She Was a Hiring Goddess

Retailers Try Virtual Stores. Letting Employees Find Their Own Health Plans. And Is Venture Capital Ruining Capitalism?

THE 21 HATS PODCAST

Episode 41: She Was a Hiring Goddess: Back in 1996, Jay Goltz had no real hiring process -- and the results to prove it. “My hiring success rate,” Jay tells us, “was probably, I don't know, 30 or 40 percent, which isn't much better than whoever walks in you hire.” And then he asked Ivy Garfield to take over his hiring. As Jay explains, Ivy brought an instinct, an understanding of how to assess people. “She profoundly changed my business,” he tells us. “She was here six years. Most of my key people she hired. They’re with me 25 years later.” Jay talks about the secret to Ivy’s success and why entrepreneurs like him tend to be terrible at hiring. Plus: Dana White tells of being disappointed by a mentor. And Jay and Loren offer an apology.

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HEALTH INSURANCE

Employers are letting employees find their own health plans: “A federal rule change last year stoked this new approach. It allows employers to reimburse workers for coverage they bought without paying a tax penalty. The concept sends employees to individual insurance markets where they can find more choices for coverage. It also protects employers from huge annual cost spikes. But it’s a big change for workers who are used to having their employer give them benefit choices every year.”

  • “This new approach — known as an Individual Coverage Health Reimbursement Arrangement or ICHRA — started with coverage plans for this year. More workers will likely see them offered this fall during their company’s annual sign-up window for 2021 coverage.”

  • “Benefits consultants say the accounts can be attractive to companies that have been hammered by insurance costs or want to offer benefits to attract new employees but haven’t been able to afford them.” READ MORE

FINANCE

To understand Silicon Valley, it helps to understand why VCs picked WeWork over NextSpace: “Venture capitalists began telling Jeremy Neuner that making piddly investments in his company wasn’t worth their time; moreover, if they funded NextSpace, they might be excluded from buying into WeWork someday. To Neuner, this seemed nuts. He was building a solid business, but the VCs wanted fantasy. ‘All we needed was five million dollars a year in revenues, and we would have made money for everyone,’ he told me. ‘That’s enough to earn a living and buy a house and put your kids through school. But no one wanted something that just made a healthy living. They all wanted to find the next Zuckerberg.’”

  • “In six years, Neuner opened nine NextSpace locations, as far east as Chicago. ‘But I was so burnt out by everyone saying I was a failure just because I didn’t want to dominate the globe,’ he said.”

  • In 2014, Neuner resigned, and NextSpace began closing its sites. ‘It was heartbreaking,’ he said. ‘V.C.s seem like these quiet, boring guys who are good at math, encourage you to dream big, and have private planes. You know who else is quiet, good at math, and has private planes? Drug cartels.’”

  • “In the traditional capitalist model, the most efficient and capable company succeeds; in the new model, the company with the most funding wins.” READ MORE

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OPPORTUNITIES

With many gyms closed, Peloton is struggling to keep up with demand: “Consumers are griping online, flooding customer-service lines, defecting to competing brands and sharing tips to recreate the Peloton experience on rival bikes and treadmills. Peloton is known for selling $2,000-plus bikes equipped with a screen that shows subscription workout classes. The company said it has nearly doubled subscriptions since March as the coronavirus pandemic has closed gyms and led more people to work out at home. In September, it dropped the starting price on its bikes to $1,895.”

  • “Online, in social media groups and via blogs, Peloton subscribers share advice on how to use the company’s app with bikes and treadmills from other equipment makers.”

  • “Peloton’s smaller rivals such as Nautilus and NordicTrack-maker Icon Health & Fitness may benefit from the market leader’s supply-chain woes.” READ MORE

CONTRIBUTOR

Lou Mosca, who runs the consulting firm American Management Services, responds to yesterday’s item about car dealers increasing profits: “We have worked with a couple of auto dealerships in the last four months. One was a single store doing about $40 mill and the second was a multi-store operation doing several hundred million dollars. They had a common theme: neither was making money! One was losing money on used vehicle sales, the other on the service department.

Overall, three things we have found is zero-interest loans bring in buyers’ folks are holding on to their existing vehicles longer, which drives service revenue higher; and used car sales are booming. Let’s not forget, the Great Recession shrunk dealer stores by more than 25 percent across the board, which allowed for better pricing for dealer owners. Here’s another common theme I will offer: In good times and in bad, solid management will find a way to outperform weaker management. Whatever your industry, make managing to an absolute profit part of your culture and it will happen.” MORE HERE

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RETAIL

More companies are opening virtual stores: “Ralph Lauren’s virtual store lets consumers browse an online rendering of an actual store in Beverly Hills, re-created down to the music that consumers would hear there. While Ralph Lauren’s stores in the U.S. remain open, the virtual edition is a way to introduce new customers to the company’s retail experience, said David Lauren, chief innovation and branding officer at the company.”

  • “‘When Covid-19 is done, we expect to see a very big increase of traffic into our stores, higher than it’s ever been and we’re going to stoke that fire with experiences like this,’ Mr. Lauren said.” READ MORE

Macy’s is turning stores into fulfillment centers, and warehouses are booming: “‘Retail has changed; it just has,’ said Daniel Horrigan, the mayor of Akron, Ohio, where Amazon opened a fulfillment center this month, creating 1,500 jobs. ‘You can’t stand in front of that wave.’ The new Amazon center replaces a once-beloved shopping mall from a bygone era that featured a Sears, RadioShack and York steakhouse. But the 54-acre site sat vacant for a decade, a glaring reminder of the Rust Belt city’s broader struggles: the body of a murder victim was discovered at the mall site and another man was electrocuted trying to steal copper from the empty building. ‘It looked like a giant haunted house inside,’ Mr. Horrigan said.”

  • “‘Some retailers will return when the prices come down,’ said Santiago Gallino, a professor at the University of Pennsylvania’s Wharton School, who has studied retail. ‘But their stores are not going to come back in the same format. They will have to be more integrated with their online business.’” READ MORE

ENTREPRENEURIAL ECOSYSTEMS

Philadelphia really should be a great place to do business: “It’s at the center of the Northeast Corridor and home to top hospitals and universities. Compared with Boston, New York City, or Washington, the cost of living is more affordable. Philly is a biotech center, too. But with influential unions boosting costs, ensnaring red tape, and a workforce sapped by intergenerational poverty, Philadelphia trails other big cities in the ease of doing business, undercutting efforts to attract and nurture employers.”

  • “The city’s Business Income and Receipts Tax (BIRT) uniquely imposes levies on both profits (6.25 percent) and sales (1.415 percent per $1,000), making it one of the most burdensome taxes. Firms must pay even if they suffer losses because the city taxes every dollar, even before the business accounts for expenses.”

  • “That still leaves Philly’s highest-in-the-nation wage tax, which is 3.8712 percent for Philadelphians and 3.5019 percent for nonresidents.” READ MORE

HUMAN RESOURCES

It’s been a long year for everyone. If you’re looking to share some appreciation with your employees, here are some gift ideas. READ MORE

—Loren Feldman (lfeldman@21hats.com)