When an Employee Makes More than the Boss

There are two keys to maintaining a functional working relationship.

Good Morning!

Here are today’s highlights:            

• Looking to raise money? Have you considered asking your customers?

• Suddenly, UPS finds there’s no shortage of people who want to be drivers.

• For businesses, there are important lessons in the latest rounds of severe weather.

• Is a Dallas-based coffee shop’s social media strategy creepy or smart?

FINANCE

More businesses are raising money by getting their customers to invest: “‘In 2017, when we were raising our fund, there were limited options for commercial services to help us take advantage of the Jobs Act changes, so being entrepreneurial we figured out how to do it ourselves,’ says Lena Phoenix, who co-founded Broomfield, Colorado-based Xero Shoes with her husband, Steven Sashen. The founders of Xero, which sells lightweight performance recreation footwear (a seven-time Inc. 5000 honoree), say they were one of the first companies to make it work, having built a cult-like following of loyal customers since 2009. They built a custom website where investors could get 25 shares for $100.”

• “Customers who invested were offered additional discounts, access to new product launches, and VIP customer support. To get the word out, the founders sent six email marketing campaigns to their list of 30,000 customers with links to the page. In total, the founders raised $1,024,732 in the six months the campaign was open.” 

• “Crowdfunding is not a new funding alternative, of course, but it's become more similar to mainstream funding in the past few years. That's due in large part to regulatory changes created by the Jobs Act, which began allowing anyone--not just accredited investors--to purchase equity in companies starting in May of 2016.”

• “‘Crowdfunding has changed the game for small businesses that don't have a network of investors or have low chances to qualify for a bank loan,’ says Angeli Gianchandani, professor at Pompea College of Business at the University of New Haven. ‘This opens the door to bring a business to the forefront and a chance to make a difference.’” READ MORE

HUMAN RESOURCES

When your employee makes more than you do: “There are two keys to a functional working relationship when a subordinate makes more money than their manager, people in both camps tell me: The boss must possess the humility to accept the situation and the confidence to project authority. And the highly paid employee can’t be a diva. Richard Reice, a labor attorney and chief people officer of a restaurant group, says fat paychecks can lead to entitlement and make a highly paid employee practically unmanageable. ‘Some refuse to do basic things, like attend meetings, just because they think they’re silly,’ he says.”

• “Many companies are scrapping the old notion that bigger titles should automatically mean bigger bucks. Instead of promoting star employees into management, where administrative duties can siphon time from their true talents, more businesses are keeping top performers in individual-contributor roles—and paying them like bosses.”

• “Nikki Barua, who runs the women’s leadership program Beyond Barriers, says her clients in managerial positions sometimes feel underpaid relative to subordinates and are unsure whether discrimination is a factor. Bosses need to recognize there are often valid reasons behind pay, she says, and advises managers to pay more attention to what their fellow bosses make.”

• “Now, as an entrepreneur trying to conserve cash, [Barua has] sometimes paid herself less than her employees. She admits that, at times, it was hard not to resent people making more than she did, feeling that she’d be able to draw a salary if only they’d work harder or do better.”

• “Founders often draw modest salaries, or none at all, in companies’ early days, says Jeff Bussgang, general partner in the Boston office of startup investor Flybridge Capital Partners. ‘Naturally, if they own a big chunk of equity, it makes it all more palatable,’ he says.” READ MORE

UPS found a way to generate job applications: “Online job site Indeed reported that it saw a 50-percent spike in searches for UPS jobs in the week after the Teamsters touted the ‘historic’ deal. Part of that deal announcement: Full-time UPS drivers will now make $170,000 in pay and benefits. Google searches for ‘UPS driver jobs near me’ trended. Meanwhile, general searches for ‘delivery driver’ didn’t see similar spikes on Indeed, according to the company, indicating it’s a UPS-specific phenomenon.”

• “Over on Brown Cafe, a forum for UPS drivers, current employees are remarking that people are coming up to them asking them how to become drivers. ‘Any of you guys getting people coming out of the woodwork now that $49 an hour has been plastered all over the media?’ one user writes. ‘This is the third person that’s come up to me about our wages.’”

• “There are some misconceptions about the $170,000 paycheck, though: Drivers don’t actually make that full salary right away. They first have to work in package loading, which is often a part-time gig; once they move up into driving, they’ll start at the bottom, with routes that include more stops and heavier packages.”

• “Even though new workers need to rise through the ranks to reach it, UPS’s pay is far better than that of its counterparts at FedEx and Amazon, which aren’t represented by unions—yet.” READ MORE

OPPORTUNITIES

The hottest hoagie in Philadelphia is made by an advertising guy with a burgeoning side hustle: “Philadelphia's self-described ‘nomad sandwich maker’ is nearing two years since he broke into the city's cutthroat hoagie scene. Since launching his Northern Liberties pop-up in 2021, Dominic Rocconi, better known as ‘Hoagie Dom,’ has turned his one-man operation into a contender for the city's ‘hottest sandwich.’”

• “Rocconi started out on Instagram reviewing hoagies around Philly. When the pandemic hit, he began making his own sandwiches at home and traded them with local businesses. They were a hit, and people took notice. ‘How can I get one?’ they'd ask. Naturally, the pop-ups followed.”

• “Pulling off one of these pop-ups is ‘no small feat.’ On the day of an event, Rocconi rises — just like his culinary creations — early. He has an espresso, then heads to Kismet Bagels in Kensington to bake his own bread. An architect of the artisanal, he uses the finest meats and cheeses, some imported from Italy or purchased at well-known Philly spots like Di Bruno Bros.”

• “Securing reservations to this pop-up is like scoring a golden ticket to Willy Wonka's chocolate factory. They're usually booked up within minutes. During a recent collaboration with Cuzzy's Ice Cream Parlor, Philadelphians snapped up 126 focaccia sandwich and ice cream combos in 105 minutes.” READ MORE

THE ECONOMY

Inflation continued to moderate in July: “Fresh inflation data offered economists and policymakers further evidence that price increases are meaningfully cooling, good news more than a year into the Federal Reserve’s campaign to cool the economy and tamp down the rapid increase in costs. The Consumer Price Index climbed 3.2 percent in the year through July, according to a report released on Thursday. That marked the first acceleration in 13 months, and followed a 3 percent reading in June.”

• “While that pickup may seem alarming on its face, it requires context. Inflation was rapid in June of last year and slightly slower the following month. That means that when this year’s numbers were measured against 2022 readings, June looked lower and July appeared higher than if the year-ago figures had been more stable.”

• “And economists are more keenly focused on another figure: the ‘core’ inflation index that strips out volatile food and fuel prices. That picked up by 4.7 percent over the past year, down from 4.8 percent in June. On a monthly basis, core inflation climbed 0.2 percent, matching an encouragingly low reading in the previous month.” READ MORE

Americans are holding a lot of debt: “Americans are dealing with record-high bills — and it might be a cruel fall as more payments come due. According to the latest data report from the Federal Reserve Bank of New York, Americans held a record $1.03 trillion in credit card debt in the second quarter of 2023. That's an increase of $45 billion from the last quarter and marks another quarter of rising balances after an initial plunge early on in the pandemic. The rise in credit card debt helped push total household debt to a record-high $17.06 trillion.”

• “For the last seven quarters, credit card balances have grown year over year amid strong consumer spending despite high prices. However, the average credit card rate remains at an all-time high of over 20 percent. This data comes just months before student-loan payments are set to resume after an over three-year pause.”

• “Even though credit card debt hit its record high $1 trillion in the second quarter, Americans had over $14 trillion in their checkings and savings accounts as of the first quarter, suggesting that they have ample liquid financial assets ready to stay on top of their bills. Additionally, debt service payments as a percentage of disposable income are also near historic lows.” READ MORE

INSURANCE

Unprecedented damage from storms is upending the insurance industry: “Waves of severe thunderstorms in the U.S. during the first half of this year led to $34 billion in insured losses, an unprecedented level of financial damage in such a short time, according to Swiss Re Group, as climate change contributes to the frequency and severity of violent meteorological events. Damages from convective storms in the U.S. — those that can come with hail, lightning, heavy rain and high winds — accounted for nearly 70 percent of the $50 billion in global catastrophic damages so far this year, the reinsurer said Wednesday.”

• “The storms in the U.S. were so severe that 10 of them resulted in damages of $1 billion or more, almost double the average recorded over the last decade, according to Swiss Re, and Texas was the state most severely affected.”

• “Kerry Symons is a businessman in Perryton, a town of about 8,500 in the Texas Panhandle, one of the communities struck by a tornado in June, and he is also its mayor. Three of his buildings were damaged and destroyed, including a furniture store. He also lost some vehicles. Symons said he is like most Perrytown residents in that he is still arguing with insurance companies. Some residents have sought his assistance as mayor.”

• “One lesson Symons has learned from the ordeal is the importance of an annual accounting for the cost of what is inside a building and what it would cost to rebuild. One of his buildings, a furniture store, was acquired recently, so the valuation was easy. A building he has owned for 20 years has proved more difficult.” READ MORE

SOCIAL MEDIA

Can drive-by compliments change the world and help build a business? “Hazel Villareal looked out the car window, spotted her target and pressed the megaphone to her lips. ‘Excuse me,’ she said, as the man on the Dallas street corner turned to face her. ‘I just want to say you’re beautiful.’ The man smiled. Another man, standing to his side, placed his palms on his chin as his jaw dropped. “You’re the most beautiful — thank you!” the first man replied. Ms. Villareal thanked him back and, as the car drove away, left him with another message: ‘I love you!’ A video of the interaction, the first installment of La La Land Kind Cafe’s ‘Drive-By Kindness’ series, uploaded to TikTok in November 2020, has racked up more than five million views. La La Land, a coffee shop chain, has posted more than 80 installments of the series in the years since — building its TikTok following to over 6.6 million in the process, and building on what its employees refer to as the company’s ‘kindness mission.’”

• “Though giving random compliments to strangers might seem odd, or even creepy, it’s impossible to argue with the reactions from those receiving them: ‘You just made my whole life,’ one woman said. And after being told he looked handsome, a man responded, ‘We need to spread some more kindness and love.’”

• “La La Land’s first cafe opened in 2019 in the Lower Greenville area of Dallas, employing 10 young people who had aged out of the foster care system and might otherwise have had a difficult time finding work. These days, foster youths make up a smaller portion of the staff across the 11 cafes — eight in Texas, three in California — though they still represent a key part of the company’s ethos.”

• “Though the videos bring in revenue through collaborations with sponsors, like Sam’s Club and Fossil, the ‘Drive-By Kindness’ videos are not framed as explicit advertisements for the coffee shops: La La Land is never mentioned as part of the compliments or included in the video captions — a deliberate choice, Ms. Villareal said. ‘I love the fact that we’re not throwing a product into your face,’ she said.” READ MORE

REGULATION

The CROWN Act would ban hair discrimination: “CROWN is an acronym for Creating a Respectful and Open World for Natural Hair. The legislation calls for a prohibition of discrimination in the workplace and schools based on natural textures and protective hairstyles including braids, locs, twists, and Bantu knots. Versions of the act have been passed by legislatures in 24 states. In 2021, Rep. Bonnie Watson Coleman (D-NJ) proposed HR 2116, national legislation to prohibit discrimination based on an individual’s texture or style of hair. The bill passed in the House of Representatives in March 2022 but stalled in the Senate.”

• “According to a study conducted earlier this year by Dove in conjunction with LinkedIn, race-based hair discrimination in the workplace is a systemic problem, impacting Black women’s employment opportunities and professional advancement. ... The Dove/LinkedIn study found that Black women’s hair is two-and-a-half times more likely to be perceived as unprofessional and that Black women are 80 percent more likely to change their natural hair to meet social norms or expectations at work.” READ MORE

THE 21 HATS PODCAST

Can I Go Dig a Hole? This week, in episode 163, Liz Picarazzi, Jennifer Kerhin, and Sarah Segal talk about whether they ever wish they could go back to their corporate lives. For Liz, there was a period during the early days of Covid. For Jennifer, it was when she made the transition from a consulting business to an employee business. These days, none of them can imagine going back—although Sarah did have a rough week recently when she lost two clients. “It's just the way of the world,” she tells us. “When businesses are looking to cut costs, it’s outside agencies that go first. But when it's two of your largest clients in the span of a week, it's like, ‘Really? Can I go dig a hole, put myself in it, and just stay there forever?’”

• What she’s actually doing, as we discuss, is figuring out some new ways to attract more clients. We also discuss whether everyone needs a business plan and whether the three owners ever wonder if someone else would do a better job running their businesses.

• “I thought, Why did I do this? I could have worked for a consulting firm. I could have worked for an association. This is stupid. This is taking up all my time. My kids were little. I hate it, hate it, hate it.”

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

Thanks for reading, everyone. — Loren