For Too Many, Recruiting Is an Afterthought

Lou Mosca says every job placement is an opportunity to showcase your business’s culture.

Good Morning!

Here are today’s highlights:            

• Would you give $30 million to an MBA graduate to go buy a business?

• Even doctors are starting to form unions.

• For employees and owners alike, vacations can actually cause more burnout.

• Passing to a fifth generation, a legendary Philadelphia bread business offers an important reminder.

MANAGEMENT

What makes you different? In week’s video (above), Lou Mosca says he’s stumbled upon a pivotal realization that changed how he approaches growth and sustainability: recruiting is not just an operational necessity; it's the lifeblood of a thriving business.  Reflecting on the evolving hiring landscape, from the days of newspaper ads to the digital maze of job boards like Indeed, Glassdoor, and others, it dawned on him that the traditional methods no longer suffice. Operating a business, especially for those in the $1 to $5 million revenue range, often means wearing multiple hats, but not all of us can expertly juggle the nuances of recruiting. It's a specialized craft akin to framing a house or plumbing, where expertise defines the outcome.”

• “Yet, recruiting is often relegated to the back burner, treated as an afterthought rather than a full-time endeavor. This oversight is a misstep that can cost you not just in talent but in the essence of what makes your businesses unique. What sets you apart in the crowded marketplace isn't just the salary or the benefits you offer; it's the culture and values you embody.

• It's about creating a sense of belonging and purpose that resonates with potential candidates. Each hiring ad and each interaction is an opportunity to showcase your culture of accountability, opportunity, and differentiation in the market. Making recruitment a strategic priority means infusing our unique story into every job posting, ensuring the first touchpoint with candidates is memorable, and personalizing the recruitment process to reflect your commitment to attracting and engaging the right talent.”

ENTREPRENEURSHIP

The New York Times has discovered search funds: “Edward Silva grew up wanting to be a chief executive. In 2018, Mr. Silva enrolled at the Stanford Graduate School of Business with the goal of starting his own company. ‘I was going to live the Stanford dream,’ he said. ‘I was going to find an engineer — we were going to find a venture capital firm and found a technology start-up.’ Then a classmate told him about another path for budding entrepreneurs. Instead of starting a company from scratch — Mr. Silva had co-founded one before business school and even been its chief executive — he could buy one and run it. To do so, he’d have to raise a ‘search fund,’ a pool of money from investors willing to bet that an ambitious young person with no track record will make them money.”

• “After raising a search fund of more than $30 million from a small group of investors, Mr. Silva bought MásLabor, a Virginia consulting firm specializing in employment visas, in July 2021. It was the perfect target company: The owners, a couple in their 70s, were ready to retire and had no children — just 15 dogs.”

• “Search funds started out as a business school experiment four decades ago, but have gained popularity in recent years as persuasive newbies armed with M.B.A. degrees entice investors to make these niche bets with the promise of high returns. Across 2020 and 2021, nearly $800 million was invested in search funds, about one-third of the total amount raised for such funds since the idea emerged, according to data from the Stanford Graduate School of Business.”

• “The typical search fund strategy goes like this: The entrepreneur raises an initial funding round to cover his or her salary and travel expenses while looking for a company to buy. While there is no recipe for a successful acquisition, most share a few key ingredients: The company is profitable and in a fragmented industry (think HVAC, home health care, or waste management), and its owners are approaching retirement with no apparent heir.” READ MORE

HUMAN RESOURCES

Even doctors are starting to unionize: “Physicians at Salem Hospital [in Massachusetts] voted overwhelmingly to unionize Wednesday, part of a growing number of doctors organizing amid concerns the health-care industry is becoming increasingly corporate and physicians’ authority is dwindling. The 112 physicians at Salem Hospital, part of Mass General Brigham, are now represented by Council 93 of the American Federation of State, County and Municipal Employees. The Salem doctors are the first of the 7,500 attending physicians in the state’s largest health care system to form a union — and the second group of doctors overall after 2,300 MGB residents and fellows in training organized last year.”

• “Like many union workers, the doctors in Salem are fighting for a greater voice, but, they say, they’re also fighting for something bigger: the ability to push back against corporate power and ‘take back medicine,’ as one physician put it.”

• “‘This is not an MGB problem. This is not a Boston or a Massachusetts problem. This is a nationwide health care system problem,’ said Sean Codier, an emergency room physician at Salem Hospital. ‘This is something that a local group of physicians can do to try to reassert their voice and reassert our stake in our patient’s care.’”

• “In response to the vote, Salem Hospital, the largest health-care provider on the North Shore, said it was disappointed by the election results but remains committed to working with the physicians and caring for the community’s needs.”

• “Union organizing is a relatively recent phenomenon among physicians. Just over 7 percent of practicing physicians, nearly 68,000 doctors, belonged to unions in 2019, according to the most recent estimates by the American Medical Association — up from as few as 14,000 in 1998. But with burnout and staffing shortages rising during the pandemic, even as financial losses fuel a push for greater productivity, healthcare workers have been seeking remedies.” READ MORE

And if you’re still wondering why doctors are starting to unionize: “In community after community, the hospitals keep closing. In 2018, it was Northside Regional Medical Center in Youngstown, Ohio. In 2019, it was Ohio Valley Medical Center in Wheeling, West Virginia, along with East Ohio Regional Hospital across the river in Martins Ferry, Ohio. That November, St. Luke's Medical Center, which had treated patients in Phoenix for more than a century, shut its doors. In 2020, as the pandemic hit, it was one in Massachusetts and another in West Virginia. Followed by four more — in California, Pennsylvania, and Texas — over the next three years.”

• “In addition to their financial struggles, all of the hospitals shared three things in common. They all served low-income communities that suffered from a lack of access to healthcare. They were all owned at various points by for-profit investors, including leading private-equity firms like Cerberus, Leonard Green, and Apollo. And in a move that stripped the hospitals of one of their prime assets, the owners had sold the land beneath the facilities to a little-known real-estate investor called Medical Properties Trust.”

• “For many of the hospitals, the deals proved disastrous. Once their real estate was sold to MPT, they were forced to pay rent on what had always been their own property. That added to the massive debt burdens already placed on the hospitals by their for-profit owners, deepening their financial woes. It also deprived Americans of desperately needed healthcare and put lives at risk — all while enriching some of the world's wealthiest investors.”

• “‘It's the biggest scam that almost no one knows about,’ says Rob Simone, a researcher at the risk-management firm Hedgeye who has spent hundreds of hours digging through MPT's financial filings and business dealings.” READ MORE

Here’s how vacations can backfire: “Workers are supposed to take vacations to feel energized when they return to their jobs, but a large number of Americans say they dread coming back to work, with many citing a feeling of post-time-off burnout. According to a survey of 1,000 employed Americans by MyBioSource, a testing and diagnostic reagent supplier, just 13 percent said they feel excited to return to work after taking time off, while 42 percent said they dread returning to work after taking time off. Among the respondents, 34 percent said a sense of burnout sets in right after returning from time off, while 50 percent said it sets in within a week of returning.”

• “The survey found that only 8 percent of employers have initiatives or policies in place to prevent burnout. ‘Small-business owners and managers must create a supportive environment that recognizes the importance of time off while supporting employees when they return,’ said Ricardo Rodriguez, a member of the creative team at MyBioSource. ‘Clear communication, flexibility and understanding go a long way in ensuring a smooth return to work for everyone involved.’”

• “It’s not just workers who battle burnout, though, as 47 percent of managers said they battle post-vacation burnout, as do 22 percent of business owners. Most of those responding to the survey said the burnout manifested with low energy levels, loss of motivation and fatigue, and reduced productivity.”

• “‘Knowing their employer makes space for its workers to go on vacation and slowly return to normal would help them relax more while on vacation,’ Rodriguez said. ‘When business owners and managers promote a healthy work-life balance and lead by example, it will help their employees do the same.’” READ MORE

Productivity is up because employees have quit quitting: “Productivity for many companies is soaring — all thanks to the ‘Big Stay.’ The phenomenon, in which fewer employees are quitting their jobs compared to two years ago, has positive implications for the economy. Companies retain more employees, and lower labor churn increases productivity and skilled institutional knowledge. The quit rate has sunk below pre-pandemic levels. This past January, three million workers — just 2.1 percent of the U.S. workforce — quit their jobs, according to the U.S. Bureau of Labor Statistics.”

• “That's in stark contrast to January 2022, when 4.3 million people quit their jobs as part of the Great Resignation. The U.S. quit rate peaked between late 2021 and early 2022 at 3 percent, with mid-career tech and healthcare professionals being the largest demographics leaving their employers.”

• “There are a couple of reasons workers have shifted to the Big Stay, Glassdoor Chief Economist Aaron Terrazas told Business Insider. Fewer companies are hiring, he said, and workers see less opportunity outside their current employers.” READ MORE

MARKETING

Retailers are growing increasingly nervous about losing TikTok—but not saying a lot about it: “What makes TikTok particularly valuable is its popularity among younger consumers. The app is especially known for its short videos on a wide range of topics but often features social media influencers recommending hot products and services. ‘TikTok sits at the convergence of content and media,’ said [Gene] Han, founder of Halo Advisory Services in Seattle. The short videos especially appeal to younger consumers who prefer to watch faster content that’s still compelling and authentic, he said. Reaching younger people has been a special challenge to U.S. apparel chains such as Macy’s, Gap, and J. Crew.”

• “These American retailers, which once dominated the fashion scene, have lost significant market share to foreign fast fashion chains H&M in Sweden, Zara in Spain, Uniqlo in Japan, and Shein in China, which is preparing to go public in the United States. It’s no accident that the chains have invested heavily in TikTok content.”

• “And yet in the lead-up to the vote, retailers said little to nothing publicly about TikTok’s predicament in Congress. One possible reason is that retailers want to stay clear of the complicated rivalry between the United States and China that permeates such debates. The National Retail Federation, the industry’s leading trade association, is ‘currently reviewing the proposed legislation and has not issued a formal position at this time,’ spokesperson Danielle Inman said in an email.” READ MORE

SUCCESSION

A fifth-generation bread business in Philadelphia offers a reminder of the importance of having a succession plan: “On the good days, Louis Sarcone Jr. gets out of bed, pops his meds, and heads to Sarcone’s, the famed South Philadelphia bread bakery that his immigrant great-grandfather opened in 1918 in the family rowhouse. On the bad days — and they’ve become more frequent, six years after he was diagnosed with Parkinson’s disease — he stays home. But he doesn’t worry too much about the brick ovens, or the rolls, or the tiled retail shop. He knows his son, Louis III, has it covered. Continuing a tradition into its fifth generation, Sarcone’s Bakery has been handed down from Sarcone son to Sarcone son. Its rolls, used by many popular sandwich shops, are considered the gold standard for hoagies.”

• “The transition from Louis Jr. to Louis III was not some momentous occasion — ‘like ‘the business is yours now,’ said Louis Jr. during a chat last week in the bakery. ‘It happened over time.’ (The transition was more sudden in the 1950s when Louis Sr.’s father, Peter, quit dental school after his father Luigi, Sarcone’s Bakery founder had a heart attack.)”

• “But there is no sixth generation coming up, as Louis III and his wife have no children. ‘He’s gotta have kids soon,’ Louis Jr. said, gently.” READ MORE

THE 21 HATS PODCAST

Man, I’m Glad We Didn’t Do an ESOP: This week, Matt Hoying, president of Choice One Engineering, explains to Shawn Busse and Jay Goltz how he created a DIY employee-ownership plan for his firm. Some 10 years ago, Matt’s predecessor as president tasked him with selecting an ownership structure that would engage employees and help Choice One be as successful as possible. That sent Matt on a mission in which he researched the pluses and minuses of every structure he could find—including employee stock ownership plans—before ultimately creating his own structure.

• Matt’s plan doesn’t enjoy the tax advantages of an ESOP, but it’s open even to part-timers, and it requires employees who want to be owners to make a financial investment in the business. In other words, they aren’t given ownership; they have to buy into it. Shawn and Jay quiz Matt on the choices he made and how the plan has worked out.

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

Thanks for reading, everyone. — Loren