Peloton CEO quit after laying off 2,800. A lesson about how not to lead (2022)

https://www.inc.com/jason-aten/pelotons-ceo-john-foley-quit-q2-2022-earnings-laying-off-2800-people.html

by whereistimbo • 3 years ago

90 189 3 years ago

When there are layoffs and the CEO keeps his job people complain, when there are layoffs and the CEO leaves people complain. I think the takeaway is that people just like to complain

hobs• 3 years ago

It is genuinely difficult to suddenly lose your job and reallocate all your time and energy on new projects, I don't see anyone wouldn't complain about that.

ethanbond• 3 years ago

Or people like complaining about bad things and layoffs are bad?

lnsru• 3 years ago

CEO gets always the money. For example: https://www.cnbc.com/amp/2014/04/17/fired-yahoo-exec-gets-58... While workers get in best case severance package and unemployment benefits.

ceejayoz4• 3 years ago

I one worked at a publicly traded company that did furloughs; we got emails from the CEO along the lines of "I feel your pain, I'm taking one too".

Six months later the execs got bonuses for successful cost-cutting. Those bonuses were roughly equal to the amount the two-week furloughs saved across the company.

GoToRO• 3 years ago

People complain because they were paid like employees but they were treated like contractors. The rest doesn't change their situation: the jobs are not back just because the CEO left.

hef198984• 3 years ago

The downside of at-will employment. Personnaly, I don't see any upsides, but I lost count of how often the employee protection in, e.g., Europe were brought up as, besides taxes, the main reason why start-ups and tech companies outside the US just aren't competitive. How things change, right?

ignoramous• 3 years ago

The takeaway is folks hate layoffs.

Context matters though: Peloton is going to save $800m/yr in expenses by laying off 20% of its workforce. It is a viable bet to take in this case.

b3lvedere5• 3 years ago

People (the workforce) complain about the total lack of respect and honesty. They couldn't care less if the CEO was on or off the company after such disasters, because the CEO usually has plenty of money to sustain his family for a decade without worrying too much. The workforce usually does not have that luxury.

rendaw• 3 years ago

I think when the CEO keeps his job people complain, when he leaves with a golden parachute people complain because they want him to be be punished/have skin in the game if he's going to lay off lots of people.

PartiallyTyped• 3 years ago

TOKYO – Nintendo CEO Satoru Iwata is to take a 50 percent pay cut for five months to atone for losses at the game giant, while other senior executives, including Mario creator Shigeru Miyamoto, will forego 20 to 30 percent of their salaries.

https://www.hollywoodreporter.com/lifestyle/arts/nintendo-ce...

People actually liked that and respect them a lot more. Is it symbolic? Given their wealth, yeah.

But the problem is the golden parachute, a slap on the wrist and lots of money to leave.

hef198984• 3 years ago

Still a far cry from folks like Neuman. And he is seen by somenas great example of a founder, opinions are different.

Those Nintendo execs did the right thing so, I almost dare call it honorable.

valdiorn• 3 years ago

This was just the CEO pulling the rip-cord on his Golden Parachute while the company can still make the payout.

He knew the company was screwed, and it's entirely the fault of top leadership. they chose to make their own performance bonuses a priority over long-term business survival, by recklessly expanding during Covid; a strategy that literally everyone could have told them would not be sustainable.

tough2• 3 years ago

Go big or go home

Or go home with a big paycheck in this case

linuxftw3• 3 years ago

I think the leadership has done an amazing job. They made something out of nothing. Selling exercise bikes for 100's of percent of markups, and then charging the clowns that buy them a subscription fee.

they chose to make their own performance bonuses a priority over long-term business survival, by recklessly expanding during Covid

There was never going to be long term survival. Peloton was the latest 'as seen on TV' level of product, and once their 15 minutes of fame burns out, the name will be sold off to license cheap products.

edgefield5• 3 years ago

As a peloton owner, I strongly disagree. I have a peloton and went from not working out regularly, despite many attempts and gym memberships, to working out 4x a week (45 min or longer), going on 3 years now. I lost 15 lbs and in the best shape of my life. A $1,500 bike + $49/month subscription fee is a small price to pay for dramatically improved health and well being.

mupuff12343• 3 years ago

I don't agree, peloton is a great product.

Would you say a similar thing about a high quality bike?

But the monthly subscription fee is way too high considering the price of the bike.

bluGill2• 3 years ago

I don't know, I think there is a long term market in social exercise at home that they can tap into and keep going. However it isn't nearly as large as their current market. Enough to be profitable by having a few trained staff (people with actual exercise degrees using the latest research to run a good class as opposed to your typical gym personal trainer who doesn't have formal training in that) so that a class is starting every 15 minutes. (and some classes can be re-runs so long as they don't fall into the trap of stale content because it is all reruns).

However the above is enough to support a small company with about a dozen full-time staff who are doing well for themselves, and a few part time staff. That is one CEO who also does basic HR and a few other tasks, 2 IT support people, 6 personal trainers (some who always work nights/weekends), a few other staff because other functions are needed, and part time is seniors at the local college who are getting a relevant degree. Once in a while they will need to outsource design of a new bike as parts on the old model go obsolete, or some new software feature (every two years at most - partially so they still remember how to get this done). Nobody will get rich doing this, but all will have a nice middle class life. And of course all the venture capitalists who funded the wild ride up will be disappointed.

steveBK1233• 3 years ago

I think there was no chance to survive at the scale they expanded to. Not an owner, but I've used one. Also - yes, the bike is expensive, but a comparable exercise bike is similar cost. Yes there are cheaper exercise bikes, they are not as well built generally. They actually lose money on the bikes but make it back on the subscription.

For city people living in HCOL areas, Peloton is a steal compared to gym membership/class rates if you like spinning. Similar for some of the other workout-from-home services that expanded rapidly during COVID.

The problem is, the TAM for that is not 330M Americans / 1B people worldwide. It's more like ~20M Americans / 50M worldwide, best case.

I think its one of those NYC/SF bubble creature mind traps that actually - gyms don't cost $350/mo everywhere. My parents pay $99/year to use a gym and they share a membership, lol. So for a small subset of people $40/mo from home is a steal. For a lot of people it looks like a luxury.

The COVID bump was always going to be temporary, but the genre in general makes some sense for WFH white collar people who don't want to get a HCOL area gym membership.

35997279• 3 years ago

There was never going to be long term survival.

Yes. It’s an tablet on a bike connected to a VOD workout service. Apple was always just about to eat their lunch. The day they announced Fitness+ was probably the day everyone in the C-Suite started looking for the exit.

b3lvedere5• 3 years ago

Amazing how little respect the leaders of a company seem to have about their workforce. It looks like leaders can never be honest towards their employees.

"It is not easy to say goodbye to valued colleagues and friends, each of whom have made important contributions to helping build Peloton into the company it is today. Decisions like these were not taken lightly, and we will work hard to assist impacted teammates with their transitions."

It was probably a lot easier than their valued golden parachute.

the_snooze• 3 years ago

It looks like leaders can never be honest towards their employees.

These aren't leaders. These are toddlers in authority positions.

gizmo2• 3 years ago

What are the long term prospects of a company like peloton? It's a bike + an iPad. Both components are commodities, and the price-insensitive segment of the market is too small to sustain a big business.

It's easy to hate on management, but the business doesn't make sense and management can't fix that. Peleton was going to crash from the covid-fueled mania, and it was going to crash hard. Inevitable.

ghaff10• 3 years ago

+ an iPad

With a monthly Apple Fitness subscription or equivalent.

eduction• 3 years ago

[CEO lays people off but does not resign]

“You’re not taking responsibility!”

[CEO lays people off and does resign]

“You’re shirking responsibility in order to get your bonus!”

SamoyedFurFluff2• 3 years ago

IMO a CEO shouldn’t be getting a bonus at all if the company is doing mass layoffs.

fatherzine2• 3 years ago

CEO lays people off, forfeits their bonus [because they failed their responsibility to the employees] and then perhaps also resigns [because they failed their responsibility to the shareholders]

ceejayoz4• 3 years ago

Yes, the CEO wins in both of those scenarios.

What people are looking for is "CEO lays people off and does resign without a golden parachute for fucking up". Maybe even a clawback for past years' bonuses if stuff like accounting shenanigans were used to earn them.

melindajb2• 3 years ago

It’s fascinating to see on hacker news of all places, the negativity towards a founder with a very successful exit.

ProjectArcturis3• 3 years ago

Literally everyone except the people who inflated the stock price.

whereistimbo• 3 years ago

The problem is, a business is more than just an idea.
Sure, every business starts with an idea, but a business is a product, and manufacturing, and supply chains, and financial reports, and customer service.
Once you involve other stakeholders, you become accountable. You become accountable to your customers, shareholders, and employees. That's a difficult thing for a founder who is used to exerting complete control over the thing they're building.

tombert2• 3 years ago

That's something I've said for a long time, after an argument with a "startup founder" who wanted me to code their entire website (from scratch!) with no help for a grand total of 2% equity (they got the remaining 98%, obviously) within basically no outside pay.

I tried to get a bit more equity before I signed [1], explaining that it seemed like I would be doing the lion's share of the work, so I felt I deserved at least 10-15% equity. The "founder" then told me that they deserve most of the equity because they had the "idea" for this startup, and I told them that everyone has ideas! Ideas are useful and necessary but also extremely cheap and unspectacular. No one gives a shit about your "idea", at least not until you've actually done some actual work to objectively prove that the idea is good.

[1] I was still somewhat young in my career and the red flags that I have now had not been fully developed.

quickthrower25• 3 years ago

Yeah “someones offering me 100% equity for the same idea, see ya later!” springs to mind!

Satam3• 3 years ago

Right, and if someone else thinks they can do a better job they're free to start their own company or acquire a stake in one.

Also, why are stakeholders being infantalized like they're some completely naive and innocent bystanders? Customers presumably are not forced to buy what you're selling, shareholders know their capital is at risk, and employees get paid every month. Are we supposed to be everyone's psychologist and finance advisor as well? Everyone's making their own decisions.

coldcode• 3 years ago

The hardest thing to realize starting a company is realizing when you are no longer sufficient to run the company. It's a big difference from starting something small to running something huge. It took Steve Jobs 10 years from being forced out from Apple to returning wiser. Some people can adapt and learn but from what I have seen, most people can only be good at small or large, but not both.

tough2• 3 years ago

10 years building NeXT and Pixar and what not too

hef198984• 3 years ago

And at Pixar ot seems he learned a lot. As someone else pointed out, Jobs did more or less the same thing after his return he did before. The crucial difference being, he did it successful after, while before he almost killed Apple. That difference is hard to learn.

matwood• 3 years ago

It's a point that people often forget. Going from 0->1 is a very different skill than 1->100 or bigger. Anyone who has started a company or been part of a small company then acquired by a larger company has felt this. It's also one of the reasons why so many acquisitions fail.

valianteffort• 3 years ago

Didn't Jobs bring in Sculley himself before getting ousted? It's not as though he was removed for any particular disaster, it was a coup.

He returned and continued doing exactly what he had done before. Investing tons of resources into new products that have cutting edge features bundled into an aesthetic package.

rickdeckard3• 3 years ago

I'd assume also a godlike human being like Steve Jobs evolved within the 12 years he was gone from Apple, so I doubt the person who returned was the same as the one that left.

II2II• 3 years ago

Apple was a disaster, riding on the coattails of the Apple II, prior to the ousting of Jobs. The Apple III was both an engineering and market failure. The Lisa was an engineering and market failure. The future of the Macintosh was by no means guaranteed. Whether he was the cause of the problems within Apple or a symptom of it is open for debate, but he certainly wasn't helping matters. Just consider how the Macintosh the world grew to love came to be.

I don't know the story of Jobs well enough to pinpoint what had changed over the intervening years, but something clearly did change. He had and maintained the confidence of the company. He was able to restore confidence of the consumer. There was a clear succession plan when he passed away, avoiding the turmoil that Apple saw after his ousting in the 1980's. This was not the same man, even if he maintained his abrasive edge.

s_dev• 3 years ago

"The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life." - Steve Jobs on being fired from Apple.

michaelsbradley• 3 years ago

Feb 2022

grantsch• 3 years ago

We need to wash out these capital destroying companies/managers/investors

It's been like a race to light capital on fire across every industry up to now

KoftaBob2• 3 years ago

Although you may not have been implying it, saying the capital is being "lit on fire" makes it sound like the money vanishes into thin air, when that's not technically the outcome.

Even if the capital is given to/spent by a failing company, that money is at least still mostly spent on either materials or labor, which means it ends up back in the economy but somewhere else.

Obviously not the most efficient use of that capital if its being invested in poor companies, but it's not vanishing into thin air.

quickthrower25• 3 years ago

But it is a waste of resources if they have to chuck stock in a landfill. Probably not what is happening here. More like some winners and losers at the craps table.

elliotto• 3 years ago

Is this like one level of abstraction from the broken window fallacy? Investing money in window breaking companies rather than just windows (to be broken).

golemotron• 3 years ago

Foley never seemed to fully understand the responsibility that comes with leading people. He never seemed to understand what it means to be accountable. As a result, he's out of a job.

He quit. That's accountable.

ceejayoz4• 3 years ago

If he forgoes his golden parachute, maybe. Even then, he'll be sitting pretty on his $20M+ a year he's already made.

JCM92• 3 years ago

The tombstone for Peloton will read “A great idea terribly executed by a poor management team”

paulcole4• 3 years ago

What’s the great idea exactly? It’s an incredibly expensive (and low margin) exercise bike with an expensive (and high margin) monthly subscription.

Charging a lot (and not making a lot) for something people probably won’t use for long isn’t a winning bet IMO.

jsheard• 3 years ago

That's underselling their innovation, they also made an expensive treadmill that was uniquely prone to eating children and pets.

JCM92• 3 years ago

People bought them in droves, and those that did broadly seem to enjoy it. I certainly have a few mega fans in my circle. The execution though was just terrible. They just kept pumping the things out after it was clear they saturated the market. They could have had an excellent business with a smaller market but instead didn’t know when to tap the brakes on their growth and built a bloated mess that may be impossible to unravel.

softwaredoug• 3 years ago

My understanding of Peloton is they have very solid user retention numbers. 92% year over year [1]

Where they struggle is growth. They are seen as a premium product. They're expensive. That's why they have tried creating new tiers, new products that aren't just the bike, and ways to get a subscription from just a streaming device.

IMO they would have done better to stay a slower growing, niche, premium product but focusing on quality and profitability instead of growth. The price elasticity in the premium user base is pretty high, they probably would have paid more / bought other products. Then they can keep their cool, and create more organic demand, but not obsess over always filling that demand. Scarcity is a good thing for a premium product.

I think, however, now they are stuck. They need growth.

As n=1, I'm a long term peloton subscriber, and find it a really invaluable way to exercise. Not for everyone, but I get a lot out of it.

1 - https://backlinko.com/peloton-users

lotsofpulp• 3 years ago

I was thinking the opposite. A terrible idea greatly executed by a great management team in times of loose money.

I cannot blame those who were able to cash out.

melindajb2• 3 years ago

There’s no way silicon valley would have realized the importance of the content in the equation. The talent is absolutely a huge part of the success. There are multiple huge facebook and ig groups for some of the most popular instructors. It’s a moat.

I started out with a different bike but eventually bought a peloton because the community and integration was so much better than bike + tablet.

Plus I love stretching, yoga, pilates, meditation.

During cancer I couldn’t ride. But those chair and standing yoga classes made an enormous difference in my state of mind and health.

I wish it wasn’t so hard for a few folks here to see that passion and emotion for a brand has value.

That said, there are enormous opportunities in front of Peloton. It’s time to get some Silicon Valley leadership in there to apply product led growth initiatives.

paulcole4• 3 years ago

Imagine going on Executive News (EN) and seeing a bunch of c-suite people armchair quarterbacking the work of a programmer at a failing company.

jasondigitized• 3 years ago

“It’s obvious she should have shifted resources to tackling tech debt”.

hotsauceror• 3 years ago

Mr. Musk would like a word with you. Please bring printed out copies of all your git commits for the last nine months.

paulcole4• 3 years ago

Is this dumber than programmers thinking they have great insight into the work of CEOs?

ChrisMarshallNY3• 3 years ago

Foley never seemed to fully understand the responsibility that comes with leading people. He never seemed to understand what it means to be accountable.

Seems to be a lot of that, going around.

rjbwork• 3 years ago

What does accountability even mean? You can drive a company into the ground, destroy the livelihoods of thousands, and make off with tens of millions of dollars. With no consequences whatsoever. What would accountability even look like under the system we have?

ChrisMarshallNY3• 3 years ago

I can't tell you that, but I spent 27 years at a Japanese corporation.

That taught me some serious personal accountability.

siva7• 3 years ago

This is a company that wouldn't have existed on this scale without the pandemic events and i don't think that leadership has done business-wise anything wrong except from a moral/ethical standpoint.

Satam3• 3 years ago

Why do so many people feel they're owed a job? When founding a company the market certainly doesn't give the entrepneur a break.

You get money, you work, that's the end of it. If someone was ever offered 2x their salary elsewhere, 99% of people would change jobs immediately.

Businesses exist to make money and employees go to work to get a bit of that money. What's up with any other delusions?

barelyauser• 3 years ago

They are not. Luckily AI will soon replace most of them and they can finally starve or something like that.

Satam3• 3 years ago

An insolvent business pays no salaries, and that's where you'll end up running an enterprise like a charity.

mhb2• 3 years ago

How do these golden parachutes (including the Wikimedia ones) make any sense in terms of incentives? Why would you want people to get a bonus for leaving? Fine, there's a negotiation with the high level employees and they ask for these things, but why not just give them more of something else instead? Like the usual things that reward tenure.

ceejayoz4• 3 years ago

The real incentive is "we all sit on each others' boards".

rickdeckard3• 3 years ago

Because if you want someone with skill to enter and run (or recover) your company, he won't do it for the sake of an adventure. He usually gets offered a big reward for achieving a goal he cannot fully judge yet, and a small compensation in case he fails (and ultimately leaves).

If such a person chooses the "golden parachute", the "golden rocket" he had to commit on hiring was maybe unachievable in first place...

mhb2• 3 years ago

The pieces of compensation can all be negotiated. The board could make an offer that trades an element with a sensible incentive for staying (or even just more cash) for an element that is an incentive for leaving.

fatherzine2• 3 years ago

This cuts both ways. Are there /really/ so few 'someone with skill' people that can run your company, often into the ground? Or it's more of an incestuous network of very connected people that sign fat checks to each other, because shareholders are divided and remote, so nobody is paying close attention anyways?

CerebralCerb• 3 years ago

You won't get a CEO to lay off 2800 people without offering them a golden parachute. Parachutes comes with strings attached.

nhylated• 3 years ago

Worth a read in the context of the OP.

https://www.businessinsider.com/slides-major-peloton-investo...

Edit: link to original slide deck from Blackwell Capital if you want to skip the BI article - https://www.blackwellscap.com/wp-content/uploads/2022/02/BW_...

keeptrying• 3 years ago

If you’re an employee it’s going to be even more important to understand the business you join.

When choosing a company you are defacto making a heavy bet on the CEO whether you like it or not. Especially in a Down economy.

The only way to really understand this is to try to start your own company. It’ll be come instantly clear to you.

shp0ngle• 3 years ago

The new CEO is a guy who pushed hard for Spotify Podcasts investment to them as a CFO.

I don't know if that is a good credential honestly, given how much money Spotify poured into podcasting with not that much return.

This is about the old CEO though, the article is from 2022

saos• 3 years ago

The co-founder is stepping down from his role as CEO, but will remain on the board

I mean.

anyways is this a new round of layoff for them. I know they’ve done a few I’m the past

joecasson• 3 years ago

I was hoping for more from the article. It lacks pretty much any detail that might actually prove to be a lesson.

It cites a layoff, a change in the stock price, and a few assumptions about how Foley generally isn't good at their business operations. Then it goes into vague platitudes about how a business is more than an idea. It doesn't mention anything of substance.

Works for the clickbait though.

ProjectArcturis3• 3 years ago

Peloton has always struck me as being the latest in a long line of fitness gadgets, from Nordic Track through Tae Bo DVDs and Bowflex. It was inevitable that the fad would end. The CEO rationally followed his incentives: lean into the fad, boost short-term profit at the expense of sustainability, and get that stock price up. Then quit and go buy an island somewhere. HIS plan worked perfectly.

EvmRoot• 3 years ago

Wait, a company whose business is strapping ipads to exercise bikes and hooking them up to onlyfans has 28,000 employees?

How is that possible?

dahwolf• 3 years ago

This is what happens when you people are too young to have seen the Rocky movies. Rocky doesn't need an expensive bike + subscription. He uses his body and public parks to grind himself into fitness.

Cost: zero.

Fitness outcome: tons better than you.

Peloton CEO quit after laying off 2,800. A lesson about how not to lead (2022)

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