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Employees Still Have the Leverage
In our latest 21 Hats Podcast, the owners talk about the continuing impact of the labor shortage as well as the tasks they’d really rather not have to do.
Here are today’s highlights:
New rules defining employees and contractors may be on the way.
The strong dollar is helping with inflation.
Amazon aggregators are trying to shift business models.
Is there a method to Elon Musk’s madness?
THE 21 HATS PODCAST
Employees Still Have the Leverage: This week, Jay Goltz, Liz Picarazzi, and William Vanderbloemen discuss how their businesses are holding up and whether they’ve gotten past the labor shortage (short answer: No). The conversation veers into a discussion of how to finance growth and what to do when your bank is unresponsive (find another one!). And then Liz explains her intense distaste for dealing with lawyers, accountants, and insurance agents and how she’s trying to cope with it. “Believe me,” responds Jay, “I haven't paid enough attention to certain things that I should have, and it's cost me. But yeah, we can't every day just do the inspiring, cool, fun, oh-my-God, we-had-a-big-sale, look-at-the-problem-I-solved thing. It’s all part of the package.”
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Employees are shrugging off demands that they return to the office: “That's likely because they feel they can get away with it, according to the latest findings from WFH Research's Survey of Working Arrangements and Attitudes, which has been polling 2,500 to 5,000 U.S. employees every month since May 2020. The most recent survey found that 35 percent of workers feel their employer would likely do nothing if they or their peers didn’t go into the office as much as required.”
“Workers were more likely to be reprimanded for failing to complete their work on time: Only 17 percent reported no consequences for not getting work done in a timely fashion, substantially lower than those who said there wouldn't be consequences for not coming into the office.”
“While most employees surveyed responded that nothing will happen if they worked in person less than requested, others reported that they would receive a verbal reprimand (18.5 percent), a pay cut or their bonus taken away (16.5 percent), or a negative performance review (14 percent).”
“And when quitting is factored into the equation, companies are slightly more bark than bite. More workers reported a threat to terminate (15.6 percent) than actual termination (12.4 percent) in response to a failure to attend the office.” READ MORE
For some African American employees, working remotely has been a welcome respite: “There has never been a time that my race was an afterthought. I have always been a Black person before any title, and the office space never let me forget that. When there would be discussions about race, I or other African Americans were often viewed as the experts on everything Black. On more than one occasion, if the police drove by with sirens while I was having lunch with colleagues, someone would joke that the cops were ‘coming to get me.’ Nearly all my white co-workers thought it was funny, letting out a laugh. Only my Asian colleague looked at me and ‘didn’t get it.’ Receptionists often questioned my credentials, such as my badge, position, and work status.”
“Looking back on those jobs, I wonder: How many racist scenarios, comments, and situations would I have avoided enduring if I didn’t need to come into the office?”
“Samella Watson, founder of Sebiya, a travel company based in Miami, noted, ‘The racism still shows up in the emails and how people respond or don’t respond to you.’”
“Still, if WFH allows a small reduction of racial workplace incidents, I will take it, and my mental health will benefit from it.” READ MORE
Gene Marks says the Department of Labor is considering changing the rules defining employees and contractors: “When needed, I employ a handful of outside developers to perform tasks for clients and then bill my clients for their time. Under the [new] rule, I may be required to classify those developers as employees because they are not ‘performing work that is outside of the usual course’ of my business. They are generating revenue for me, which means I would have to withhold taxes and potentially offer them participation in my company’s benefit plans.”
“This would also be the case for small businesses that use independent drivers, content creators, technicians, trainers or specialists who perform billable services for their customers.”
“The Department of Labor held two open forums for employers and workers in June to get feedback and has now begun the formal rule-making process. Although no date has been given for the final rule, I’m expecting this to happen by the end of the year.” READ MORE
Air travel is broken: “This summer was supposed to mark the rebirth of commercial aviation after two years of travel restrictions left the industry nearly in hibernation. Instead, it is turning into one of the most chaotic travel seasons in decades. Flights are being canceled, and delays are becoming chronic. Baggage is getting lost. Hours long waits for check-in, luggage drop-off and security have exasperated travelers. It’s not just one thing going wrong. The system is under strain or breaking down at every link in the chain, and each of the problems at the airlines and airports exacerbates others.”
“A dearth of baggage handlers and security agents keeps passengers from checking in, leading to flight delays.”
“When immigrations and customs at hub airports are short-staffed, passengers have sometimes had to wait on planes, an issue that affected 2,700 flights arriving in Toronto in May.”
“All this means that pilots and flight attendants work longer days and that there is less time for overnight maintenance. Over time, crew and equipment shortages build.” READ MORE
The party is over for Amazon aggregators: “When e-commerce boomed earlier in the pandemic, investors flocked to aggregators, which roll up top-performing brands on Amazon and attempt to optimize them to increase profitability. Some aggregators' valuations quickly climbed into the billions, and the space rapidly became crowded. Now, investors are growing leery because of concerns over the macro environment and aggregators' business models.”
“Aggregators are trimming costs as layoffs hit the industry — Suma, Heroes, and the industry heavyweight Thrasio have announced significant staff cuts since April.”
“‘It's not surprising when you see hundred-plus entrants all come into a new space within an 18-month time frame,’ Tom Welch, a partner at Victory Park Capital, a debt provider with 10 aggregators in its portfolio, told Insider. ‘They're not all going to make it.’”
“Pattern, a Salt Lake City firm, performs much of the same optimization work as aggregators but does not acquire brands.”
“Instead, it works with them as clients. Pattern's work isn't limited to Amazon brands, either — its clients sell their products in other retailers, including Target and Walmart.” READ MORE
The strong dollar is driving down commodity prices: “Prices of oil, metals and agricultural products have tumbled since early June after shooting up in the wake of Russia’s invasion of Ukraine. In part, the recent fall reflects investors’ fears that a demand-busting recession is around the corner. But it is also because most commodities are priced in dollars. That means a rallying dollar makes them more expensive for buyers around the world and drags on demand.”
“If the dynamic holds and commodity prices remain under pressure, that could help tame inflation and spare the Fed from having to raise interest rates so quickly and so far that the U.S. economy is tipped into a recession.”
“Consumers are already getting some relief. The commodity selloff is pulling down gasoline prices at the pump and has some investors hoping that consumer-price inflation in the U.S. peaked in June.” READ MORE
Maybe Elon Musk isn’t as crazy as he seems: “Based on our research and teaching on strategy for innovation, technology, and growth, we see (some) method to the madness. Musk’s strategy can be characterized by common themes across three areas: what fits into his vision for problems to solve, how he designs an organization as a solution to those problems, and why he can so effectively mobilize resources towards those solutions. In understanding the strategy across his many businesses — and the significant risks of that strategy — executives can apply those lessons to launching and growing their own groundbreaking businesses.”
“While we conventionally think of a vision as being in pursuit of a specific type of solution, Musk seems to take a different approach: he pursues a specific type of problem. Specifically, he seems drawn to problems that involve navigating scale and overcoming complexity.”
“Musk famously asked Steve Davis, a SpaceX engineer, to build a part for the Falcon 1 rocket, which Davis estimated would cost $120,000, for $5,000. Davis eventually delivered the part for $3,900.”
“Yet Musk maintains he makes achievable asks. ‘I certainly don’t try to set impossible goals. I think impossible goals are demotivating,’ he’s said.” READ MORE
A traveling exhibition reviews the rise and fall of Jewish delicatessens: “The colors are fading, but the photograph of the Carnegie Deli from 2008 still calls up a world of heaping pastrami sandwiches, pungent smells of brine and smoke, and tourists lined out the door onto Seventh Avenue in New York. A few steps away, a kosher carving knife, a pushcart, a pickle barrel and a battered traveling valise used by immigrants from Lithuania are lined up against a wall. They conjure the Lower East Side of a century ago, bustling with Jewish immigrants from Eastern Europe, in the midst of creating a cuisine and a new kind of restaurant. This attic’s worth of artifacts sprawls through ‘‘I’ll Have What She’s Having: The Jewish Deli,’ an exhibit chronicling the rise of that restaurant culture in America.”
“It surveys the story of immigration as a force behind changing American tastes: The pushcarts, as the curators note, foreshadowed the food trucks now operated by a new generation of immigrants.”
“A grainy film clip near the start of the exhibit shows police officers fanning out to clear carts from a New York street in the early 1900s, a scene reminiscent of the 2020 crackdowns in Los Angeles on unlicensed food vendors.”
“There were an estimated 3,000 Jewish delis in New York City in the 1930s; now there are just a few dozen, according to the New-York Historical Society.” READ MORE
THE 21 HATS PODCAST
Dashboard: Something Is Going to Happen: This week, Mel Gravely, CEO of Triversity Construction in Cincinnati, joins Dashboard to explain why—even though he has a healthy backlog of work lined up for 2023—he’s more than a little concerned about where the economy is headed. He also talks about how the labor shortage in his industry started well before the Great Resignation and why he doesn’t see it ending any time soon. Plus: He talks about what he’s learned in the year since he published his book, “Dear White Friend,” in which he sought to start a real conversation with other business owners about race.
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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