come to light. Now it’s too late for him to stay CEO and make those changes. Leader, invite people in.
Leadership has to go deeper than charisma. Charismatic leaders tend to be like shooting stars: they fly fast, light up the world, and then are gone, making you wonder if the star was a star at all.
My content was taken from sources including the New York Times, the Wall Street Journal, and The Journal podcast. Do look them up and find out more.