The Toughest Conversation
In our latest podcast episode, the business owners talk about what happens when a longtime employee stops performing—and where the owners rank on the hardass scale.
Good Morning!
Here are today’s highlights:
Suddenly, Ubers aren’t necessarily cheaper than taxis.
The bidding war for new hires has ended.
Forget the burger and fries. These days it’s salad and fries.
And who deserves credit for a restaurant’s success: the chef who made the food or the owner who built the restaurant?
THE 21 HATS PODCAST
The Toughest Conversation: This week, Paul Downs, Jay Goltz, and Laura Zander don’t hold back. Laura and Jay both say their sales are coming in well below expectations. Not surprisingly, Jay has a five-point checklist that he’s using to assess and address his shortfall. Laura’s situation involves a marketing team that she says has been feeling stressed and is coming apart, with lots of crying and arguing. “They’re just collapsing,” she tells us. Paul, meanwhile, says his sales aren’t bad, but he’s got one employee who’s been holding them back. The employee, who’s been with Paul for 10 years, has been spiraling of late, says Paul, who’s dreading what he calls “the toughest conversation,” a conversation he fears will leave the employee devastated.”
“In such situations, Jay says, he’s found it helpful to rank himself from one to 10 on the hardass scale: If Mr. Rogers is a 1 and Jack Welch—the take-no-prisoners former CEO of GE—is a 10, where do you want to be? “If you pick four or five,” Jay says, “you're probably gonna go out of business.”
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PRICING
As tech companies grow profit conscious, some of that price disruption they promised is disappearing: “The Financial Times recently reported that a basket of the top U.S. streaming services would cost $87 this fall, compared with $73 a year ago. The average cable TV package was $83 a month, it reported. A similar shift is happening in ride-hailing. Uber has been on a quest to become profitable, and it achieved that, based on one measure, in the most recent quarter. Lyft is desperately trying to keep up. How are they doing this? Raising prices is one way.”
“Wired's editor at large, Steven Levy, recently took a 2.95-mile Uber ride from downtown New York City to the West Side to meet Uber CEO Dara Khosrowshahi. When asked to estimate the cost of the ride, Khosrowshahi put it at $20. That turned out to be less than half the actual price of $51.69, including a tip for the driver. ‘Oh my God. Wow,’ the CEO said upon learning the cost.”
“Finally, there's the cloud, which has promised cheaper and more secure computing for companies. There are massive benefits from flexibility here ... The other main benefits—price and security—have been looking shakier lately.”
“Salesforce, the leading provider of cloud-marketing software, is increasing prices this month. The cost of the Microsoft 365 cloud-productivity suite is rising, too, along with some Slack and Adobe cloud offerings, CIO magazine reports.” READ MORE
HUMAN RESOURCES
The bidding war for new hires has ended: “Wages, especially for people who changed jobs, climbed in recent years as companies competed for workers to fill pandemic-induced labor shortages. Now, as the job market cools and businesses become more cautious in their hiring, many companies are paying new recruits less than they did just months ago—in some cases, much less. Among postings for more than 20,000 job titles on ZipRecruiter’s site this year, the average pay for a majority of roles has declined from last year. Some of the steepest drops have been in technology, transportation, and other sectors that experienced frenzied hiring sprees in 2021 and early 2022.”
“The declines mark a stark turnaround from 2022, when compensation for three-quarters of advertised job titles rose from the year before, according to ZipRecruiter. In a July survey of about 2,000 employers conducted by the online hiring platform, nearly half said they had reduced pay for recent job openings.”
“Overall wage growth continues and it surpassed inflation in June for the first time in two years as consumer price increases slowed. Still, wage growth peaked last summer and has since declined to 5.7 percent, according to Labor Department figures.”
“While employers have more leverage now on pay, they should tread carefully, says Marc Goldberg, CEO of Stages Collective, which specializes in recruiting for the ad tech industry. ‘I advise my clients not to go down too far, because you’ll have a temporary employee,’ he says.”
“To control costs without alienating applicants, he says, companies are doing things like increasing performance incentives while reducing base salaries for certain roles, such as sales.” READ MORE
But companies that push too hard to get employees back to the office are paying a price: “That's one of the big takeaways from a new survey by The Conference Board, which found about 73 percent of organizations reported challenges getting workers to return to the office. Another takeaway? Hybrid setups still represent a critical tool for businesses looking to balance their desire for in-office work with turnover concerns. About 71 percent of companies that are mandating onsite work are reporting difficulties retaining workers. That's significantly higher than the 46 percent rate for companies that give workers a choice between remote, in-person or hybrid setups.”
“The Conference Board found onsite workers saw a 26 percent turnover rate in the last six months, twice the turnover rate of remote workers.”
“But [Peter] Cappelli, author of ‘The Future of the Office: Work from Home, Remote Work, and the Hard Choices We All Face,’ said while there are strong individual contributors who benefit from remote work and the flexibility it provides, workers might ultimately suffer in remote roles even as they pursue them.”
“‘Basically the evidence suggests pretty clearly that, in terms of your life, most people really like it. For sure they like the choice,’ Cappelli said. ‘In terms of your career outcomes, it's bad for everything. You don't get promoted as much. Commitment is lower. It's worse.’” READ MORE
HOUSING
The biggest thing in new homes is an extra bedroom—but not to sleep in: “The rise of remote and hybrid work—recent survey results from WFH Research indicate that close to 30 percent of paid full workdays in the U.S. are being worked from home this year, up from around 5 percent in 2019—is making home workspaces with doors you can close much more important. Eighty-eight percent of builders in a National Association of Home Builders survey said demand for home offices increased during the pandemic, and 72 percent said a home office was a ‘likely’ feature in a typical 2023 new home, on a par with granite countertops.” READ MORE
RESTAURANTS
The latest trend in restaurants? Skipping the entree: “American diners have long adhered to basic unwritten rules about what goes with what. Meat and potatoes. Eggs and bacon. Or a dinner that starts with soup, then salad, entree and dessert. Diners and restaurant workers say that more and more, those guidelines are flung aside for menu mayhem. Fries, traditionally paired with burgers, have become salad’s best friend. A ‘starter’ can be had anytime, while a ‘main’ may be skipped altogether. Food-industry consulting firm Technomic has observed an increase in customers ordering sides over the last year and estimated that 15 percent of diners order sides as their entree.”
“The salad-and-fries craze speaks to an emerging connection between indulgence and mental health, says Diana Kelter, associate director of consumer trends at market-research firm Mintel. Although indulgence is typically regarded as bad for physical health, Gen Z sees it as helpful for mental health.”
“Skipping larger entrees may also save money at a time when restaurant prices have climbed. According to market-research firm Datassential, the median price of a beef entree at casual and fine-dining restaurants is $22.95. A non-fried veggie side, such as green beans, costs about $4.50. Other appetizers, such as sliders, are $10.”
“‘We’ve gone to a space of more liberated dining,’ says Nia Grace, who owns three Boston restaurants, including Darryl’s Corner Bar & Kitchen. Some patrons make a reservation for dessert only, or ‘swap and choose’ from around the menu. ‘They’ll say, ‘I’ll do this and that, and listen, give me one of those, give me that, I’ll pair it with this and we’ll share that.’” READ MORE
OPPORTUNITIES
These days, there’s big business in mental health: “A search for ‘anxiety relief’ on Google pulls up links for supplements in the form of pills, patches, gummies and mouth sprays. There are vibrating devices that hang around your neck and ‘tone your vagus nerve,’ weighted stuffed animals, bead-filled stress balls and coloring books that claim to bring calm. Ads for online talk therapy apps pop up on social-media sites. Americans are anxious—and a flurry of old-line companies, upstarts and opportunistic entrepreneurs aim to fill the demand for relief.”
“Sherry Frey, vice president of total wellness at NIQ, said surveys have found that consumers listed vitamins and supplements above things like diet and exercise in how they managed their mental health. Sales have been helped along by social-media influencers, some of whom are therapists or doctors themselves and sell products from their profile pages.”
“An array of wearable devices and apps that claim to tame anxiety led the American Psychiatric Association to recently create a tool to help members evaluate their usefulness. Products include the $325 Apollo Neuro, a small, wearable device that uses waves of vibrations in an attempt to mimic the body’s natural, calming response to touch.”
“Weighted blankets, which have been shown to reduce anxiety in certain situations in a few small studies, are now being transformed and marketed as $25 weighted stuffed animals, $160 hoodies and $100 pajamas. And the range of fidget toys, used to relieve excess energy and ground people in the moment, has exploded into things that can be popped, chewed, rotated, squished, and sucked.”
“Headspace contracts with more than 4,000 companies including Adobe, Mattel, and Starbucks to offer mental-health services to their workers. Users on its Ginger app can immediately connect via text-based chat with a mental-health coach. The app also encourages users to take several assessments that measure anxiety, depression, and stress levels.” READ MORE
STARTUPS
Dormify wants to capture customers for life: “Amanda Zuckerman and her mother, Karen Zuckerman, were shopping at the Bed Bath & Beyond in New York City’s Chelsea neighborhood when they got the idea for what would become their dorm room décor company, Dormify. They were looking for twin XL-sized bedding, among other dorm essentials, for Amanda’s freshman year at Washington University — and they found that function definitely took precedence over style, Amanda said. ‘Moving to college can be an overwhelming transition, and moving your life to a college dorm room is a pivotal life experience,’ she said. ‘We were pretty shocked that there was no one-stop shop for on-trend dorm products.’”
“Karen, who founded creative agency HZDG, provides marketing expertise for the company, and bloggers and a team of ambassadors — the company’s ‘eyes and ears on campus,’ Amanda said — spread the Dormify name.”
“Last year, Dormify saw 40 percent revenue growth. The company has 95 employees, including 45 at its New York City headquarters, and provides internships there for its brand ambassadors.”
“What’s next for Dormify? Amanda said the company would like to continue to grow with its Gen Z customers through phases of life after college as they furnish their first apartments and, eventually, baby nurseries. ‘We hope to capture them from their first-need moment and continue that relationship,’ she said.” READ MORE
LITIGATION
A partnership breaks up, and a legendary restaurant closes: “Chef's Table at Brooklyn Fare, the iconic three-Michelin-star tasting restaurant helmed by chef César Ramirez, quietly ceased operations in July. The closing, which hasn't been previously reported, comes amid an ugly legal battle between Ramirez and Brooklyn Fare's owner, Moneer ‘Moe’ Issa, that has stranded diners and cost the restaurant hundreds of thousands of dollars in lost revenue.”
“Chef's Table at Brooklyn Fare is one of New York's most hallowed culinary institutions. Guests book reservations months in advance and travel from around the world to experience Ramirez's decadent menu, including Hokkaido uni with Australian black truffle, Norwegian langoustine, and ramp custard with foie gras.”
“On July 24, Ramirez filed a complaint against Issa and the restaurant's holding company, Manhattan Fare Corp, in which they were co-owners, claiming damages in the tens of millions for breach of contract, unpaid wages, defamation, and more.”
“In an affidavit in response to Ramirez's complaint, Issa states that he didn't embezzle the $400,000, but rather ‘safeguarded the company funds by removing them from the company's operating account.’”
“The court documents, as well as interviews with more than 10 people associated with the restaurant who asked to remain anonymous for fear of professional repercussions, depict a battle of egos between Issa and Ramirez. Who deserves credit for Chef's Table's success: the man who made the food or the man who built the restaurant?” READ MORE
21 HATS PODCAST: DASHBOARD
Why Business Owners Don’t Like This Economy: Gene Marks says that by almost any measure the economy continues to perform quite well. And yet, business owners don’t seem to believe it. Why is that? Gene says owners have some cause for concern. In fact, he expects a slight recession or slowdown in the next three to six months—of course he’s been saying that for more than a year now. “One of these days,” he says, “I’m going to be right.” Plus: Gene highlights two significant tax credits that he says most business owners don’t know about.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren