What Would Deming Say?
In our latest 21 Hats Podcast episode, the goal was to see if we could figure out what management guru W. Edwards Deming would say about the way Paul, Jay, and Laura run their businesses.
Here are today’s highlights:
There’s a surprising new place where employers and job candidates are connecting.
Lots of states are helping business owners save on their federal taxes.
What does it mean that lumber prices have fallen more than 50 percent since March?
In Silicon Valley, startups are being told to behave like real businesses.
THE 21 HATS PODCAST
What Would Deming Say? This week, Kelly Allan—a consultant who specializes in sharing the principles espoused by the late management guru W. Edwards Deming—returns to the podcast for a conversation with Paul Downs, Jay Goltz, and Laura Zander. After World War II, you may recall, Deming was sent to Japan, where he was largely credited with resuscitating the devastated economy. He went on to become tremendously influential here, too. And if you read his books or scan his “14 points” for management, it’s clear that many of his lessons are now widely accepted—but not all of them.
For example, he encouraged business leaders not to set production quotas, not to hold people accountable—at least not without first holding the process accountable—and not to address employee performance and pay in the same conversation. Some of these issues came up in an episode that Paul, Jay, and Laura taped in December, which is why we decided to invite Kelly, who is chairman of the Advisory Council of the W. Edwards Deming Institute and has his own management consulting business, to join us. The goal was to see if we could figure out what Deming would tell Paul, Jay, and Laura, and whether the three owners would be open to the suggestions. Spoiler alert: Paul’s not really buying it.
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The new place for employers to connect with job candidates is on Slack: “In the past two years, Slack-based networking groups have grown, providing a way for far-flung members to swap career advice and tips. Many job seekers say they are turning to these invite-only networking forums to land new roles—often much faster than they would have through traditional job-application methods. ‘It was nuts,’ says Clark Barron of how quickly he found a new marketing job this month after joining the Cybersecurity Marketing Society, a Slack group started in March 2020.”
“He submitted a request to join the Slack channel after professional contacts introduced him to it. Before he was let in, one of the group’s members touted his experience in the channel and flagged that he was looking for a job.”
“Within a week of joining the Slack channel, Mr. Barron, who lives in Huntsville, Ala., estimates he took about 20 calls for interviews and introductory conversations.”
“Slack Technologies, which is owned by Salesforce, says it doesn’t know how many networking groups exist on its platform, but a search found networking channels for professionals in technology, human resources, sales, recruiting, and other fields.”
“They range from MKTG WMN for women in marketing to the Customer Education Org for specialists in product instructions, and many say their memberships have grown over the pandemic.” READ MORE
Pools, restaurants, and camps are cutting back on operations even though demand is strong: “Many Americans hoped this would be the first normal summer after two years of Covid-19 disruptions. A chronic labor shortage means it probably won’t be. In Phoenix, less than half of the public pools are opening because the city can’t hire enough lifeguards, despite offering a $2,500 incentive payment. Trolley lines in coastal Maine that service beaches are shutting down for the summer due to a dearth of drivers. Across the country, restaurants in tourist destinations are operating on limited hours because they don’t have enough staff to stay open longer.”
“Polar Cave Ice Cream Parlour in Mashpee, Mass., a Cape Cod town, is struggling to find workers to scoop its dozens of ice cream flavors, including the shop’s popular Death By Chocolate.”
“‘We knew we were going to have a busy summer. But no employer that I know—and I know lots of them—could’ve dreamt that it’s like, What, no one is applying?’ said Mark Lawrence, owner of Polar Cave. ‘When you think it can’t get worse, it just gets worse.’”
“Andy Pritikin, owner of Liberty Lake Day Camp in Mansfield Township, N.J., said before the pandemic, 85 percent of his advertising budget went toward attracting campers and 15 percent went toward attracting staff. ‘That’s completely switched this year,’ he said. Demand for spots for campers is ‘off the charts,’ he said.”
“The camp is competing for young workers with employers in retail, amusement parks, warehouse distribution and food-delivery apps, which are all boosting wages faster than the camp. Liberty Lake is trying to find workers by turning to the traditional places it uses to advertise for campers, such as roadside billboards and social media.” READ MORE
States are helping business owners save on their federal taxes with SALT-Cap workarounds: “The state laws blunt the cap’s effect on owners of closely held businesses such as law firms, hedge funds, manufacturers, and car dealerships, while workers earning wages generally can’t take advantage. The strategy, now available in 27 states, converts business owners’ personal income taxes into deductible business taxes that escape what is known as the SALT cap on state and local tax deductions. Much of the money flows to high-income people in California, New York and New Jersey, while those in Illinois, Massachusetts, Minnesota and Connecticut are likely saving hundreds of millions of dollars as well.”
“But it isn’t just a phenomenon in high-tax Democratic states. The proliferating workarounds mark a rare case where a state-tax policy trend has been swift, national, and bipartisan, and Utah, Georgia, Arizona, South Carolina and Kansas now have similar laws.”
“For states, approving the workarounds has been easy, because their residents benefit and state tax collections are barely altered.” READ MORE
Veterans are starting businesses inspired by their experiences overseas: “Emily Miller recalls first deploying with the Army in Afghanistan over a decade ago, when the U.S. military was finally realizing how culturally inappropriate it was to have male service members tramping through villages and talking to women and children. In 2011, she joined a team tasked with engaging ‘the other 50 percent of the population that has been pretty much largely ignored.’ She ended her two deployments ‘pretty disillusioned with the war effort and how we weren’t making the difference.’ She believed that business could be a more effective force for good. Soon, Ms. Miller was at Harvard Business School and on a Skype call with a classmate, Kim Jung, and a third friend, Keith Alaniz. Everyone on the call was an Army veteran who had cycled through Afghanistan.”
“Mr. Alaniz told his friends about his second tour in the Maidan Wardak Province, and meeting Hajji Joseph, a saffron farmer who was eager to tap into the U.S. marketplace.”
“The three friends started mulling saffron together. They wondered if they could connect farmers with restaurants in the United States. They talked about starting a business that could improve economic conditions in rural Afghanistan in the process.”
“Rumi Spice has since trained nearly 4,000 local women to work in its processing and fulfillment centers, some of them receiving a salary for their labor for the first time.” READ MORE
Tesla is planning a supercharger station with a 24-hour diner and a drive-in theater in Hollywood: “The 9,300-square-foot space includes plans for a drive-in movie theater and a 28 stall supercharging station. Architectural plans show a two-story diner with over 200 seats, both indoors and outside. The outdoor seats will have a direct view to two tall LED movie screens. Food will also reportedly be delivered to cars.”
“Almost a year ago, Tesla filed applications with the U.S. Patent and Trademark Office to trademark a ‘T’ logo for an array of restaurant concepts, from self service to take out.”
“The original location of the Tesla restaurant was reported to be in Santa Monica, although that Supercharger location opened in Feb. without any branded eating options.” READ MORE
What really killed Honest Tea? “Perhaps Honest Tea will still live on as a case study: How an apparently successful mission-driven brand can beat the odds, transcend its niche, find a backer who believes in it, make the transition to the mainstream—and still end up dying. The origin story is a classic entrepreneurial tale. A young [Seth] Goldman thirsted for a bottled tea that was flavorful without being overly sweet. It was an era when consumer demand seemed to be trending both healthier and more virtuous, and he hit on the idea of making his product organic. With borrowed money and a lot of hustle, Honest Tea became a solid business.”
“Still, some observers were startled—and skeptical—when, in 2008, Honest Tea sold a 40 percent stake to Coca-Cola for $43 million. Samuel Fromartz, author of Organic Inc. and other books, at the time wrote on his blog that while the deal presumably opened up new distribution opportunities, it meant ‘getting into bed with the people who put high fructose corn syrup on the map. You’re selling equity to the same people you want to displace.’”
“Goldman countered that he believed his company’s mission and product were good for the entire ecosystem it was part of: workers, consumers, the environment.”
“‘If you believe that, then you have a responsibility to sell as much of it as you can,’ he said, and the Coke deal would help achieve precisely that goal.” READ MORE
Lumber prices have fallen more than 50 percent since March: “Wood prices were a leading indicator of the supply-chain problems and inflation that followed pandemic lockdowns. Prices shot up in the summer of 2020 as cooped-up Americans remodeled en masse and demand for suburban houses soared. By last spring, lumber cost more than twice the pre-pandemic high. Now, two-by-four prices are flashing caution.”
“‘Lumber buyers have slowed orders and wood is piling up at mills, which are slashing prices, according to Random Lengths. ‘Triple-digit discounts became the rule rather than the exception,’ the service said Friday in its weekly price bulletin.”
“While some are concerned about a big slowdown in construction, many are simply not stocking up like they were last year when dealers and builders were having trouble meeting demand and hoarded lumber when they could find it, said Ash Boeckholt, co-founder and chief revenue officer at online wood-products marketplace MaterialsXchange.”
“‘Buyers don’t have the same mentality of having to go out and buy 10 when they only need five,’ Mr. Boeckholt said.” READ MORE
Rental car prices are expected to soar because car dealers are getting the inventory: “Over the past three to four months, the [car rental] industry has been buying 60,000 to 100,000 cars a month. Usually rental operators get two to three times that amount but can’t now because car dealers are demanding that they get most of auto manufacturers’ production, Healy says. So the teeming demand could send rental rates even higher. The rental companies may not want to stock up much more on vehicles, which are at record prices but are likely to moderate when auto production normalizes.”
“Plus, having fewer rental cars means they won’t have to discount rates to keep cars rented. Hertz, for example, enjoyed 40 percent margins in the first quarter compared with just about breaking even before the pandemic.”
“‘The industry,’ Healy says, ‘is realizing that it’s more profitable at $70 a day than it was at $60.’” READ MORE
Venture capitalists are telling startups to go into survival mode—in other words, to behave like real businesses: “In recent online slide presentations, blog posts and social-media threads, venture-capital doyens including Lightspeed Venture Partners, Craft Ventures, Sequoia Capital and Y Combinator are telling the founders that they need to take emergency action for what could be the sharpest turn in more than a decade. Their advice includes cutting costs, preserving cash and jettisoning hopes that hedge funds or other investors will swoop in with big checks.”
“The investors’ admonitions are a departure from the growth-above-all mantra for startups in recent years, and come as the venture market is showing signs of sputtering.”
“Bill Gurley, a partner at Benchmark Capital known both for his successful investments and for calling out excesses in venture capital, has taken to Twitter several times in recent weeks to offer advice. ‘The cost of capital has changed materially, and if you think things are like they were, then you are headed off a cliff like Thelma and Louise,’ he said this month.” READ MORE
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