A lot can be learned from the mistakes of others and there are a few pieces of sage wisdom that can be learned from Peleton’s recent blunders. On a meteoric rise during COVID, the exercise equipment company that revolutionized the stationary bike industry, was in the news recently after they announced a layoff of 2,800 corporate employees and that their CEO, John Foley, was resigning.
Peleton receive a ton of criticism over how the organization’s leadership handled the situation. The truth is that sometimes businesses have to make tough decisions to protect the future, yet in this case, they went about it poorly. In this article, we explore where they went wrong and steps they could have taken to avoid the negative fallout.
1. Anticipate the Worst.
At the start of the pandemic, Peloton had a 400% surge in stock, as COVID-19 altered everyone’s workouts to exist solely at home. This lasted throughout 2020, yet once accessibility to the vaccine increased and gyms started to reopen in 2021, sales decreased dramatically. This should not have come as a surprise to Peleton, yet often companies get caught up in the excitement of positive blessings that they forget to play out worst case scenarios and create contingency plans for the worst case scenarios.
Peloton’s former CEO, John Foley, acknowledged that they did not anticipate sales decreasing at such a dramatic rate and were caught off guard without a strategy to course correct. As a result, they found themselves with a declining stock price, a bloated workforce and no plan to immediately change course. Had their executive leadership team been better equipped to adapt to the changing market, they may not have been in the situation they’re currently in. The responsibility for this misstep is laid at the feet of the CEO, however responsibility should be shared at least two levels down. Executives should have been pressuring the company to have multiple strategies – one to keep the COVID boon going with innovation, and a second to manage growth more carefully to avoid the inevitable blow-out of ramping up the business to meet the demand of an anomaly.
2. Don’t Be Tone Deaf.
As a communication expert, I found this next misstep rather shocking and completely avoidable. In planning for the lay-off of approximately 2,800 employees, they included in their severance package included a12-month all-access membership to Peloton’s subscription services. The backlash created here seems obvious – why would a laid-off employee want to use the services of the company that terminated them? While this was likely done with good intentions, it brings to mind the tone-deaf blunder that cost Marie Antinette her head…”Let them eat cake!”
“Let them ride bikes!” showcased the leadership team’s lack of awareness and sensitivity to the emotional impact the layoff would have on their people. That’s just not okay. Whether it’s the impact you’re making on another human being or awareness of how things might reflect on the company, good executives take time to gain a well-rounded perspective of how their words and actions effect those around them.
3. Control the Process.
There were reports from employees that they found out about the layoffs from a leaked online source. Plus, some say that they hadn’t heard about all the severance package details until they read about it in the press. When it comes to difficult conversations with employees, it’s important that employees hear it directly from the organization.
Leaks are avoidable and executives need to know how to navigate these tricky situations with gravitas and respect. A few basics that help control the process are 1.) have a crystal clear, documented communication plan so that everyone is on the same page at all times. 2.) Keep the circle of informed people very small. 3.) Hire and share only with people who have demonstrated trustworthiness. An executive team that truly understands the mantle of responsibility they took on when they accepted their positions, would show respect to their employees and their company by prioritizing the importance of exceptional communication and handling of a massive layoff.
The key to a strong, resilient organization starts with your c-level executives. Many executive leaders have great technical skills, yet do not have experience, the grit, the strategic power unique yet essential to success in C-level roles. Peloton has a great product and they have done some wonderful things for the at-home exercise industry and hopefully, under new leadership, they will continue to innovate and power-through this pothole. In the meantime, we can learn from their mistakes – all of which seem to have occurred at the executive level, because the CEO and the top-level leaders simply weren’t prepared for their strategic, high-impact and highly visible roles.
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