How a toxic work culture made WeWork bankrupt

Following last week’s news that global shared office provider WeWork has filed for bankruptcy in the US, coworking analysts have been pitching their thoughts on what caused the startup’s property empire to topple.

Many point to the company’s financial woes. Also cited, the loss of founder and ex-CEO Adam Neumann, who left the company in disgrace in 2019. Both arguments trace back to an underlying theme in modern workplaces: the backlash against toxic office culture.

WeWork’s early beginnings may have been defined by a meteoric rise in memberships and valuation. But after leaders faced allegations of a poisonous work environment, the startup has never recovered from the losses it incurred as a result of the reputational damage.

We explore how WeWork’s founding company values, established in 2010, have set it up for a crash thirteen years later.

Startup culture

Heralded as ‘the future of work’ when it first entered the scene back in 2010, WeWork was part of a cohort of tech and media startups that claimed to revolutionise modern work environments.

In practice, this meant a lot of gimmicky office interiors. Where Buzzfeed had its office puppies, and Google had its slides, WeWork doled out free beer and ping-pong tables in an attempt to bring home comforts into an office setting. 

Moving away from rigid processes and a defined management pecking order, WeWork also popularised the open plan office which it said created the ideal atmosphere for innovation, and accelerated growth.

With these benefits, the founders argued, they were selling more than just an office. They wanted to build a global community of workers who were empowered to ‘Do what you love’.

This narrative got WeWork off the ground. It expanded to almost every major global city, growing at a pace that wowed investors and ultimately led to a $47 billion valuation over the summer of 2019. In August, everything was lined up for the company to go public. 

Toxic leadership

Around this time, however, came the fallout. Pushback against WeWork’s organisational culture began when the darker side effects of its anti-corporate principles were revealed.

WeCrashed, a tell-all documentary that tracked the WeWork saga from disruption to debt, uncovered a toxic leadership style from CEO Adam Neumann which led his former personal assistant, Megan Mallow to require therapy.

An annual ‘WeLive’ event, held each year to encourage teams to engage with the company vision, was also found to culminate in an alcohol-fuelled party which had led to allegations of sexual assault.

One employee, Ruby Anaya, who began working at WeWork in 2014, sued the company after allegedly being groped at two such company-wide events where attendance was mandatory and alcohol was readily available.

To top it all off, Neumann was accused of misleading investors regarding WeWork’s valuation. In one month, the company cut its valuation down to $10 billion and delayed its initial public offering (IPO) indefinitely.

David Soffer, founder and editor in Chief of TechRound commented: “At its peak, WeWork epitomised the ‘work hard, play hard’ ethos, but its so-called frat-boy culture blurred the lines a little too much. 

“This approach to office life, while initially appearing to foster better relationships, ultimately contributed to a lack of professionalism.”

Cultural change

WeWork’s leaders weren’t completely naive to the impact that this toxic workplace culture was having on the firm’s reputation. Neumann was asked to leave the company in 2019, after shares plummeted following the failed IPO. 

Following his departure, WeWork could potentially have recovered from the above PR crises. But then came the COVID-19 pandemic, triggering an abrupt transition to remote work and rendering many of WeWork’s perks obsolete.

With the majority of office-based firms shifting to an hybrid or remote working model, many UK employees have drastically altered how they view modern office space in 2023.

Rowdy office features, like WeWork’s bars, have since fallen by the wayside as workers increasingly prioritise productive environments that allow them to collaborate with team members they might usually chat to over Zoom.

Related to this came a rejection of the so-called “hustle culture” that defined 2010s office working. An epidemic of staff burnout in UK workplaces came to light, as employees pressed pause during COVID and reconsidered their personal and professional goals.

As a result, the past two years have seen a wave of anti-work trends like ‘quiet quitting’ and ‘career cushioning’, as workers put greater emphasis on keeping work and home lives separate.

Re-embracing red tape

WeWork’s troubled teenage years signal the end of an era. The short-lived office customs of frat-boy camaraderie and blurred boundaries have given way to a renewed emphasis on culture that supports employee mental health and wellbeing.

“A lesson to be learned from WeWork is the importance of investing in robust HR structures,” says Soffer. “Employee satisfaction goes beyond office perks like ping pong and free coffee. It’s about genuine care for employees’ wellbeing, offering benefits that support life outside work.”

It’s time for entrepreneurs to grow up. This year, coworking spaces have sought to establish themselves as providers of productive work spaces, not just a quirky, fun sofa area. 

Many have introduced ‘dull’ human resource (HR) policies, such as sober work events, in recognition of their importance for crafting inclusive, professional work environments. Even WeWork has taken steps to ‘normalise’ its business offering. In 2020, it ended its free beer policy as part of a string of new membership house rules.

The move has done little to alleviate members’ concerns, however. Between Q1 and Q2 2023, the firm reported a global drop in physical memberships of around 29,000.

The new operators changing how We Work

Alexandra Livesey is CEO of Clockwise, a flexible workspace business based in Europe and the UK. Livesey says that WeWork’s demise is not evidence for the death of in-person office work. 

Instead, he argues, it signals the need for fresh operators like Clockwise, who can embrace modern workplace culture.

“People are at the centre of our business and wellbeing is at the centre of our brand,” says Livesey. “We couldn’t, in good conscience, talk about wellbeing for members if we’re not extending the same to colleagues.”

Livesey tells Startups that all Clockwise colleagues have access to “wellness support, professional therapy and education”. The firm’s people team also carries out a quarterly colleague survey to help understand their thoughts and feelings of working at the company.

“We are a values-led business,” adds Livesey. “Our purpose is to create personal, purposeful and productive work environments and experiences that enable individuals, companies and communities to flourish.”

For businesses that might be still clinging to outdated cultural practices, WeWork’s is a cautionary tale that underscores the importance of adapting to the ever-changing demands of today’s workforce.

WeWork has since moved to reassure its UK members that their agreements will not be impacted after it filed for Chapter 11 last week. Yet even if the company can recover financially, its legacy as a toxic employer will be a much bigger hurdle to overcome.