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3 Leadership Lessons from the Failure of WeWork and Theranos

Denise Liebetrau

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3 Leadership Lessons from the Failure of WeWork and Theranos

A number of start-ups have gone from being mere innovative ideas to money-making machines. Some have the right servant leaders and team members in the right seats.  And they also have deep knowledge of the market, establish a daring vision, listen to the insights of a diverse and truth-telling board, and have the data that makes the case for their business. 

These companies continue to bask in success. The companies that don’t? Businesses like WeWork and Theranos. What went wrong? Let’s get into it. 

Truth vs. Storytelling

Let’s let the moral of Hans Christian Andersen’s tale The Emperor’s New Clothes highlight where  WeWork and Theranos went wrong. In the story, the Emperor hired two weavers to create clothes that only wise men, the ones “fit for their posts,” could see. 

To put it bluntly: the Emperor wanted to separate the smart from the stupid. When he donned the clothes, everyone pretended they could see them. In the end, it took the voice of a child to reveal that the Emperor was naked. 

The moral? People knew the truth but feared to look stupid so they didn’t speak up. The story the Emperor and the weavers told caused others to doubt themselves and what they knew to be true.

How does this tie in with WeWork and Theranos? WeWork’s co-founder and CEO, Adam Neumann, and Theranos’s founder and CEO, Elizabeth Holmes, continued to push their companies in a downward spiral due to a multitude of skewed, corrupt actions. Their ability to tell great stories allowed companies with little to no value to be viewed as valuable.

Before we continue, let me ask you this: 

How many intelligent people around Elizabeth Holmes and Adam Neumann saw the truth but didn’t speak up for fear that their truth would cause them to be viewed as stupid?  

Leadership Lesson #1: Speak your truth even if you are the only one with the courage to do so. 

Facts vs. Assumptions

Once dubbed as the most exciting start-up in America, WeWork went from an astonishing 47 billion dollar value to near bankruptcy in just six weeks. Critics placed blame on Adam Neumann’s lavish lifestyle (reports declare he adores drinking tequila and smoking weed), and lack of management ability

Reports show that Neumann purchased numerous homes. And he used company funds to pay for his party-boy, reckless lifestyle. Even when the company started losing around $219,000 per hour, Neumann and his wife, Rebekah Neumann, continued to live like billionaires. 

However, WeWork’s S-1 report kickstarted the start-up’s demise. Journalists and investors alike blasted the company for being flawed, corrupted, and led by an incompetent CEO. And Amy Nelson, writer for Inc., made a good point: “But instead of spending time analyzing WeWork’s downward spiral, we should instead question how we can disrupt a system that continues to throw money into the hands of men who operate with recklessness.”

When you think of it, how could Neumann’s behavior be unchecked by the board of directors (consisting of only men until recently), the other C-Suite leaders, and the collection of more than 10,000 employees? Thankfully, the S-1 report served as the child’s voice and worked to stop the IPO because investors questioned the valuation that wasn’t based in truth. 

Leadership Lesson #2:  Believe the facts and data instead of your assumptions and what appears to be a success.

 

Greed vs. Service

“The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.” -Michael Douglas as Gordon Gekko in Wall Street (1987) 

This Wall Street movie quote holds true today. Many startups and founders exhibit this philosophy in their actions. We have certainly seen what greed and a focus on lofty, inspirational statements caused at WeWork and Theranos. Theranos’ was focused on revolutionizing blood testing.  WeWork is focused on creating a world where people make a life, not just a living. 

Elizabeth Holmes ensured her employees kept quiet about her company, Theranos. She also ensured that visitors never saw behind-the-scenes. Business Insider reports that they had “to sign non-disclosure agreements before being allowed in the building, and had security guards escort visitors everywhere, even to the bathroom.”

Investigators eventually discovered that the once-claimed revolutionary blood-testing system that could detect cancer via a small needle prick actually used the same system as regular blood-testing businesses. Over the years, Holmes told investors that she couldn’t reveal how their system worked. Reports declare that Holmes always desired to achieve billionaire status. In the end, lust for money and greed ousted both Holmes and Neumann. 

What was missing was a focus on service instead of greed.  A focus on making an impact on the world and customers based on facts, data, courage, truth, servant leadership, and the relentless pursuit of creating something truly valuable.  

Leadership Lesson #3: Without the right focus on service instead of greed, success is fleeting. 

What can be done?

At the end of the day, we need to trust our instincts, our opinions, and our intelligence. We need to stand up to those in positions of power and recognize that our intelligence is enough. And more importantly, we need to have the courage to speak the truth loudly. Not just quietly in cubicles or conference rooms to fellow employees. We need to express our doubts on social media, C-suite leaders, and board members. There are those who will have the courage to stand with us. Believe in your ability to call out those who perpetuate lies and tell stories that serve no one but themselves. Because in the end, that is what true leadership is all about. 

Denise Liebetrau is the CEO of Prosper Consulting, a firm providing HR & Compensation Consulting, as well as Career and Salary Negotiation Coaching. www.prosperconsultingllc.com

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