Over the past few months, the epic fail—and fall—of WeWork’s reputation has played out in the media like some kind of lurid story in a supermarket tabloid. Yet there was a time earlier this past summer when WeWork was riding high, heading into a massive IPO with a projected valuation in the billions. Judging by how it was covered in the tech and business press, WeWork could do no wrong.
Now journalists are falling all over themselves doing exposé stories about the company and its colorful founder, Adam Neumann. Almost overnight the red flags about WeWork’s rise to prominence as a ‘disruptor’ to the office real estate industry have come into sharp focus—albeit in the rear-view mirror of journalists. According to an article in Digiday about how the WeWork debacle has been covered in the media, Business Insider alone has written over 250+ articles about the company since the IPO termination news broke.
Journalists took an extended holiday on WeWork during its climb to prominence since 2011. They spent the better part of the past decade admiring, rather than inquiring into, the company’s meteoric growth and near-obscene funding rounds from SoftBank, its main venture capital investor. Indeed, there seemed to be no end to the coverage of how successful and transformative the company was.
The rise and fall of a sham narrative
Make no mistake, WeWork was at its core an office space leasing company. What it did right was turn the executive office leasing model on its ear by building community into the mix, and turning it into a fun, hip and super flexible work environment. It took the co-working space model that was rising in popularity on a highly fragmented basis and fashioned it into a scalable enterprise. WeWork appealed to solopreneurs, techpreneurs, small businesses and even larger enterprises — all seeking flexible office solutions. At the end of the day, WeWork’s incredible growth was made possible from outside investors like SoftBank.
The sham came about when the company negotiated its successive funding valuations in such a way that grossly inflated its true valuation as compared to valuations of other companies in its market. Its valuations were also highly suspect from a revenue perspective, especially with respect to its potential for future profitability. According to Crunchbase, the company went from a $40 million Series B round with a $328 million valuation all the way to a $619 million Series F with a $16.2 billion dollar valuation.
Its pre-IPO valuation? A whopping $47 billion. Based on what exactly? Sales? Customer membership valuation? Hardly. The company’s revenue was $1.8 billion last year from some 401,000 paying members. That put the valuation of each customer member at around $117,200 dollars, an order of magnitude greater than competitors like Regus, which came in at a more realistic $11,300 dollars per customer. (source: FastCompany).
So, how did WeWork justify such stratospheric valuations for a company that was at its core just an office leasing company? By positioning itself as a tech company! You know, ones like Slack, Uber, and Zoom. Like other ‘pre-IPO tech companies’ it, too, was operating at a loss. Like other tech companies (so its communications narrative went), it would soon figure out the magic formula to scaling growth and profitability at much higher rates than traditional industry competitors. In short, it would become an unassailable player in its industry with technology at the core of its model.
Yet there was no magic tech bullet in WeWork’s model. Nor was Wall Street buying the narrative. Once the filing took place, analysts started pointing out the IPO’s financial valuation inconsistencies, which forced the company to vigorously defend the filing. When that happened, the news broke and the sham was exposed. The story, of course, went viral.
The marketing pixie dust WeWork used to bewitch the tech and business media for years failed to work its magic any longer. When WeWork’s nearest competitor, IWG, has more customers and more overall square footage, not to mention operates at a profit, the valuation bubble is bound to burst (source: Vox).
PR owns some of the blame
Why the long backstory on WeWork to make my point that PR has blood on its hands? Simple. The rise of WeWork was fueled in part by favorable media coverage, lots of it. What’s more, professional communicators were behind the shaping, distribution and selling of the WeWork narrative.
It’s easy to find fault with professional colleagues that end up on the wrong side of history. The CPAs who audited Enron — Arthur Andersen, remember them? — took the brunt of the public humiliation right beside Enron itself. Yet CPA firm was eventually proven to be innocent of any ‘criminal’ wrongdoing. That said, Arthur Andersen undoubtedly had plenty of opportunities as accredited accounting professionals to do something more than just turn a blind eye to Enron’s off-balance-sheet machinations. When the truth about Enron came out and its elaborate financial house of cards collapsed, Arthur Andersen, one of the leading CPA firms in the world with over a billion dollars in annual revenue, went right down with it.
So where do we go from here? If the PR profession wants to continue to be viewed as a reputable profession with governing ethics and associated credentials, then it must find ways to push for more responsible behavior from all practitioners. Granted, it’s much harder to do that given PR’s much looser professional reach and enforcement. Unlike CPAs or attorneys, you don’t have to have credentials to practice PR. (Full disclosure: only one person at Swyft has PR credentials, and he provides us with valuable best-practices feedback).
They crux as I see it is how to infuse a widely diverse and unregulated profession with a sense of collective ethics and responsibilities to drive better decision making. Clearly something has to be done. We can’t let what happened at WeWork erode confidence in our profession’s ability to do its job without resorting to misrepresenting the facts. It’s one thing to spin, it’s another to perpetrate a sham based on fundamental untruths or self-serving logic.
Journalists already have a very low opinion of the profession, as does the broader public. We need to do our best to reverse the damage the profession has sustained at the hands of companies like WeWork.
While I don’t purport to know the answer to what ails PR (other than a good old fashioned capitalistic urge to win accounts and do what it takes to make clients happy), I do have some suggestions on how to at least start rebuilding PR’s damaged reputation. Let’s call them the 3 A’s of PR ethics.
The Public Relations Society of America is the leading professional organization that serves the communications field. It provides accreditation, professional development and advocacy for over 30,000 members.
PRSA, not to mention individual PR professionals and agencies, would be wise to publicly acknowledge the role that PR played in helping WeWork’s perpetuate its global ruse through the media. It should call out the profession, point to its code of ethics and demand more from professionals in agencies and private/public organizations alike.
But it should also address the pink elephant in the room, which is the inherent conflict of interest PR professionals face when working with clients or employers. True independence is impossible, nor even necessary, as that would imply that PR serves an oversight role in an organization, which it clearly does not.
The profession should nonetheless acknowledge that it will always run the risk of becoming an enabler of a false narrative, if not of outright falsehoods. In PR we are paid to help an employer or customer achieve certain communications goals. With financial incentives come the ever-increasing risk of compromising one’s ethics for the sake of an accomplished goal, a paycheck, a happy customer.
Once we acknowledge the inherent risk, it frees us up to discuss the risks and develop ways to offset them.
PR professionals need to take a stronger stand when it comes to advising their clients and employers about the ethical implications of taking certain positions that increase the risk of falling afoul of ethical, and even legal, conventions. Fortunately, the kind of risk that reaches the level of a WeWork and Enron doesn’t come along that often. Still, when it does, it can happen over time and in such a way that one’s ethics erode almost imperceptibly and eventually fall victim to the wishes of the client.
PR professionals can and should fall back on their ethical training from PRSA or, absent that, their business ethics training from college. The fact is, most of the time making an ethical decision is a common-sense call. But in the event a professional is supporting a client or employer and the nuance between fact and fiction starts to get blurred, it’s incumbent upon the PR pro to speak their mind to ensure the client does not take a wrong turn.
PRSA, at the national and local group level, could also do more to advise its members and the greater business community on the need to remain ethical in all communications with the media. Stakeholders of all kinds — investors, customers, vendors, employees, etc. — rely upon that communication to make certain decisions that can have real-world implications. Beefing up that kind of grassroots outreach can help educate PR professionals and put them on alert for the early signs of dubious ethical decision-making that could have a larger ripple effect.
Business ethics will never amount to anything unless they have teeth. In the case of CPAs, if they fall afoul of their profession’s Code of Professional Conduct, they can get stripped of their license and, in severe cases, be held liable in a court of law.
PR professionals should be held accountable, too. That way they will be more incentivized to adhere to a code of ethics, which might help prevent more extreme outcomes of certain high-risk scenarios. Clearly there is a difference between a CPA losing a license to practice and having PRSA issue a reprimand or pull back credentials. The PR pro can still practice PR, even own an agency. A CPA, on the other hand, can’t practice in a CPA firm and will have to explain the reason for losing a license in any job interview they do.
I realize how different two professions are, both in terms of what they are called on to do and how their work is relied upon by 3rd parties. But the take-away here is that by strengthening accountability, the profession takes a stand. And that stand won’t go unnoticed by stakeholders like journalists, board members, and investors.
If we are to keep the PR profession in good standing, we have to keep our individual reputations in good standing, which includes owning our mistakes. WeWork was a mistake of epic proportions. It probably started innocently enough, a compromise here or an overlooked exaggeration there. But over time what may have started as a small lapse in professional ethics became a massive crisis that could ultimately end up bringing the company down.
To start the process of healing and earn back some much-deserved respect for the profession we practice we have to acknowledge the role PR played in selling the sham of WeWork. We must acknowledge the inherent conflict of interest we have as we seek to support our customers and employers. We have to figure out how we can better advise our customers that it’s in their best interest to adhere to some basic ethics when it comes to representing facts to the public by way of the media. Most importantly, we have to avoid the temptation of sacrificing our own ethics to get the big media win.
Failing to take a more proactive approach — or reactive, in the case of WeWork — to dealing with these kinds of events will continue to erode the public confidence in the PR profession as a whole. That, in turn, will impact our ability to be taken seriously by journalists who already hold the profession in low regard. It will also negatively impact the perceived value of what we provide as communicators, further marginalizing the profession and its ability to responsibly shape public opinion.