The Challenge for Growing Businesses

It’s never easy when loyal, hard-working, well intentioned employees don’t grow with the job.

Good Morning!

Here are today’s highlights:            

• Bakers say there is a “cake renaissance” spreading across the country.

• Is being high at work still a fireable offense?

• Work from home isn’t a problem just for cities on the coasts.

• Is the American Dream now more accessible outside of America?

MANAGEMENT

Sometimes you have to think about where your loyalty truly lies: “The owner of a plumbing business, Len—not his real name—has always been passionate about his trade. He possesses excellent plumbing skills and a strong work ethic, which has allowed him to build his business from scratch. Like many entrepreneurs, however, Len needs more financial and accounting expertise. Managing money is not his forte, and he has relied heavily on his office manager, who has become his trusted companion in many aspects of the business, what some might call his work-wife. While she has no formal training, Len’s office manager has taken on the responsibility of handling essential accounting tasks, which has allowed Len to focus his energies elsewhere.”

• “But while his manager has done her best to figure things out, Len recognizes that her skills are limited. He often finds himself facing cash flow problems and worrying about whether he will be able to meet payroll. When this happens, the fear can be crippling.”

• “Len’s situation is a common one for entrepreneurs. The intense loyalty they feel toward those who have helped them reach their current level of success can blind them to the need for change. Len knows that to ensure the long-term success of his business, he eventually will have to add additional layers of financial support.”

• “From a distance, Len’s situation may seem easy to assess. But the reality is that we all have areas like this in our business where we know we need to make a change, and for different reasons, we struggle to take action.” READ MORE

OPPORTUNITIES

In New York, there’s a “cake renaissance” that has customers waiting on line for slices: “When [Lucie] Franc de Ferriere, 27, first told people she was opening a bakery to simply sell cakes, some couldn’t fathom the concept. ‘One particular neighbor told me three times, Are you going to make bread? Have you thought about my idea of making bread?’ Franc de Ferriere said. ‘I was like, Drop it — I’m not making bread. It was almost like trying to reassure me and tell me: Are you going to be okay if you only make cakes?’ She had rented a small kitchen space, so she could work on more orders than in her apartment kitchen. She was honest with herself: She didn’t want to agonize about the survival of her bakery in a larger space with an exorbitant rent.”

• “Whatever concerns she had about her prospects evaporated on the first day, when she was greeted by around 500 customers. She soon found herself wrapping her mind around a novel concept: that so many people would want individual slices.”

• “Bernadette Haas, who represents 700 bakers as the executive director of the Retail Bakers of America, says she has seen a ‘whole new energy’ in the cake industry nationally ... Haas attributes the revival to a confluence of factors: newfound creative expression among bakers, the power of social media marketing and a shift in consumer patterns post-pandemic.”

• “Andrew Rigie, executive director of the New York City Hospitality Alliance, who is from a family of bakers, says the demand comes after years in pandemic-induced isolation. ‘We had to miss out celebrating with our loved ones,’ Rigie said, ‘and now what better way to do it than with a beautiful, delicious cake?’” READ MORE

Unilever operates a salon where it tests products intended for the Black beauty market: “The salon — and the insights gleaned from the people who test products there — is one way Unilever is trying to tap into the long undervalued, yet increasingly important, Black hair care market. Black consumers are a group that beauty companies have underinvested in or outright ignored for generations. Yet with people of color making up a growing percentage of the American population, it has become a business imperative for beauty companies to understand the millions of consumers with textured hair.”

• “If Unilever gets this right, the company could gain a larger share of the $1.8 billion that Black consumers in the United States spend annually on hair products. Black women tend to use twice as many products for their hair care and styling routines as white women.”

• “And despite this demand, Black consumers are three times as likely as other racial groups to say they are dissatisfied with their options for hair and skin care, according to a McKinsey report released last year.”

• “Each week, Unilever brings in about 50 men and women to its salon, which it calls the Polycultural Center of Excellence. More than half of the participants are people of color. They aren’t told the name of the product being tested — or what the company believes it should be used for. Instead, executives are looking to see how testers interact with the product because they might reveal a use for it that hadn’t already been considered.”

• “Unilever is facing increased competition from e-commerce upstarts that have gained loyal followings on social media, and both it and its fellow giant Procter & Gamble have acquired some of these emerging brands.” READ MORE

HUMAN RESOURCES

It’s getting trickier to figure out who’s high at work: “More Americans are using marijuana. Their employers are trying to decide how much that matters. One in six American adults now says they smoke marijuana, a share that has eclipsed the number of cigarette smokers, according to recent Gallup data, and expanding legalization of the drug has led more companies to scrap employee drug-testing. Instead, many are leaning on managers to spot signs that workers are impaired on the job and determine what to do when they are. For one thing, some companies say being high at work isn’t necessarily a fireable offense.”

• “‘It used to be, you test positive: See you later,’ says Eric Mack, a partner with employment-law firm Littler Mendelson, who says he has trained employees at more than a dozen companies to spot the signs of drug-related impairment in the past two years.”

• “‘Managers are really on the front lines of making these determinations, and it’s very difficult to do,’ says Mack, who notes telltale signs include slurred speech, fumbling with equipment or otherwise acting erratically. He also advises companies to make sure more than one person observes that a co-worker is not themselves.”

• “Workplace changes, including the rise of hybrid and remote work, have made it easier for some employees to use drugs on the clock without their bosses knowing. With rising social acceptance, meanwhile, some professionals say they feel comfortable openly discussing and even using at work.”

• “Giovanni Kapa, 58, a technician for an IT support company in Royal Oak, Mich., says he recently lit up a blunt—marijuana rolled into a tobacco-leaf wrapper—in front of his boss over lunch. ‘It’s so accepted,’ he says.” READ MORE

Work from home is crushing Midwestern downtowns: “Most of the concern has been focused on coastal cities like San Francisco and Seattle, which have seen the usual stream of commuters shrink to a trickle due to remote work's hold on the white-collar workforce. But Midwestern cities are also facing a crisis of their own — struggling to attract workers, residents, and visitors to their downtowns. And while many coastal metros experienced a ‘golden age’ in the decade before the pandemic, cities in America's heartland have been struggling since well before Covid came around. In order to pull out of their tailspin, economists and urban planners say many Midwestern cities need to get serious about improving amenities and boosting quality of life in their downtowns. Instead of being places where people are forced to go to work, leaders need to make their center cities into a destination that people actually want to visit.”

• “Researchers at the University of Toronto have been analyzing anonymized cell phone data for the past few years to track the number of people physically present in central business districts each day. The granular, individual-level data provides a fuller picture of downtown vitality — both before and after the pandemic — than other measures such as office vacancy rates and mass-transit ridership.”

• “Five of the bottom 10 cities in the tracker's most recent data, which measured the period from December 2022 to March 2023, were in the Midwest: St. Louis, Indianapolis, Minneapolis, Cleveland, and Kansas City, Missouri. Nine of the 13 Midwestern cities tracked in the study were in the bottom half of the rankings.” READ MORE

ECOMMERCE

The FTC sues Amazon for allegedly tricking users into signing up for Prime: “The complaint alleged that Amazon used ‘manipulative, coercive, or deceptive user interface designs known as dark patterns’ to dupe users into automatically renewing Prime subscriptions. ‘Amazon leadership slowed or rejected changes that would’ve made it easier for users to cancel Prime because those changes adversely affected Amazon’s bottom line,’ the FTC added. The FTC has been examining the use of dark patterns—a term for design tactics that prompt users into actions that benefit the company but not necessarily the user—in online commerce for several years.”

• “For years, Amazon made it easy to enroll in Prime with one or two clicks, but created a ‘four-page, six-click, fifteen-option cancellation process’ known internally as ‘the Iliad Flow,’ the FTC said, in an apparent reference to Homer’s epic about the Trojan War. The agency said the ‘labyrinthine’ procedure was designed to make it cumbersome and confusing for customers to cancel Prime.”

• “JPMorgan analysts estimated in June 2022 that a Prime subscription would cost $1,100 a year if its included benefits were sold separately. JPMorgan estimated at the time that Prime would have 270 million members around the world by the end of 2022.

• “About 72 percent of all U.S. households, or 96 million, have a paid Prime membership, according to recent estimates from market research firm Insider Intelligence.” READ MORE

ENTREPRENEURSHIP

Is the American Dream now more accessible outside of America: “The American Dream might look a little different for everyone. But at its heart, it promises upward mobility, the opportunity to attain success no matter what situation you might be born into. Recent research shows that's more likely to happen in Denmark, Germany, Australia, and the UK. In a recent paper titled The Intergenerational Persistence of Poverty in High-Income Countries, academics at Bocconi University and Rockwool Foundation and Stockholm University explored how poverty persists across generations in multiple countries. Their finding: ‘Intergenerational poverty in the U.S. is four times stronger than in Denmark and Germany, and twice as strong as in Australia and the UK.’"

• “The researchers found this difference between countries has little to do with differences in quality of education, nor is it based on racial discrimination or location, with the persistence of poverty in the U.S. high across racial and geographic lines.”

• “Instead, the researchers find that the persistence of poverty is strongly connected to tax rates and what they call transfer insurance effects, which can be considered as akin to a social safety net.”

• “Even more meaningful in the U.S. is what the researchers call a ‘residual poverty penalty,’ or the scars that a childhood in poverty can leave on an individual. The researchers found that ‘exposure to childhood poverty is particularly severe in the U.S.,’ citing for example less access to quality health care among low-income U.S. residents. READ MORE

PROFILE

In Los Angeles, Shirley Raines’ nonprofit brings food, soap, and the salon to the homeless: “To Shirley Raines, they are royalty: The woman with the paralyzed arm who uses a shoelace as a sling. The man whose hands shake as he opens his bag. The little girl who, when seeing Ms. Raines and her bright coif, shouts ‘pink hair!’ Ms. Raines, 55, provides food, hygienic services and unconditional support to people without a home through her nonprofit in Los Angeles, Beauty 2 the Streetz. They are all ‘kings’ and ‘queens.’”

• “Beauty 2 the Streetz became a registered nonprofit in 2019. Sydney Granados, the organization’s executive coordinator, estimates that it feeds about 1,000 people each week, mostly on Skid Row, an area of Downtown Los Angeles. Some days, Ms. Raines brings McDonald’s burgers. Other days it’s pizza from Costco.”

• “Sometimes a chef in a food truck cooks enchiladas, chicken tortilla soup or vegan cauliflower steaks. Ms. Raines and her volunteers also hand out toiletries — toothpaste, toothbrushes, deodorant, shampoo — and they even color hair.”

• “A camera hangs in the truck where she passes out food, capturing moments that are uploaded to her TikTok and Instagram accounts (5.3 million and 373,000 followers) that she hopes are changing the narrative on homelessness. It is also a fund-raising device for an operation that runs entirely on donations, Ms. Raines said.”

• “‘People have grown to love some of the people that we support and take care of,” Ms. Raines said. ‘It’s become a little internet family.’” READ MORE

THE 21 HATS PODCAST

Twelve Hours a Day, Six Days a Week: This week, we meet Jennifer Kerhin, the newest addition to the 21 Hats Podcast team. Jennifer’s business, SB Expos and Events, is an event-management business that survived the shut down in 2020 and has grown to more than $3 million a year in revenue. When Covid first hit, Jennifer tells Jay Goltz, she really thought it would put her out of business; in the end, she says, it made her stronger. Even so, she is very much stuck working in her business, while looking for ways to extract herself from day-to-day tasks someone else could handle. But how do you free yourself up enough so that you have the time to put the people and systems in place that you know you need? And how long should that take? “I hate to tell you,” says Jay, “it took me 10 years, but I'm going to help you here, so it's going to take you 10 months.”

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

Thanks for reading, everyone. — Loren