The Rise of ‘Stay Conversations’
Discover more from The 21 Hats Morning Report
The Rise of ‘Stay Conversations’
Hoping to avoid the need for exit interviews, some companies are trying to engage employees with regular listening sessions.
Good morning!
Here are today’s highlights:
For many, RTO is bringing sticker shock.
The U.S. is building more homes than it has in 16 years.
The direct-to-consumer model is no longer working.
A former NBA player is building a Y Combinator for cannabis.
FINANCE
Rising interest rates are another reminder to be wary of private equity: “Companies with heavier debt loads can find themselves running short on cash if their interest rates climb alongside wages and other operating expenses. ‘It is one of the biggest concerns that we have and we have been tracking it in our portfolios since the end of last year,’ said Somnath Mukherjee, head of investments at Lakemore Partners. Higher costs on the loans could also have a chilling effect on the buyout boom that hit a record of about $1 trillion last year and that investment bankers hoped would carry over into 2022. The private-equity firms behind most of those deals paid for them primarily with leveraged loans borrowed by the companies they acquired.” READ MORE
HUMAN RESOURCES
Employees who return to the office are facing sticker shock: “As the security software company KnowBe4 weighed whether to require a return to the office, executives knew to anticipate a certain set of concerns from employees. Less flexibility. More time in transit. Then, in recent months, came a new set of worries about RTO: the rising cost of gas and food, especially near the firm’s headquarters in Clearwater, Fla., one of the areas of the United States hit hardest by inflation. Workers advised one another on their internal messaging system where to find cheap gas ($3.25!). The company tried to ease the transition by offering free snacks (pickles, Nutella!). But some employees, partly put off by RTO expenses, including dog sitters and child care, told their managers that they preferred to keep working from home.”
“While office occupancy has crept up to its highest level since March 2020, above 40 percent, some workers have experienced RTO sticker shock.”
“The cost of a daily routine — travel, coffee, food — is far pricier than it was when offices shut down two years ago.”
“‘Remote work started off as a safety measure,’ Ms. Frankiewicz said. ‘Now it’s a cost-containment measure.’” READ MORE
Do you ask employees if they are happy in their jobs? “Most people are familiar with the concept of an exit interview, where someone in HR interviews an employee who has given their notice to understand why they’re leaving. A ‘stay conversation’ is when a leader checks in to make sure an employee is having an experience at work that makes them want to stay. I recommend having these conversations quarterly and also setting them up around key milestones (like work anniversaries). Research shows just how important it is to keep these ‘career-risk triggers’ in mind. The largest risk happens when an employee experiences a change in manager or responsibility, with job search activity going up by 17 percent.”
“Let your employee know this is not a performance conversation or a meeting to talk about projects, but instead a check-in to understand how they are doing and how you can best support them.”
“Remind the person that you are here to listen, understand their experience and see if there is anything you can do to improve it.”
“Avoid the temptation to try and propose solutions. Instead, listen for their commitment, reframe it, and ask about what you could do to address it together.” READ MORE
How do you know it’s time to hire your first employee? “If the goal of employing someone is to free up time, make sure you’re aware of the heap of paperwork involved (more on that later) and the time it takes to recruit and manage someone new. ‘It’s not necessarily the case that the more people you have on the team, the more you get done,’ says Rachel Mumford, co-founder of medical software startup Anima. ‘A lot of time is spent teaching, mentoring, giving feedback.’ Some founders recommend staying lean for longer to give yourself time to raise the capital to hire top-notch talent. Milbourn disagrees.”
“‘Start looking way earlier than you think you need to,’ she says. ‘So many founders leave it too late to start looking for the person they want and then when they finally find someone halfway good, they’re desperate to hire them.’
“It’s competitive out there: Job hunters are viewing close to twice as many job posts per application compared to 2019. Aim for fewer than 300 words, as posts of this length are ~8 percent more likely to convert views into applications.”
“Keep the tone formal and generic; candidates are 2-4x less likely to apply for jobs when the employer comes across as casual.”
“According to Milbourn, your interview process should have at least 3 stages: one to test chemistry, one to dive deeper into the candidate’s skills, and one for them to ask questions about your company.” READ MORE
CONSTRUCTION
The U.S. is building more homes than it has in 16 years: “U.S. housing starts unexpectedly rose in March to a seasonally adjusted annual rate of 1.79 million units, the Commerce Department announced Tuesday morning. Economists surveyed by Bloomberg expected starts to fall slightly to a pace of 1.75 million. The March rate marks the fastest since 2006 and a second consecutive monthly improvement. The jump was fueled by faster construction of multifamily units. The category saw annual construction leap to an annual pace of 574,000 units from the prior month's reading of 534,000 units.”
“The acceleration in home construction is the latest signal the market is on the mend. While the reading is somewhat volatile and the pace of construction could quickly reverse course, the increase hints builders are rushing to meet demand.”
“Builders will want to move fast before buying activity slows. Mortgage rates have soared roughly 2 percentage points since the end of 2021 as the Federal Reserve has begun raising broad interest rates in an effort to slow sky-high inflation.” READ MORE
ECOMMERCE
The direct-to-consumer model isn’t working: “Ten years ago, emerging digitally native brands like Dollar Shave Club wouldn't have dreamed of selling wholesale. The novel idea of brands selling their products directly to consumers online and ‘cutting out the middleman’ seemed to make financial sense. Without a retail partner cutting into profit margins, brands could make more money and pass on savings to consumers. Now, that strategy is being upended. For the majority of digitally native brands, the question of when to start wholesaling isn't an ‘if’ but a ‘when.’”
“Digitally native brands embarking on retail partnerships isn't a new phenomenon. Harry's entered Target in 2016, paving the way for many DTC-first brands like Native and Quip that would follow the razor startup into big-box retailers.”
“Sales are up at mass retailers like Target and Walmart. Meanwhile, DTC darlings like Warby Parker, Allbirds, and Casper have gone public, exposing their lack of profitably.”
“Operating a direct-to-consumer e-commerce business ‘comes with its own set of expenses’ that wholesale players don't have to contend with, including shipping, fulfillment, technology, and marketing, Siegel said in a January research note titled ‘DTC Isn't All It's Cracked Up to Be.’” READ MORE
LOGISTICS
Farmers are getting left out of the supply chain: “As Scott Phippen looks out on his orchard on a recent afternoon, he feels a sense of foreboding tinged with rage. His warehouse is stuffed with the leftovers of last year’s harvest — 30 million pounds of almonds stored in wooden and plastic bins stacked to the rafters, and overflowing into his yard. Orders assembled for customers sit in giant white plastic bags and cardboard cartons arrayed across pallets, awaiting ships that can carry them across the water to Asia, the Middle East and Europe. The almonds are here, the customers are over there, and the global shipping industry is failing to span the divide.”
“Every week, Mr. Phippen, 67, a compulsively organized overseer of his family business, Travaille & Phippen, peers hopefully at a calendar showing confirmed bookings on container vessels sailing to points worldwide from the port of Oakland, 65 miles to the west on San Francisco Bay.”
“Every week, he absorbs all manner of disheartening news: No shipping containers available, no vessel arriving, no space on board.”
“‘My warehouses are already bulging at the seams,’ Mr. Phippen says. ‘It scares the crap out of me, because in five months I’m going to get a new crop in the door. There’s no timeout in farming.’” READ MORE
SOCIAL MEDIA
A Dollar General store manager made a video that went viral—but not in the way any retailer would welcome: “On the morning of March 28, in between running the register and putting tags on clothing, Ms. Gundel, 33, propped up her iPhone and hit record. The result was a six-part critique, ‘Retail Store Manager Life,’ in which Ms. Gundel laid bare the working conditions inside the fast-growing retail chain, with stores that are a common sight in rural areas. ‘Me talking out about this is actually kind of bad,’ Ms. Gundel said as she looked into her camera. ‘Technically, I could get into a lot of trouble.’”
“And with that, Ms. Gundel was instantly transformed from a loyal lieutenant in Dollar General management into an outspoken dissident who risked her career to describe working conditions familiar to retail employees across the United States.”
“As Ms. Gundel had predicted, Dollar General soon fired her. She was let go less than a week after posting her first critical video, but not before she inspired other Dollar General store managers, many of them women working in stores in poor areas, to speak out on TikTok.”
“She said the company’s way of avoiding serious issues was to bury them in bureaucracy. ‘You know what they tell you? Put in a ticket,’ she said. ‘Ms. Gundel started using the hashtag #PutInATicket, which other TikTok users tagged in their own videos.” READ MORE
PROFILE
A former NBA player, Al Harrington, who owns a cannabis business, Viola, says his main goal is to create entrepreneurs: “‘The opportunities in our communities need to be owned by us—period,’ Harrington says. Through Viola, Harrington is trying to right some of the wrongs caused by America’s drug war, one entrepreneur at a time. Like a one-man Y Combinator for cannabis, he is pursuing a plan to create 100 Black cannabis millionaires.”
“Viola launched its incubator program two years ago. The company has since invested around $700,000 into four companies, including Mezz, a vape and pre-roll company in Colorado and Los Angeles-based Butter Baby, which makes THC-infused butter to use in baking things like brownies.”
“Harrington takes between a 10 percent to 25 percent stake in exchange for help with marketing and fundraising. He doesn’t invest in ideas, rather he buys into companies that are already up and running.” READ MORE
THE 21 HATS PODCAST
Just answer the question: This week, in a special bonus episode, Marcus Sheridan talks about the revolutionary strategy that he used to save his pool-building business during the Great Recession and that he’s been preaching ever since. That strategy is to volunteer answers to the questions your customers always ask—especially the ones you’ve been taught not to answer, at least not until you absolutely have to, such as those about pricing and potential problems with your product or service. In this conversation, Sheridan also explains how to implement a content marketing strategy, why he isn’t a big proponent of social media, and what most business owners get wrong about marketing.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
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