Getting Pay-for-Performance Right

It’s not a subjective bonus. It’s about driving better financial performance.

Good Morning!

Here are today’s highlights:            

• U.K. retailers accuse Amazon of ripping off their products.

• A real estate brokerage chooses AI over its brokers.

• Buying new devices? Think about how you discard your old ones. 

MANAGEMENT

In this week’s video, Lou Mosca talks about pay-for-performance: “When most owners hear pay-for-performance, they tend to think of it as a commission or a bonus they can give employees. But that’s not what it is. These plans are not subjective bonus schemes but should be linked to the company's operating results, sometimes tied to gross profit. Pay-for-performance aims to exceed minimum profit standards, drive better financial results, and reward key contributors accordingly.” CONNECT WITH LOU

ECOMMERCE

U.K. retailers are suing Amazon for ripping off their products: “In 2015, merchants selling their wares on Amazon began to notice that whenever one of their products began to fly off the virtual shelves, the e-commerce powerhouse itself would seem to quickly come out with its own, cheaper version. Unable to compete on price, the retailers’ own sales would begin to tail off. They soon started to suspect something fishy was going on. Nine years later, they have decided to act. Last week, retailers in the U.K. filed a $1.27 billion class action against Amazon, accusing the company of abusing a position of strength to squeeze third-party sellers on its marketplace and boost sales of its own products.”

• “The lawsuit, the largest class-action ever filed by retailers in the U.K., alleges that Amazon misused data belonging to sellers on its platform to selectively undercut them with competing products of its own. The retailers claim that Amazon used its Buy Box—which features the conspicuous ‘Add to Cart’ and ‘Buy Now’ buttons and through which the majority of sales are alleged to be made—to push those own-brand products, thereby unfairly depriving competitors of sales.”

• “The effect of this ‘abusive conduct,’ the plaintiffs claim, has been felt particularly acutely among ‘smaller independent retailers’ already struggling to stay afloat in difficult market conditions.” READ MORE

ARTIFICIAL INTELLIGENCE

A real estate brokerage is getting rid of its brokers: “The company on Tuesday announced the ‘strategic realignment’ to focus exclusively on Sidekick, its generative AI assistant for real estate agents, marking a new direction for the real estate technology company. It will transition away from providing brokerage services to its agents at the end of July as it accelerates Sidekick's growth. Justin Fichelson, co-founder and co-CEO of Avenue 8, told me that Avenue 8 had about 100 of its own agents in the Bay Area, twice as many in Southern California, 30 agents in New York and a handful in Miami.”

• “Michael Martin, co-founder and co-CEO of Avenue 8, told me the company realized its go-to-market strategy was going to be involved in creating partnerships and selling to other brokerages and that the company's leadership wanted to do that without raising competitive concerns.”

• “Avenue 8 launched its Sidekick app — which trained on real estate workflows and MLS data — earlier this year after its engineering team began building it out in November, and has since received accolades for both Best AI Product & Service and Best AI Work & Productivity App at the 28th Annual Webby Awards.”

• “For a subscription cost of $25 per month, users of the trainable tool have some extended options at their fingertips as are also able to create presentations, market reports and spreadsheets analyses and MLS searches with the app. It can also generate listing descriptions using computer vision, develop marketing strategies and content and manage email inbox and calendar updates via a conversational interface.” READ MORE

AI startups are competing to give homeowners more control of their home renovations: “Homeowners are experimenting with an explosion of new artificial intelligence applications to quickly visualize an array of layout and style ideas, coordinate with builders and designers and estimate costs. These new tools say they can help save time and money in the building and renovation process, which has traditionally been filled with seemingly endless decisions and an avalanche of paperwork that often result in longer projects and ballooning costs. There are now dozens of AI apps related to home construction, design and renovation—most of which have sprung up in the past two years.”

• “Some apps, like Renovate AI, focus on visualization. Users can generate images to see how different design ideas might look by uploading photos or drawings of their rooms. Then they can choose styles like ‘rustic farmhouse’ or tell the tool to adjust specific elements like paint colors, lighting, furniture, or the style of the cabinets.”

• “Other platforms, like Digs, use AI to create 3-D ‘dollhouse; floor plans and manage the logistics of a project, room by room. Digs can layer in the location of specs like the load-bearing beams, plumbing lines and lighting plans to show where walls can be knocked down, and users can query it to get the make and model of an appliance or the dimensions of the wall, all sourced from the original documents.”

• “The decline in construction of new houses, combined with a rapid run-up in interest rates over the past two years that sent mortgage rates soaring, has resulted in many people choosing to stay and fix or add on to homes they already own.” READ MORE

TECHNOLOGY

Gene Marks offers a warning about buying powerful new devices: Think carefully about what you do with your old hardware: “It’s obvious that a new generation of powerful devices will soon be replacing what businesses are using today. But what to do with your older hardware? If not disposed of properly, a business could be opening itself up to serious problems. ‘There are many risks, but the biggest by far is potential data breaches that could cost your company untold thousands or even millions of dollars,’ said Andrew Segal, the president of eForce Recycling in [Philadelphia], which provides recycling services to businesses and individuals across the Delaware Valley.”

• “AJ Porrino, director of The E-Waste Project, said hard drives, in particular, can contain sensitive information that needs to be properly handled. The E-Waste Project is a community collective based in Norristown [Pa.] that offers a variety of recycling services including regular ‘Drop-Off Events.’”

• “In Microsoft Windows, there’s an option to reset your computer, which will remove all information from it. Both Apple iOS and Android operating systems have similar options. ... Many IT experts also encourage people to destroy the device’s physical hard drive by hammering a nail through it.”

• “‘Please don’t just throw away your electronics,’ said John Shegerian, the CEO of ERI, a New Jersey-based integrated IT and electronics asset disposition provider and cybersecurity-focused hardware destruction company. ‘Electronic devices contain toxins like mercury, arsenic, cadmium, lead, etc. that can leach into the soil and water.’” READ MORE

PAYMENT

The proposed Visa and Mastercard swipe-fee settlement is likely to be tossed: “The settlement, reached in March,would have brought an end to a battle between the card networks and the banks with merchants that have been suing them for nearly two decades. But the terms were criticized by big-merchant lawyers and trade groups that vowed to kill the deal. ‘This proposed settlement does nothing to address the problem of how Visa and Mastercard centrally price fix swipe fees,’ said Christopher Jones, executive committee member of the Merchants Payments Coalition in a statement.”

• “If Judge Margo K. Brodie rejects the settlement, Visa and Mastercard could be forced to agree to a deal that is more favorable for merchants or face the likelihood of going to trial. The judge said on Thursday it is time for a trial, agreeing with lawyers for the big merchants, the person in the courtroom said.”

• “Central to this case are the fees that Visa and Mastercard set and that credit-card issuers pocket. Merchants pay those interchange fees every time a consumer uses a credit card to purchase goods and services.” READ MORE

HUMAN RESOURCES

In-N-Out Burger has raised its prices in California: “California’s minimum wage hike for fast food workers, which kicked in on April 1, was a factor in the price hike, according to Chief Operating Officer Denny Warnick. ‘On April 1st, we raised our prices incrementally to accompany a pay raise for all of the Associates working in our California restaurants,’ he said in a statement. ‘The price increase was also necessary to maintain our quality standards.’”

• “Warnick said In-N-Out’s starting wage in California is $22 to $23 per hour, depending on location. At its most recent opening, in Jurupa Valley on May 31, the wage was $22 per hour.”

• “The minimum wage rose to $20 for fast food workers following the passage of Assembly Bill 1228, which affects more than 550,000 employees and about 30,000 restaurants in the state, officials said.” READ MORE

THE 21 HATS PODCAST

I Decided to Slow Our Growth: This week, Jennifer Kerhin tells Shawn Busse and Jay Goltz that she finally managed to take her first real vacation since starting her business almost 20 years ago. The vacation is part of a decision she made last year to regroup a bit, in part by backing off on her sales and marketing outreach. The goal is to give her team and herself a bit of a respite while they catch their breath and while Jennifer institutes processes that will improve operations. Of course, that raises an obvious question: Will she be able to turn the growth back on when the time comes?

• Plus: Shawn and Jay explain how they’ve eliminated negotiation from their hiring regimens. And all three debate who’s really responsible when owners pay for a marketing plan that doesn’t work: Is it the salesperson who pitched the plan? Or the owner who fell for the pitch?

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

Thanks for reading, everyone. — Loren