Does HR Have a Seat at the Table?

Going forward, Jack Stack says, the companies that succeed will be the ones that have the best talent strategies.

Good morning!

Here are today’s highlights:

• The number of households shopping at salvage food stores has risen significantly.

• Makers of energy-efficient heating and cooling systems expect a sales surge.

• More climate-tech startups are choosing to incorporate as public benefit corporations.

• In Ukraine, entire factories are packing up and moving west.

MANAGEMENT

Jack Stack of SRC says that, with the labor shortage likely to just get worse, it’s time to bring HR into the conversation: “When the presentations concluded, and the collective five-year growth plan was flashed on the screen, Keith [an HR associate] checked his pad and then raised his hand to ask a question. ‘It’s really awesome to see all the growth everyone is planning over the next five years,’ Keith said. ‘But, based on my calculations, that means you’ll collectively need to hire a lot of new people to do all that work. What’s your plan to accomplish that?’ It was like Keith punched me in the gut. I couldn’t breathe. He was absolutely right. If we wanted to take advantage of all the opportunities in front of us, we needed to completely rethink how we approached the recruitment, development, and retention of our people not just now—but also well into the future.”

• “Moving forward, HR needs to have as much input as the CFO and CTO when it comes to setting the future strategy of the company.”

• “The skills they apply to their jobs day in, and day out, have always been valuable. Now, we need them to be heard at a strategic level. We’re counting on them to ensure we have the right people in the right seats to make our plans.”

• “Their input cannot be treated as just another job to be done. Rather, they need to be the ones leading the tough conversations with everyone in the organization around questions like: Do we have enough people? If not, how can we attract them?”

• “The value of companies will soon be tied to the value of their people. The ones with the best talent strategies will dominate their markets in the coming decade.” READ MORE

HUMAN RESOURCES

OPINION: California is considering legislation to support fast-food workers: “The Fast Food Accountability and Standards Recovery Act, or the Fast Recovery Act, would create a state-appointed council of workers, employers and state agencies that would collaborate to improve working conditions, benefits and wages for California’s 550,000 fast-food workers. The measure passed the state Assembly earlier this year, and appears likely to clear the Senate and reach Gov. Gavin Newsom’s desk. Led by the Service Employees International Union and Fight for $15 and a Union, more than 100 organizations and unions have endorsed the legislation. So have five cities and counties, including Los Angeles and San Francisco.”

• “Why focus on fast-food workers? For one thing, low-income Americans have been hit hardest financially by covid-19 and faced the greatest workplace exposure risk — and for California’s fast-food workers, this risk was especially pronounced.”

• “The biannual public hearings required by the measure would provide space for workers’ concerns to be addressed. Corporate franchisers would be accountable for violations that occur under their brands.”

• “Opponents of the California bill, including the International Franchise Association and the U.S. Chamber of Commerce, have attempted to pit workers against small businesses to derail the bill.”

• “Small businesses could also benefit from being at the table. The process would allow both franchisees and workers to help set policy that works for them — not just their corporate franchisors.” READ MORE

SECOND ACTS

Seth Goldman’s new tea business is starting to ramp up:

Seth Goldman @HonestSeth

It’s happening…..⁦@eat_the_change⁩ #JustIceTea

RETAIL

Selling the unsellable, salvage food stores are having a moment: “With grocery prices 13.1 percent higher than a year ago, according to the Consumer Price Index for July, a new batch of customers has discovered the joys and pitfalls of shopping at salvage food stores, where a crushed box is never a problem, package dates are mere suggestions and questionable marketing attempts (Hostess SnoBall-flavored coffee pods?) go to die. The stores, which traffic in what mainstream food retailers call ‘unsellables,’ operate in a gray zone between food banks and big discount chains like the German import Aldi or Dollar General, which has grown to more than 18,000 stores. With names like Sharp Shopper, the Dented Can, and Stretch-a-Buck, salvage stores have long been a salvation for families on tight food budgets and the naturally thrifty.”

• “An analysis of 405,101 receipts submitted by consumers to the consumer rewards app Fetch showed the number of households shopping at salvage stores in the first half of this year was more than 8 percent higher than a year earlier.”

• “The manager of Dickies, a small chain in North Carolina, said sales were up 36 percent from last summer. Other store managers reported double-digit increases.”

• “Salvage shopping has even spawned a tiny sub-genre on social media, where people record their trips to the stores and display their hauls like trophies, piled on kitchen counters.”

• “In March, one TikTok video went viral, sending hundreds of people into an unprepared Oklahoma City store, where they stripped the shelves. The store closed shortly afterward.” READ MORE

THE ECONOMY

Home building fell sharply in July: “House construction in the U.S. continued to slow in July, as high inflation and higher mortgage rates make it more expensive to build and buy property. Housing starts in July fell 9.6 percent from the month before to a seasonally adjusted annual rate of 1.45 million, the Commerce Department said Tuesday, down from a revised 1.6 million the prior month. Building permits declined 1.3 percent to 1.7 million.” READ MORE

MANUFACTURING

Makers of energy-efficient heating and cooling systems expect a surge: “The tax-and-climate bill passed by Congress offers a slew of tax breaks and rebates to encourage more Americans to buy energy-efficient heating and cooling systems and other products, which has manufacturers anticipating a sales surge. The bill, which President Biden signed Tuesday, is the largest investment in energy efficiency in U.S. history, with more than $21 billion allocated for rebates and federal tax deductions for household energy-saving upgrades over the next 10 years.”

• “Anticipating an increase in sales, Mark Kuntz, chief executive of Mitsubishi Electric Trane HVAC US, which makes high-efficiency heat pumps, said the company plans to announce the location of a new 2,000-worker factory by the end of the year on expectations of higher sales.”

• “The most immediate incentive available to consumers is a federal tax credit, which would allow buyers to deduct up to 30 percent of energy-saving purchases starting Jan. 1.”

• “For air conditioners, water heaters, furnaces or boilers, purchasers can deduct $600 per appliance. It also offers credits for doors, windows and insulation.” READ MORE

FINANCE

Here’s a look at what private equity has done for autism treatment: “ABA [applied behavior analysis] has long been viewed as the gold standard for kids with autism, so much so that every state mandates insurance coverage. For some families, it is the only option that insurance will cover at all. But like other pockets of the health care industry, this one has been transformed over the past decade by a flood of investments from private equity firms, drawn by the promise of insurance reimbursement and the rising rate of autism in children across the U.S., now estimated at 1 in 44 kids. Families and clinicians who once believed fully in the promise of ABA say the financial investors’ fixation on profit has degraded the quality of services kids receive, turning it into the equivalent of fast food therapy. They’ve grown disillusioned with the industry, they told STAT.”

• “Several people working in the industry say that private equity, in an effort to save money on time-intensive assessments, often uses ‘cookie cutter’ treatment plans that are at times simply copy-pasted from one client to the next, which they said runs counter to how the therapy is intended to work.” READ MORE

SUSTAINABILITY

More climate-tech startups are choosing to incorporate as public benefit corporations: “Nearly every company today claims to be mission-driven. But the quest for profits and shareholder demands can often get in the way of more altruistic goals. A new wave of climate-focused startups is trying to mitigate those competing interests using a wonky and somewhat dry piece of business incorporation status that’s existed for more than a decade: the public benefit corporation. Ultimately, PBCs are just one attempt — albeit a still untested one — to better align the capitalist system with combatting the climate crisis.”

• “‘Can you solve the problem with the same system that created the problem? It just seems so silly to look that question in the eye and say categorically, Yes,’ Chris Tolles, the co-founder and CEO of Yard Stick, said.”

• “There’s one major distinction between PBCs and traditional corporations: PBCs are just as accountable to their corporate mission or ‘public benefit’ as they are to their fiduciary duty to shareholders.”

• “In other words, unlike traditional companies (in which a mission such as doing no harm to the planet is a nice marketing slogan), PBCs have a legal obligation they must take as seriously as maximizing quarterly returns.” READ MORE

THE RUSSIAN INVASION

Ukraine’s factories are moving west: “Above a factory floor in Lviv, Ukraine, where Volodymyr Mysyk has relocated his furniture-making business, he and his 15 employees have become roommates. They have brought their children and their dogs, and share a kitchen above the machinery where they spend their days reviving a company that could have been destroyed by the war. But Mr. Mysyk, 23, and his workers, who came to Lviv from the bombarded city of Kharkiv in eastern Ukraine, have benefited from a spirit of solidarity and a government policy that aims to rescue  industries threatened by an invading Russian army and help reassemble them, piece by piece, in cities along Ukraine’s western frontier.”

• “Under a government relocation program, Mr. Mysyk was able to offer workers at his small company, Roomio, an opportunity: Join him in the relative safety of Lviv and keep their jobs, although it meant living in close quarters with their boss until they could find their own lodgings.”

• “This region is quickly being remade into the new economic heartland of Ukraine, with more than 200 transplanted businesses that make just about everything, including paint, construction materials and parts for electric vehicles.”

• “Factories in Russian-occupied areas were packed up and moved on trains and trucks, and are being resurrected in the west. Manufacturers are creating jobs and hunting for skilled workers.” READ MORE

THE 21 HATS PODCAST

This week, Shawn Busse and Paul Downs talk about what they’ve learned from their worst client experiences. Shawn, for example, tells us that he’s come to think about taking on a client much the way he thinks about hiring an employee. And Paul stresses the importance of watching what he says about difficult clients to his employees, because he doesn’t want to encourage a cynical attitude. From bad clients, our conversation shifts to bad partners. Even though their own partnerships ended poorly, both Shawn and Paul emphasize that having a partner can be invaluable in getting a business off the ground. In fact, Paul says he might even consider taking on a partner again. Plus, both Shawn and Paul explain why all the talk of recession is not giving them second thoughts about their ambitious marketing plans.

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

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