WeWork’s “State Of Consciousness”: The More They Grow, The Weaker Their Community?

Published on May 25, 2018 - By Cecilia Amador

• WeWork’s 2018 ‘Economic Impact Report’ reveals the positive impact it is having on cities that are home to WeWork spaces
• While the macroeconomics may be impressive, the brand should also focus on their microeconomic impact
• There are concerns that staff and customer satisfaction are being neglected in the company’s relentless pursuit of growth

A couple of weeks ago, WeWork published its 2018 Economic Impact Report. The report, developed in collaboration with HR&A Advisors, Inc. aimed to measure WeWork’s economic and fiscal impact in the cities of New York, Chicago, and Los Angeles.

The report was published shortly after WeWork was forced to sell ‘junk’ bonds in order to finance its continued global expansion. The sale proved that WeWork’s size and footprint comes at a price, and revealed insights into the company’s expenditure and revenue, raising alarms within the flexible workspace industry and beyond it.

WeWork’s aggressive growth plans have been highly criticized, with many raising the question of whether or not WeWork will be able to maintain its quality standards as it continues to rapidly expand across countries. WeWork, on the other hand, remains confident on its ability to successfully scale its product and service offering, without compromising quality.

In fact, they are so confident in their performance that they partnered with a consulting firm to measure the impact they have in some of the major cities they are present in. Findings and conclusions of the WeWork economic report included the following:

• WeWork has helped uplift and energize its surrounding neighborhood; 70% to 80% of WeWork members across New York City, Los Angeles, and Chicago did not work in the neighborhood prior to joining WeWork
• WeWork helps new businesses grow, save, and thrive: a reported 45% of WeWork member companies saying that WeWork helped them accelerate their growth
• WeWork has led to increased reliability on public transit, walking, or biking as commuting options, with WeWork members in Los Angeles being 3 times more likely to use these methods of transportation as opposed to cars
• WeWork creates a powerful economic ripple effect for cities, with more than two-thirds of WeWork members being employed in the innovation economy, which adds millions of dollars into a city’s economy each year, as entry-level jobs in the innovation area pay 10% more than average
• WeWork creates an approximate 2x economic multiplier for cities; for every 10,000  WeWork members, an additional 10,000 jobs are created through direct and indirect spending

You can read the full report here

This is all great news for the cities in which WeWork is operating, and it serves to demonstrate the potential that the flexible workspace industry holds. However, WeWork’s report focuses mostly on the macroeconomics of its business, which makes us think: is WeWork forgetting about its microeconomics (mainly staff and member satisfaction)?

The coworking movement is known for being community-driven, both within a workspace’s walls and beyond them. However, community is hard to build, and even harder to maintain; it takes time and effort and it is never a job done — communities are constantly growing and evolving.

In the case of WeWork, its community has more than tripled since the company’s early days. Not only that, but the company has mostly focused on growth over the past few years, and although WeWork has deep pockets backing it, the ‘junk’ bond sale confirms that it doesn’t have endless resources. And if most resources are being channeled into opening new locations, what happens to those locations opened back in 2010 and since then?

On a recent LinkedIn post titled “WeWork is in Trouble, and Here’s Why”, WeWork member Peter Abraham addresses this particular issue: growth vs quality-control.

“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,” Abraham writes.

Abraham’s conclusion is that he sees a “steadily deteriorating commitment to serving the customers” at WeWork.

At this year’s BCA Conference, Keynote speaker Emma Jones urged flexible workspace operators to “not forget their roots”, adding that operators should focus on ways in which their spaces can help small businesses connect with each other. Reading Abraham’s post, it’s safe to assume that WeWork was good at doing this in the past — connecting small businesses with one another.

WeWork’s report claims that the company helps small businesses grow, however Abraham believes that WeWork isn’t as good at doing that as it was in its early years, before they reached their US$20 billion valuation.

“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.”

And to a certain extent WeWork has already paid a price for this, not only with customers but also with former employees. Following a couple of lawsuits for labor rights violations for which WeWork was found guilty of unfair labor practices, the company was compelled to revise its employee handbook.

We would argue that WeWork has forgotten its roots.

WeWork’s negligence towards employees and customers, however, isn’t on purpose; and last year (2017) even WeWork executives admitted that “the rapid expansion left community staff working hard without much guidance or proper training.”

Abraham finishes his post with suggestions of what WeWork can do to “get back on track.” Now, whether or not WeWork will be able to reinstate a strong feeling of community remains to be seen; however Abraham’s post should get company executives thinking whether or not they are doing a good enough job at training their staff and keeping their clients. After all, what good will WeWork do to cities if it loses members over bad customer service?

WeWork has the opportunity and potential to positively impact cities in several parts of the world, but in order to do this, they need to focus on their microeconomics, they need to train their staff and make sure they are happy so that they, in turn, can keep WeWork members happy. In order to replicate their economic impact in other cities, they need to ensure top customer service, at all times and in all of their locations, otherwise membership rates will wane.

WeWork has created a lot of value both for cities and for the flexible workspace industry. Their investment in marketing efforts to spread the word about coworking has paid off; but with great power comes great responsibility.  WeWork has been surrounded by controversy for a long time, and the company has reached a point where it cannot afford to lose customers, especially if it needs to maintain all of its locations with at least 60% occupancy in order to break even.