Good Morning!
Here are today’s highlights:
Do you spend more time with your A players or with your non-A players?
Gene Marks says it's time for aging business owners to stop trying to get away with using aging technology.
Americans may finally get to pay a real estate commission fee of less than 6 percent.
Michael Girdley says he always pays severance when he fires someone.
MANAGEMENT
Here’s how Mike Wolfe realized he needed to have more meetings: “I was not going to be labeled a ‘micromanager’ or waste people’s time. If the leadership team was performing, I decided not to waste their time, or mine, with meetings. Instead, I put all this energy towards the areas that needed the most help, and the ‘A Players’ would be able to handle things on their own. In all fairness to my coach, I was warned it wouldn’t work. For whatever reason, it didn’t resonate with me.”
“If I’m not meeting with our A Players, who am I meeting with? Answer: Non A-Players. I’m investing my time with team members that are underperforming and ignoring the key players that are driving the company. It worked for a little while.”
“Once I realized my mistake I acted quickly to make a change: consistent meetings (we call them huddles) with A Players. These now take place once a week with the following agenda: How are you doing? Did anything happen last week we need to discuss? What are you working on this week? How can I help?
“There are weeks when this meeting takes 10-15 minutes and weeks where it’s a 30-45 meeting. It’s not about me, it’s about them.” READ MORE
CONSULTING
Why can’t consultants fix their own businesses? “The troubles are arising after the industry boomed with new business—and hired staff to match—during the Covid-19 pandemic when companies sought expertise on how to handle the global slowdown, the work-from-home paradigm, and supply-chain delays. When relative normalcy returned, companies looked hard at their costs and many have been in contraction mode ever since. Interviews with more than 60 current and former consultants and partners from Bain, EY, McKinsey, and beyond reveal a new frugal environment where everything from office snacks to Uber rides are under scrutiny and travel for client meetings has scaled back.”
“Private-equity work—a big wellspring of consulting contracts for top firms—has dried up, due to a drop in dealmaking amid high interest rates. Management consultants often advise on due diligence for mergers and acquisitions and then get contracts to integrate one firm with another. The overall M&A market, globally, dropped 15 percent last year ....”
“McKinsey asked partners last year to defer some of their pay to weather the downturn in client interest, though by year’s end business was good enough that they got their full pay. The company also cut 1,400 largely back-office employees last year, and slowed down the pace of promotions and trimmed some in-person training and retreats.”
“Clients have demanded that consultancies charge less. Some are trying to save by hiring experienced freelancers who work solo, often specializing in a single industry, said Pat Petitti, CEO of Catalant, a freelance marketplace for consultants. Not only is it cheaper than engaging a big-name firm, he said, but clients don’t have to spend as much time bringing teams of consultants in their 20s up to speed.”
“Last fall, as another Deloitte consultant was flying to a college campus to woo students to his firm, he received an email inviting him to a talent update meeting. Translation: He was out of a job. He went to the campus and pitched the students on a great career they could have at the firm, knowing that by Monday he would be unemployed.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
You’re Still Using a 20-Year-Old CRM? This week, Gene Marks tells us it’s time to update your clunky old technology. There was a time when he understood why owners said they were sticking with the old stuff because it wasn’t broken and they didn’t want the pain of fixing it. But those days are over, says Gene. If you have any hope of selling your business or passing it on to the next generation, it’s time to act. Plus: Why Gene thinks most owners need to get out of their offices more. And why he opposes a ban of TikTok.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
REAL ESTATE
The landmark National Association of Realtors settlement announced Friday will have a dramatic impact on commission structures: “Starting in July, most home sellers won’t need to make an upfront offer for how much they will pay a home buyer’s agent. That means if home sellers won’t cover the cost of the buyer’s agent, buyers could have to pay their agents out of pocket. Home shoppers paying directly for each task an agent performs could save buyers $30 billion a year compared with under the current system, because buyers would negotiate for lower prices and tour fewer homes, according to a working paper released by economists at the Federal Reserve Bank of Richmond.”
“Companies already experimenting with different structures offer insight into what this new world of home sales might look like. Some buyers pay their agents directly through a flat fee or an hourly rate, instead of relying on the seller to set a rate. Some sellers offer a lower commission to a buyer’s agent than the currently typical 2 percent to 3 percent.”
“Fred Glick, founder of the Los Angeles brokerage Arrivva, represents buyers for a flat fee of $9,750. If sellers offer a higher compensation to the buyer’s agent, Glick rebates the difference to the buyer. For sellers, Glick charges a flat fee of $15,750. In exchange for those savings, buyers take on some duties often performed by an agent. Glick’s buyers typically find homes for sale on their own. “
“DeLeon Realty in Palo Alto, Calif., began advertising in January that sellers could list their homes for a total commission of 3.5 percent or less, which would include 3 percent for the listing agent. That compares with the 5 percent to 6 percent typical commission nationwide, which is split between the seller’s agent and the buyer’s agent.”
“Of 20 sellers who used the firm in January and February, nine chose to offer the buyer’s agent $10,000. Another chose $20,000. The other 10 offered compensation ranging from 0.5 percent to 2.5 percent of the sale price. Despite the discounted commission rates, Repka said, demand for the listings was strong. One Palo Alto home that listed at just under $2 million and offered a $10,000 buyer’s commission got 17 offers, he said.” READ MORE
HUMAN RESOURCES
Michael Girdley offers some advice on firing people: “There’s tons of stuff out there about how to hire great people. It’s fun, exciting, and you come out ahead! But the opposite is letting people go, which is no fun for anyone. It’s horrible and the worst thing you do as a boss or manager. Every manager will have to let someone go sooner or later. So you want to be prepared, and do it in a way that is kind and direct and compassionate.”
“Personally, I think severance is always the right thing to do. You want people to leave on good terms and set them up for success. Even when I’ve been disappointed in people, I never regret doing the right thing in retrospect. Plus, it’s good karma. Treat people like human beings as much as you can. That said, if you’re downsizing and the company’s struggling financially, you may not be able to do much for them.”
“The next step is making a termination letter. This should have the date of their final paycheck, information about their benefits, the severance agreement, details about the retirement plans, etc. This is also where you put any confidentiality clauses or that kind of thing if that’s important. Again, consult the professionals on this, since the requirements are different depending on where you are.”
“The meeting itself is usually short. Most people don’t hear much beyond ‘we’re letting you go’ because they’re in a state of shock. That’s why you have the document to give them.” READ MORE
Bernie Sanders is proposing a 32-hour workweek: “Senator Bernie Sanders this week unveiled legislation to reduce the standard workweek in the United States from 40 hours to 32, without a reduction in pay, saying Americans are working longer hours for less pay despite advances in technology and productivity. The law, if passed, would pare down the workweek over a four-year period, lowering the threshold at which workers would be eligible to receive overtime pay. The 40-hour workweek has stood as the standard in the United States since it became enshrined in federal law in 1940.”
“Senator Bill Cassidy, Republican of Louisiana, said at the hearing such a reduction would hurt employers, ship jobs overseas and cause dramatic spikes in consumer prices. ‘It would threaten millions of small businesses operating on a razor-thin margin because they are unable to find enough workers,’ Mr. Cassidy said.”
“Mr. Sanders is far from the first to propose the idea, which has been floated by Richard Nixon, pitched by autoworkers, and experimented with by companies ranging from Shake Shack to Kickstarter and Unilever’s New Zealand unit.”
“In proposing the legislation, Mr. Sanders cited a trial conducted by 61 companies in Britain in 2022, in which most of the companies that went down to a four-day workweek saw that revenues and productivity remained steady, while attrition dropped significantly.”
“‘There is no statistical evidence to merit a nationwide mandate of a 32-hour workweek,’ said Liberty Vittert, a statistics professor at Washington University in St. Louis. ‘If it works for some companies in some sectors, that is great, but it cannot be applied to all sectors.’” READ MORE
RETAIL
A store-owner in San Francisco caught women shoplifting and then posted the videos on TikTok: “Videos of masked men brazenly ransacking San Francisco store shelves and displays have flooded social media feeds in recent years. But recently, a viral TikTok exposed a different breed of culprit: well-dressed white women carefully pocketing goods. The video, viewed over 80,000 times, shows the thieves casually swiping merchandise from Post.script., a gift shop in Lower Pacific Heights. For Chandler Tang, the shop’s owner, it spotlighted how crafty shoplifters can be, challenging stereotypes of who is behind the retail theft crisis plaguing the city and region.”
“‘I filed the police report but knew the response might be limited since there is so much going on in the city,’ Tang told The Standard. ‘So we took it in our own hands and put it on TikTok.’”
“Admittingly, Tang said, she was nervous about how the video would be received and if it would be seen because the shop didn’t have much of a TikTok presence. ‘However, it was super positive,’ she added. ‘It really snowballed.’”
“Tang, who grew up in San Francisco, noted that many of the comments in response to her video disparaged the city, saying she should just leave—but she has no plans to do so. ‘I’m not going to leave. I’ll be here,’ she said. ‘I don’t blame shoplifting on the city, but I also don’t know what it is. Possibly the economy.’” READ MORE
CYBERSECURITY
Small businesses are turning to college students for protection from hackers: “It isn’t easy to be a David against Goliath hackers. Small organizations—nonprofits, local public services, mom-and-pop businesses—don’t have the cybersecurity resources to put up much of a defense. But thanks to a new initiative, help for such groups is increasingly available—from college students. Similar to clinics in which law and medical students perform pro bono services, university-based clinics around the country staffed by students now give cybersecurity assessments, training, and other help to groups with little in the way of such resources.”
“More than 15 schools, including Massachusetts Institute of Technology, University of California at Berkeley, and Indiana University, offer such clinics as part of the Consortium of Cybersecurity Clinics. The clinics typically offer risk assessments and recommendations, according to Ann Cleaveland, co-lead of the consortium.”
“Amanda Floyd Bovino, owner of Baton Rouge-based Royal Treatment Pet Manor and Grooming Spa, says she went to the LSU cybersecurity clinic after a mishap accidentally connected her business and personal social-media accounts, which caused the accounts to be shut down.”
“She’s working with the clinic to prevent another incident like that, she says, and is finding out more about virus protection and spam. ‘We have names, we store credit cards,’ she says. ‘It’s better to be on the offense than on the defense.’” READ MORE
OBITUARY
Sydell Miller, eyelash and hair-care entrepreneur: “Ms. Miller and her husband, Arnold Miller, created two dominant brands: Ardell, the industry standard for abundant and shapely false eyelashes, and Matrix Essentials, which has often been described as the nation’s largest manufacturer of salon products and was the primary source of Ms. Miller’s fortune. In 1994, two years after her husband’s death, Bristol Myers Squibb bought Matrix from Ms. Miller for $400 million.”
“Mr. Miller assumed Sydell would be a housewife. One day, when his receptionist called in sick, she appeared at the salon and announced that she would help with the phones. Soon, she was running her own women’s wear boutique above the salon.”
“The Millers invented the first pre-cut eyelash kit and false-eyelash strips, reducing procedure time from hours to minutes. They also changed how hairdressers colorize hair, creating cream-based (rather than liquid) dyes that allowed for precise application and giving hairdressers control over a range of mixable colors, as if they were painters — not aestheticians so much as aesthetes.”
“The couple split their duties by having Mr. Miller as the company’s public face and Ms. Miller as the corporate manager. Early on, she accounted for corporate inventory by hand, working until midnight. Each of them got the same paycheck and offices of the same size.” READ MORE
THE 21 HATS PODCAST
Man, I’m Glad We Didn’t Do an ESOP: This week, Matt Hoying, president of Choice One Engineering, explains to Shawn Busse and Jay Goltz how he created a DIY employee-ownership plan for his firm. Some 10 years ago, Matt’s predecessor as president tasked him with selecting an ownership structure that would engage employees and help Choice One be as successful as possible. That sent Matt on a mission in which he researched the pluses and minuses of every structure he could find—including employee stock ownership plans—before ultimately creating his own structure.
Matt’s plan doesn’t enjoy the tax advantages of an ESOP, but it’s open even to part-timers, and it requires employees who want to be owners to make a financial investment in the business. In other words, they aren’t given ownership; they have to buy into it. Shawn and Jay quiz Matt on the choices he made and how the plan has worked out.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren