By Angel Gutierrez
If your house had no windows, faulty wiring, and a bad foundation, what’s the first step you would take to fix it? Would you decide to repaint the house, or would you go to work fixing the essential problems first?
The answer’s obvious. But in the business world, many companies face deep foundational issues, yet nonetheless, devote their focus to cosmetics. It’s a common mistake that has spelled ruin for many promising businesses.
Could WeWork be next?
If you’re unfamiliar, WeWork is perhaps the top co-working company in the country (co-working meaning an office space where companies, usually startups, share common spaces and amenities). They’re expanding everywhere, and have recently announced a new Palo Alto location here in California.
The company hit the scene at just the right time when it was founded in 2011 – real estate was cheap due to the economic downturn, and the hip millennial business craze was in full flight across the country.
Over the last eight years, WeWork has matured from a trendy startup into a $47 billion dollar company, according to Fast Money. But as the company has grown, they’ve opened themselves up to new problems.
For starters, WeWork has a spending problem – a big one. According to Recode, last year, “[WeWork’s] net loss was $723 million in the first half of the year on about $764 million of revenue.” This wasn’t a one-off; the company has a pattern of money going in and out at just about the same rate.
That’s probably fine today while the economy is hot. But in the event of another downturn, such a small amount of cash-on-hand could be a real problem.
WeWork’s also come into some ethical dilemmas lately that threaten their reputation as a socially-conscious 21st-century company. For instance, it’s no secret that WeWork takes heavy investments from Softbank, a Japanese company that’s bankrolled by the Saudi government – especially problematic given the kingdom’s human rights violations.
Not to mention, WeWork’s also taken heat for their poor response to sexual harassment allegations and for firing cleaning staff who asked for a pay raise.
So far, WeWork has not done much to address the problems themselves. Rather, they’ve embarked on a new expansion and rebranding effort. They now operate under an umbrella brand called “the we company” and are launching new business ventures in the education and housing spaces.
Launching a new rebrand and expansion isn’t a bad thing. But if this is WeWork’s only solution to poor financial management and problematic ethical situations, then it’s not the right move.
Not to mention, the rebrand itself has raised some eyebrows. By calling itself “we,” WeWork is mirroring the name of a well-established Canadian charity called the WE Organization. The WE Organization has been around for over two decades, and in that time has made a mark around the world for their philanthropic efforts. Furthermore, the charity is involved in many of the same sectors as WeWork.
It’s one thing to change your company’s name, but when you're using a similar brand as a nonprofit that is involved in the same sectors, it's certainly not the most ideal look for the millennial-driven company.
Bottom line: WeWork’s effort to rebrand itself and grow as a business is fine. However, it is not the sole path to solving the true problems facing the company. WeWork has a lot of potential as it expands in California. If the company can solve its internal flaws, there is no doubt that WeWork will achieve even greater success.
Angel Gutierrez is the President/CEO of Crescent College.