Small Businesses Are Getting Caught in the DEI Crossfire

A spate of lawsuits is attempting to block programs that support underrepresented entrepreneurs.

Good Morning!

Here are today’s highlights:            

• Meet Channon Kennedy: An entrepreneur emerges from tragedy.

• Sometimes, the only ones who show up at the meeting are the AI notetakers.

• It’s not necessarily the remote workers who are working multiple jobs.

• Is business school the right path for would-be entrepreneurs?

LITIGATION

Small businesses are getting caught in the DEI crossfire: “Legal activists seeking to roll back diversity programs have sued big companies such as Comcast, Progressive, and Starbucks as well as the government. In reality, many of their lawsuits target programs that aid small businesses. The Wall Street Journal has identified roughly a dozen lawsuits that take aim at programs providing financial support, business opportunities, or other services to small businesses owned by entrepreneurs who are Black, Latino, or otherwise considered disadvantaged. Plaintiffs say that programs that limit participation to certain racial minorities or other groups are discriminatory, and that they are asking that the aid be open to everyone. Much of the litigation is still in its early stages but the challenges, or threat of them, are beginning to reshape corporate and government assistance aimed at specific groups of entrepreneurs.”

• “‘Hello Alice co-founder and President Elizabeth Gore said she believes much private-sector funding for small businesses wouldn’t be available if diversity criteria were prohibited. Supporting small businesses alone isn’t a big enough draw, Gore said. ‘There has to be a wrapper around it,’ she said, such as that a program is tailored to women, people of color, or military veterans. ‘I’m already seeing a chilling effect,’ Gore added.”

• “‘It’s their fault that they did it in the first place, and not the fault of the plaintiffs that are holding them to account in the court of law,’ said Dan Lennington, deputy counsel of the Wisconsin Institute for Law and Liberty, which represents a white male software-company owner suing a Texas county and a nonprofit over a Covid-aid program for diverse small businesses.”

• “A federal judicial panel in Atlanta blocked Fearless Fund, which helps companies founded by women of color secure financing, from making a $20,000 grant from its foundation. A lawsuit brought by Edward Blum, the activist who successfully challenged affirmative-action programs in higher education, called the grant program discriminatory.”

• “Efforts to craft programs that target disadvantaged entrepreneurs without explicit mention of race could still be subject to litigation if they mostly benefit certain groups, said Blum. ‘That very well may be the next battle,’ said Blum, who has challenged several companies’ diversity policies. ‘It’s going to be case by case.’” READ MORE

THE 21 HATS PODCAST

Bonus Episode: An Accidental Entrepreneur: It took a series of sad losses to turn banker Channon Kennedy into an entrepreneur. If a friend hadn’t lost his son and if Channon’s mother and sister hadn’t been diagnosed with cancer, she never would have designed, prototyped, manufactured, and started selling the Morgan Square, a tool that can save carpenters time while framing a project. Shannon is just getting started, but we’ll keep in touch as her journey continues.

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

TECHNOLOGY

AI is changing the way businesses gather: “Now companies have begun using AI to root out another workplace inefficiency: meetings. Across the U.S., some workers are using tools that record, analyze and summarize what has been said, allowing them to skip gatherings entirely and skim the highlights. The AI also acts as a kind of virtual Miss Manners, reminding people to share the mic and to modulate their speaking pace, and advising them how to avoid verbal flubs.”

• “[Joseph] Zalkin sits on multiple committees associated with a foundation and a local university, and on days when he is double-booked, he will send in an AI-powered notetaker to silently listen in, transcribe and recap what was said. The follow-up reports hit his inbox from 20 minutes to two hours later.”

• “The reports Zalkin receives for meetings he attends also note whether he arrived on time and the number of times he interrupted people. During one recent family meeting about investments, the answer was 14 times—mostly to interject over his brother, Zalkin says.”

• “‘It’s like having a conversation with someone at a coffee shop, and you look out the window and all you see are a pair of eyes looking at you,’ says Zack Schwartz, 33, the Chicago-based founder of a design firm who pulled the plug after experimenting with AI in meetings this spring.”

• “[Jessica] Malnik says she has noticed many more AI notetakers showing up. Each one occupies a faceless, darkened Brady Bunch square, which she says can create a weird feeling in a virtual room.” READ MORE

HUMAN RESOURCES

More employees are working multiple jobs or have a side hustle, but it’s not necessarily who you’d think: “A recent Owl Labs survey of 2,000 employed Americans found 46 percent had at least one additional job outside their full-time occupation. About 16 percent said they don't currently have one, but they would like one. But while some managers have expressed concerns about remote work enabling employees to work multiple full-time jobs, the survey found it's not hybrid or remote workers that dominate those ‘polyworkers’ but, rather, in-office workers. Of the 46 percent that said they had at least one additional job, 68 percent  are full-time office workers. They are also mostly men, according to the survey — 62 percent of those who said they had an additional job identified as male, compared to 38 percent who identified as female.”

• “For many polyworkers, their second job is a side hustle they hope to turn into their full-time job in the future while, for others, their second job is more fulfilling than their full-time job. But employees with multiple jobs may find themselves burned out or struggling at work, [Frank Weishaupt, CEO of Owl Labs] said.”

• “But, he stressed, if a manager learns an employee is working multiple jobs, they need to remain focused on the quality of the work the employee is producing. If they are efficient and hard-working employees who meet deadlines and expectations, then managers should not worry about that other job, he added.” READ MORE

Retailers seasonal hiring plans suggest a cooling labor market: “As the most important selling season for retailers approaches, job applicants may feel a chill. Macy’s and Dick’s Sporting Goods plan to hire fewer seasonal workers after a surge in the past two years, when shoppers thronged to stores after pandemic lockdowns and employers struggled to keep up. Many retailers have dropped the incentives they used over the past few years to bring workers in the doors, such as signing or referral bonuses and steeper employee discounts.”

• “The career site Indeed said that searches for seasonal jobs were up 19 percent from last year, but that listed positions were down 6 percent. Companies helping businesses find temporary workers note that major retailers have been slower to release hiring plans this year.”

• “‘The seasonal hiring market looks a whole lot more like 2019 than those pandemic bounce-back years,’ said Nick Bunker, director of North American economic research for Indeed. ‘I really do think this is emblematic broadly of what we’re seeing in the U.S. labor market, where demand for workers overall is fairly strong but down from where it was in the last year and a half.’”

• “Amazon is a notable exception, saying it will hire more seasonal workers this year — 250,000, up from 150,000 last year. It also said that a $1.3 billion investment would bring the average hourly wage of those jobs to more than $20.50 and that it would still offer signing bonuses in some locations.” READ MORE

STARTUPS

Business schools say they’re focusing more on entrepreneurship: “Those programs, with some exceptions, traditionally have not catered to students with entrepreneurial interest, a cohort that represents a small share of the graduate MBA pool. GMAC, which surveys enrolled students about their career plans and goals, neither asks about nor tracks interest in starting a business. Only 4 percent of students who graduated from full-time U.S. MBA programs in 2022 planned to start a company, according to data collected by the MBA Career Services & Employer Alliance, which tracks MBA outcomes.”

• “But administrators and faculty say they see far more enthusiasm for the startup life on the ground. ‘Over 70 percent of our students will take entrepreneurship classes at Kellogg, which to me indicates an interest, at least at the high level,’ says David Schonthal, director of entrepreneurship programs at Kellogg.”

• “Instruction in entrepreneurship has evolved—it’s not just about putting together a business plan. B-schools are teaching future founders how to study the competitive landscape and analyze the market; recruit talent; manage a workforce as it’s growing; set a strategy and then revise it as needed; and cultivate a network of contacts.”

• “Still, a persistent question lingers: Do you need to go to business school to become an entrepreneur? ‘If you do have the ability to get admitted into one of these very elite programs, that’s often going to be a positive financial proposition for you,’ says Preston Cooper, a senior fellow at the Foundation for Research on Equal Opportunity, of top-ranked MBA programs. Otherwise, he says, the cost of a degree, combined with lost earnings, presents more of an obstacle.”

• “Steve Tobak, managing partner at business consulting firm Invisor Consulting, says he believes prospective entrepreneurs should learn the ropes at a large company in the sector that interests them, rather than go to graduate school.” READ MORE

PROFILE

Years after gentrification seemed to have put it out of business, a restaurant returns to the same neighborhood: “To the current late-night revelers, the sign probably means nothing. But to those who lived and frequented downtown Manhattan in the ’90s, it signals the return of the Bereket Turkish Kabob House, a former all-night stalwart that fed cabdrivers and inebriated customers for nearly 20 years before closing. And it also signals a rarity in the landscape of New York real estate: A beloved restaurant that shuttered when its neighborhood was gentrified, against incredible odds, actually returned to the block.”

• “But then came the bad news, in 2014: Their lease would not be renewed. Almost the entire block of Houston, except for Katz’s Delicatessen, would be razed to build a new condominium building. It was peak gentrification, and the brothers weren’t able to secure a new space that was financially sound.”

• “Gutted, the brothers went their separate ways. Haci and Suleyman returned to Turkey; Ramazan stayed in New York. The youngest Turgut opened a restaurant in Williamsburg, Brooklyn, and when that closed after a few years, he worked as a manager at a few other eateries for other owners, but nothing seemed to match the magic of Bereket.”

• Then, in 2019, Suleyman’s daughter had been accepted to college in New York. Tired of working for others, Ramazan persuaded his older brother to follow his daughter and revive Bereket in central Brooklyn to target a different clientele, or the new immigrants from Central Asia that had settled in Kensington and Midwood.”

• “Suleyman Turgut and Ramazan Turgut, the two brothers who owned Bereket — which, despite the big sign in the window, is actually called Ankara #3 — are taking a gamble that New Yorkers still have an appetite for late-night meals.” READ MORE

THE 21 HATS PODCAST

The Employee Engagement Industry Has Failed: In this week’s bonus episode, Bill Fotsch, a business consultant, explains why he thinks much of the effort that he and many others have put into creating employee engagement over the past three decades has been wasted effort—well intentioned, but wasted. The fact is, Fotsch says, employees today are no more engaged than they were some 30 years ago when the concept of employee engagement first gained currency. So what’s the answer? Fotsch has come to the conclusion that it’s something he calls “economic engagement,” which happens to be the name of his consulting business. What exactly is economic engagement? He says it’s getting employees to focus on serving customers, and doing so profitably. He says it’s not so much about sharing financials with employees but about getting employees to understand the strategies and actions that really drive a business’s profitability.

• Fotsch is so convinced that he’s cracked the code that he’s gone beyond mere consulting and has been buying stakes in businesses so he can implement his ideas and prove his concept. So far, he says, it’s working.

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

Thanks for reading, everyone. — Loren