Does Your Bonus Plan Incentivize the Right Stuff?
Good Morning!
Here are today’s highlights:
The SBA has revamped its Lender Match platform.
Ami Kassar has stopped carrying business cards.
What can businesses do to make the return from parental leave less stressful?
Let’s be clear about dynamic pricing.
Management
Lou Mosca, in the video above, offers some guidance on structuring a pay-for-performance plan: Imagine if every effort employees put into their work directly contributed not just to the success of the company but also to their financial well-being. That's the essence of pay-for-performance, beyond traditional year-end bonuses or subjective reward systems. Unlike commissions or tenure-based bonuses, pay-for-performance is tied to the incremental profitability of a company—be it by department, division, or the organization as a whole.
For example: If a company sets a goal for a 5-percent profit margin but achieves 8 percent on $4 million of revenue, that extra 3 percent in profit amounts to $120,000. I believe a portion of this surplus should be allocated to a quarterly pay-for-performance plan for employees.
This concept isn't just about rewarding hard work—it's about creating a culture where everyone's efforts are aligned with the company's financial goals.
FINANCE
The SBA has released a revamped version of its Lender Match platform: “First launched in 2015, Lender Match is the SBA's free online tool that helps small businesses tap into new capital sources by matching founders with roughly 1,000 potential lenders. The revamped Lender Match program now features a mobile-first interface, which the SBA says should help boost access and usability of the tool. It's a step above the tool's prior iteration, which had no formal platform, and instead functioned more like an online form.”
“Thursday's announcement is a ‘crucial step forward’ in bridging gaps in access to capital, according to Lenwood V. Long Sr., CEO of the Orlando-based African American Alliance of Community Development Financial Institution CEOs, an organization that works to empower Black-led CDFIs.”
“‘By providing a direct connection to non-predatory lenders, Lender Match levels the playing field for entrepreneurs lacking traditional banking relationships and presents an enhanced opportunity for CDFIs to engage with them more effectively,’ Long Sr. said in a press release.”
“In the new system, founders will still be prompted to enter the same information, but will now be verified in the tool. Lender Match will also screen for fraud. The process will still take about two days to find a match, which also allows smaller lenders to have time to compete as well, according to a spokesperson.” READ MORE
POLICY
As of today, all businesses in NYC have to put out their trash in containers: “The required weapon is a bin with a secure lid. All businesses must put their trash in such containers from now on. No longer can they leave their trash out in the open in plastic bags. Food-related businesses — restaurants, bars, delis, bodegas, grocery stores, wholesalers and catering companies — have had to use containers since last August. The Department of Sanitation said those groups accounted for 20 percent of city businesses but by far the largest portion of the trash that attracts rats.”
“For businesses that had not been covered by trash container rules until now, there will be a one-month grace period. Enforcement agents will issue warnings that will look like violations, except that no fines will be imposed yet. Then, businesses with trash that is not in containers will face a $50 fine the first time they are cited, a $100 fine the second time and a $200 fine for any subsequent citations.”
“‘The city is absolutely going in the right direction,’ said Liz Picarazzi, who runs Citibin, a company that supplies trash containers, ‘but the implementation for small businesses is really difficult.’ Wheelie bins take up space in basements. And many stores do not have a side wall or a rear wall on an alley where bins can be anchored, she said.”
“Christine Noh, who owns two sneaker and apparel stores in the Bronx and one in Washington Heights, said containerizing trash has been difficult. ‘We bought receptacles,’ she said. ‘They did not last a week. They were stolen.’” READ MORE
TECHNOLOGY
Don’t tell Jay Goltz, but Ami Kassar is giving up on business cards: “Rather than walking around with my business cards these days, I am popping out my Kardz.Biz, where people can either scan the QR code or tap on their phone and immediately have access to my full digital profile on their phones. They love it, and it’s a great conversation piece over dinner. I encourage everyone to check it out.”
Meanwhile, Jay offers a different view in this week’s podcast (see below).
Jay and Ami will both attend the 21 Hats Live event in Fort Worth next week. We’ll let you know whose cards are more popular. READ MORE
HUMAN RESOURCES
Returning from parental leave can be stressful for employees: “The days, weeks, and months after a new parent returns to work after leave can be a critical and challenging time for an employee. Many experience anxiety about how they are going to manage work and parenting, and some end up feeling like a failure at both. To address that, some organizations have launched formal ‘reboarding’ programs that structure those first months back after leave so they aren’t overwhelming for new parents, while also providing them with emotional support.”
“Many see it as a business imperative. Organizations are making substantial investments in paid maternity and paternity leave—in 2023, 40 percent of organizations in a Society for Human Resource Management survey offered paid maternity leave and 32 percent offered paid paternity leave—and they want to ensure new parents return to work and are productive and content when they do.”
“A successful reboarding program requires planning, and it starts long before an employee goes on leave, consultants and HR leaders say. It begins with mapping out a comprehensive work-coverage plan, including if and under what circumstances the employee wants to be contacted about work while out on leave.” READ MORE
ARTIFICIAL INTELLIGENCE
Google’s deal with Stack Overflow shows the AI giants will pay for data: “Last year Stack Overflow became one of the first websites to announce it would charge AI giants for access to content used to train chatbots. Now the popular Q&A service for coders has signed up its first customer—Google—in what CEO Prashanth Chandrasekar says is the start of a ‘meaningful’ new stream of revenue. The deal is significant, because it remains unclear how broadly Google and other AI developers will pay for content needed for AI projects. Millions of books and websites have fueled the development of AI systems, but most publishers have not been compensated, and some are suing over what they allege is misuse.”
“Google and other AI developers have previously gathered data from Stack Overflow and other websites without much notice. As demand for generative AI technologies has surged—and the valuations of the companies developing them has rocketed—the websites supplying the foundational text have begun demanding what they view as their fair share.”
“The new Stack Overflow deal comes just a week after Google reached a licensing agreement to hoover up data from Reddit, the discussion forums operator, whose content has helped chatbots’ ability to converse.” READ MORE
PRICING
It’s worth repeating: Wendy’s dynamic-pricing mistake was really a PR mistake: “Everyone tried to exploit the fast-food flip-out, including some of the burger chain’s competitors. Chili’s mocked it on social media. Burger King used the opportunity to announce a new deal on Whoppers. ‘We don’t believe in charging people more when they’re hungry,’ the company said in a saucy tweet. Meanwhile, progressive pundits co-opted the controversy into their ongoing anti-greedflation crusade. ‘@Wendys is planning to try out surge pricing — that means you could pay more for your lunch, even if the cost to Wendy’s stays exactly the same,’ Sen. Elizabeth Warren (D-Mass.) wrote on X. It’s price gouging plain and simple, and American families have had enough.’”
“Wendy’s scrambled to contain the fallout. In a blog post, the company said news media had ‘misconstrued’ the CEO’s words and that the company has ‘no plans’ to raise prices when demand is highest at our restaurants.’”
“Here’s the thing: If you read the Wendy’s statement carefully, it’s not actually a reversal. Wendy’s still plans to experiment with varying prices, and that’s totally reasonable. In fact, it’s quite common!”
“Note that Wendy’s said it will offer discounted prices ‘particularly in the slower times of day.’ In other words, things will be cheaper when demand is low to draw in more customers when there’s otherwise idle capacity. Lots of restaurants do this, including other burger chains. It’s usually called ‘happy hour.’ Or the ‘early-bird special.’”
“Cutting prices during slower hours of the day is arithmetically identical to raising prices during busier periods. But for whatever reason, consumers seem more willing to stomach a ‘discounted’ low-demand price rather than a ‘surged’ high-demand price. ... In other words, there’s a good way to market variable pricing and a bad way.” READ MORE
THE ECONOMY
Inflation has largely abated—but not for car insurance: “Motor vehicle insurance rose 1.4 percent on a monthly basis in January alone and has risen 20.6 percent over the past year, the largest jump since 1976. It has been a huge hit for those driving the roughly 272 million private and commercial vehicles registered in the country. And it has played a part in dampening the ‘mission accomplished’ mood on inflation that was bubbling up in markets at the beginning of the year.”
“According to a recent private-sector estimate, the average annual premium for full-coverage car insurance in 2024 is $2,543, compared with $2,014 in 2023 and $1,771 in 2022.”
“That spike has a variety of causes, but the central one is straightforward: Cars and trucks are pricier now, so insurance for them is, too.”
“‘The classic example is that, you know, a bumper used to be a cheap replacement part, and it’s no longer that way because you have advanced sensors in there — that makes it quite an expensive proposition,’ said R.J. Lehmann, a senior fellow at the International Center for Law and Economics, a nonpartisan research center.” READ MORE
THE 21 HATS PODCAST
Managing Your Tasks, Your Credit Cards, and Your Anxiety: This week, Jay Goltz, Jaci Russo, and Sarah Segal talk about whether it’s finally time for Jay to enter the brave new world of task-management software. That’s, in fact, what his two kids in the business are encouraging him to do. As it happens, Jaci and Sarah have tried most of the project-management tools out there, and they kind of love them—but with one caveat: They can be a lot of work. Which is all Jay needed to hear. After that, we talk about the challenges of managing credit cards and points, and Jay explains why, after 40 years, American Express is no longer what’s in his wallet.”
Plus: the owners tackle a question posed by an entrepreneur with a very new startup: “When does the anxiety of a new business subside?” asks the newbie, which prompts some laughter and this answer: The anxiety subsides in the 42nd year, says Jay, who’s been running his business for 42 years.
Jay also mounts a defense for carrying traditional business cards.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren