In early October, Peloton slashed another 500 jobs as part of a restructuring sequence within the business. That restructuring, led by CEO Barry McCarthy, is part of a larger strategy aimed at returning to growth. In the tumult, McCarthy told The Wall Street Journal that the business had only six months to turn itself around and prove it could stand alone.
McCarthy later released a memo taking responsibility for the negative impression the article gave. He also asserted that he had been expecting a “story about the successful redemption and turnaround of Peloton” and told CNBC that the business was still on track to meet its cash flow goals for the fiscal year. But given McCarthy’s acknowledgment that the public might not have gotten the right message, Peloton’s situation demonstrates that giving your company any kind of survival timeline is something to approach with caution.
Expectation in the Transparency Age
One element of the fitness equipment maker’s story is the expectation of transparency that professionals stress worldwide. The basic concept is that when you are transparent with your employees, stakeholders, or customers, you build trust. With that trust, you become stronger and improve your capability to compete.
In that context, some people might appreciate seeing Peloton’s true situation. They might respect the business for not sugarcoating what has to happen. Of course, leadership can’t ignore the difficulties that layoffs can create (e.g., survivor guilt), but managers and executives can handle those challenges appropriately — revealing a set timeframe for success might help to clarify or redefine roles, goals, and key performance indicators. The remaining employees could become even more unified and motivated to work hard if they have a renewed, shared sense of purpose and know that everything is on the line.
The Pattern of Mess in the World
Transparency can win a business some brownie points in times of crisis. But the benefits of transparency can be tempered by wider circumstances over time.
Looking at Peloton more broadly, the latest round of layoffs is the fourth to hit the business: Peloton eliminated 2,800 positions in February 2022, 570 people in July, and 784 people in August. This final round means the company has reduced its headcount by more than half during this year.
It’s not all that unusual for businesses to go through layoffs in rounds. That’s because executives might underestimate how deeply they need to cut, and because they are sometimes emotionally hesitant to let people go until they can no longer avoid it. But people who have been keeping tabs on Peloton might see the pattern and degree of cuts and understand there’s not much fat left to trim. It’s arguably this long journey of difficulty that has led publishers like the New York Times and PYMNTS to refer to the company as having “deteriorating finances” and the last layoffs as being a “last hope” for the “struggling” business.
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To make the situation even more anxiety-producing, employees at Peloton — and around the world — are facing broader economic instability. Workers have seen thousands of companies close their doors through the pandemic: 200,000 small businesses shuttered in the first year alone, and that number is likely lower than it might have been had government assistance not been available.
Now, inflation is soaring at 8.2 percent, causing additional woes to personal finances and corporate accounts. Many people are at their breaking point in terms of mental health and stress, with the World Health Organization reporting a staggering 25% increase in anxiety and depression around the world.
So even as company culture shifts toward more openness, customers, stakeholders, and employees are having to work especially hard to stay optimistic. Employees who take McCarthy’s statements about survival in a longer context might already feel like the writing is on the wall. They might be motivated to jump ship before it’s too late, not only because of the pattern of terminations inside the company, but due to the bigger pattern of mess globally, and because it’s so hard to predict what is going to happen at all.
Be Truthful With the Whole Story
To some degree, Peloton’s struggles aren’t surprising: Like other companies such as Zoom, much of their growth can be attributed to the unique conditions of the pandemic. So it’s reasonable to expect a drop in sales when those conditions start to break.
But Peloton’s position is admittedly uncomfortable, and perception is not merely for the moment. It is something that gets influenced by internal and external factors over the long haul. Good transparency is not a total buffer against doubt or panic whose roots have been growing for weeks, months, or even years. Businesses that find themselves in Peloton’s shoes can provide an honest rationale for whatever timeline they set, and always look at the bigger picture when trying to predict how the public might respond to the paths they present.