“I got laid off and all I got was a free bike ride” became an internet meme today. And all because fitness brand Peloton was forced to announce 2,800 redundancies, as part of a major restructuring and cost control exercise. It's a move seen by some analysts as a last-ditch attempt to stay independent.
Rumours that the company is in trouble and up for sale have been swirling for months, with huge potential buyers from Amazon to Apple also said to be circling. Founder and CEO John Foley recently announced the company had been forced to halt production of its bikes and treadmills, after demand hadn’t matched the company’s forecasts.
Peloton was a major pandemic winner, with its at-home-but-shared exercise model an ideal way for people to get most of the hit of going to a gym class (and to share the pain and sweat) without leaving the house. It was perfect for fitness junkies stuck at home during lockdowns as well as offering the ideal antidote to all that banana bread and sourdough we were all filling up on. Lockdown luggage, sorted.
The success appears to have led to phase of apparently reckless expansion, which is coming unstuck as societies reopen and people once again start to exercise in real life (and maybe eat less bread and cake). There is little doubt the company needs to adopt some special measures to get itself back in shape. It has hired a replacement CEO (a former CFO of Netflix and Spotify), with Foley stepping back into a new role as executive chairman.
As painful as the restructuring is for those who have lost their jobs, it sounds like a sensible plan. But in the age of Zoom and Teams, examples abound of how not to do mass layoffs (yes, Vishal Garg we’re looking at you). Is this the latest in a long line of badly handled layoffs and if so, what did Peloton do wrong?
1. Announcement by email: This seems a sensible enough way to communicate with lots of people at once. The email that was allegedly sent at 5am. However well phrased it was (from the excerpts that have appeared it seems a little excessively filled with corporate jargon), the trouble was that lots of employees didn't see the email before they heard the story on the news.
The understandable needs and sensitivities of investors and the requirement to get the corporate news out quickly, appears to have trumped the sensitivities of those being laid off. Thousands of staff were apparently sent scrambling, trying to discover whether they were fired or not. After a month of speculation that jobs were going to be cut (following the announcement of production being halted), it left employees feeling a little deflated. As one staffer told the New York Post "morale is at rock bottom".
2. The token goodwill gesture: And so to that free bike ride. All laid off staff were told they would be given a year's free subscription (worth £40 a month), which was probably as well-intentioned as it now appears ham-fisted.
If nothing else it gave rise to a wave of "I lost my job and all I got" memes. Probably not what the communications or HR teams behind the move were thinking. If nothing else it drowned out some of the other, useful, things that Peloton was offering to those losing their jobs including access to a package of support to find a new role (with a CV doctor service). They also appear to have been as generous as the trying financial position allowed.
3. The instructors are the real talent: The announcement included news that none of Peloton's instructors or content would be affected by the changes. All classes would continue as before. This makes sense, as "the talent" and "the content" are central to the company's offering, and to it attracting and keeping members and subscribers.
The problem is that it is comes across as a little crass to those being laid off. It plays to an existing feeling within the company that it cares much more about instructors than anyone else. A big holiday party hosted in New York for instructors contrasted with cost-cutting measures that meant there were no comparable events last year for others.
Making everyone feel a little more loved could have helped. The apocryphal story of President Kennedy and the Nasa janitor springs to mind. Successful organisations have every single employee aligned behind a very clear mission and purpose.
We live in an age of outrage, fuelled in large part by social media. In such a febrile environment there is probably no easy way to make a chunk of your workforce redundant without some reputation blow back and an inevitable backlash. It's also a harsh fact, but any outrage generated by this move (whether genuine or not) isn't close to being the biggest problem facing Peloton right now.
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