Employees pay the price for Peloton’s management

(Vice) Executives and insiders at the luxury home athletic equipment maker Peloton have cashed out over the last year to the tune of hundreds of millions of dollars, benefiting massively from the unexpected financial benefits of the COVID-19 pandemic. Now, as the company’s share price is in free fall, workers appear likely to bear the brunt of leadership’s bad decisions.

Peloton is reportedly working with the consulting firm McKinsey & Co. It plans to cut staff, halt production, increase prices, and close stores while potentially piling extra work on low-level employees. “Morale is at an all-time low,” one employee told CNBC. “The company is spinning out so fast.”

This is the same McKinsey whose top consultants will have to defend a federal racketeering claim after losing an appeal in a case alleging that the firm hid conflicts of interest when advising clients going through bankruptcies.

How does Peloton feel? “We can make it pretty easy by just stripping out low performers,” one executive said in the meeting.

Vice goes on to say, “the lowest performers appear to be at the top of the company. CEO and co-founder John Foley has admitted that the company was “undisciplined” in the way it hired after a massive surge in interest during the initial phases of the COVID-19 pandemic, which shut down gyms around the world and led people to search for a way to exercise at home. Maybe just as importantly, company leadership appears to have overestimated how many new people would want to purchase at-home machines moving forward. As a result, Peloton now has “thousands of cycles and treadmills sitting in warehouses or on cargo ships,” according to CNBC, and plans to halt production of its basic bike for two months starting in February, after already doing the same for its souped-up “Bike+” bike in December, according to documents reviewed by CNBC. on to say”

Before the crash, Peloton upper echelons got rich. Over the last year, executives and insiders reportedly sold $496 million in stock according to Securities and Exchange Commission filings. That includes the company’s president, William Lynch, who nabbed $105 million, and Foley, who sold $119 million.

Vice

So what happened?

Peloton bikes start at $1,495, with the newest model, the Peloton Bike+ costing $2,495.

But the company’s fortunes have shifted abruptly over the past year. It faced complaints over delayed deliveries and hours spent waiting for customer service representatives early last year. In May, Peloton had to recall its Tread+ and Tread treadmills after reports of several injuries and one death of a child linked to them. More recently — as more countries began to lift lockdown restrictions, businesses started reopening, and people were less inclined to work out at home — demand for Peloton’s equipment slowed sharply. And it faces growing competition, including from less expensive bikes that people can use with the programming on Peloton’s app.

But here is more of a fundamental issue here; the failure to understand their market, the competition that would follow, and the limited appeal of paying for a subscription. In other words, they thought their brand was more important and more appealing than it was.

The sad thing about all this is a CEO who collected over $100 million and then is laying off people to cut costs because we all know that employees do nothing but collect paychecks.

This is a crucial reason why so many people are quitting their jobs. Management makes mistakes, and they are paying the price while senior executives cash in. Peloton didn’t see competitors coming, and that’s an unforgivable mistake.

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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