Episode 42: The Great Covid Churn

Guests:

Paul Downs is founder of Paul Downs Cabinetmakers.

William Vanderbloemen is founder and CEO of Vanderbloemen Search Group.

Laura Zander is co-founder and CEO of Jimmy Beans Wool.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Episode Highlights:

William Vanderbloemen: “Turnover just happens in the job market. There’s healthy turnover, there’s unhealthy, but there’s always turnover—except when there’s a pandemic.”

William Vanderbloemen: “Better to keep a good employee—even if it costs you more than you think it should—than to have to call me.”

Paul Downs: “I’m gonna err on the side of the company survives, because that’s actually the best thing for the employees in the long term anyway.”

Full Episode Transcript:

Loren Feldman:
Welcome, Paul, William, Laura. I’d like to start with you, William. You run a recruiting business, which gives you perspective not just on your own employees but also on those of the client companies you work with. I’m wondering if you’ve drawn any conclusions as to what this crazy year has done to relations between employers and employees and what that might mean going forward.

William Vanderbloemen:
I do think that this year—and the pandemic in particular—has accelerated a lot of things that might have taken a while to change, and it’s also decelerated some things that were going to change and didn’t. A quick way of saying that is: I think you’re gonna see—in fact, I know, because I’m already seeing it—you’re going to see 2021 as a year of—I’m calling it—the great COVID churn. In other words, it’s a year of turnover.

Loren Feldman:
What are you seeing that convinced you of that?

William Vanderbloemen:
You remember in elementary school there were the tests you take, and then there was the teacher’s edition that already had the answers in it? We kind of get the teachers edition on the job market, because we’re already seeing people tell us, “I’m ready to make a move.” It’s December, and who moves in December? You move in January, right? That’s when everybody’s gonna lose 10 pounds and balance their checkbook. But we’re already seeing—instead of January—“Okay, I’m ready to look around.” We’re seeing in December some pretty major moves.

It’s made me stop and say, “What’s really going on here?” A couple things. I’ll try not to ramble, but one, the pandemic put up a dam in the middle of what’s a normal flow of turnover. Turnover just happens in the job market. There’s healthy turnover, there’s unhealthy, but there’s always turnover—except when there’s a pandemic. Obviously, some companies had to lay people off because of the pandemic, so there was some churn there. But a lot of good people who would have made a natural move because of career stage or geographic need or a promotion or try a new thing—a lot of the people who would have made those moves voluntarily hunkered down during the pandemic, and what should be a natural flowing river of healthy transition, it actually got dammed up by the pandemic, so that’s one thing.

And now that the vaccine has been approved in the U.K. and should be here in the U.S. pretty soon, maybe it’ll take until the end of Q2 for everybody who wants a vaccine to receive one… By the end of Q2, I think the fear of moving will have gone away. That’s just to say, we’ve lived with a really uncertain year. And a lot of people who would have made a move have said, “I don’t need any more extra uncertainty in my life right now. So I’m gonna wait and make a move once this clears.”

Laura Zander:
Can I jump in? So where we live, in Reno, it’s a lot of—I don’t know what the statistic is, but there’s not a huge population of people who were actually born in Reno and are from Reno. It’s a lot of people from the East Coast and all around, and people are moving home. They’ve just decided, this is it. I’m done.

William Vanderbloemen:
Laura, I totally agree with you. I would say there are a myriad of reasons why this is going to be the year of turnover. One of them is, people who were waiting to start their own company, people who were waiting to take a job at a competitor, people who were there like, “No, I’m not doing that right now, no more uncertainty,”—now, right after that, there’s a whole lot of other reasons like we’re doing several searches right now for repeat clients where we placed an individual, and it’s only been three, four, or five years, and the individual has moved. And the client has rehired us to refill the spot, which you’d think, “Why would you rehire us if the guy only lasted that long?” And they say, “No, no, no. They did a wonderful job, but the pandemic has made them realize they want to live near their family of origin. They want to go back home.” So that’s only going to accelerate.

Then you add in, I’ve got some dear friends in Park City, which has been a quiet little mountain town forever, and now it is one of these bedroom communities outside of a major city, and Salt Lake’s growing like crazy. Well, Park City’s growing quicker, because—as Loren can relate—Princeton, Stanford, all the places Don and Betty Draper would have lived that everybody said was a dead real estate market, well it’s hopping. Everybody wants out of the city, so people are moving geographically, and that’s going to increase in ‘21. People are moving for family reasons; that’s going to increase in ‘21. People are moving because they would have moved in ‘20 and they put it off, and that’s going to increase in ‘21.

The other thing that’s happened is everyone’s job has completely changed, and a whole lot. I mean, I can’t tell you the number of people who are like, “This isn’t what I signed up for anymore.”

Loren Feldman:
That’s interesting. Laura, are you seeing any of this? Are you experiencing any of this turnover?

Laura Zander:
Well, I’m not directly in our business experiencing the turnover, but from a geographic viewpoint, we’re seeing the exact same thing, because [we’re in] Reno, and then we’re right by Truckee. We’re on the edge of Lake Tahoe, which is where Doug and I moved 20 years ago from the Bay Area. At the time, it was 80 percent second-home owners. We had a population of 14,000 Monday through Friday, and then 100,000 on the weekends. Right now, it’s 100,000 all the time.

So it’s similar to the Park City thing, and it’s really drastically changing the community. And we can’t keep up. The quality of life is so different. But from a turnover/employee standpoint, I have a very different perspective than the employees do. I only see what I want to see, in some ways.

For me, I’m like, “Oh my God, everybody’s so happy. They love their jobs, they love their boss.” But I checked in yesterday, and I’m like, “How much turnover do you think we’re gonna see next year?” And we have one girl who we think wants to start her own business, just as William just said. We have another girl who is going to be moving back to her country of origin in the near future, and this has really ignited that.

Down in Texas, though, we’re seeing kind of the opposite, where people are really hunkered down. I think, partially because of the way that we treated people during this, I don’t know that anybody’s going to go anywhere. They seem very, very happy and grateful, and we think, actually, that 2021 will be the year where we’re one of the best places to work in the city of Fort Worth.

Loren Feldman:
You’re kind of taking the opposite perspective. Things have been so difficult and uncertain that people are just happy to have a job and eager to make it work. Is that what you’re saying?

Laura Zander:
That’s part of it, yes. I would like to think—and again, I know I’m speaking from an ivory tower—that our true colors came out as an employer and how we treated people, and that people are cognizant and realize that they work for a good company, and they work for people who care about them. The grass is just not really that much greener anywhere else. Does that make sense?

Loren Feldman:
It does make sense. Paul, how about you?

Paul Downs:
I recently sat and had the thought that this is the first year since 1988 when I have neither hired nor fired anybody, and so I would vote for, at least in my experience, stability. But in another enterprise that I’m associated with that’s sort of peripheral to the restaurant industry, we made an effort to hire last spring, because we realized a lot of good people were on the street. I think a lot of it has to do with what sector you’re in, that some are going to be churned through involuntarily, more or less, and there’s going to be a lot of moving around, or people moving in and out of different industries. I think that you could throw out any answer, and there’s going to be some sizable group of people who it applies to. 2021 is bound to be just as much of a surprise as 2020, is my feeling.

Laura Zander:
Is there going to be a difference in professionals and the behavior in the turnover of professionals versus warehouse hourly workers? I think that professionals tend to be a little more transient, and they’ll move other places—like William said, out of their city of origin—versus most of the hourly employees who we have. This is where they’re from. They’re never going anywhere. This is where their family already is. They’re just looking for a good, stable job to be at for a long time.

William Vanderbloemen:
Yeah, I think that’s spot on, Laura. We are primarily within what you would call the “professional industry,” so I don’t have nearly as much expertise as you guys on the non-professional. And we may be skewed in our view because we lean so heavily this way. Sidebar just for a second. The reason Billy Graham is Billy Graham—other than a lot of people would say he was a great preacher, or God blessed him or whatever—Billy Graham’s Billy Graham because of World War II. He really broke loose in 1949, and that’s when this mass evangelism movement happened.

Well, why is that? Well, people had just faced death, pretty much square in the eye. And all of a sudden, they’re like, “Wow, life’s short. Wow, I’d better think forward, like past this world,” or whatever you want to say. So just from a forensic study of Billy Graham, I think you’re gonna see, after this pandemic, not quite the same conversation, but people saying, “Life can end quickly. This is more fragile than I thought. I want to do something that matters and not just earn the buck.” So you’re going to see people changing jobs.

Turnover is going to happen because people make values-based decisions for their career that they might not have made if they didn’t have to stare at awful pictures of overloaded ICUs or lose a friend or family member or whatnot. I’ll be quiet after this last one, but there’s also the latter half of the Baby Boomers who are yet to retire. A whole lot of them have said, “I thought I was gonna do 10 more years. But am not, I can’t run at this pace. My company needs a different leader, a digital native, and let’s find a parachute and get me out of here quicker.”

Laura Zander:
It’s a reckoning, a total reckoning, right?

Loren Feldman:
William, if you see this coming, either for your business or those of your clients, what do you do? What do you suggest?

William Vanderbloemen:
That’s a great question. Get to know a good executive search firm.

Paul Downs:
Funny how that came in line one, right there.

William Vanderbloemen:
If you’re me, it’s: How quickly do we staff up? Because I do think we’re going to be incredibly busy next year. But if you’re not me, three pieces of advice: retaining employees, it’s almost like customers. Retaining a good employee is way less expensive than going and finding a new good employee. I would say, make sure your compensation is right. Within our vertical of faith-based schools and churches, we spent the last two years building compensation data and algorithms because that vertical’s horrible about sharing information with each other. We’re already setting a record number of compensation studies that we’re doing for clients, because people are trying to make sure they’re paying their people fairly. We don’t want to lose somebody over a couple thousand dollars.

Point one of getting ready for turnover: make sure you’re paying fairly. Don’t lose somebody over a small amount of money, because replacement costs are way more than a little bit more of a raise. This is a year where it’s really tempting to say, “Well, we don’t know what’s going to happen, so we’re not going to do raises. Or we’re going to lower pay a little bit.” I would say just the opposite: It’s going to be the year of turnover, so spend whatever you can to make sure you’re paying very competitively.

Laura Zander:
We gave raises this year. It’s a pandemic, and so we feel like most of our profits need to go to our employees, because they’re the ones who are on the front lines. It’s not even about retention. It’s about doing the right thing. It’s about recognizing that half of our employees may have somebody, might have a spouse at home, who’s not working right now. And so what can we do to make their lives better?

Paul Downs:
I’ve got a slightly different perspective on that. I think it’s really important to not necessarily just hand out money to employees, because once you do that, you can’t ever get it back. My particular industry is still quite uncertain. It’s just not clear to me who wants to buy big conference tables, and I think it’s important that the company remain healthy. I’m gonna err on the side of the company survives, because that’s actually the best thing for the employees in the long term anyway.

They’re already compensated well over market, and they don’t have any place to go to get more money in my industry. And I do a lot of messaging with my people about, “We work for the company. The company has to be healthy in order for it to take care of us. And sometimes the company takes care of us, and sometimes we take care of it.” I see this as a period during which we take care of it. None of them have had their pay cut, other than a brief period of unemployment that was mandated when we were shut down by the state. I took the PPP money and actually bonused people back in the spring to sort of top up for that period of unemployment. Other than that, everybody’s been working full speed, and they’re going to get all the pay they would normally get.

Laura Zander:
So you did give them a bonus. You did give something back to them.

Paul Downs:
I gave something, but now we’re at the end of the year. If I heard what William was saying, it would be like, now I would put my foot harder on the pedal and pay them more or bonus them more and try to buy loyalty.

Laura Zander:
I don’t know if that’s what he’s saying.

Paul Downs:
Okay, I’ll withdraw that. You’re trying to ensure loyalty.

Laura Zander:
You just did. You already did, because you did already give bonuses out to them.

Loren Feldman:
Paul, it sounds like you’re not terribly concerned that you’re going to experience the COVID churn next year. Is that correct?

Paul Downs:
No, I’m not personally. I mean, I could be surprised. I don’t know. Employees are what they are, but I don’t see it as likely, for me.

Loren Feldman:
Because…

Paul Downs:
Because as I said, we already pay over market. It’s a good place to work. I don’t see people having better alternatives.

Loren Feldman:
Paul, I think you referred to a side hustle earlier in this conversation that you haven’t mentioned to us before. Did you say it was in the restaurant business? What were you talking about?

Paul Downs:
So I have a son who’s autistic, who is now an adult. In the course of dealing with him, I entered into a relationship with a service provider who deals with intellectually disabled adults. They have an employment scheme they’ve been trying to establish as a nonprofit, which is a bakery operation to employ people like my son. It also employs regular people as well, because you can’t have an entire business staffed with autistic people. I’m on the board of the nonprofit that owns two bakeries and a coffee operation, a bunch of little micro businesses. In the course of running that, that’s how I got into the restaurant world.

Loren Feldman:
Interesting. We’re gonna have to talk more about that at some point.

Paul Downs:
If I’d thought about it, I probably would have given a more coherent answer, but that’s how.

Loren Feldman:
William, I’m curious, are there any signs of the churn you’re talking about that aren’t obvious when employees are thinking of leaving, things that owners should be looking for?

William Vanderbloemen:
Well, I’d say in general, shore up your compensation, and that’s not to buy loyalty as much as to make sure you’re not going on the cheap in a year that feels like you could, and then you’d end up losing people over a couple thousand dollars. Second thing is, there are so many Best Places to Work surveys out there, but if you’re not regularly taking one of those—that’s a blind 360 of your company culture—and there’s so many good ones. We have one, it’s totally free: theculturetool.com. Go and take it. There are 10,000 organizations that have taken it. You can measure yourself.

Laura Zander:
You’re so good. What’s the URL again?

William Vanderbloemen:
Theculturetool.com.

Laura Zander:
Okay, is there an 800 number, too?

William Vanderbloemen:
Exactly.

Paul Downs:
Operators standing by. [Laughter]

Laura Zander:
No, I love it. That’s a really great idea.

William Vanderbloemen:
Well, we were tired of the shortcomings of some of the ones we were using, so we just built our own and did it through a bunch of research. But anyway, I would say, Loren, you need to be doing a self check—kind of like going to the doctor—and make sure there’s not a problem in your culture. Because people will leave if the culture is bad and if the manager is bad. But then the third thing I’d say is, just be ready for the thing you weren’t ready for. I’ve already faced—

Loren Feldman:
Isn’t that easier said than done?

William Vanderbloemen:
It’s going to be a year of surprises. I had a mentor a long time ago tell me—and I’ve kept it to this day—“William, you need to keep a vomit list.” I’m like, “What are you talking about?” He said, “Of all your staff people, you need to know right off the top of your head the two or three that, if they came into your office at the end of the day and said, ‘Hey, have you got a minute? I need to talk to you about something,’—which we all know what that talk is. It’s the ‘I’m leaving’ talk. The first thing you do is reach for the trashcan, because you’re gonna vomit. Know who those people are, and take care of them, even if it’s inequitably taking care of them. Take care of them in a way that, if they’re really going to leave, it’s not because you’re not taking care of them, not appreciating them, not paying them enough, not creating a culture for them. And guard against this.” You will lose some people you didn’t think you would lose this year. Paul, I bet you lose somebody.

Laura Zander:
From a personal standpoint, I have never had to practice stoicism and a stoic approach to life more than I have in the last nine months. I think what you’re saying is, for me, that’s my way of getting through it. It is what it is. If I do the right thing, I pay them well enough, I make sure our culture is not toxic and we’re in a good spot. We’re listening. I can’t help it if somebody wants to move back to Chicago, and like you said, wants to move somewhere else or has changed their priorities. Everybody’s changed, and so it just is what it is.

Loren Feldman:
William, have you tried to quantify the cost of turnover? You referred earlier to how it’s more expensive to replace somebody than to keep somebody. Have you tried to put a number on that?

William Vanderbloemen:
Okay, everyone listening to this podcast, I’m not paying Loren to ask me these questions.

Loren Feldman:
Do you have another URL for us?

William Vanderbloemen:
I have blog articles, and you can spell Vanderbloemen however you want to spell it in Google—it’s the only reason we named our company that—so you’ll get there, and look for articles on turnover: “cost of turnover, Vanderbloemen.” And you’ll see, we’ve done really specific studies on what it means. And it’s scary, particularly if you get north of about $75,000 in salary. You lose one of those, and it is well into six figures, the replacement costs.

Loren Feldman:
You’re not saying to pay the new person. You’re saying just to replace them it costs six figures?

William Vanderbloemen:
That’s right, that’s right. You can figure it out yourself: How many meetings are you gonna sit through to hire the next person? How much do you get paid an hour? What are the soft costs on everybody involved? What’s the loss of momentum? What’s the loss of revenue? How long does it actually take, once you’ve got a new person, to get them up and running, where they’re earning their keep? We say it in sales all the time, “Better to keep a happy customer happy than to have to go find a new one.” Well, better to keep a good employee—even if it costs you more than you think it should—than to have to call me.

Paul Downs:
Hey, can I jump in and play the role of Jay? I’m going to just ask the question, whether you think it’s not also likely that the stress on the business in the last year has revealed your weakest performers, and that it may not be bosses cleaning house that contributes to the churn?

William Vanderbloemen:
Hmm, that’s good.

Loren Feldman:
Good impression of Jay.

Paul Downs:
I can try to imitate his particular delivery, too, if you want, but I think that that’s what he would be saying.

Loren Feldman:
Any thoughts about that? Is it possible any of you are sitting there thinking about the churn, and you have certain employees in mind that you hope will move on?

Laura Zander:
No, because we did that, for us, back in April. That gave us the opportunity at the beginning.

William Vanderbloemen:
Same, Loren, and we didn’t just get rid of dead weight. All of our people were good, but when we had to do our layoffs back in early April or late March—I don’t remember the date—I compared notes with my COO and one other leader on our team. Like, if we had to make this percentage of a cut, who do you think should go? And all three of us had the same lists independently drawn up, not one name different. It wasn’t that we had it in for them, or they were bad people, but it was just, “I know who we really cannot lose.” So the people that are shining are shining bright. We’ve had a lot of internal promotions even since this summer. We’ve had a nice little surge of business. I think this is a time where it’s like, “Hey, if you’re working your tail off, it’s going to show like never before.” That’s not the way Jay would say it, but yeah.

Laura Zander:
Same thing. I mean, we’re doing more with less people, and it’s unbelievable. It’s so impressive.

Paul Downs 29:00
In the course of this conversation so far, I’m picking out an assumption that the economy is going to continue to be pretty strong. Do you guys really believe that? I think it could really go either direction.

William Vanderbloemen:
Well, I think if it goes the other direction, you’ll have turnover as well.

Paul Downs:
But that would be more, if I’m going to have turnover, I think it’s much more likely that I’m just going to have to downsize. I’m staffed for $4 million a year and I know what $2 million a year looks like, and I may just have to go there, as opposed to someone just leaving. I mean, that can always happen, but that to me is a different event.

William Vanderbloemen:
What I’ve learned studying the job market as a search person is that churn happens most in the highest highs and the lowest lows of the economy. That’s just historical fact. So if it turns south, churn happens then. Some of it’s forced, some of it’s unforced, but I don’t think there’s any way around it. I’d love to find a way. I don’t know if I’m talking to Jay or Paul. I’d love to find a way to tell you you’re not going to lose anybody next year. But I’d rather tell you to be ready for it.

Paul Downs:
Okay, thank you.

Loren Feldman:
Let’s talk about the PPP issue. Let me see if I can articulate the issue correctly. Please correct me if I get this wrong, but basically, the IRS seems to be saying that if your PPP loan is forgiven, the loan then becomes essentially a grant, which means it’s taxable income. If you can’t deduct against that income, which seems to be the case, some owners are going to wake up and realize that they have to pay tax on more income than they were expecting. Do I have that right? Are any of you concerned about this?

Paul Downs:
That sounds correct, aAnd I think in an earlier iteration of the podcast, I couldn’t put my hand on why that might be a bad thing. Because personally, we got the money, and I still have the money. If it got converted into a grant, and then I had to pay some tax on it, I’m still way ahead by a couple of hundred grand. But if you were not able to operate, and you paid out all of your PPP money to your employees, you might not have any income or any cash to cover the tax bill that’s coming, and it could be quite bad. I think that people who are maybe in the restaurant industry or some of these other industries where it was really impossible to either operate normally or to sort of recover from the hit could be in a very difficult position.

Loren Feldman:
Well, let me let me ask William this, because William, I know you’ve tracked the PPP thing closer than anybody from the very beginning. This shouldn’t be a concern for someone in the restaurant industry if they are losing money. I mean, if you’re losing money, this is not going to be a problem for you, right? The trick is going to be, there are going to be some businesses that think they’re going to lose money, and then when the loan gets converted to a grant, they end up with a profit that they have to pay taxes on that they weren’t expecting. Do I have that right?

William Vanderbloemen:
The short answer is, Loren, I don’t know. I really don’t know anybody who’s studied the PPP more than our team, particularly our COO. We’ve talked to numerous accountants, including our own who works only with family-owned small businesses that are in growth mode. There are smart accountants that completely disagree on this, on how it will play out. My current opinion is that we took PPP money, we spent it on salaries. It will show up on our ledger as it’s exhausted. And my accountant’s current advice—and I’m gonna believe with her for now—is that, if it is taxable income, that we will be able to deduct the payroll money that we spent that income on. It’s just a wash. You just can’t double dip. You can’t not call it income, and then deduct the payroll in another spot in your ledger.

Paul Downs:
I think the way you described it sounds wrong to me. You pay it out to the employees, and no, you’re not allowed to deduct those expenses. And so basically, the forgiven amount just ends up as income without a compensating deduction from the paying to the employees. I was talking to my woodworking business owners group. All those guys were in the same boat that I am, which is they still had the money, because they were able to operate. And I said, “Well, I’m thinking of just taking it as cash and paying the taxes out,” and they’re like, “Oh, no, don’t do that. We’re just gonna buy equipment, because then we get a section 179 deduction that we can take this year that eats up the extra income. So it’s basically like getting a bunch of free equipment from the federal government.” That’s how they’re thinking about it.

Laura Zander:
Can I just interrupt? Six months ago, when we were talking about the PPP stuff, I think Loren would have said, “Paul, aren’t you going to go to jail for just holding on to that money?” Are you worried about getting in trouble?

Paul Downs:
Not at all. First of all, if you look at my books, money is fungible. Which money is it that I have right now? Is it the money that I made by operating profitably over the course of the summer? Or is it the money that the government gave me? They gave me money—

Laura Zander:
You just admitted on a public podcast.

Paul Downs:
I’m not worried about it. All I did was get money, pay my employees, operate normally. I haven’t done anything that’s wrong. Where’s the fraud? What was it?

Loren Feldman:
I think Laura is raising a concern that some expressed early on, that if a business applied for the money—for the loan—they had to need it. And if they didn’t need it, that could be a problem. And I think that’s what she’s referring to—the fact that you haven’t spent the money suggests—

Paul Downs:
I’m not worried about that at all. First of all, they asked me that question on April 15th, or whatever it was, where I was sitting in my office by myself, and all of our customers were shut down. And if you said to anybody, then or even now, “Is a guy selling huge conference tables likely to be in a good position a year from now?” the answer is: no. And it’s still no.

We do business with all kinds of people. A significant amount of my business comes from Midtown, New York, and there’s nobody there right now. I’m still just as concerned about the future as I was in April. And if that was the question: Am I concerned about the future? Am I worried about what’s going on? Yeah, I’ll stand up in a court of law and swear to God that I’m not sure that I’m not going to need that money.

Loren Feldman:
I think that changed over time, too. I think that has receded as an issue as the government has changed the rules. Laura, I’m curious about you. Are you concerned about the deductibility issue and a possible unexpected tax bill?

Laura Zander:
No, because I learned my lesson from being so concerned that I was going to go to jail in our old podcast [episodes] that I’m not going to spend time being anxious about it until the rules actually come through and until we find out. I just can’t do it again. This whole thing has been so emotionally exhausting with the uncertainty of the rules and how’s it gonna play out…

Loren Feldman:
So you’re not even thinking about it. You’re just waiting until you know something definitive?

Laura Zander:
Yeah, I don’t care. It just is what it is. There’s nothing I can do about it, and I’m not going to waste time trying to figure it out because we don’t know. I mean, if William doesn’t know, nobody knows. Once he tells me what the deal is, then we’ll know.

William Vanderbloemen:
We’re keeping our powder dry in case we have to pay a tax bill. But my current hope and understanding is if you received the money, and you spent the money, and it’s within a P&L, then the current understanding that I’m adopting is: you should be fine. But I’m also keeping money set aside in case I’m wrong.

Loren Feldman:
So none of us are CPAs, and I think we’ve kind of gotten three different approaches to dealing with this. And I think that makes the point that we should make, which is: be careful. Anybody thinking about this should not assume that they know everything they need to know. Let’s move on to another happy topic: Has anybody gotten their health insurance bill for next year yet?

William Vanderbloemen:
It’s amazing.

Paul Downs:
In what way?

William Vanderbloemen:
Our benefits guy [said] it’s just across the board. He manages probably 500 small businesses, and he said, “Across the board, rates are coming back lower. Insurance companies are freaking out that people are going to cut benefits, so they’re cutting costs everywhere they can to try and get things down to keep people from leaving benefits plans.”

Loren Feldman:
When you might have expected that, with a pandemic underway, rates would skyrocket.

Paul Downs:
I’ll add a data point to that. All these things are different state to state because states have different insurance regimens. But under Obamacare in general, if an insurance plan doesn’t spend out all the money that they collected in premiums the previous year, they’re supposed to give a refund. A lot of those plans did not spend out because people stopped doing voluntary medical transactions, so we actually got a refund from our insurer back in May.

They’re like, “Holy smokes, people just stopped going to the doctor. We’ve collected all this money in premiums, and we’ve got to give it back.” That could be part of it, that all of those plans are sitting on big pools of cash, and they have to go back to a state insurance regulator every year and justify their rates. They’re going to have a hard time going and saying, “We need to raise our rates.” “Oh, but you didn’t spend all the money you had last year.” We saw a very minor increase in two of the three plans that we offer and a decrease in the bronze level plan. It’s a wash, more or less. But that’s better than it’s been over the last 10 years.

Loren Feldman:
William, that kind of suggests that the same thing that you see happening with employment next year could happen with medical procedures. There could be pent-up demand for all kinds of things that people weren’t going to the doctor for this year.

William Vanderbloemen:
Fascinating. Yeah.

Loren Feldman:
Laura, have you gotten your plan for next year?

Laura Zander:
I haven’t looked at it. But this was the very first year that we had ever offered health insurance, so I don’t have a lot to reference. So I don’t know. I know our home insurance has been quite an issue and quite a problem. We’re having trouble getting our house insured.

Paul Downs:
Is that because you’re in fire country?

Laura Zander:
There was a fire 100 yards from our house. Yeah, that’s probably why.

Paul Downs:
Yeah, that might have something to do with it.

Laura Zander:
Yeah, you think? I don’t have a lot to say on the health insurance stuff. This is a whole new experience for us.

Paul Downs:
I just have a quick question for William. Do you know approximately how much you pay to ensure your people?

William Vanderbloemen:
Not anymore. I used to and now my COO manages all that. I just know if we have a big increase or not.

Paul Downs:
It’s the second biggest bill I pay every year.

William Vanderbloemen:
Yeah, it’s huge. We don’t fully underwrite insurance. We subsidize the premium, but not fully.

Paul Downs:
Right. Even taking that into account—I do the same thing, share costs with my employees. But it’s still the second most expensive thing we buy as a company.

Laura Zander:
Even more expensive than cost of goods?

Paul Downs:
Yeah, like from a single thing. I’ve got COGS [cost of goods sold], and that’s a bunch of stuff. But in terms of writing checks to one company for one thing—

Laura Zander:
Ahhh, yeah. Great point. I don’t think people realize that. It’s for us, six figures, for sure. Well beyond six figures.

Loren Feldman:
You just started doing that last year?

Laura Zander:
We just started doing it this year: 2020.

Loren Feldman:
And has that worked out well for you? Are you happy with the way it went?

Laura Zander:
Yeah, more people took advantage of it than we thought were gonna take advantage of it. It makes me happy to know that people have insurance.

Paul Downs:
I’ll tell you a couple of data points on some of my hourly workers. I take the cost of covering them and their families and divide it by the number of hours worked so that they have some sense of what is insurance in dollars per hour. It ranges from $4 to $10 an hour in total cost.

Laura Zander:
That’s a great way to do it. That’s a great way to drive it home and make it understandable.

Paul Downs:
Yeah, because you’ve got someone who’s making 18 bucks an hour, and we’re picking up the insurance bill. I was like, “Oh, by the way, you’re actually getting paid $28 an hour. Just so you know.”

Laura Zander:
Do you do a 401k as well?

Paul Downs:
We have what’s called a “simple plan,” which is a version of that. That’s available for everybody, and about half of them take advantage of it.

Laura Zander:
Okay, but you don’t throw anything in there?

Paul Downs:
We do. We throw in up to 3 percent of their wages, and they still won’t sign up. I’m like, “Well, okay. I offered you free money. You didn’t take it.” I’m done with that. But health insurance is just super expensive, and I think a lot of people don’t realize how expensive it is.

Loren Feldman:
I’ll do my Jay impersonation. He likes to point out that the minimum wage discussion often ignores health insurance. There’s a huge difference between a company that’s paying minimum wage and no health insurance and one that’s paying something in that arena plus health insurance.

Paul Downs:
Absolutely. And then, speaking of the vomit conversations, one of my very best workers, a guy who doesn’t have great English, came into my office in August: “I’ve got to speak to you.” And I’m like, “Oh my God. You’re not leaving.” Because we really rely on this guy. What he told me was that his 13-year-old daughter had just been diagnosed with stage four esophageal cancer. What he was asking me was, would it be okay if he took some hours off here and there because his wife had had to quit her job, and he needed to watch his other daughter. And I was like, “Well, sure. But beyond that, what can we do to help?”

He didn’t have the English to really answer that question. But thinking about it, what I did was offered to pick up all of his deductibles and any bills he had, because this guy is not prepared to deal with the American medical system. Going through the last few months, he has brought me a few bills, but I was worried that they were getting lost in the mail. You never know what an insurance company will do. I finally persuaded him to give me access to an account we set up with the insurer so we could actually see all the bills. The insurer does not make this easy. You have to download a spreadsheet, and the spreadsheet is in a bad format. You can’t actually sum all the transactions. A lot of things had to happen before I could see the bills.

But his daughter’s already racked up more than half million dollars in bills just since August. He personally would have been on the hook for more than 9,000 bucks so far. Then that clock is gonna reset on January 1st as the new plan year comes in. How does an ordinary person deal with this? I’m spending a fair amount of time and company resources and my own personal resources to make sure this guy doesn’t end up bankrupted by this. I don’t even know what the moral of the story is, but it’s just a sickening situation for anybody who actually has a need for medical care.

Laura Zander:
Well, I think the moral of the story to me, Paul, is that 30 minutes ago, you said, “I’m not giving anybody raises, and I’m not giving anybody bonuses.” But then you’ve just told us five stories of all these things that you do do to make your business one of the best places to work.

Paul Downs:
Well, that’s what I’m saying. Sometimes you can take care of the company, and then the company can take care of you. Everybody in the company is aware of this gentleman’s situation, and they all know that they’re working to help him in this situation. And if it happened to them, hopefully, we’d have the resources on hand to help them, too.

Laura Zander:
That’s really cool.

Paul Downs:
That’s why the company has to be healthy. And that’s why you don’t just hand out money to employees, because as I said, once it’s there, you can’t get it back.

Loren Feldman:
I have one quick question for all of you. We had an item in today’s Morning Report that talked about business owners starting to think about whether they will require employees to be vaccinated once vaccines are available. Real quickly. Have any of you guys thought about this?

Paul Downs:
Boy…

Laura Zander:
I know, I saw that, and I immediately told Doug. I’m like, “Look at this, Loren says that we might be able to require people to get the vaccines!” That’s fascinating.

Paul Downs:
I can easily see both sides of the argument and I think that you might make the case that we require employees to do any number of things to be safe in the workplace and to not endanger themselves or their fellow workers, including all kinds of safety equipment and all kinds of safety procedures. I don’t think that, conceptually, it’s different from requiring people to wear a breathing apparatus when they’re working in a difficult situation. But you’re going to run up against a group of people who just do not want to do anything like that and see that as an imposition.

Loren Feldman:
Do you anticipate that at your place?

Paul Downs:
I’m not sure I would require it. We’re not public-facing. I think that I would probably put it out to my people as a discussion, like: “What do you think we should do here?” In case there’s somebody who strongly objects, then we would at least know who it is.

Loren Feldman:
William, have you thought about it?

William Vanderbloemen:
Yeah, a little bit. I appreciate you putting it in the Morning Report, which I read every single day.

Loren Feldman:
Thank you, William.

Laura Zander:
Every morning, you mean, right?

William Vanderbloemen:
It’s my first thought. [Laughter] Anyway, Loren, I think it’s gonna be a different answer for everybody. I live in Houston, Texas. So the city of Houston, to give you a sense of our spirit here, there’s no zoning allowed in Houston. People don’t know that. It’s not legal, and it’s so Texan. It’s like, “It’s my dirt, and I’ll damn well do what I want with it.” Right?

Loren Feldman:
You can build a skyscraper wherever you want.

William Vanderbloemen:
It’s why if you fly over Houston, you say, “Oh, there’s the skyline. No, there’s the skyline. No, there’s the skyline.” Trying to force Texans to do anything is pretty tough, and you’ve gotta choose your battles carefully. I doubt very seriously I’ll have to force that. I think our people, which is 72 percent millennials, they’re going to line up for it.

Loren Feldman:
What about your church clients? It could be an issue there. Do you see them requiring it?

William Vanderbloemen:
You know, I haven’t seen it. But your article was prescient, and we’re gonna send it out to people because we thought, “Hey, have you considered this? Because are you really going to take your kids to a church where they’re not requiring their people to get vaccinated?” Etc., etc., etc.

Loren Feldman:
Laura, have you thought about it?

Laura Zander:
Well, I’m sure we’re not going to require it. We just won’t. Like William said, we’re in Nevada, and it’s a little bit of a Wild West.

Loren Feldman:
And Texas.

Laura Zander:
Yes, and we’re in Fort Worth, so we probably won’t. And help me understand this. If we only have one or two people who don’t do it, then aren’t they the only ones that are in danger anymore? So if they come in, and they’ve got it, aren’t we all vaccinated, so we’re fine?

Paul Downs:
Probably. Yeah, that sounds right.

Laura Zander:
We have a couple of hippie anti-vaxxers who probably won’t do it. But you know what, fine. Then if you want to get it, go for it. The rest of us will be fine.

Loren Feldman:
I think Paul’s point about the public-facing issue is important there. If it’s just your group, that’s one thing. If it’s in a restaurant, or somewhere where people are coming in, it makes a difference.

Laura Zander:
Yeah, really great point. That’s a really, really good one. So yeah, on the public-facing side, we probably will have to have a strong conversation. I hadn’t really thought about it from that side.

Paul Downs:
I bet I could get most of my people to do it, because if we did, then we’d be able to get rid of the masks, and everybody hates those.

Loren Feldman:
You know, that’s a great way to sell it, isn’t it?

Laura Zander:
Yeah, super smart. Really, really, really good one.

Loren Feldman:
I like that. All right, guys, my thanks to Paul Downs, William Vanderbloemen, and Laura Zander. As always, thank you for sharing.