In January 2020, a funding round closing at $285 million brought ClassPass’ valuation to $1 billion.1 It wasn’t long before the COVID19 pandemic began and the newly minted unicorn would see revenue drop by 95% in 10 days.2 Countries entered lockdowns, forcing gyms and studios to close indefinitely. Lobbying for government aid and stipends to prop up fitness operators had little success globally, causing many of ClassPass’ partners to close permanently. With the company’s business model tied to in-person fitness activities, tough decisions had to be made, and fast.
Samuel Canavan, Managing Director Asia-Pacific of ClassPass, was the man tasked to lead ClassPass through this rough patch. In this conversation, he shares what it was like to keep the business afloat through the pandemic and how he helped his team hunker down until they made it to the other side.
Managing Morale through Honest Conversations
ClassPass anticipated a resurgence in the fitness industry post-pandemic. They bet on in-person fitness activities believing that the pent up spending power and demand would cause people missing the gym and studio to return. This strategy required them to batten down the hatches. Costs cuts were swift and across the board. They tore up leases and cut out non-essentials like travel, entertainment and marketing budgets. There was no tiptoeing around fact that salaries were the biggest bill they had on the books. Sadly, they had no choice but to lay off about 40% of their staff globally. Sam tells us that the day he had to deliver this news to his team was categorically the hardest day of his career. It was emotionally wrenching, and complicated by the fact that his team worked across timezones. The news broke out overnight in US time so some of his people woke up to press about staff cuts.
It’s easy to imagine a heartless corporation leaving employees out in the cold but this picture is far removed from ClassPass’ reality. Sam always had a people-first mentality when it came to management. He put a great deal of effort into cultivating genuine and meaningful connections with staff at every level of the organisation. He recounts that they had two different Zoom rooms: one for those staying, the other for those going. He couldn’t inject much personality and empathy in his remarks at the time because of legal and HR scripts. However, he immediately went on to Whatsapp to talk to people one one one. He prioritised these conversations because giving people more clarity and closure was important.
The move naturally impacted morale. It was a challenge to rally the troops in such bleak times and keep everyone aligned to the business’ mission and vision. The company was intent on cutting once and cutting deep so that the remaining staff could carry one with some sense of certainty. The message was clear: If you're here, you're important to this company. We believe there's a really important part for you to play.
Care for staff was not confined to those who were retained. Sam and his team helped the ones leaving them grieve the loss of their jobs, understand the rationale behind the change, find new roles with other organisations. Outgoing staff were allowed to keep their company-issued computers and work from home set ups to equip for new roles elsewhere. Severance packages were generous. Taking inspiration from other business leaders, Sam actively sought to do what he could to land these employees new jobs. He, his managers and colleagues offered support and professional references. 18 months on, many of those former teammates are now in new employment and about 20% were brought back from furlough. While the situation was far from ideal, it allowed the team to come together and find reason to ride out the pandemic with the business.
A Dynamic Leadership Style
Resilient teams need leaders who can roll with the punches. Sam points to his time in the army as a major influence on his leadership style. It is where he’d observe how mindsets of teamwork, camaraderie and overcoming adversity came into play in achieving common goals. Absent military training, we can still learn from Sam’s example. We identified three elements of his style that fosters effective leadership, especially in difficult situations.
First, he embraces failure. Sam alludes to a startup trope: everyone wants to be the Harvard dropout with a multi-million dollar company founded out of a garage. Too often, we fixate on the success of outliers rather than the reality of failure and navigating it. Sam is very open with his team about failure. He admits that he stuffs things up regularly. He owns up to errors and uses them to learn with those around him. In the same vein, as early as the interview stage, he asks team members about their mistakes. He shows an interest in what happened, how they responded to the situation, their feelings about the mistake and what it’s taught them. The exercise encourages a growth mindset and builds a culture of resilience.
Second, he jumps on grenades for the sake of his people. “The buck stops here”, a phrase popularised by US President Harry Truman is a principle Sam lives by. He takes responsibility for mistakes - his own and those of other people - as the leader of the organisation. Taking the heat for decisions and actions gives his people the space to perform and grow, rather than shrinking back in fear. Jumping on grenades builds trust.
Third, he seeks to unlock greatness in the agency of others. Sam recognises that he cannot achieve anything as a standalone soldier. “I firmly believe that my job as a sort of empowered or empowering style of leader is to make sure that greatness is in the agency of others”, Sam explains. While he considers mistakes as something for him to own, success is treated differently. He passes on the kudos to the team and celebrates wins as achievements they’ve earned. It is his role to unblock roads and clear paths for those he works with. When team members can count on their superiors for support, they develop the autonomy and agency that drives them to achieve great things.
Together, these three strategies help establish a leader’s reputation with their team as someone reliable and trustworthy. As staff understand that leaders are in it with them, they gain the confidence to operate through crises knowing that they can find support from their leaders.
Adapting to Change
Businesses adapt and grow over time and leaders need to be equipped to manage change. Thing is, we can’t always control when they happen and some changes are more chaotic than others. Few are as disruptive as mergers and acquisitions. This is what Sam is poised to tackle now.
In October 2021, Mindbody acquired ClassPass. After fighting fires for almost two years, Sam is shifting gears and is encouraged by growth opportunities ahead. He remembers how he was on the other side of an acquisition when he started with ClassPass in 2019. In his first week, he was tasked with migrating competitor Guava Pass into the fold. This experience has informed his engagements with his counterpart at Mindbody, allowing the merger to go smoothly. Sam is keen for the marriage of the businesses to result in a cultural addition. He sees an opportunity to take the best of their scrappier startup roots and line them up with Mindbody’s robust systems. They target different customer segments so there’s room for them to work synergistically.
Apart from representing his team’s interests on an organisational level, he has set the tone for his team when it comes to the merger by communicating his enthusiasm and levelling expectations around teething issues. Sam tells his team that there will be systems, processes and people that will be foreign to them but it will all work out if both parties are intellectually honest with each other. He takes the time to explain why things are happening, and how it is the best way forward for both businesses. He’s found that this is all his team needs to go on the journey with him.
Sam’s mantra for the coming year is simple: what’s not good for the hive is not good for the bee. He espouses radical transparency with his team so they know exactly where the business is headed. As his team gets behind the vision, the process of assimilating will accelerate and they can shift focus back to their core, and shared, business objectives.
Final thoughts
In times of crisis, people look to leaders for decisive action and perspective. We might not have all the solutions but we can support our teams through change.
- Tough choices might need to be made but execute them with empathy.
- Empower your people to do great things by removing roadblocks and jumping on grenades for them.
- Be radically transparent and set the expectations of your team. The game plan will keep the team on track and mitigate the fear of uncertainty.
https://techcrunch.com/2020/01/08/classpass-finally-a-unicorn-raises-285-million-in-new-funding/
https://www.nytimes.com/2020/04/01/technology/virus-start-ups-pummeled-layoffs-unwinding.html
