Are New Hires Ready for the Workplace?

The pandemic years have taken a toll on both soft skills and basic skills: "We’re just trying to find some people who could fog the mirror."

Good Morning!

Here are today’s highlights:            

• There’s no shortage of real estate agents.

• Walmart has something new in its aisles: advertising.

• Here are 15 ideas to revitalize America’s downtowns.

• After losing nearly $30 billion, Uber just posted its first operating profit.

ARTIFICIAL INTELLIGENCE

Cladwell, a promising startup that went bust in 2019, is back—thanks in part to ChatGPT: “When Erin Flynn took over that year, after joining as a co-founder a few years prior, the personal styling company had essentially cut all staff, and its app was so bogged down and buggy, it needed to be rebuilt from scratch. It seemed to lack product-market fit, she said. But still there were glints of potential. Today, Flynn's emerging from a heads-down rebuild, slowed somewhat by the Covid pandemic, but now ready to go. A new studio office in a Cincinnati suburb and a new product rollout – one that could be a first in fashiontech – means the outlook is bright.”

• “‘Ask Cladwell,’ a feature that leans heavily into the world of ChatGPT, will allow users to get personalized style advice anytime. Flynn said it will be a huge driver for the company, which hit profitability for the first time earlier this year.”

• “‘In some ways it feels like Cladwell was meant for this era,’ Flynn said. ‘Being able to use the data and knowledge we've gathered over the last 10 years – to combine that with AI – it’s magical.’” READ MORE

HUMAN RESOURCES

Businesses are finding that many new hires don’t have the basic skills for work: “The knock-on effect of years of remote learning during the pandemic is gumming up workplaces around the country. It is one reason professional service jobs are going unfilled and goods aren’t making it to market. It also helps explain why national productivity has fallen for the past five quarters, the longest contraction since at least 1948, according to the U.S. Labor Department. The shortcomings run the gamut from general knowledge, including how to make change at a register, to soft skills such as working with others. Employers are spending more time and resources searching for candidates and often lowering expectations when they hire. Then they are spending millions to fix new employees’ lack of basic skills.”

• “Talent First, a business-led workforce-development organization in Grand Rapids, Mich., is encouraging employers to stop trying to hire based on skill. Instead, hiring managers should look for a willingness to learn, said President Kevin Stotts. ‘Employers are saying, We’re just trying to find some people who could fog the mirror,’ Stotts said.”

• “Since 2020, when the pandemic began and remote learning moved students out of schools and into virtual classrooms, the pass rates on national certifications and assessment exams taken by engineers, office workers, soldiers and nurses have all fallen.”

• “Jerrica Moses, national recruitment manager for Senture, a London, Ky.-based call-center company, says new workers have problems with soft skills, such as an inability to deal with frustration. Senture, which employs about 4,200 customer-service representatives, has adopted a new set of tests to determine which prospective employees will be able to keep their cool under stress from angry or rude callers.

• “Candidates who wash out respond by explaining how aggravated they get with the callers and then focus on the stress,” said Moses. Most of the people who struggle are under 25 years old, she added.” READ MORE

The labor shortage continues—except for real estate agents: “In most states, getting a license to help people buy or sell a home requires only a few hundred dollars, several weeks of coursework, and a passing grade on a multiple-choice test. The low barrier to entry and fat commission checks lure many to the industry, especially when home prices rise. In the decade-plus since the housing market started to rebound from its financial-crisis lows, the ranks of agents have swelled with part-timers and career switchers looking to capitalize on the boom. At the end of June, there were roughly 1.6 million registered Realtors in the U.S. — or about 2½ Realtors for every available home on the market.”

• “This surplus of agents is bad for both the industry and regular people in the housing market, a report from the Consumer Federation of America said last month. The low barrier to entry puts buyers and sellers at risk of ending up with dubious advice on one of the biggest transactions of their lives, while the capable agents are forced to spend inordinate amounts of time and money trying to stand out from the pack.”

• “Last year, Realtors with less than two years of experience earned a median gross income of just $9,600, according to the NAR. Those with 16 years or more of experience collected a much-larger median gross income of $80,700, but fewer agents make it that far — roughly one-third of Realtors last year said they'd been active for five years or less.”

• “‘The real estate industry shows the entrepreneurial spirit of Americans who start their own business in a fiercely competitive environment,’ Lawrence Yun, the chief economist and a senior vice president of research for the NAR, said in an emailed statement. ‘Similar to restaurants and retail, not everyone succeeds.’” READ MORE

Turnover eased in June: “There were 5.9 million hires in June, down from 6.2 million in May. And the quits rate, a measure of workers’ confidence in the job market and bargaining power, decreased to 2.4 percent, from 2.6 percent in May and down from a record of 3 percent in April 2022. The number of workers laid off was 1.5 million, about the same as in May.”

• “‘We’re still in an economy where the labor market is unbalanced,’ said Michael Strain, an economist at the American Enterprise Institute, ‘with the demand for workers substantially outpacing the supply of workers.’ There are roughly 1.6 job openings for each unemployed worker.”

• “With quit rates falling in recent months, the so-called great resignation appears to be over, if not receding, and the continued downward trajectory of job openings implies that employers are less eager to fill staffing shortages.” READ MORE

MARKETING

Walmart has a new offering: “Shoppers will soon see more third-party ads on screens in Walmart self-checkout lanes and TV aisles; hear spots over the store’s radio; and be able to sample items at demo stations. Walmart’s push into advertising resembles similar moves by retailers like Kroger, which struck a deal to bring digital smart screens to cooler aisles in hundreds of its stores, and Target, which began testing in-store demos and giveaways, including a recent ‘Barbie’ branded event with Mattel that took place at about 200 stores.”

• “For Walmart, selling ad space to its wealth of existing partners is another way to capitalize on the company’s huge reach and to expand into higher-margin businesses. The discounter has nearly 4,700 stores across the U.S., with roughly 90 percent of Americans living within 10 miles of a Walmart store.”

• “The company plans to ramp up in-store ads using its approximately 170,000 digital screens across its locations as well as 30-second radio spots that will be available to suppliers later this year and can target a specific store or region. And it’s hoping at least one of the new advertising initiatives will be easy to digest: free samples in stores on the weekends.”

• “According to Mark Boidman, head of media at New York City-based investment bank Solomon Partners, that proximity offers a unique opportunity that online advertising can’t replicate. ‘It’s better to reach people with video when you’re aisles apart as opposed to miles apart,’ Boidman said.” READ MORE

RETAIL

Here are 15 ideas to revitalize lifeless downtowns: “Readers around the world — from teenagers to retirees — have called, emailed and spoken to us offering their best ideas. The resounding takeaway is most people want fewer cars and more public spaces, parks and events to bring them together. Other proposals such as bike lanes, property taxes and congestion charges remain controversial. Here, in their own words, are 15 innovative suggestions:”

• “I think cities should invest much more heavily in public transit. Over-reliance on personal cars, especially in downtowns, limits the number of people who can access the area, makes such areas unpleasant with excess noise and pollution, unnecessarily takes up huge amounts of valuable space, and results in people being isolated from one another in their vehicles.”

• “I’m inspired by Japan where a whole six-story building can have dining and drinking establishments scattered across every floor. For example, there could be little one-room bars with one owner and employee, a very niche theme that will appeal to a small number of dedicated people, and seating for 10 people max, requiring reservations. This would allow many small entrepreneurs opportunities they would not have otherwise.”

• “Add walkable outdoor amenities for vibrancy: dog parks, skate parks, cafe seating, farmers markets and music venues (indoor and outdoor). Target a neighborhood and build out from there. If amenities are spread too thin, it doesn’t achieve the goal. Moving colleges downtown would also help restore vibrancy.” READ MORE

THE ECONOMY

The Atlanta Fed is now predicting 4 percent GDP growth in the third quarter: “This rosy outlook follows a 2.4 percent GDP increase in the second quarter, outshining economists’ predictions for a 1.8 percent rise and the first quarter’s 2 percent uptick. The manufacturing funding that Congress and the Biden administration unleashed in 2022 is encouraging more corporate investment in infrastructure and equipment, despite steeper borrowing costs. The solid investment data exemplifies how well-structured stimulus can ‘crowd in’ instead of ‘crowd out’ private money and help businesses safely invest in capital-intensive projects.”

• “With the Fed’s key inflation measure hitting a two-year low, consumer confidence hitting a two-year high, and unemployment stable at 3.6 percent, stock markets remain upbeat.” READ MORE

SILICON VALLEY

After nearly $30 billion in losses, Uber just posted its first operating profit for a quarter: “The results for the three months through June were driven by solid growth in both of Uber’s core businesses, as the number of rides in the U.S. and Canada surpassed pre-pandemic levels for the first time and demand for delivery stayed strong despite restaurant reopenings. The quarter was the first since Uber’s 2009 founding that it reported its underlying operations were profitable. The easy availability of capital for much of the past decade had Uber and others burning tens of billions of dollars in an attempt to gain market share. From 2016 through the first quarter of this year, Uber has collectively reported close to $30 billion in operating losses, according to S&P Global Market Intelligence.”

• “The operating performance helped lift Uber to a net profit in the quarter. Uber has posted a quarterly net profit four times before, but those results were on the back of investment gains that outweighed losses in its operations.”

• “Lyft, which also trimmed its losses over the years and is now led by a new CEO, has yet to post its first operating profit.” READ MORE

SUCCESSION

Barbara Taylor, a business broker and friend of 21 Hats, posted the following on LinkedIn: “The most recent episode of The 21 Hats Podcast is well worth listening to if you're unclear on how you will leave your business (something every owner eventually does). There are so many great gems in this discussion between Loren Feldman and Jay Goltz! Topics covered include family business succession, ESOPs, contingency planning, finding advisors, and selling.”

• “‘This is more complicated than it appears. It just is. You’ve got the family piece, the employee piece, the money piece, the customer piece, the legal piece. There are just a lot of things here. And I am confident if somebody had some good counsel, they could do much better than what’s happening now, which, in most cases, I think that’s a fair statement. In most cases, the business just closes one day.’" — Jay Goltz

• “Listen to this podcast, then binge-watch ‘Succession’ on HBO Max.” JOIN BARBARA’S CONVERSATION

THE 21 HATS PODCAST

What’s Going to Happen to My Business? This week, Jay Goltz tells us that, on second thought, he did learn something important watching HBO’s “Succession.” He still wants to work as long as he can—even if that means dying at his desk—but he now realizes, thanks in part to Logan Roy, that he needs to put a plan in place in case he were to get hit by that proverbial bus. This realization was also furthered by hearing the sad story of a 51-year-old entrepreneur who died in his sleep recently, leaving his wife to figure out how to keep their bank from calling its loans.

• As part of his hit-by-a-bus plan, Jay says he’s crossing streets very carefully, but also considering creating a board of advisors that will be able to offer advice to his survivors. But that’s a little tricky because, as you may have noticed, Jay’s not exactly a board-of-advisors kind of guy.

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren

If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren