WeWork is in Trouble, and Here’s Why

WeWork co-founder Adam Neumann at an event I attended last week

The broken microwave that takes three weeks to fix

I’ve had an office in a WeWork space in Santa Monica for over two years. I joined this location as soon as it opened, in late 2015. And mostly I’ve had a great experience here. I’m a huge fan of the coworking space model: lots of community, fellow freelancers that I collaborate with, nice facilities, and overall the cost is reasonable. WeWork has taken the lead in this industry because they understood, more than other shared workspaces, that this is a service business. I’ve seen some journalists describe WeWork as a “real estate business,” and that’s not exactly accurate. Anyone can rent a space and put some desks in it. The hard part is scaling a feeling of hospitality and community. That’s the magic that built WeWork as it grew.

And with that energy, WeWork has taken in almost $7 billion in investments, at a current valuation of $20 billion. They now have 250 locations and 250,000 paying members. That’s a significant business, and they’re still growing at a dizzying rate. In New York City alone there are 53 WeWork spaces. It feels like Starbucks there, with a WeWork on almost every corner.

Of course, the challenge for any service business growing this fast is about maintaining the quality of their product. Can they keep delivering on that hospitality and community management while they’re exploding? I think about this often, and increasingly I’m worried about WeWork.

Here are the three things they’re doing wrong:

1. Not listening to their customers: In my time here, I’ve been asked my opinion about WeWork exactly once, and that was about two years ago. I do give Regional Manager Jon Slavet credit for coming in and listening to members in my space at that time. But since then not a single manager or any employee from WeWork has asked me about how things are going. I can say from having been both a CEO and CMO myself, that listening to customers and the community at large is one of the most critical parts of any business. And this is particularly true in the service sector.
2. Forgetting about the community building that got them here. When I first started as a WeWork member, we had all kinds of community-focused events that were well attended: free tacos on Tuesdays, Friday afternoon barbecues, lectures, learning events, and more. These were mostly quite good — there was a social component, and often I’d learn something. This stuff has largely fallen by the wayside. Maybe it’s due to budget cuts, or it could be that many members aren’t interested. But for me, it was this sense of community that separated WeWork from many other shared work spaces. I went to see Adam Neumann, WeWork’s co-founder, speak with the Mayor of LA at a WeWork last week. Julie Rice, the founder of SoulCyle and WeWork’s new Chief Brand Officer, was also there to lead a panel discussion. Adam has an intoxicating story about WeWork’s goal of improving communities. But I found it telling that neither Adam nor Julie stuck around for even a few minutes after the event to meet all the WeWork members in attendance. They’re clearly too busy to try the food at their own restaurant.
3. The little things matter. A brand’s value is the sum total of all the touch points — digital, people, physical, ads, everything. The great brands are maniacal about consistently getting all those things right. In a service business, this is mostly about the interactions customers have with the people, and how quickly the service team can fix problems. Think about United Airlines’ often disastrous episodes of customer service failure. They may never overcome that. What I see at WeWork is a steadily deteriorating commitment to serving the customers. One small but representative example: when an appliance breaks in the kitchen area, it takes 3–4 weeks to fix it. How can it take that long to replace a broken microwave? I wondered the same thing myself, so I asked. I got a defensive answer about “company policy…the warehouse…busy opening a new location, etc.” I told them if I was in their position, I’d have driven to Costco, bought a new one and solved the problem in less than an hour. But that makes too much sense. When your WeWork staff starts sounding like United Airlines, you know things are in trouble.

WeWork’s service IS its product. Without that all they have are spaces with a bunch of desks. That’s a commodity. What I see is that they’re forgetting the great things that made them who they are and focusing 100% on getting as big as they can as fast as they can. That’s bad news for their customers and ultimately the brand will pay a price for this.

Here are three things WeWork can do to get back on track:

1. Meet with members every six months to get a feel for how their customers feel about the product. This could take two forms: online surveys and, importantly, in person interviews. This should happen world-wide, at every location. It’s not difficult to do this, and the live interviews are critical; they allow a manager to read the non verbal signs of happiness or dissatisfaction.
2. Send the senior leadership team, including CEO Adam Neumann, on a tour of their various markets to meet and greet customers. There’s no substitute for shaking hands and looking your tribe directly in the eyes.
3. Train and hire staff with more emphasis on customer service and hospitality. Required reading for all employees should be restaurant mogul Danny Meyer’s book Setting the Table. While some employees embody these traits, others do not. The commitment to customer service currently feels optional and inconsistent.