Coping with HR Issues Without HR Staff
In today’s Dashboard, Gene Marks offers a suggestion for business owners who have yet to hire an HR department.
Good Morning!
Here are today’s highlights:
The tech layoffs are feeding a surge in startups.
Outside of tech, layoffs are uncommonly low.
But some companies are laying off employees without actual layoffs.
Join the 21 Hats Founding Members group, a monthly CEO forum.
SELLING THE BUSINESS
A Jewish deli in Philadelphia is available for $6 million: “Famous 4th Street Deli, believed to be the oldest Jewish-owned delicatessen in Philadelphia, is on the market. Then again, it’s pretty much always been ‘on the market’ since Russ Cowan bought the 90-year-old Queen Village landmark in 2005. ‘My standard answer is what every business owner would say: For the right number, I’ll sell,’ he said. But as Cowan constructs a new deli-restaurant near his Cherry Hill home, he is taking a hard look at operating two deli-restaurants simultaneously, at age 67. ‘I’m not looking to retire, but I’m looking to make my life a little easier.’”
“Cowan confirmed speculation by the Philadelphia Business Journal that his asking price was $5.95 million — $1 million more than his asking price in 2016, a previous listing when he was kicking tires and feeling the market.”
“That $6 million would include the building on the southwest corner of Fourth and Bainbridge Streets, the business, and the name — the whole ball of matzo. The deli’s oversize inventory of mustard is not included.” READ MORE
OPPORTUNITIES
The tech layoffs are feeding a surge in startups: “Tech companies laid off at least 160,000 workers in 2022, according to Layoffs.fyi, a site that tracks job losses in the industry. The cutting has continued into 2023, with more than 100,000 additional people losing their jobs. In the blink of an eye, the largest and most lucrative tech companies known for high salaries and lavish perks seem like a riskier choice.”
“For many, healthy severance payments provide ample cover to work up their own ideas. And the layoffs give them space to finally work on a passion project.”
“‘I just kind of felt this weird sense of relief,’ says Jen Zhu, who was laid off last summer and is working on a health tech startup, Maida AI. ‘The golden handcuffs are off, and I can do whatever I want now.’”
“But the workload of a new entrepreneur can be unforgiving. Zhu says she is working every day on Maida AI, which automates health care administration tasks like patient intake and note-taking. ‘It’s a grind,’ Zhu says of the transition. ‘It’s really hard to turn off. There’s always more to do.’” READ MORE
THE 21 HATS DASHBOARD
Coping With HR Issues Without an HR Staff: If, like Gene Marks, you think dealing with employees is a pain, Gene has a suggestion for you: professional employer organizations, or PEOs. It’s a way to outsource all of the functions of HR—even including, if you want, health insurance. Gene also talks about why too many business owners ignore the many resources government has to offer, why it’s time to start preparing for a government shutdown, and why Kevin O’Leary--aka Mr. Wonderful--is a buffoon.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
HUMAN RESOURCES
Outside of tech, layoffs are uncommonly low: “Despite a year of aggressive interest rate increases by the Federal Reserve aimed at taming inflation, and signs that the red-hot labor market is cooling off, most companies have not taken the step of cutting jobs. ... There were fewer layoffs in December than in any month during the two decades before the pandemic, government data show. Filings for unemployment insurance have barely increased. And the unemployment rate, at 3.4 percent, is the lowest since 1969.”
“John Keener, a restaurateur in Charleston, S.C., said his establishments, which include two Charleston Crab House locations and the A.W. Shuck’s Seafood Shack, had effectively been understaffed since the early days of the pandemic.”
“To attract employees, he raised wages, offered more generous benefits, and started advertising open jobs on LinkedIn, Yelp, Facebook and Instagram, he said. When that wasn’t enough, he figured out how to work with less, altering menus so he could have fewer prep cooks and giving servers hand-held electronic devices so they could beam orders directly to the kitchen without leaving the floor.”
“But as the all-important spring tourism season begins, he is more desperate than ever to hire additional employees — 50, if he gets his wish, which would bring his total to about 270.” READ MORE
A report finds companies are pulling back from offering the big raises of 2022: “The percentage of employers planning raises of more than 5 percent slipped to 11 percent in 2023 from 18 percent in 2022, but it appears many of those employers are settling in at raises of 4 percent to 5 percent. Companies continue to have turnover top of mind when it comes to pay strategy — with 60 percent of organizations noting they've had more difficulty attracting and retaining talent in 2022 than in previous years even as voluntary turnover in their organizations has fallen from 36 percent to 25 percent. But 71 percent of organizations say the reason for the increase in salary budgets stems from the increased competition for labor. About 41 percent said pay was the leading reason for why their company was losing talent.”
“About 69 percent of organizations formally give pay increases annually, down from 79 percent in 2022. The number that gave raises twice a year more than doubled from 4 percent in 2022 to 11 percent in 2023.”
“The number of organizations that gave out quarterly pay increases grew from just 1 percent in 2022 to 5 percent in 2023.” READ MORE
But some companies are laying off employees without actually laying them off: “A number of employers are taking other approaches to manage their workforces. Some are adding new restrictions on remote work, stepping up scrutiny in performance reviews or requiring staffers to relocate across the country to keep their jobs. The moves, though not labeled as layoffs, can at times have a similar effect in thinning a company’s ranks, human-resources specialists and corporate advisers say.”
“Companies have long had ways to push employees out without firing them. Reorganizing teams, requiring employees to report to new bosses or making them take on new projects can all prompt staffers to look elsewhere for work, said Roberta Matuson, an executive coach and adviser to businesses on human-resources issues.”
“Some employers prefer a corporate restructuring to a layoff because it means they don’t have to single out individuals.”
“Efforts to increase voluntary turnover can carry risks, advisers say. Companies might lose the highest-performing employees who can most easily find work elsewhere, said Keith Goudy, a managing partner of the leadership advisory firm Vantage Leadership Consulting. ‘You can get a lot of undesirable turnover,’ he said.” READ MORE
REAL ESTATE
Peter Lohmann wrote recently about a brutal stretch in the property management business: “In the past three weeks, we received non-renewal or termination notices from four large clients. Their unit counts were 7, 22, 30, and 60 units. Together that’s about 17 percent of our total units gone. That’s on top of an absolutely brutal year for churn in 2022—despite adding over 120 net units during the year, we churned out 25 percent of our clients. As a business owner, it’s hard to describe the feeling that comes up when you receive news like this. Something along the lines of: Why are they leaving? Are they stupid? What did we do wrong? Am I stupid?”
“Our company has grown quickly, adding over 100 units under management for the last three years in a row. We staffed up and had to make a lot of changes to support that growth. Our company has a departmental organization structure, which means each person at the firm has a specific function they perform for all units under management.”
“An advantage of this structure is that you can hire and easily train specialists, who become highly efficient at what they do. Two disadvantages of this structure impacted our clients: No single person at the company has a complete picture of any individual property or portfolio (information is siloed within departments). From our client’s perspective, it feels like nobody knows or cares what’s going on with their properties.”
“Without extremely careful attention being paid to process, an extraordinary amount of time can be wasted on interdepartmental handoffs and communication. This destroys throughput, and everything grinds to a halt… made worse by the above. Hiring more people just makes this worse!” READ MORE
PROFILE
The sad mental-health struggles of a spice entrepreneur: “Dhiraj Arora had terrorized Fort Greene for years, but the campaign he launched on a warm January night in Brooklyn was remarkable even for him. Just after 2 a.m., he threw bottles at Evelina, a trattoria on DeKalb Avenue, smashing a large window. From there, he took aim at Izzy Rose in neighboring Clinton Hill, where a security camera captured him pitching shards of concrete through the cocktail bar’s large storefront window. He capped the night off by returning to Fort Greene, where he tossed a metal garbage basket into the window of the Great Georgiana, a popular gastropub on the corner of Dekalb and Vanderbilt.”
“‘I immediately knew who it was because he’s been doing this for years,’ said Giuseppe de Francisci, a managing partner at Evelina. ‘He’s trashing restaurants that have kicked him out.’”
“Twenty years ago, [Arora] founded a company that rode the health-food craze by selling packets of Indian-spice blends in grocery stores across the country. In 2007, Crain’s named Arora one of the city’s top business owners, and a few years later the New York Post crowned him the ‘Spice King.’”
“But Arora’s bluster masked his struggle with bipolar and alcohol-use disorders, a dual diagnosis that made it impossible for him to maintain his business.”
“With his star on the rise, Arora lived the life of a swaggering playboy entrepreneur who spent extravagantly on clothes, travel, and restaurants. ‘I am the definition of passion,’ he told a small magazine at the time. ‘Stay tuned.’” READ MORE
THE 21 HATS MASTERMIND
Join our monthly CEO forum: It’s an informal monthly gathering of entrepreneurs and owners from around the country who gather every month to compare notes, check in with each other, discuss the topics of the moment, and occasionally hear from guest speakers.
When: We meet at 12 ET on the second Wednesday of each month. Next meeting: March 8.
Why: Building a business can feel isolating. It’s not always clear where you can share your challenges and concerns. This is one place.
Fee: $480 a year, payable annually.
Money-Back Guarantee: If it’s not right for you, get your money back any time.
Questions? Send them in a reply to this newsletter.
OBITUARY
Rick Newman, who opened Catch a Rising Star on the Upper East Side of Manhattan in 1972: “Mr. Newman had run a few other businesses, including a singles bar and a steakhouse, before he decided to try a comedy club. ‘For the first time in my life I’ve got a reason why I was born,’ he told United Press International in 1975, when Catch, as it became known, was drawing crowds and making careers. ‘It’s unbelievable. Sometimes I just want to bust.’ Budd Friedman, who died in November, had shown the way with the comedy club Improvisation (soon known simply as the Improv), which he opened in Midtown in 1963. Mr. Newman made his new club — on First Avenue near East 78th Street — equally influential, serving up a hodgepodge of performers whose very unevenness was part of the fun.”
“As [David] Brenner explained in an interview with The New York Times in 1982: ‘You can’t practice on ‘The Tonight Show’ or in Vegas. Catch is a place where you can be bad, and that’s how you get to be good.’”
“The newspaper noted that a sign above the stage read, ‘All entertainers must leave the stage instantly if any objects are thrown.’”
“[Richard] Belzer, Catch’s longtime M.C., died the day before Mr. Newman did. ‘Their encouragement and belief in me gave me the confidence I needed, and I was one of many with the same feelings,’ [Billy] Crystal said. ‘As hard as it is for me, their losses a day apart seem kind of poetic now.’” READ MORE
Thanks for reading, everyone. — Loren