Flex Time at the Factory?
You know the ongoing labor shortage is real when even manufacturers start offering flexible hours.
Good Morning!
Here are today’s highlights:
The latest 21 Hats Live event gets underway in Fort Worth.
Gene Marks writes about the benefits of getting out of your office and working alongside your employees.
The business backlash against the Biden administration’s new contracting rules is building.
Washington, D.C.’s experiment with ending tipped pay may offer a look into the future.
21 HATS LIVE: FORT WORTH
Today, we kick things off at our second 21 Hats Live event with a group of about 25 impressive entrepreneurs from all over North America and from all sorts of industries: We’ll start this evening with a get-to-know-you dinner and a couple of surprise guests who will share their remarkable journey to employee ownership.. Thursday we’ll have our first peer-group conversation, and we’ll take a tour of Laura Zander’s Madelinetosh factory. Friday we’ll record a podcast. All of which is to say, these newsletters are likely to get shorter as the week goes on.
MANUFACTURING
Even factories are trying flexible hours: “Until last April, there had really been just two ways to make 329,000 pounds of cheese a day at the Land O’Lakes plant [in Melrose, Minnesota]: Start at 5 in the morning and work till 5 at night, or the other way around. Rigid factory shifts were the default for churning out cheddar, as they are at factories the world over that make all kinds of products. The most efficient way to keep production humming uninterrupted, 24 hours a day, seven days a week, is to start and end in unison, bundling dozens of individuals’ efforts into a single unit of labor. At Land O’Lakes, those days are over.”
“They ended last year, when the member-owned cooperative began hiring for a handful of roles in its Melrose plant, along with a few of its animal-feed factories, that let employees choose their own start times and shift lengths. It worked: Those positions proved easier to fill than full-time openings, and had the knock-on benefit of boosting retention.”
“There are some trade-offs. The company needs two or three flex workers for every full-time employee, raising the cost of training, says Dewberry. There are also increased costs that come with figuring out the weekly shifts. Some of this, however, is offset by increased retention and cutting back on overtime pay.”
“Before the flex program, one factory had 26 full-time open roles without a single application—but when it posted a single ad for a flex position, more than 100 people applied. Across the company, Land O’Lakes is seeing twice the volume of applicants for each flex role as for full-time openings.”
“‘There are less and less people going into manufacturing every year, and for us it ran across every category,’ says Yone Dewberry, chief supply-chain officer at Land O’Lakes. ‘If you look at the demographics of the U.S., this is an obvious long-term problem.’” READ MORE
MANAGEMENT
Gene Marks writes that if you want to motivate employees, you should try working alongside them: “Andrew learned something important a few years ago when construction was being done to his office and he was forced to find another place to be. So he sat somewhere else. He took an empty desk next to his customer service team. And what happened next really opened his eyes. ‘During the month that I sat there I learned more about my people — and my customers — than I did in the previous 10 years,’ he told me. ‘Sitting there, I was part of the team and not just the boss.’”
“During that month, Andrew listened in on conversations and offered his thoughts. He was able to propose suggestions and helped to coach the reps around him, which in turn helped them to better offer answers to customers and even suggest new products to sell them. He helped them do their jobs better. That made them happier and more motivated to do a better job for him.”
“And when his office was finished, Andrew moved … to the production floor. He took another desk in the production team’s area and worked out of there for a month. Because that location was at the back of the plant he frequently walked the floor and chatted. He noted inventory that wasn't moving. He pointed out potential safety issues. He acknowledged a daughter’s graduation, a wedding anniversary. He offered condolences on deaths and congratulations on births.”
“‘When you run a business you get wrapped up in things that are important like deals and contracts and customer meetings, but I was ignoring the most important thing: my people,’ Andrew said. ‘I discovered that I was becoming a figurehead and people don’t get motivated working for a figurehead.’” READ MORE
MARKETING
As beauty brand Tarte Cosmetics learned the hard way, influencer fatigue is very much a thing: “The 30 influencers on the four-night trip, as well as their plus ones, stayed at the Four Seasons Resort Bora Bora in bungalows atop crystal blue waters. Their rooms were filled with gifts, including luggage, clothing, swimsuits, beauty products and record players. On social media, the influencers chronicled their activities — getting makeovers, snorkeling, jet skiing, partying by the pool, playing with dogs from a nearby animal shelter (to which Tarte made a hefty donation) and imbibing plenty of cocktails.”
“The trips started as a cost-effective way to promote Tarte in its early years, according to Maureen Kelly, the brand’s founder and chief executive. ‘We found the investment in these relationships to be more valuable in the long term than spending millions of dollars on one-off media campaigns,’ she said.”
“Nearly a decade into its blingy campaign, Tarte seems to be eliciting more and more negative comments. In 2024, anyone with an online password knows that the attractive person trying to persuade you to buy this or that cute sweater either got it for free or will receive a kickback from your purchase. The result is an increasing skepticism toward marketing campaigns that once seemed organic.”
“The reaction has been decidedly mixed, with some commenters expressing annoyance with the conspicuous consumption on display and suggesting that they may be suffering from influencer fatigue, a weariness with content that has become the stuff of social media cliché.”
“‘I’ve been influenced! To buy any brand but Tarte,’ one TikTok user commented.” READ MORE
REGULATION
Businesses are escalating their fight against the Biden administration’s new rules on contract workers: “The legal challenge could prevent more ride-sharing drivers, home-health aides, janitors and truckers from being treated as employees, rather than independent contractors, which would ultimately deny these workers access to a minimum wage and overtime pay. The dispute concerns one of the more significant regulatory actions taken by the Labor Department since President Biden took office pledging to reinvigorate workers’ rights. Finalized in January, the government’s new rules spell out the process by which companies must determine how a worker is classified, and as a result, the benefits they should receive.”
“But many of the companies that rely on independent contractors — from delivery apps like DoorDash to lesser-known firms that retain janitors, truckers and others — have fiercely opposed the Biden administration’s approach. They have argued that the rules put pressure on them to treat more of their workers as employees, which could carry steep costs they can’t afford, potentially even forcing them to slash their labor force.”
“With the new rules set to take effect next week, these industries banded together to file a broadened and revised version of a previously pending lawsuit Tuesday, warning that the Labor Department threatens to ‘irreparably harm not just companies employing independent contractors nationwide, but the workers themselves.’”
“Uber and Lyft each said at the time they did not believe they would be affected by the changes. But the two companies still lobbied against the new rules: Writing the Labor Department in 2022, the ride-hailing giants each argued that many independent contractors do not want to be treated as employees, preferring to preserve flexibility in their hours and pay.” READ MORE
In multiple locations, legislation is targeting tipped pay, with little agreement on what the ramifications will be: “A useful place to look for answers is Washington, D.C., one of the first U.S. cities in decades to begin phasing out the tipped wage — a move so contentious that it took two elections to make it happen. (The measure passed in 2018 with 56 percent of the vote, but was repealed by the District of Columbia Council, only to pass again with nearly 75 percent support in 2022.) More than a year into its experiment, the city — where food service, including a diverse collection of independent restaurants, is the third-largest sector of the local economy — is still torn.”
“The number of restaurants in Washington has actually grown — to 3,472 last year, from 3,307 in 2022, according to the U.S. Bureau of Labor Statistics. And new ones continue to open; according to Yelp, there were 283 openings in 2023, compared with 254 the previous year.”
“Rick Allison, who runs several restaurants in the district, Virginia and Maryland, said labor costs at his King Street Oyster Bar, in Washington, are up 12 percent from a year ago. He blames the initiative. Coming on top of rising rents and inflation, the impending wage increases are unsustainable, he said.”
“Chris Kennedy, who co-owns the bar Reliable Tavern, sees the current challenges as short-term growing pains. ‘It will be a clunky few years in D.C., but we will find our way.’”
“As restaurateurs grapple with higher labor costs, their most widespread tool appears to be the service charge — a fee of about 3 percent to 22 percent or more that’s added to the end of the check. Every restaurant disperses the money differently; some funnel it straight into employee pay, while others split it between staff and management.” READ MORE
HUMAN RESOURCES
Employers are reducing or ending coverage of the new weight-loss drugs: “Employers that embraced paying for weight-loss drugs are now reckoning with the high costs, forcing growing numbers to dial back or cut off their reimbursement because they can’t afford it. The companies are putting in place restrictions such as limiting use to workers with high body-mass indexes, or a $20,000 cap, while others have eliminated coverage altogether. They can’t sustain the spending, they say, and question whether the medications are reaching the right patients.”
“Weight-loss drugs such as Wegovy and Zepbound are among the hottest prescriptions in the U.S., so popular that makers Novo Nordisk and Eli Lilly can’t meet demand. But the drugs list for more than $1,000 a month.”
“The popularity—and effectiveness—of the medicines has put employers in a bind. They want to add medicines that improve employees’ health—which could reduce long-term spending—and could help recruitment and retention.” READ MORE
LITIGATION
The U.S. Chamber of Commerce is promising to file a lawsuit opposing the new ban on credit-card late fees: “Federal regulators finalized a rule on Tuesday to cap most credit card late fees at $8 as part of a broader push by the Biden administration to eliminate junk fees. The Consumer Financial Protection Bureau estimates the new regulation, first proposed in February 2023, will save families more than $10 billion a year by cutting fees from an average of $32. The new rule applies to large credit card issuers – those with more than 1 million accounts. These companies represent more than 95 percent of total outstanding credit card debt, according to the CFPB.”
“The financial industry slammed the CFPB, warning the new regulation will hurt consumers by causing more people to pay late, damaging their credit scores. ‘Today’s announcement is a prime example of how the CFPB has been politicized, and how its regulatory actions promote rhetoric over analysis and data,’ Greg Baer, CEO of the Bank Policy Institute, a bank trade group, said in a statement.”
“The U.S. Chamber of Commerce went a step further, saying it will ‘imminently’ file a lawsuit against the CFPB to prevent the “misguided and harmful” regulation from taking effect. ‘Once again, the Consumer Financial Protection Bureau has exceeded its authority,’ Neil Bradley, chief policy officer at the Chamber, said in a statement. ‘The agency’s final credit card late fee rule punishes Americans who pay their credit card bill on time by forcing them to pay for those who don’t.’” READ MORE
THE 21 HATS PODCAST
Can Jimmy Beans Wool Sell Yarn on LinkedIn? This week, Shawn Busse and Laura Zander discuss what exactly Laura’s job should be. She’s CEO, of course, and she’s been focused on acquisitions and growing the business, but she’s never really found someone to take over the big role she used to play, which leads to these questions: Should she go back to being her own chief marketing officer? Or does she need to go out and spend real money to hire one? And then, toward the end of the conversation, Laura actually devises a plan on the spot to sell yarn in a surprising and creative way, which perhaps answers the very question we’d been discussing. Plus: Shawn explains how having the right partner can make or break a business as he celebrates having made his final payout to his own former partner.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren