2 key lessons from Peloton’s bumpy pandemic ride

Jhe first sign for Peloton employees about to be laid off came when they couldn’t log into certain work-related apps. A few hours later, on a Tuesday morning last week, thousands of people learned that they had indeed been released.

Not so long ago, Peloton was booming. Then we blinked, apparently, and his fortunes crumbled just as quickly.

Last week, the company laid off 2,800 workers, or 20% of its workforce. At its peak, the stock price exceeded $170 per share with a market capitalization of around $50 billion. On Monday, Peloton’s stock closed at $32.83. Under pressure from investors, CEO John Foley resigned and installed former Spotify chief financial officer Barry McCarthy.

What was wrong, and why so fast? Peloton made massive investments in complex manufacturing and delivery operations to meet a huge surge in orders at the start of the pandemic – only to belatedly find demand plummeting.

If you’re a Peloton user (confession, I am), you might not notice all of these changes. Instructors are not affected by the layoff. (Although many of them are already superstar brands on their own and could easily burst if instability persists.)

If you’re an employer (confession, I am), it’s impossible not to watch Peloton’s rapid-fire turnaround and look for key lessons for what feels like an era of relentless turbulence and erratic consumerism.

Because Peloton’s crisis is all of us. Consider the release of a recent Grant Thornton poll showing a decline in optimism. Only 57% of CFOs have a positive economic outlook for the next six months, down from 69% in the third quarter. More than half of CFOs are also preparing for the negative impact of the novel COVID-19 variant.

More than ever, expect the unexpected.

A key lesson from Peloton is that we need to build planning for uncertainty and volatility into everything we do.

One of Peloton’s biggest headaches is its supply chain; the gear itself is heavy (a typical bike weighs 135 pounds) and made overseas. While it had a large fan base before the pandemic, the spring of 2020 brought renewed demand as gyms closed and workers sought shelter (and exercise) at home. Online groups have been inundated with complaints about order delays as the company ramps up manufacturing and tries to resolve delivery issues.

Faced with a huge surge in demand, Peloton invested $100 million to expedite shipments, spending a hefty amount of money on airlift products from its Asian manufacturing facilities. “If we’re technical about it, temporarily paying high air freight rates isn’t exactly ‘investing in the supply chain,’ it’s just burning money,” wrote Freight Waves, a company information and data intelligence for the supply chain industry. The piece was titled “Peloton’s Supply Chain Is Broken (And $100 Million Won’t Fix It)” — and it aired a year ago.

The problem? The solution was extremely expensive and the company lacked information on the demand side of the equation. For that, Peloton could have talked to workers in its own warehouses, which eventually became “so full they felt like puzzles, with employees trying to figure out where to store another bike,” Insider wrote last month.

Some of that isn’t Peloton’s fault. Who can predict the next Covid variant or associated shutdowns? And so, part of safeguarding our future is not just creating a patchwork of solutions, but solving the fundamental problems, such as the fragility of a global supply chain. And beyond selling the goods, we need people who can look up and notice the first signs of a problem. This requires significant investment in everything from physical (eg roads and subways) to virtual (data and technology, and staffing to plan and analyze).

Talent is everything.

In addition to the supply chain, another concern unites employers: talent. In a recent PwC survey of business leaders, 77% say the most important factor driving growth in 2022 is the ability to hire and retain talent; 48% say talent is also their biggest risk.

In the case of Peloton, several themes emerge from its hiring and firing processes. Thanks to its growth and a certain “cool” factor, the company was able to quickly evolve its workforce. But the bumpy rollout of communications over the past week shows less attention could have been paid to laying off workers. Remote work makes this even more difficult, because relationships between colleagues have been interrupted or have never been established. And firing people leaves virtually little room for affirming or preserving a company’s culture.

After being unable to log into various work-related apps, employees said they woke up Tuesday morning to news of the CEO’s resignation and rumors of restructuring. That morning, human resources began notifying those who were part of the layoffs.

“It was sudden, cold and scripted – and I’m still in shock,” a field operations employee (the people who deliver the bikes, set them up and show customers how to use them) told Insider. .

“When I got the call, I could tell my manager was reading a script,” this person said. “Peloton really prides itself on transparency, but we felt like we had a complete lack of information about the status of the company.”

The same pandemic in which Peloton faced unprecedented demand also did. In our tech-connected world, it’s very difficult to keep a layoff a secret. Transparency should have been the least Peloton workers expected from their employers, especially since Peloton had a history of impressive leadership in this area, such as its willingness to engage in difficult conversations from #BlackLivesMatter to #StopAsianHate, and her blog posts on how exercise is life-changing to the challenges of homeschooling.

Peloton’s stumble also made less sense given that the stigma attached to being laid off is diminishing. Going on Twitter or LinkedIn is almost a first step, both as a form of catharsis but also as a necessary way to let people know you’re open to the next thing.

The ease of sharing information led to another embarrassing moment for Peloton, as departing employees called Wednesday’s general meeting with the new CEO. The chat was peppered with comments such as: “I’m selling all my Peloton clothes to pay my bills!!!” and “It’s terribly deaf.”

Indeed. The meeting finally ended early.

This experience shows the need for companies to share more information with employees about the company’s financial health. There’s a reason employee meetings come alive whenever leaders share budget information, resource rationales, or new plans and initiatives.

Peloton’s own instructors preach eloquently on the connection between mental and physical health. Emotional well-being must be built into any layoff strategy, both for laid-off workers and those who remain.

Thus, we must plan for redundancies as carefully as recruitment, onboarding, retention and development. It’s not just about departing employees and maintaining goodwill; it’s about retaining the remaining talent. Over time, transparency can also help build a workforce that is more adaptable and aware of sudden needs to pivot or learn new skills.

Because the truth is, given the current uncertainty, companies laying off thousands of employees could find themselves back in the workforce within months, ready to hire again.

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