Are Your Employees Engaged?

At most companies, the answer is no. But this consultant says there’s a solution.

Good Morning!

Here are today’s highlights:            

• A lot of young professionals are giving up on owning property.

• If we take flood risk into account, the price of housing will go even higher.

• You’d think a startup intended to help homeowners after natural disasters would be thriving right now.

• In San Francisco’s Chinatown, stores sell luxury items for an especially hard-to-reach target market.

PROGRAMMING NOTE

Today’s Morning Report will be the last one until Tuesday, September 5: Next week, 21 Hats will be on vacation (paid subscribers will not be charged for the week). There will be no Dashboard podcast published this Monday or on Labor Day, but our Tuesday podcast episodes will continue as usual. See you in September!

HUMAN RESOURCES

Bill Fotsch believes American businesses have spent 30 years trying to improve employee engagement: “Thirty years of failure isn't for lack of trying. According to one report, American companies spend over $100 billion every year in pursuit of employee engagement. We hear engaged employees improve profits, reduce costly turnover, and drive repeat and referral business--in other words, engagement improves the economics of the business. But instead of talking about the economics, like profits and customers—you'll note no mention of either in the G-12, or most employee engagement measures—companies try to improve superficial perks or enhance environmental factors. This clearly isn't working.”

• “In these same 30 years, I've coached 400-plus businesses with a focus on improving financial results and the lives of the people who drive those results. We do this by partnering with employees to serve customers profitably.”

• “Admittedly, our focus was on economics, not engagement per se. But what became apparent is that partnering with employees to focus on customers and profits drives both financial results and employee engagement.”

• “Imagine if your employees began thinking about the business the way you do. Imagine if their actions, day to day, reflected that. Wouldn't your profits improve? Wouldn't your customers and shareholders be delighted? Giving employees freebies does not make them think or act like partners in the company. Treating them like partners does.” READ MORE

HOUSING

We’ve gone from yuppies to guppies: “Starter homes are expensive, so young professionals are opting out of the homeownership game instead of saving to buy a house. They're called ‘guppies,’ and they've given up on owning a house. The term, coined by British real estate company Zoopla, is a play on the 1980s phrase ‘yuppie,’ which meant a young, financially successful professional. But these would-be buyers have Given Up on Property — putting the GUP in guppie. In 2023, the guppie represents 42 percent of adults under 40 in the U.K. who don't own a home and don't see themselves buying one in the next decade, according to Zoopla. Thirty-eight percent of those adults earn over £60,000 annually.”

• “This mirrors a similar situation in the U.S., where competition is also heating up between potential first-time homebuyers. Mortgage rates remain close to 7 percent, and current owners are refusing to sell their houses in favor of their lower, locked-in mortgage rates.”

• “Millennials and Gen Zers are being forced to reevaluate as affordable starter homes become a thing of the past. The average age of first-time homebuyers has jumped to 36.”

• “In June the median price for a typical starter home was $243,000, according to Redfin. However, the National Association of Realtors estimated that the price was much higher in July, at $406,700.” READ MORE

INSURANCE

Rising insurance costs are starting to affect home sales: “Cape Coral, Florida, was devastated by Hurricane Ian last year, but real-estate agents still pitch waterfront homes as ‘Gulf access haven.’ Insurers take a different view. Home-insurance premiums are soaring in the Southwest Florida city, and there is evidence that the higher costs are starting to affect the real-estate market. Buyers’ concerns about insurance costs are slowing sales and causing some canceled deals in areas with particularly high flood or wildfire risks.”

• “Home-insurance companies are trying to claw back steep underwriting losses by hiking rates, or pulling back from disaster-prone areas such as Cape Coral. The average annual home-insurance premium for Floridians has tripled in five years, from $1,988 in 2019 to $6,000, according to the Insurance Information Institute, an industry group.”

• “The cost of flood insurance—mandatory for some in the Sunshine State—is rising faster still in many vulnerable areas. The federal National Flood Insurance Program, which provides most policies, recently changed its pricing to more closely tie premiums to risk. In Cape Coral, the average annual flood-insurance premium for a waterfront zip code has increased from $1,791 to $4,728 a year, federal data show.”

• “If flood risks were taken into account, U.S. residential properties would be worth at least $121 billion less, according to a study earlier this year by nonprofit the First Street Foundation, the Federal Reserve, and others. In Florida alone, properties in flood zones are overvalued by more than $50 billion, the study found.” READ MORE

STARTUPS

Lending startup Captain was supposed to help homeowners after natural disasters, but now it’s facing its own disaster: “Founded in 2021, Captain vaulted onto the public stage last year, with splashy news stories and $104 million in funding. The Louisville, Kentucky, startup aimed to help homeowners rebuild after natural disasters. It purported to fund claims in days instead of months, and match the homeowner with a contractor in its network. Captain would pay the contractor for the repairs up front, and then collect the deductible from the homeowner and the payout from the homeowner's insurance company. ‘The lens in which we view ourselves is how we can help the policyholder put their life back together as quickly as possible,’ Gray told TechCrunch last year.”

• “In an email to staff on June 29, which Insider has reviewed, Demetrius Gray, the founder and chief executive of Captain, said the company had tried to raise additional funds in March and then went to existing investors to secure bridge financing in April and May. Unsuccessful, Gray wrote, ‘This then led us down the path of putting the company up for sale.’"

• “Many early-stage startups such as Captain, which had raised $107 million across equity and debt capital, have struggled to raise new funding as a drought in venture capital spreads through Silicon Valley.”

• “Captain hooked investors with its mission to bring the contractor industry into a digital age. In a blog post in March of 2022, Pete Flint, a general partner at NFX and a Captain investor, said the company used technology to simplify and streamline the process of rebuilding.”

• “Flint also marveled at the expanding market size. According to data from Munich Re, the world's largest reinsurer, losses from natural catastrophes covered by insurance are expected to surpass $100 billion for the third straight year, as extreme weather rages around the world.” READ MORE

A Philadelphia protein-ball startup is taking a slow-growth approach: “Plants on Fire was launched in 2019 as a wholesale and direct-to-consumer business and has since landed in local retailers like Riverwards Produce, South Philly Food Co-op, specialty grocery store Salt and Vinegar, and Herman’s Coffee. Founder Danielle Kocher, who has had a longtime interest in the startup world, is growing Plants on Fire slowly as part of the do-it-yourself ethos she’s leaned on for the brand. That means self-funding the business, not seeking out a co-packer or large retailers yet, and keeping product offerings limited for the time being.”

• “Kocher got the idea for Plants on Fire several years ago after being frustrated with the vegan protein bars on the market. Originally from the Poconos area, Kocher went vegan at the age of 19 as part of an effort to reclaim her health and fitness. ‘I was tired of being tired,’ she said.”

• “Today, Plants on Fire comes in four flavors: cookie dough, chunky peanut butter, almond butter and jelly, and snickerdoodle. A single pouch contains two protein balls, which can be purchased for about $4 each in retail shops or online in packs of four for $14.”

• “In addition to local stores, Plants on Fire is available on healthy direct-to-consumer platform Bubble Goods, as well as premium commerce wholesaler Bulletin. The latter has expanded the brand’s reach to cities like Los Angeles and New York.” READ MORE

ENERGY

Could carbon management be a trillion-dollar industry? Big Oil seems to think so: “Executives at America’s largest oil companies, a group that includes Houston-area giants Exxon, Chevron and Occidental, are beginning to invest tens of billions of dollars in developing carbon management systems that would allow society to keep using oil and natural gas but do so without increasing the concentration of carbon in the atmosphere. Of course, if a truck is burning gasoline, it will still emit carbon dioxide. But if the company selling the oil from which the gas is made captures an equivalent amount of carbon dioxide, it could claim it is having no climate impact. And if enough machines were sucking carbon out of the atmosphere, the theory goes, you could burn all the oil and natural gas you needed without hurting the climate.”

• “Large oil companies have for years made investments in clean energy technology that paled in comparison to the money they sank into finding new oil and gas fields and building chemical plants.”

• “But that storyline began to shift last summer, following Congress’  decision to expand the tax credit for carbon capture under the $680 billion Inflation Reduction Act, allowing companies to claim $180 per ton for carbon dioxide pulled from the atmosphere and $85 per ton if captured from a smokestack.”

• “Less than 10 days after President Joe Biden signed the bill into law, Occidental, which had declared its transition into a ‘carbon management company’ in 2020, announced it was moving ahead on construction of the world’s largest direct air capture facility in West Texas, with tentative plans to build 100 direct air capture projects by 2035.” READ MORE

CRIME

When small businesses are the victims of crime: “A refrigerated van was stolen in the night. For a city caught in a homicide crisis, this was petty crime. But for three restaurant owners, it was the last of several devastating thefts that have left their small businesses reeling. Without the vehicles, Marcos Tlacopilco, who travels to either New York or Maryland thrice weekly, has difficulty getting the fresh fish he needs for his restaurants, Marco’s Fish Market & Crab House and Alma Del Mar. The seafood restaurant, named for his wife, Alma Romero, garnered fame when it was featured for a makeover on the fifth season of Netflix’s Queer Eye. Nacho Flores, who opened Los Taquitos de Puebla in 2020, struggles with buying food and supplies.”

• “‘My van was stolen in February and a few days ago, Mrs. Alma’s work van was stolen, so we cannot buy another van to do the shopping for our businesses,’ Flores said. That’s the reason behind the trio’s $45,000 crowdfunding campaign, which has been verified by GoFundMe.”

• “As of Thursday, 37 donors had given $1,377, but less than one out of four crowdfunding campaigns reaches its goal. For the restaurant owners, the largest contributor, at $150, is Jill Fink, executive director of the Merchants Fund, a nonprofit grant-making organization that has also provided emergency funding to Tlacopilco.”

• “‘I am a former small-business owner so I have a lot of empathy and understanding for the challenges of small business. I know how something like a stolen truck can be devastating,’ Fink said.” READ MORE

RETAIL

This is the real after market: “In Chinese culture, if you dream about your loved one who has died and they tell you that they have no place to live, you may need to buy a ‘mansion’ for $188 and ‘send’ it to them. This superstitious practice may strike people raised in other spiritual traditions as peculiar, but many Chinese immigrants are loyal followers of this religion. And in San Francisco Chinatown, a store sells all kinds of ‘luxury’ goods meant to comfort the dead in the next life. These fancy items are actually paper replicas, or ‘Zhizha 纸扎’ in Chinese. The replica can be anything, such as mini-houses, sports cars, designer bags, fancy wines—even the latest iPads and Apple Watches. The cost may vary, but of course, the paper version is much cheaper than the real one. The way to send these items to the dead, who now live in the underworld, is by burning them.”

• “Vincent Fung, the manager of Buddha Exquisite Corp. on Jackson Street, is the second-generation owner of this family business, the largest store selling Zhizha in Chinatown.”

• “​​‘We burn these things for our ancestors,’ Fung said, explaining that the practice is closely related to Taoism, an ancient Chinese philosophy that believes in ‘spiritual immortality,’ where the spirit of the body joins the universe after death. ‘We have these items that they need, just like [in] the life here.’” READ MORE

THE 21 HATS PODCAST

The Toughest Conversation: This week, Paul Downs, Jay Goltz, and Laura Zander don’t hold back. Laura and Jay both say their sales are coming in well below expectations. Not surprisingly, Jay has a five-point checklist that he’s using to assess and address his shortfall. Laura’s situation involves a marketing team that she says has been feeling stressed and is coming apart, with lots of crying and arguing. “They’re just collapsing,” she tells us. Paul, meanwhile, says his sales aren’t bad, but he’s got one employee who’s been holding them back. The employee, who’s been with Paul for 10 years, has been spiraling of late, says Paul, who’s dreading what he calls “the toughest conversation,” a conversation he fears will leave the employee devastated.”

• “In such situations, Jay says, he’s found it helpful to rank himself from one to 10 on the hardass scale: If Mr. Rogers is a 1 and Jack Welch—the take-no-prisoners former CEO of GE—is a 10, where do you want to be? “If you pick four or five,” Jay says, “you're probably gonna go out of business.”

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

Thanks for reading, everyone. — Loren