‘I Can’t Succeed Without a Staff’
Too many businesses, Gene Marks says, still don’t understand they are going to have to pay higher wages. But do higher wages solve the problem?
Here are today’s highlights:
With Covid cases receding, office workers and holiday shoppers are returning.
A tech bro finds out what it means to be a woman in Silicon Valley.
The governor of Texas bans employers from mandating vaccines.
THE 21 HATS PODCAST
Should I Open My Books to My Employees? This week, in episode 80, we talk about open-book management, which its proponents call the only sensible way to run a company. To test that theory, we bring together three skeptics (Jay Goltz, William Vanderbloemen, Dana White) and three believers (Michael Kiolbassa, Chris McKee, Bob Schwartz) to discuss what it really means for owners to open their books: Do employees know what the boss makes? Do they flee when the numbers turn red? Do they expect to have a say in big decisions? What emerges from the conversation is an intimate look at how six smart business owners run their businesses—a look that even those who have no interest in open-book management will find fascinating.
You can subscribe to The 21 Hats Podcast wherever you get podcasts.
A tech bro entrepreneur finds out what it means to be a woman in Silicon Valley: “She had been assigned male at birth and raised as a boy. Married with three children, Egan took pride in her college-frat bona fides and harsh management style. She was a tech bro—a successful one, raising $7 million in investments for the tech-sales company she founded. Sure, it was the product of hard work, but it was nothing more than she—presenting as a straight white man—thought she deserved. Or so she thought. When Egan began transitioning at 38, and started a second business as a woman, she was in for a rude awakening.”
“Despite her years of experience, once she transitioned, Egan says investors didn’t take her seriously; men talked over her, and she struggled, sometimes literally, to find space at the table.”
“‘I remember being in shock, and thinking, Oh, this is what women have been talking about the whole time,’ she says.” READ MORE
By helping hundreds of hospitals like HCA Healthcare hire nurses, Iman Abuzeid has built the rare VC-backed startup that’s already profitable: “Abuzeid walked into the Andreessen Horowitz annual barbecue in the summer of 2019 with two term sheets from other VC firms already in hand, but she was determined to leave with a third. The cofounder and CEO of Incredible Health was sure she wanted a16z managing partner, Jeff Jordan, the former CEO of online restaurant reservation marketplace OpenTable and senior vice president at eBay, to help grow her nurse hiring startup. What she didn’t realize is that she would not only land a key investor that night but also one of her company’s marquee customers.”
“Abuzeid says she started the conversation with Tyson the same way she does with all hospital executives she’s pitching. ‘We’re in a huge nursing shortage,’ she tells them. ‘I’m guessing your units are understaffed?’”
“To help hospitals find nurses, San Francisco-based Incredible Health flips traditional hiring on its head with hospital customers essentially paying to pitch themselves to nurses who join for free.”
“Hospital customers pay for annual subscriptions with tiered pricing based on the number of nurses they plan to hire. Revenue is expected to reach $16 million this year, triple last year’s $5 million.” READ MORE
Gene Marks says some of his clients still won’t accept that they have to pay higher wages: “Many small business owners across the country – and across industries – get this. For example, there’s Amanda Cohen, who owns a vegetarian restaurant in New York City and who raised her starting wages to $25 an hour. She says she hasn’t ‘had a single problem’ attracting workers to her business. ‘We put the focus on staff comes first and everything comes second,’ she told a Business Insider reporter. ‘I can’t succeed without a staff.’ Cohen has raised her prices 30 percent to cover these costs.”
“This is not temporary. Once you increase an employee’s wage you’re not going to ever take it away from them in the future. Which means there’s an enormous shift in overhead structures at small and large firms happening across the country, a shift that will continue for the foreseeable future.”
“Those businesses that accept this reality will adapt and continue to profit. They will hire good people and succeed. Those business owners that refuse to understand this simple concept simply won’t.” READ MORE
But some businesses say as many as 90 percent of job applicants don’t show up for interviews—and that higher pay doesn’t help: “Yolanda Garcia and Jesse Hoover, who own Cafe Elk Grove in Elk Grove, California, told Insider that they ‘tend to get a ton of applicants’ for job vacancies, but nine out of 10 people don't show up for their interviews. ‘We've even had people accept the position, just not show up the next day, no call, no show, no nothing,’ Hoover said. ‘So it's just basically wasting our time.’ Garcia said the cafe has raised some starting wages from $14 an hour to $22 ‘and they're still not showing up.’”
“Jonathan Bergstein, owner of Maid to Sparkle, a residential cleaning service in Richmond, Virginia, said he'd started offering hiring bonuses of between $200 and $300 in the hope that it would make more people show up to interviews.
“Bergstein said some people used excuses like family emergencies for not attending the interview. He thought, however, that some of them may have scheduled the interviews just so that they could prove they were applying to jobs to claim unemployment benefits.” READ MORE
As Covid cases recede, the return of office workers hits a pandemic high: “A widely anticipated surge in employees returning to the office after Labor Day never materialized. But as Covid-19 infection rates fall again, workers are trickling back to the office at the highest rate since the pandemic began. Office-building use has been slowly rising after a number of businesses required employees to return at least part of the week. In other cases, workers are returning voluntarily with summer vacations over and their children back in school.”
“The number of workers returning to traditional office space has been edging higher since the week of Labor Day, when an average of 31 percent of the workforce was back in the 10 major cities monitored by Kastle Systems.”
“The average hit 35 percent during the week that ended Oct. 1 and 36 percent during the week that ended Oct. 8, a new high during the pandemic period, said the security company that tracks access-card swipes.”
“Austin, Houston, Dallas and other Texas cities have remained at the top of the list throughout most of the pandemic. But during September, the return rates in these cities flattened out in the high 40 percent range, a reflection of the relatively high infection rate in the state and hurricane season, Mr. Ein said.” READ MORE
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Texas governor Greg Abbott has banned employers in Texas from mandating vaccines: “Mr. Abbott’s order makes no exception for hospitals and healthcare facilities, many of which require vaccines for Covid-19, flu and other communicable diseases because patients may be immunocompromised or too young to be vaccinated. His order applies only to the Covid-19 shot, allowing entities to require vaccines for other diseases.”
“‘The Covid-19 vaccine is safe, effective, and our best defense against the virus, but should remain voluntary and never forced,’ Mr. Abbott said in a news release Monday.”
“The ability of healthcare facilities to require Covid-19 vaccines was previously tested in court, when some employees of the Houston Methodist hospital system sued to prevent the hospital from requiring them to receive vaccines.”
“A judge dismissed the lawsuit, writing that the hospital’s interest in providing safe medical care to its patients outweighed the vaccine preferences of its employees.” READ MORE
THE COVID ECONOMY
Holiday spending is expected to grow as much as 5 percent, and foot traffic is up, too: “Joining other reports in predicting a better holiday season for retailers, a new report from The NPD Group projects that this year's holiday spending will increase by 3 percent in November and December. Taking into account October and early January, holiday spending could increase by 5 percent, the NPD group estimated.”
“More than half of shoppers (58 percent) said they are open to shopping in stores now that vaccines are widely available.” READ MORE
Automakers are figuring out what they can do with 5G: “Manufacturers aim to use the high-speed networks to do a host of things, including downloading crucial software updates on the go, updating digital maps with greater speed, and sounding alerts about road conditions. The cars might also communicate with smart infrastructure such as traffic lights and buildings, so that a self-driving taxi would know that the stoplight at the next intersection is red. And they might talk to each other, perhaps to alert another car that a pedestrian is jaywalking or that there is some obstacle in the road.”
“Like a smartphone, the car has become another device connected to the internet. By 2025, analysts estimate that there will be 100 million connected cars on the road world-wide.” READ MORE
New research suggests that PPP lending was skewed by racial bias: “From the very start of the Paycheck Protection Program last year, it was clear that minority entrepreneurs, especially Black business owners, struggled more than white borrowers to find a willing lender. A new research project indicates that the problem was particularly pronounced at smaller banks — and human bias appears to be the main reason. The majority of Black borrowers who received aid from the $800 billion relief program got their loan from a financial technology company, not a bank, according to an economic working paper released Monday.”
“‘I was taken aback by the striking disparity — it was a surprising and unexpected fact, and we wanted to figure out why,’ said Sabrina T. Howell, an assistant professor of finance at New York University’s Stern School of Business and the lead author of the paper.”
“It turned out that the automated loan vetting and processing systems used by the fintechs, as well as some of the nation’s biggest banks, significantly improved approval rates for Black borrowers, the researchers found.”
“‘You’d hope to find zero evidence of discrimination in PPP because the banks largely faced no credit risk at all,’ Dr. Howell said. ‘What happens when banks are putting their own money on the line?’” READ MORE
California will outlaw the sale of gas-powered lawn mowers, leaf blowers, and chain saws as early as 2024: “The law requires all newly sold small-motor equipment primarily used for landscaping to be zero-emission — essentially to be battery-operated or plug-in — by that target date or as soon as the California Air Resources Board determined it is feasible. New portable gas-powered generators also must be zero-emission by 2028, which also could be delayed at the discretion of the state agency.”
“[Assemblyman Marc] Berman said the state has set aside $30 million to help professional landscapers and gardeners make the transition from gas-powered equipment to zero-emission equipment, but an industry representative said that’s woefully inadequate for the estimated 50,000 small businesses that will be affected by the law.” READ MORE
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
Loren, I really enjoyed this week's podcast "Should I Open My Books to My Employees?" and thought the discussion was very relevant as as it is an issue I am considering as I search for a business to buy (I am an Acquisition Entrepreneur).
I think the conversation became a little convoluted because there was some confusion between between the operating system (OS) The Great Game of Business and the idea of Open Books. These are actually 2 entirely separate things: Open Books is the concept of making a company's finances transparent to its employees and The Great Game of Business is and business operating system that happens to employ the practice of open books among many other management and operational best practices. I think it is important to distinguish between the 2 because there are many different OS's (Gino Wickman's EOS is another that comes to mind) and there are also different levels of employing open books. You can implement a business operating system without implementing open books and vice versa.
One of the interesting results of the conversation is that most, if not all your guests agreed that some level of transparency with the books is beneficial to the company (even Jay! 😱). The real debate was to what granularity the open books were applied. The big question is whether or not employees should know the salary of the CEO/business owner and all the other employees. This seemed to be a major sticking point for those who were resistant to the open books idea.
However, if I'm not mistaken, NONE of the open books implementers took the concept down to that level of detail. The closest thing to 100% transparency was ranges of salaries for each department - none of these companies had a system in place where every employee's salary was revealed.
Excellent topic and discussion as usual.
Also, as I mentioned to you privately, thank you for hosting a podcast which deals with real-life issues for real-life business owners and not just a bunch of tired, overused rah rah motivation or "get rich with digital businesses" content that seems to be so prevalent in the podcast world.