It was just another day at Bangkok, Thailand where a conference was held for remote-independent internet entrepreneurs. JP Zhang, the founder of SoftwareHow, wanted to brainstorm and share ideas with his friends. Since he had a WeWork membership, he decided to book a meeting room.
The 6-pax meeting room could barely fit Zhang and his friends but no matter, they had more important issues at hand: how can they grow their business in the next year?
Unfortunately, that important issue soon changed when Zhang’s friend leaned backward on his chair.
What was thought to be a wall was in fact, glass, which was used as a whiteboard and mounted on to the wall with a substantial gap between its back and the wall. Immediately, Zhang and his friends went to find the community team to admit the mistake; they were willing to cooperate with WeWork Thailand to fix, especially with paying for the damage.
After a month of waiting for the evaluation, WeWork’s community manager reached out with an invoice that simply states “Replacement of damage whiteboard”.
That was coupled with a price tag that came to about 36,861.50 baht (US$1,220).
Flabbergasted, Zhang wanted an explanation. Why did it cost that much? Where is the itemization break down? How much does the whiteboard actually cost if they bought it from the vendor?
The actual cost of the whiteboard, including tax and installation, was only 15,000 baht (US$675).
The community manager heard about this and shifted the responsibility to the operations manager, suggesting that Zhang should speak with her instead. When the operations manager came, Zhang and his friends shared about the findings, asking for an itemized bill.
That was unexpectedly met with dismissal: the manager claimed that it was a question of confidentiality.
According to her, the high price of US$1,220 was due to a few reasons:
- The product was imported from overseas
- The glass whiteboards were “made of ultra high-quality glass”
- The glass whiteboard is different from “the typical glass whiteboards used in most offices”
How did Zhang get the US$675 then? The operations manager believed that Zhang’s friend, who did the research, deliberately misled the glass whiteboard manufacturer in order to obtain a lower quote. None of the facts were verified and the operations manager refused to check with her team.
Frustrated, Zhang’s friend decide to simply call up the manufacturer on speakerphone.
“Hi, so how much is the whiteboard, again?”
“15,000 baht,” came the reply.
The operations manager, visibly chastened, decided to quietly agree on speaking with the construction team.
To date, Zhang’s friend is still attempting to convince the WeWork Thailand team that their invoice is inaccurate. The itemized bill that came from WeWork revealed that the high cost actually came from removal and transportation.
Apparently, it cost WeWork Thailand 10,000 baht (US$331) to remove the damaged whiteboard and transport it to the junkyard.
To add more insult to the injury, there was even a charge for a management fee at 8,500 baht (US$280).
Even if the transportation and removal costs were necessitated (perhaps their vendor overcharges WeWork, for example), the management fee from what can easily be a few hours’ worths of work raises a lot of eyebrows. In sum, anyone can see that:
- WeWork’s initial invoice charge had no explanation and itemization. Should Zhang and his friends be any less wary, they would have blindly paid for something that could have cost less. Even if the cost was that much, it is mandatory that any vendor should itemize their invoice, especially with construction, furniture, and maintenance work.
- The operations manager was clearly bent on pushing her point, rather than working with a long-time customer and maintaining an important relationship (Zhang is a WeWork member for 18 months).
- The WeWork team handling the entire issue has showed a lack of accountability
The embattled co-working space giant is facing an accelerated shrinkage as they attempt to plug the holes in their war chest. Their business model generated little income relative to their losses and despite establishing market supremacy across the globe, self-dealing and poor corporate governance eventually tore the company apart. Softbank had to swoop in with billions to save the sinking ship, which raised a huge question.
Who’s the winner in this situation?
The answer? Former CEO Adam Neumann, whose shares got bought out with a $1.7 billion exit package: $1 billion to purchase his shares, $500 million in an extension of his credit line and the rest in “consulting fees”, apparently mandated because the board needed Neumann to “guide the company” before his departure.
With all the negative press surrounding WeWork up till today, Zhang’s experience is indicative of the root cause of WeWork’s problematic situation: a broken organizational culture.
How broken is it? It starts at the boardroom.
Self-Dealing and Founder Worship
Neumann is an octane, eccentric founder, brilliant by his own means. Undeniably, it takes a certain level of talent and grit to bring a startup that started with a single space to a sprawling global brand that, at its highest, was valued at US$47 billion. Softbank’s cash infusion gave Neumann the war chest to diversify its service offerings, which came in the form of non-core businesses such as the gym with a spa, a co-living area and even a co-working space on demand that charges you $12 per hour.
With Neumann being placed in the center of everything, it is a small wonder why he could also sell the rights to use the word “We” to WeWork for $6 million, lease buildings to WeWork that he owned a 50% stake in and establish a Neumann dynasty without feeling that all of this is absurd.
Why did the board not stop it from happening?
Neumann, at one point, had 20 votes per share, which made him a corporate monarch.
When you have pseudo-monarch sitting on your board claiming that he can end world hunger with WeWork, the board are just sitting ducks when stinging losses come in their way.
The corruption of power led Neumann astray. Rather than protecting the company from recession risk, he chose to expand in a way that made WeWork unstable at its foundations.
The root of all this started with the boardroom.
Founders should not be worshipped. While they are brilliant entrepreneurs in their own right, the later stages of the startup require the effort of many other amazing talents from the junior-level employees to the board. When founders are worshipped without restraint, their power can grow in an unfettered manner.
Trickle-down Effects to the Workplace Culture
The best way to see a company’s organizational culture is to observe how its employees manage their relationships with customers. Are they receptive to criticism and feedback? Are they willing to be patient when dealing with complaints? Are they open to findings and observations that are different from their own?
The operations manager’s handling of the broken whiteboard issued is indicative of a few things:
- WeWork attempted to take advantage of the situation. Are WeWork employees exploitative in nature? No one knows for sure but this creates distrust. WeWork can simply slap their brand on any invoice and charge freely without having to explain what goes into their charges, expecting the customer to pick up the tab.
- WeWork did not care about their customers. They only do so when you are paying them without causing any trouble.
- WeWork’s values and beliefs did not reach their other branches. Unfortunately, there was no alignment of culture from the main branch to their other spaces worldwide.
It makes it even more ironic that for a company that audaciously named themselves “We”, they were only focusing on themselves and not on their customers—which is almost basic for any company. WeWork was tone-deaf to their customer's inquiries and complaints, which showed that their leaders still have much to do in the wake of their devaluation.
Integrity as a Company Value
For instance, if you are charging $100 for something, break down the cost and explain why it costs as such. Since companies are not humans, it can be difficult for people to trust them.
Hence, there is a need for companies to focus on building trust into their brand—for a company as large as WeWork, the stakes are even higher. When a company takes advantage of their customers, future customer relationships will be ruined. The snowball effect can be uncontrollable.
Customer-First as a Company Philosophy
Never be complacent: a business only exists because of its customers. Every demographic is important and leaders need to invest in every customer relationship that comes their way.
Never be complacent: a business only exists because of its customer.
Employees should put their customers on the pedestal rather than themselves—leaders need to eliminate such behavior when it occurs.
Empathy as a Company Belief
Take the itemization for example: for startups, funds are scarce and every dollar counts. Breaking things at an office space by accident should be a routine matter, but charging $1,200 with just a single line of explanation shows that WeWork didn’t care about their customers.
When you are unempathetic of your customers, you are essentially sending a message that they are expendable.
Even if that is not the case, businesses need to understand that they are not unique. In co-working, for example, customers have freedom of choice to select another space. With an already very low customer lifetime value, not deploying something as simple as empathy will only sever whatever flimsy connection the business has with the customer in the first place.
Never Tolerate Toxic Behaviours
The operations manager's rude and dismissive behavior is not something created from that one situation. With the knowledge that Zhang actually got the cost right and that WeWork was overcharging them, the operations manager yet chose to defend WeWork’s decision, refusing to listen to their side of the story. This shows that:
- Leaders are not observing their employees
- Such behavior is probably rampant across the organization
- Leaders are not doing their management roles well as they allow such behaviors to proliferate, without any intervention
- Leaders (in this case, a middle manager) possess such toxic behaviors that most likely pollute the workplace and cause unnecessary tensions
The breaking down of an organization’s culture signals that there is most likely a gap between leaders at a certain level. For instance, it might be middle managers not listening to their senior leaders. It might also be the reverse when the senior leaders are not instructing their employees well.
Senior leaders must always ensure that culture is aligned from top to bottom. It can be difficult for a large organization but that creates an even bigger impetus.
WeWork will have much to prove in the coming months as they bleed hundreds of thousands of dollars every second. As they attempt to sell their non-core businesses and shutter down loss-making spaces, their new leadership needs to take a look at their current organizational culture and find the gaps.
For leaders, WeWork is an excellent example of a company implosion. As Zhang wrote in the original blog post: WeWork’s culture is broken from the boardroom down to the whiteboards in their meeting rooms.