The UI Fund: Why You Should be Watching

Author: David Woger 

The spotlight always seems to shine on the federal political scene but, with the Minnesota legislature in session, it is time to illuminate what’s happening closer to home. As we (hopefully) round the bend on the Omicron variant and as a return to a “new normal” no longer seems so out of reach, Minnesotans should turn their attention to the current state legislative session. This year, the legislature will tackle many important topics with lasting financial and practical impacts on the business community, including the looming tax base rate increase for the Unemployment Insurance Trust Fund (UI Fund).

You Deserve a Break Today

Stepping away from work and going on vacation can be a struggle. With the weight of business on your shoulders, it is so easy to convince yourself that there just isn’t time for a break. After all, there are always more numbers to hit, business to obtain, and goals to achieve.

These reasons may even seem more important this year due to the impact of the global pandemic on your business. And — truthfully — there probably is not a perfect time to go on vacation. However, stepping away from work is not only beneficial for your mental and physical health, it is also important for the health of your business.

Wage and Hour Risks for Small Businesses

While I am not an employment lawyer, it doesn’t stop my entrepreneurial clients from calling with questions in that domain. It also doesn’t stop friends and family members, who assume having the title “Juris Doctor” means you are an expert on all things legal, from calling asking for me to guide them on employment issues — but that’s a topic for another post.

When clients call, I often provide some high-level thoughts on the issues (stuff that I have learned from some awesome colleagues, who actually are experts in HR-related matters) and, if they need more than that, I hand them off to these same colleagues on the 4th floor for more guidance.

Given that I frequently see early-stage entrepreneurs with limited cash resources struggling with employment-related legal issues, I wasn’t surprised that this recent article, titled “This New Kind of Expensive Lawsuit Could Easily Bankrupt Your Small Business,” was about the risks relating to the failure to comply with applicable wage and hour laws.

Female Entrepreneurs: A Growing Trend?

Longtime entreVIEW readers — and I mean really long time readers — already know that, despite spending most of my days working with entrepreneurs, I'm a big fan of "Shark Tank".

I was recently watching an episode (which, admittedly, may not have been the most recent episode as I keep a stash of them on my DVR) with my oldest daughter. We both noticed that, for the first time, a majority of the sharks (three of five) were female. This is a long way from when the show premiered in 2009 and only one of the five sharks, Barbara Corcoran, was female. Since then, Lori Greiner (Queen of QVC) has become a regular and, more recently, Sara Blakely (founder of Spanx) and Bethenny Frankel have become frequent guest sharks.

Maybe the entrepreneurial world is finally closing the gender gap? I came across this article containing facts that may support this proposition. The article indicates that, while only one in four companies in the U.S. are run by women, the number of female-owned firms is growing twice as fast as all business. There’s also a lot of interesting analysis about other significant differences between the sexes in how and why women start and run enterprises.

Favorite Entrepreneurial Takeaways from the Retail Success Summit 2018

This past month I attended the 10^th Annual Retail Success Summit, presented by WhizBang! Training in Grand Rapids, Michigan. This training is geared towards store owners, but employs principles that can be universal in their business application. Last year I came home filled to the brim with ideas and motivation, so I went back this year hoping for the same.

I was not disappointed! I made an entire book of notes, but I thought I’d pare them down and share a few favorites that other entrepreneurs across various industries can also put to use. 

1.  http://www.mentimeter.com. This one did not come in the form of a session or a tip, but it was used heavily and successfully throughout the conference, and I brought it home to my own July staff meeting for a bit of fun and some great results. This website allows you to create live, interactive presentations where participants can pull out their smartphones, enter a code, and submit their votes. These can be open-ended “word clouds,” multiple choice questions, scales, reactions, and so much more. It’s a great way to keep your audience’s attention, to brainstorm for honest input, and to encourage participation by allowing anonymous responses.  

Exercise: Coming Soon to Your Workplace?

Like most people who work in an office, I spend most of my workday sitting. Although I periodically use a standing workstation or walk to the printer (right outside my office), my workday is generally a sedentary affair. Exercise is part of my evening and weekend schedule.  

Perhaps that is why a recent article in the Harvard Business Review by Carl Cederstrom and Torkild Thanem titled “The Swedish CEO Who Runs His Company Like a CrossFit Gym” caught my eye. The article profiles Bjorn Borg, a Swedish sports fashion company (yes, named for the tennis star), and in particular, its CEO, Henrik Bunge. Bunge, not like some other CEOs, has implemented mandatory company workouts.  Think your yoga class or boot-camp session at the office. That sounds simultaneously inspiring and terrifying.
  
Bunge is part of a generation of CEOs who are throwing concepts like “transformational” and “authentic” leadership to the wayside in favor of “fitness leadership.” The theory is that work and fitness go hand-in-hand: Much like at the gym, the harder you work, the better your results. Bunge was brought in as CEO in 2014, when the company was struggling. His view was that the 60 employees had to “train harder, measure our goals better, and become a better team” and that success could be achieved through a marriage of exercise and work. All employees are now required to take fitness tests twice a year and there are mandatory Friday fitness classes, team wall squat and push-up competitions, and the occasional game of ping pong. 

“Smart Engagement” – Preventing Highly-Motivated Employees from Burning Out

I recently came across an interesting article in the Harvard Business Review written by Emma Seppala and Julia Moeller: 1 in 5 Highly Engaged Employees Is at Risk of Burnout. As its name suggests, the article discusses the “dark side” of employee engagement—highly engaged employees often suffer high levels of stress, which can lead to employee burnout. But the article also provides a few suggestions of how to foster “smart engagement,” which Seppala and Moeller describe as the kind of engagement “that leads to enthusiasm, motivation, and productivity, without the burnout.” 

In short, to prevent highly-motivated and high-performing employees from becoming burned out and leaving the organization altogether, employers should do more than offer wellness programs focused on healthy eating, exercise, or mindfulness. According to Seppala and Moeller, employers should ensure that the workloads of productive employees or those with a particular skill set are not overburdened and increase the resources available to employees, including intangible resources such as the ability to disengage when not working. 

After reading Seppala and Moeller’s article, ask yourself how your organization can support smart engagement.

Focus as a Competitive Advantage

I recently came across a short Harvard Business Review article written by Mike Erwin, “In a Distracted World, Solitude Is a Competitive Advantage,” that instantly resonated with me. The basic premise of the article is that technology has led to work environments where workers are constantly distracted, and that the ability to focus is a competitive advantage. Though this idea is not particularly novel, focusing can be increasingly challenging when the work you are supposed to be focusing on is constantly interrupted by other work that also demands your attention.

A particularly illustrative example is email response time. If someone sends you an email, how quickly should you read it and respond? 

From a client service standpoint, ideally, you should read it and respond as soon as possible. However, if you read and respond to emails immediately, you will probably never accomplish any of the other work that you need to do in a given day. You will spend the work day responding to emails, and your evenings accomplishing other projects or tasks that you need to finish.

An alternative is to read and prioritize emails as you receive them, and send a quick response saying that you have received the message and will address it at a later time. This plan seems better, in that it is responsive and sets expectations, but it isn’t without its flaws. Even if you are not fully responding to emails, every time you receive an email alert and check it, you are breaking your focus on whatever task you are performing.

Another alternative is to designate certain times during the day when you will review and respond to emails. This is ideal for being fully engaged in the task that you are working on, but may lack the responsiveness required for a particular email. And what happens if someone emails you about the particular task that you are performing?

Given that each of the alternatives has its pros and cons, I am not sure what the best email response policy is. As business folks, we have to be responsive to our clients and engaged in our work assignments for our clients, and so there is no clear answer. 

Email is only one of many distractions that we face on a daily basis, so it is easy to appreciate how focus can be viewed as a competitive advantage in the workplace. To sharpen your ability to focus, I suggest that you read Erwin’s short article, which offers several practical tips of how to stay focused at work. 

No Free Speech Rights Under Private Employers

Last week, we held a presidential election in this country. You may have heard about it.

When I woke up Wednesday morning (after very little sleep, like a lot of Americans), I found social media ablaze with fuel being thrown from all sides. I was barely two steps into Facebook when I found my first post from an employee (in addition to practicing law, I own a few companies, including a retail business) spewing some nasty words at another candidate’s voters. Jump two posts away, there’s a different employee posting a personal letter directed at all voters for the other top candidate.

A Nod to Behind-the-Scenes Workers

This past weekend, I was lucky enough to score incredible seats to Disney’s live stage musical, The Lion King. It was a fantastic production and I highly recommend seeing it if you get the chance! I marveled at the vocals, the set, the mechanical stage tricks, the lighting, and especially the animals.  Life-sized elephants and giraffes, flying birds, laughing hyenas, running antelope, and even a rhinoceros (!) on stage, in the aisles, in the balconies – it was mind-blowing!  

After the performance, I posted some pictures on Facebook, and learned through a comment that a friend had actually been working behind the scenes, handling male costume changes all night! I think the biggest compliment I can give this friend is that I actually forgot he was there.  Everything looked so flawless that it was easy to get caught up in the magic and forget that there were real people walking around on the giraffes’ four stilt legs, making the hyenas’ necks crane around as they laughed, and thrusting Scar’s lion head forward whenever he got angry.

Fraud Deterrence in Small Business

This past week, I watched the ABC original movie “Madoff,” which recounts the life of Bernie Madoff, the former NASDAQ Chairman notorious for engineering the world’s largest Ponzi scheme.  The amount of money that Madoff investors lost is staggering, but most shocking to me is the length of time over which Madoff’s practices continued relatively unquestioned.  Despite numerous complaints filed by a financial analyst with both the SEC’s Boston and New York offices, asserting that Madoff’s claimed returns were “legally and mathematically impossible,” Madoff’s “business” survived multiple SEC investigations.  

Of course, fraudulent business practices aren’t happening only on Wall Street.  In its 2014 Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners found that the typical organization loses five percent of its revenues each year to fraud, with a median loss of $145,000.  The report noted that small businesses are disproportionately bearing the brunt of all fraud losses: Organizations with less than 100 employees experienced a 28 percent greater median fraud loss than organizations with more than 100 employees.  And where there are two or more people involved, the median losses increase to $300,000.  For small businesses, these are big numbers.

Independent Contractor or Employee? It’s Not Always Clear.

The question of whether to treat a worker as an independent contractor or employee is an age-old question that has plagued many an entrepreneur. The classification affects how much you, as a business owner, pay in taxes, whether you need to withhold from your workers’ paychecks, and what tax documents you need to file. The consequences of misclassifying can include debilitating tax liabilities and failure-to-pay and failure-to file penalties. There are many examples of “successful” businesses that ran into problems or even were forced out of business entirely because it was determined that they had misclassified individuals (even exotic dancers) as independent contractors.
  
But how do you know when a worker crosses the line from independent contractor to employee? The IRS generally uses a three-factor test: Behavioral control (i.e., whether your control how the work is done), financial control (i.e., whether you direct or control the financial aspects of a worker’s job), and type of relationship (i.e., how the workers and business owner perceive their relationship). Not surprisingly, however, the application of these factors still leaves some businesses questioning their determinations.  And, when the decision-making is left to a court, the results are sometimes surprising.  This article written by Kevin McGowan and recently published on BNA does a good job of summarizing the findings of the U.S. Court of Appeals for the Sixth Circuit regarding the classification of an installer of satellite dishes, which was ultimately sent to a jury for resolution. Some of the relevant parts of the summary are:

A jury must decide if a technician who installs satellite dishes in Michigan for a satellite-internet-dish service firm is an employee entitled to overtime pay under the Fair Labor Standards Act or an independent contractor, a divided U.S. Court of Appeals for the Sixth Circuit ruled March 26.

In a 2-1 decision reversing summary judgment for Miri Microsystems LLC, the court said under a nonexclusive six-factor economic realities test, Michael Keller raised triable issues he was a Miri employee entitled to overtime pay. 

Miri, which provides satellite installation services in Michigan for HughesNet and iDirect, argued Keller was an independent contractor, who was paid flat fees for each installation and repair, remained free to work for other installation companies and controlled the number of days he worked and how many jobs he accepted. Keller's evidence indicated he worked six days a week from dawn until midnight.

The Sixth Circuit, however, said after reviewing the relevant factors—permanency of the relationship, degree of skill required, Keller's investment in the enterprise, his opportunity for profit and loss, Miri's right to control how work is performed and whether Keller's services were “integral” to Miri's business—disputed issues remain that require a jury's resolution.

In dissent, Judge Alan E. Norris agreed Sixth Circuit precedent supports use of the six-factor test for determining employee or independent contract status in FLSA cases. But he said he would affirm Keller was an independent contractor, given the absence of an employment contract with Miri, his ability concurrently to work for other companies and Keller's control over his own schedule.

Some business owners believe it’s always less risky to classify a worker as an employee, simply because the added compliance costs today outweigh the potential misclassification liabilities. Before making worker classification decisions, be sure to carefully review the existing guidance and consult with your professional advisors, who routinely counsel businesses of all sizes through such matters.

Grumpy Old Venture Capitalists

Last week I attended a panel session entitled “Grumpy Old Venture Capitalists” which was hosted by Club Entrepreneur, a local club that hosts semi-monthly lunches for those in the entrepreneurial community. Norm Dann, Andy Greenshields, Richard Perkins, and John Trucano (a.k.a. the Grumpy Old Venture Capitalists (GOVCs) shared stories about their best deals and what they have learned from their investment failures over their past combined 100 years in the venture capital world. The event was extremely well-attended–I mean who could resist learning from venture capitalists who have seen the good, the bad, and the ugly (and I don’t mean the movie)?!?

Several of the questions during the panel session inevitably focused on what the GOVCs look for when determining if they are going to invest in a company. Not surprisingly, the response was unanimous—they look for a company with the right people. They want to see a company comprised of people who are passionate about the company’s product or service and are working non-stop to make the enterprise a success. One panelist added that he’s not going to be impressed if he meets with an executive who has a nice tan or boasts about what a low handicap he or she has. They want to see executives who live and breathe their businesses.

The bottom line: if you’re running a start-up, it better be the focus of your team members’ lives. If you’re an entrepreneur, take a moment to think–do you have the right people in your organization? Does each person contribute something unique to the organization? Do your team members execute their ideas effectively and successfully? It’s the right people that drive innovation and create success. As the GOVCs highlighted, it’s the people that can make or break your company.

Are you willing to bet your company’s future on your current team members?

What: Professor X, In the Basement of the Ivory Tower: Confessions of an Accidental Academic (Viking, 2011)

Why: Qualification inflation is rampant. On a purely utilitarian basis, are we forcing people to obtain costly postsecondary qualifications that are unnecessary for the tasks they perform? 

Readers of my posts will know that I am a fan of David Brooks, whose writings I have come to admire notwithstanding certain differences in political outlook. Close friends will also know the great influence my father’s views on education have had on me and the course of my life. Let’s just say he saw education as the key to unlocking potential, a world view he successfully imprinted on his children.

So, when I saw that David Brooks had awarded a Sidney Award to Professor X for an essay on higher education that appeared in The Atlantic a few years ago, I made a mental note to track the piece down. Later, to my delight (sometimes it doesn’t take much to delight me), I found that it had been expanded into this book. Cracking it open, I immediately discovered why this was published under a pseudonym.  

Professor X has the somewhat controversial opinion that too many people who do not belong in college and don’t need a college education to do what they do are being told they need to get a sheepskin. They are incurring huge amounts of debt (in excess of $1.2 trillion) in what for many of them has become a failing enterprise.

Professor X tells us there is a social disconnect here. He identifies, as a typically American trait, the use of a meat-axe where a scalpel would serve nicely:

                    The United States of America does a few things extremely well. It is

                    unmatched at completing a certain species of task requiring a relentless 

                    approach….We’re not the best at figuring out why we’re doing any 

                    particular task, but we are a people who can get stuff done….

                    We are, if nothing else, thorough.

We have, he suggests, been much too thorough in pushing people into postsecondary education and in requiring qualifications for occupations that may be gainfully pursued without an education unrelated to the tasks at hand.

I personally believe that education is its own reward, and that education can lead to the discovery of potential that might otherwise remain untapped, but on a purely utilitarian level Professor X makes an important point—one that I suspect most entrepreneurs know or soon discover as they pursue their dreams.

Think of Bill Gates dropping out of Harvard to build what has become the leviathan we know as Microsoft. He learned what he needed, but knew that a liberal arts degree wasn’t necessary for him to achieve his vision. And that, at the end of the day, is the conclusion Professor X reaches: “Let’s start judging based on skills and experiences and talent, and save failing students from a mountain of unnecessary debt.”

THE WORLDWIDE VILLAGE AND THE CHILDREN WE’RE RAISING

It’s been said that entrepreneurs have to think globally to survive locally.  This statement is more true today than ever before, as the competition (large, multinational corporations) is looking overseas to improve cost efficiencies by reducing overhead. Unfortunately for the local “mom and pop” establishments we have come to cherish, the economics make staying in business harder to manage.

One thing I love about Minnesota is the emphasis on “locally sourced” products, as this instills in us a tremendous sense of pride in the collective sweat equity of our state’s workforce.  My wife and I believe that patronizing local businesses is a great way to show our appreciation, and we are both attuned to the benefits of local entrepreneurship and how such establishments can make or break the character of a particular neighborhood.

This has inspired me to take a more in-depth look at what “globalization” means, how it impacts other countries, and whether it is the type of villain that should be taken on by the agents of S.H.I.E.L.D. (which is one of my favorite shows now that this season of Scandal has concluded). The fanciest definition I was able to find (on Google®) is “increasing integration of economies around the world, particularly through trade and financial flows,” but it is easier to comprehend globalization as the movement of people (labor) and knowledge (technology) across international borders. 

In other words, globalization stimulates free trade that motivates American corporations to move operations overseas to developing countries so that they can circumvent union activity and take advantage of cheaper labor opportunities. Quite often these countries are located in third world developing countries like Asia, Africa, and Latin America. These countries have also historically suffered from high unemployment, political instability, corruption, and little—if any—government interference or regulation.

Because of this, the word “globalization” has become an ambiguous and emotionally charged term—a mixed bag of acceptance and rejection. Some see it as leading to positive free trade that leads to healthy competition, higher productivity, and economic prosperity for both the developed and developing country. Others see it as enabling a negative trade system that exploits developing nations. Whichever way you see it, it is widespread and it is here to stay.

 American corporations easily find that they can contract out their raw materials to overseas factories in countries like India, Indonesia, Pakistan, Mexico, China, and Brazil because unemployment is high and many of the people are willing to compete with each other to work for less. Economists and politicians have referred to this as “downward leveling” or a “race to the bottom.”  Developing countries pit themselves against each other to see which can offer multinational corporations the cheapest labor.

Accordingly, some see globalization and the rise of multinational corporations overseas as creating substantially increased demand for child labor in developing countries.  While companies say that they do not condone the use of child labor, the reality is that these corporations “sub-contract” out their work to smaller companies that do use child labor as a way of competing with other companies to lower labor costs substantially.  

Look, I get it: globalization ushered in free trade and open markets, which in turn encouraged multinational corporations to look for the cheapest labor markets. Who isn’t guilty of trying to save a buck here and there? But let me step onto my portable pulpit here for a moment.  Shouldn’t we be tying the protection of children to free trade and the prosperity of developing countries?  The progress, success, and wealth of a nation are dependent upon the education of its children. Multinational corporations have a social responsibility to live up to high standards that value children first over profits.

The Games HR is Playing

Let’s face it. The HR department isn’t typically filled with the go-to techies in your office. Usually HR lags more than a bit behind the curve on technology adoption – primarily because HR isn’t usually a profit center so acquiring new technology can be an uphill battle from the get-go. But there’s some really, really cool stuff happening in HR tech.  My favorite is gamification.

Gamification is starting to pop up everywhere in HR, and that should be no surprise. With everyone from my 6-year-old to his grandma playing Angry Birds or Candy Crush, new and established companies are finding gaming as a way to transfer detailed information to a wide variety of employees. By using a game, companies can engage employees and potential applicants in something fun and educational. Just like Where in the World is Carmen Sandiego? (and its catchy theme song by Rockapella) taught me geography.

How about using a game like Farmville to attract your next Restaurant Manager? Marriott Hotels did just that.  By placing a game on their Facebook careers page permitting potential applicants to test their restaurant managing skills – complete with purchasing ovens, hiring chefs, and selecting produce – Marriott engaged thousands of potential applicants before they even submitted an application. Plus, applicants could self-evaluate whether they’d even be good at the job. (I’m awful and should not apply.) 

But gamification isn’t just coming from big companies, entrepreneurs are developing games too. Imagine training folks on ever-changing and complex concepts using a video game. Cool, right? That is exactly what VitalSims is doing – using video game simulations to teach doctors and nurses how to treat the chronic disease of diabetes. Because diabetes treatments are evolving, training care givers can be tricky. With gaming, the sometimes tedious task of reading scientific journals can be supplemented with gaming simulations providing richer and more meaningful training. By partnering with HealthPartners and the University of Minnesota, VitalSims has developed their gaming simulations to be as up-to-date as possible so patients receive the best possible care.

If you think gamification will only work on your young, male employees, think again. Video gamers are much different than you think. The demographics are astounding: 45% of gamers are female and 68% of gamers are over 18. In fact, almost twice as many females play than teenaged boys. Female gamers are not mythical creatures!  While not everyone may be tracking down drug dealers in Grand Theft Auto V, you may hear your HR department advocating for some gaming soon.

A Post by Kate Bischoff, Guest Blogger