Why Did Productivity Surge When Workers Stayed Home?

And why did it fall when those workers started to return? The data seem to suggest that remote work may not be the productivity disaster many assume.

Good Morning!

Here are today’s highlights:

• Companies can no longer demand silence in return for severance.

• Culver’s has a remarkably successful record for franchising.

• Federal contractors are starting to prepare for the debt-ceiling crisis.

• You really wouldn’t expect TikTok to have a positive impact on book sales.

HUMAN RESOURCES

Gene Marks says businesses should consider outsourcing HR tasks to professional employer organizations: “A PEO is not a staffing company that provides workers. Instead, it takes over not only payroll for existing workers, but the administration of health, retirement, and other benefit plans, which includes tax filings, workers’ compensation, compliance, policy-making and other functions that an internal HR manager would perform. As regulations have increased, many small business owners are deciding to outsource this function to firms that are better equipped to handle the complexities. Steven Sweeney, the President of NEMR Total HR, a PEO service located in Marlton, N.J., says that his average client has about 20 employees, but he serves companies with as few as five workers in industries ranging from manufacturing to health services.”

• “‘Generally clients come to me when they’re growing but they’re not at the stage of affording a full-time HR executive,’ he said. ‘They’re looking to make sure things are uniform and consistent and that they’re keeping up with all the changes in the rules.’”

• “This is probably the biggest issue that business owners raise when considering a PEO service: the employees of the business are no longer technically its employees. With a PEO, your company is no longer the employer of record.”

• “PEOs generally charge a percent of the payroll they manage. But by creating a pool of employees from all of their clients, the PEO can then benefit from the economies of scale and negotiate better rates on health insurance and other benefit programs as a larger purchaser.” READ MORE

The National Labor Relations Board has ruled that companies can no longer offer severance agreements that demand non-disclosure: “The federal agency said these agreements require employees to waive their rights under the National Labor Relations Act, and that such policies are a violation of the act. According to the NLRB, ‘the employer’s offer is itself an attempt to deter employees from exercising their statutory rights, at a time when employees may feel they must give up their rights in order to get the benefits provided in the agreement.’ Employees also cannot be prevented from disclosing the terms of their severance packages as outlined in any exit agreement, the NLRB said.”

• “The NLRB's decision reverses two made during the Trump administration that found these types of agreements were ‘not unlawful.’”

• “The NLRB said in its decision its previous rulings were wrong and did not recognize ‘that unlawful provisions in a severance agreement proffered to employees have a reasonable tendency to interfere with, restrain, or coerce the exercise of employee rights.’” READ MORE

Remote work often gets blamed for being unproductive, but the data seem to suggest otherwise: “If quiet quitting and the resultant drop in productivity stemmed from remote work, we should see a drop in productivity right from the start of the pandemic, when office workers switched to remote work. Then, when offices opened back up, especially after the Omicron wave at the end of 2021, we should see productivity going up as workers went back to the office from early 2022 onward. In reality, we see the opposite trend. U.S. productivity jumped in the second quarter of 2020 as offices closed, and stayed at a heightened level through 2021. Then, when companies started mandating a return to the office in early 2022, productivity dropped sharply in Q1 and Q2 of that year.”

• “Productivity recovered slightly in Q3 and Q4 as the productivity loss associated with the return to office mandate was absorbed by companies—but it never got back to the period when remote-capable employees worked from home.”

• “Forcing employees to come to the office under the threat of discipline leads to disengagement, fear, and distrust, according to the director of research and strategy for workplace management at Gallup Ben Wigert.”

• “Gallup finds that the optimal engagement boost occurs when employees spend 60 percent to 80 percent of their time—or three to four days in a five-day workweek—working off-site.”

• “Disengaged workers aren’t productive. That’s especially the case if they’re looking for a new job. The career website Monster reported that two-thirds of survey respondents would quit rather than return to the office full time.” READ MORE

Companies that test four-day work weeks don’t want to give them up: “In one of the largest trials of a four-day week to date, 61 British businesses ranging from banks to fast-food restaurants to marketing agencies gave their 2,900 workers a paid day off a week to see whether they could get just as much done while working less, but more effectively. More than 90 percent said they would continue testing the shorter week, while 18 planned to make it permanent, according to a new report from the study’s organizers. The idea of working less than the conventional 40 hours over five days a week has been discussed for decades. The concept has gained new momentum recently as employers and employees seek new and better ways to work.”

• “Widespread adoption faces a number of obstacles. Most companies that have experimented with a four-day week are small employers. Many larger companies haven’t embraced the concept. And at some companies trying four-day weeks, some workers have reported struggling to get everything done in that time.”

• “In the U.K. study, which ran from June through November, most employees didn’t work more intensively, researchers say. Rather, they and their bosses sought to make work days more efficient with hacks such as cutting back on meetings and ensuring employees had more time to focus on completing tasks.”

• “On a scale of 0 (very negative) to 10 (very positive), employers on average scored their productivity and performance over the six months at 7.5. A survey conducted halfway through the trial found 46 percent of companies said their business productivity had remained about the same, while 34 percent reported a slight improvement and 15 percent a significant improvement.” READ MORE

MARKETING

TikTok, oddly enough, continues to drive book sales: “A dedicated and growing community of readers has blossomed around the hashtag #BookTok, a combination of the words ‘book’ and ‘TikTok,’ which had 110 billion views as of February 17. Publishers who spoke with Insider credited the BookTok phenomenon as the primary driver of 2021 being the most successful year for the industry in almost 20 years. ‘It's huge, beyond anything in my career,’ James Daunt, CEO of Barnes & Noble and of British bookstore chain Waterstones, told Insider in early 2022. And now new data from NPD BookScan, the largest sales tracker of physical books in the US, shows that BookTok continued to be instrumental for the industry in 2022.”

• “Sales of backlist books, or books published over 12 months before NPD collects data, have been growing steadily for 20 years. In 2022, only 30 percent of the books sold were newly published titles, while 70 percent were backlist names. That's up from 68 percent in 2021.”

• "‘Part of the backlist story is the fact that a lot of the books that were embraced by BookTok, which is one of the strongest drivers of adult fiction, were backlist titles,’ McLean said.” READ MORE

GOVERNMENT CONTRACTING

As the debt ceiling crisis looms, federal contractors are taking steps to prepare in case the government stops paying its bills: “For one, [Hugh Shaw, the chief financial officer at Ventera, a consulting and contracting firm based in Reston, Virginia] says all contractors should keep in close contact with their federal customers. That way, in the event of a shutdown, open channels of communication can help them understand project statuses and keep track with invoicing. He also recommends diversifying project portfolios—taking on commercial clients can mitigate the impact caused by government shutdowns if federal clients miss payments.

• “Another suggestion is for contractors to evaluate their balance sheets to make sure their working capital needs are being met. Don't forget to maintain good relations with your financial institutions—it could prove helpful if you find yourself in a cash flow crunch.”

• “‘It may cost the company a little bit more money to get bridge loans to keep operations going,’ Shaw says. ‘But in my opinion, that's probably a much smaller price to pay than having to lay off people or defer payroll.’”

• “The lead-up to the crisis does not bode well for federal contractors, particularly for small business owners who were awarded $154.2 billion in contracts during the last fiscal year.” READ MORE

OFFICE SPACE

Companies could lose tax breaks if their employees don’t return to the office: “Of the billions in tax incentives granted to U.S. companies every year by cities and states, many agreements require workers to come into the office some of the time, or at least live in the region. For companies receiving these incentives, relaxing in-office attendance could be costly. The contracts were crafted in a pre-pandemic era, at a time when commutes to the office were a given. Now governments are deciding whether to crack down or rewrite the rules entirely. In some states and cities, policy changes have already been proposed to account for the new reality of hybrid work. ‘The idea of remote working wasn’t built into any of those contracts to the extent it should be now,’ said Seth Martindale, senior managing director at real estate investment firm CBRE. ‘Covid disrupted that whole environment. It’s been a learning curve for everybody out there.’”

• “New Jersey and Texas are states that stand out for spelling out exactly how often employees must work from the office to qualify for tax breaks. Before the pandemic, several New Jersey tax programs required workers to show up at least 80 percent of the time, and one Texas program set the threshold at 50 percent.”

• “Provisions like these were designed to ensure that the jobs boosted local revenue from income, sales and property taxes, and bolstered downtown economies.”

• “Cities looking to stimulate their economies via office attendance walk a fine line: Set the return-to-office bar too high and risk losing out to more laid-back localities; get too soft and risk a gaping hole in the budget where sales and property tax revenue used to be.” READ MORE

FRANCHISING

Culver’s requires potential franchisees to work in a restaurant for an entire week before they can sign a franchise agreement: 

The Wolf of Franchises 🍟 @franchisewolf

Top franchises diminish an operators startup risk significantly. Best example I've found is Culver's: Franchising since 1988, they've grown to ~830+ locations and only *two* locations have failed in their history. That's a wild success rate.

READ THE THREAD

CLIMATE

New York’s warm winter is wreaking havoc on businesses that depend on snow and ice: “For businesses and civic boosters, the impact of the unusual weather may come into even sharper relief this week, during the weeklong Presidents’ Day school holiday that is typically one of winter’s most lucrative periods. Not this year, however, for Mark Mayer, the owner of the Big Moose Inn, a popular snowmobiling stop in the Adirondacks. Mr. Mayer estimated that sales were down 80 to 90 percent from last Presidents’ Day weekend, with only two of 16 rooms booked. Cancellations were becoming more common than bookings. ‘When the phone rings,’ he said, ‘It’s that cringe of, Yup, there goes another one.’”

• “And at mountains around New York, skiers are finding fewer open trails this season and a lot of machine-made snow. The need for such mechanical precipitation has simply become the norm, according to Scott Brandi, the president of Ski Areas of New York, a trade association for what is a $1.1 billion industry in the state.”

• “‘We don’t run our business based on expected natural snowfall,’ Mr. Brandi said on Monday, when much of New York was again seeing above-average temperatures. ‘We run our business based on our ability to make snow and keep the snow that we make.’”

• “Mr. Brandi of the ski association seconded that. ‘We’re dealing with climate change: we all know that,’ he said, adding, ‘You can’t be a denier.’” READ MORE

Florida’s climate migration has already begun: “As many residents will be proud to tell you, the thousand-odd islands that make up the Florida Keys are one of a kind: there is no other place in the world that boasts the same combination of geological, ecological, and sociological characteristics. The islands have a special, addictive quality about it, an air of freedom that leads people to turn their backs on mainland life. The Keys are also the first flock of canaries in the coal mine of climate change. Over the past few years, the residents of these islands have been forced to confront a phenomenon that will affect millions of Americans before the end of the century. Their present calamity offers a glimpse of our national future.”

• “In the five years since Irma, the bill has come due. The hurricane made undeniable what previous floods had only suggested: that climate change will someday make life in the archipelago impossible to sustain.”

• “The storm destroyed not only the massive mobile home parks on islands like Big Pine, but also hundreds of so-called downstairs enclosures, small apartment-style units that sat beneath elevated homes. It also wiped out dozens if not hundreds of liveaboard boats and older apartment complexes in island cities like Marathon.”

• “The storm was the first episode in a long and turbulent process of collapse, one that will expand over time to include market contraction, government disinvestment, and eventually a wholesale retreat toward the mainland.” READ MORE

THE 21 HATS PODCAST: MARKETING WORKSHOP

Selling Cookies on LinkedIn: This week, Shawn Busse and Loren Feldman are doing something a little different. This is the first in a series of episodes we’re calling Marketing Workshops. In an attempt to confront one of the biggest pain points business owners face, we’re offering a series of conversations with owner-operators about their marketing experiences: what’s worked and what hasn’t. We’re starting with Grayson Hogard, co-founder of Grove Cookie Company. For Grayson and his wife, Marie, the company is a bootstrapped side hustle, but in a very short time they’ve come to some very smart conclusions about their marketing. Most importantly, they’ve figured out that the most effective sales channel for their cookies is, of all places, LinkedIn.

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

Thanks for reading, everyone. — Loren