Why Do You Pay What You Pay?

Introduction:

This week, Paul Downs, Jay Goltz, and Sarah Segal talk about where the dust has settled after years of turmoil in the labor market. As you know all too well, we’ve been through COVID, supply-chain issues, inflation, labor shortages, the Great Resignation, minimum-wage hikes, new pay-transparency regulations, and countless rumors of recessions that have yet to come—all of which has had an impact on wages. And that’s why I decided to ask Paul, Jay, and Sarah where their thinking has landed. The consensus here is that leverage is shifting back to employers, but Paul, for one, remains committed to paying his people more than they can find elsewhere. “It’s worth it to me to have the team I want,” he says. “And sure, it affects profitability, but turnover affects profitability, too. And I’d rather not have that.” Plus: We also talk about whether Lululemon was right to fire two retail employees who tried to stop a robbery, and we answer the following listener question: If something’s not working, how do you know when it’s time to walk away?

— Loren Feldman

Guests:

Jay Goltz is CEO of The Goltz Group.

Paul Downs is CEO of Paul Downs Cabinetmakers.

Sarah Segal is CEO of Segal Communications.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome, Paul, Jay, and Sarah. It’s great to have you here. I wanted to start today by talking about employee compensation. As we all know, we’ve been through a lot of turmoil the last few years: COVID, inflation, the labor shortage, the Great Resignation, all things that have had an impact on hiring and wages. I’m sure I’ve left something out.

Jay Goltz:
Yeah, there are five things that have changed: COVID, inflation, labor shortage, minimum-wage changes, and the fact that people are now posting how much money you make in ads that we didn’t use to do.

Loren Feldman:
Pay transparency.

Jay Goltz:
Yeah. Whether it was forced or not, it’s become clear that it does help your response rate. So yes, that’s a lot is right.

Loren Feldman:
So I guess my question is: Why are you paying what you’re paying? And are you happy with where you landed? Maybe Paul, start with you?

Paul Downs:
Why am I paying what I pay? I tend to pay high, because it takes such a long time to train my staff that I don’t want them going anywhere.

Loren Feldman:
So that’s been true for a while, I assume—well before COVID?

Paul Downs:
Yes, that’s always been my strategy, which is: I don’t want people to have a better situation that they can easily waltz into. And including pay.

Loren Feldman:
When you say higher, do you have a set percentage in mind over what you think is the market rate?

Paul Downs:
Not really. It’s mostly: Are they making $25 an hour-plus in total compensation? Which I think of as kind of a baseline for being able to survive in my area. And then some employees make considerably more than that. And those are the ones who have professional degrees or whatever, and they have options. They could go get another job anytime.

So I focus on staff retention, and part of that is pay. And part of that is just providing a good working environment. That said, yeah, I had to give a bunch of people raises the last few years. People just come into my office and say, “I want a raise, bup, bup, bup.”

Jay Goltz:
I think part of the key, in your case, is part of your business model is you’re selling a premium product, which is why you can afford to pay more because you’re giving a premium product. It all makes sense. You’re not selling a commodity.

Paul Downs:
Yeah, exactly. It’s worth it to me to have the team I want. And sure, it affects profitability, but turnover affects profitability, too. And I’d rather not have that.

Loren Feldman:
So Paul, when somebody comes into your office and says, “I want a raise, bup, bup, bup,” do you give them the raise? Or do you make them go get an offer?

Paul Downs:
No, no, no, I don’t want anybody looking around. Usually I give them a raise. Because, generally, there’s a reasonable case to be made for it. Often I hire people, and a year later, the ones who are really good, they’re like, “Hey, I’m good.” I’m like, “Yeah, you are, here’s some money.”

So there’s no huge calculation on my part as to exactly what it’ll be. But one thing I do keep careful track of is what their total compensation works out to in pay per hour. Like if you roll in all the costs of the health insurance and everything that we do, I’ve got a spreadsheet that divides all those numbers into the number of hours they work. And I can say to them, “Okay, you’re only getting paid what you think is 20 bucks an hour, but I’m covering health insurance for your wife and three kids. And that’s another 11 bucks an hour. So, surprise! You’re actually making $31. It’s just that some of it is in a form that you hate.”

Jay Goltz:
Paul, I assume from knowing you, I think you try to stay ahead of this and you’re trying to pay appropriately. So I’m sure this happens, but it doesn’t happen that often, does it? Because you already are staying up with it. I mean, this isn’t a monthly event.

Paul Downs:
Yeah, I would say, actually, that the proportion of times I have simply given people money, as opposed to them asking for it, is maybe three to one. LIke, for instance, you hire someone and you have to think about, “Okay, well, I hired this guy. I need to pay them X to get him in the door. Do I need to recalculate some of the other people in that case, just to be fair?” I mean, that’s a pretty common scenario. And then other times, there might be someone who’s shy and just is afraid to ask me, and they’re doing well. And I’ll be like, “Hey, it’s been a year. What do you want?”

Loren Feldman:
Seriously? “What do you want?”

Paul Downs:
Yeah. Okay, let me just give a warning to everybody listening to this: The things I do, you probably should not do. Because I really am biasing the whole thing towards staff retention and investing in people over a series of years, because that’s how long it takes to train people up. And so, no, I’m not doing a lot of things. I’m sure Jay has a completely different playbook.

Jay Goltz:
I wouldn’t say completely different. But you’d be correct—different, in that you are truly dealing with skilled labor. And I’m dealing with semi-skilled in some cases, and unskilled in other cases. So I fully understand what you’re saying—in your case, you’ve got skilled labor that takes you years. You really can’t afford turnover. In my case, I can afford a little turnover. But it’s also not 180 degrees from what you’re doing. I also have very low turnover. My turnover is probably 10 percent.

Paul Downs:
Yeah, mine’s less than that. I only had one employee leave after COVID—voluntarily. And that was because he just got tired of the commute, and so he found a job that was closer to home. It was too bad, because he was a fantastic engineer, and we miss him. We were able to replace him, but money wasn’t really the issue, at that point. I would have given him more money, but I couldn’t find a way to not have him spend 45 minutes in a car each way.

Jay Goltz:
I’ve gotta tell you, traffic has become a major factor in employment these days.

Sarah Segal:
Jay, don’t you have somebody who has a commute of, like, an hour and a half each way?

Jay Goltz:
Yeah. And he’s been with me for 25 years, and he’s a critical person. I’m tight with him. And he’s totally with me on the whole mission. But yeah, he drives a long time.

Paul Downs:
That’s crazy.

Jay Goltz:
But you know, he’s a six figure guy.

Paul Downs:
Six figures, but that’s still an incredible—that’s 1,500 hours a year.

Jay Goltz:
Yeah. Let me add a piece of this that I don’t think either of you have to deal with, which is minimum wage. In 2014, the minimum wage in the city of Chicago—because there was no special minimum wage for Chicago versus Illinois—was $8.25. And as of next week, the minimum wage in Chicago is now $15.80.

Sarah Segal:
Wow.

Jay Goltz:
Which means it’s gone up 91 percent in nine years, which is about 10 percent a year. That does have an effect on things. And it’s caused what I call “labor compression,” which means the spread between the top person and the bottom is not as much as it used to be. And part of it is simply because, when you think about it, if one person can frame, whatever, 10 pictures a day, and the other person can do five, one could say, “Oh, well, they should make twice as much.” That doesn’t really work. Because at the end of the day, everybody has rent to pay and has food to buy, which is why I fully support minimum wage. It’s compressed, though, meaning maybe at the bottom, they’re making $3 an hour more, but that doesn’t mean it went all the way to the top. That has to be factored in.

Loren Feldman:
Tell us about the impact that that increase had on you specifically. Were you paying many workers the minimum, at that point?

Jay Goltz:
I’ve been close. Over the years, close. And I’ve definitely had to build that into my cost of doing business. I would say this: I just lately had a case of every one of those five things I mentioned, they had a profound impact. You put them all together, and that’s a lot of moving things. And I have had to sit down and think, “All right, what is our starting wage going to be? What is the marketplace?” We put ads out there. We’re not getting a lot of responses. There are less employees.

So we just had a situation where somebody came to us and complained that we’ve been trying to find someone for a particular position, and now we’re putting it in the ad. We raised how much money we were offering. And she goes, “That’s almost what I’m making, and I’ve been here for two years.” And you know what? She had every right to be upset. And we talked about it. And the fact is, we gave her a raise, and we’re going to give other people in that department raises.

So part of my feeling on this is, I feel good that she felt comfortable coming to say something and that she didn’t just quit. And we apologized. We said, “You know what, we didn’t react quick enough to the changing dynamics of the marketplace.” We fixed it. She’s happy, we’re happy.

But yeah, we did get caught a little bit on our heels with that, because we didn’t change it quick enough. Because it’s definitely affected the marketplace, especially the fact we’re putting it in the ad now—how much we’re paying—which we never used to do.

Loren Feldman:
Are you required to do that, Jay?

Jay Goltz:
I don’t believe it’s become a law in Illinois yet. But here’s the big but: But, I keep reading, they keep doing studies. You do get more respondents when you put it in the ads. So we’re going with the flow, and we put it in there. And I think it’s true. You also get less tire kickers, because they can see what you’re paying, and they’re not going to bother if it’s not what they’re looking for.

Sarah Segal:
Where are you, in terms of your salary ranges for your positions? Did you increase them over the last year?

Jay Goltz:
Absolutely. Because of inflation, we probably did 5-6 percent, which we haven’t done in many, many—I don’t know that we’ve ever done that. Inflation has been next to nothing for years. We were good with 2 or 3 percent. So we definitely gave a bigger raise. I don’t think it’s going to continue this year, but time will tell.

Paul Downs:
When you asked about the range, do you mean like I pay from $40,000 a year to $110,000 a year, or something like that?

Sarah Segal:
Per position. So if you have somebody who’s a sander—I don’t know what you have—but you know, last year, your starting salary for that position was $35,000.

Paul Downs:
No, most of those people, they’re making in the mid to upper $20s per hour with some variation on what their benefit package is, because we offer to cover employees. Whatever dependents they want to bring, we pay for part of that.

Sarah Segal:
Do you think that we’re in an employers’ market or are an employee’s market right now?

Jay Goltz:
I think it’s evened out.

Paul Downs:
I think it’s not quite as employee as it was, but it’s not 2009. That’s for sure.

Jay Goltz:
Right. I think it’s in between.

Sarah Segal:
Well, here in California, I definitely think it’s migrating entirely to an employer market. Because I mean, I look at my LinkedIn feed and you know, “open to opportunities” and “looking for jobs” is like every other post, at this point. Just because we’ve seen so much of the tech stuff implode here on the West Coast. I increased my salary ranges last year, and it wasn’t for inflation, but it was for getting people to apply.

Jay Goltz:
I will tell you that this quote-unquote problem is an opportunity, because some of your competitors—some of my competitors—are knee-jerking and not giving any raises. And it’s pissing people off. It’s an opportunity to get some good employees who their bosses have gotten short-sighted and forgot the quote-unquote greatest asset is their people. And I do think it’s freeing up some good employees who might not have been looking before, which is what I think you’re saying.

Sarah Segal:
Agency size is a little weird, though. When you’re a boutique agency like me, I can’t compete with the big guys, in terms of their salaries. I just can’t. And I’m surrounded by tech companies that are hiring people straight out of college with six figures. I cannot compete with that. So really, what I have to offer is the full package. We will really have respect for people’s work-life balance. We really have a great PTO plan.

Jay Goltz:
I think you’re right, but the fact is, that is competing. The fact is, you might not financially be able to compete, but you are competing. And I’m in the same situation. You were here a couple weeks ago. I had two different employees tell me they had job offers from major retailers in the United States that came to work here because they want to work in what I call a collaborative environment. They want to matter, and they don’t want to deal with corporate politics and stuff.

We can compete out there. There are people out there now who will give up money for working in a nice place. And to your point, the hours thing. Some of these people… I brought back somebody who was making 30 percent more at one of the big companies. They were just killing them: 60-, 70-hour weeks every week.

Sarah Segal:
Yeah, I’m small enough where we have summer Fridays, and nobody puts “out of offices” on summer Fridays. If there’s something urgent, we respond to it. But if a team member is going to be out, and they don’t have anybody to cover because their partner-in-crime is at a conference or something like that, I’m like, “I’m here.”

I’m always a person who people can call, because I never put “out of office.” Because I want people to be able to disconnect and for people to go off the grid and really kind of have that opportunity to get refreshed and motivated and inspired by life. But corporate? You don’t really do that as much.

Jay Goltz:
No, and there are plenty of people out there who value that more than money.

Loren Feldman:
Sarah, when you raised your wages last year, how did you figure out the number where you settled?

Sarah Segal:
Well, we’re lucky, in that we are part of a number of different professional PR organizations, one of which is really great about doing surveys where people provide transparency in what they’re offering people. And we also look at what other people are offering. More and more companies are posting the range, at least. And so we just bumped it up by a small percentage, but it just makes it a little more competitive.

But you know, part of me is like: Inflation is going down. The job market’s becoming more tough. I’m thinking maybe later this year, I can reconsider those increases, depending on what things look like. Because, honestly, I think I’m paying somebody out of college way too much. I mean, I made peanuts when I got out of college, but it was a great job, and it was a cool opportunity, and I loved it. And it wasn’t about the money.

Loren Feldman:
Paul, I want to go back to that conversation you have where you turn to your employees and say, “How much of a raise would you like?” I’m curious, do you get realistic responses? Are you often able to meet their request? How does that go?

Paul Downs:
You know, you do that with people who are afraid to ask for raises. So they’re generally delighted that I’ve recognized them, and I rarely get an answer back. And so I’ll say, “How about X?” And they’re pleased as can be.

Sarah Segal:
I don’t think people are greedy. I think when you ask a question like that, someone’s not going to look at you and be like, “I want $10 million a year.” They’re gonna look at what they do, and give an appropriate answer. I just think with human nature, most people won’t do that.

Paul Downs:
The other thing is, it’s just a basic negotiating tactic. It’s better to get the other person to name the first number.

Loren Feldman:
Well, I was gonna say, what if they ask for less than you were prepared to pay, what do you do?

Paul Downs:
Depends on what they ask for. But sometimes I give them more. That particular conversation often happens at the point where I’m deciding to hire somebody. And I’m interviewing them and I say, “What do you want? What are you looking for?” And if I want to hire them, they tell me, “X and such dollars an hour.” I’ll say, “Listen, I’ll do X plus one. I want you to accept this job right now, though. I’m gonna take you off the market because I want you to work for me.”

Jay Goltz:
He’s watching too much “Shark Tank.” That’s the problem.

Loren Feldman:
Paul, you told us that a while ago when the labor shortage was acute. You’re still doing it?

Paul Downs:
Well, yeah. It is a tactic that’s predicated on the employees-in-charge labor market. And when the time comes that we flip back the other way, I may rethink it. Or I may not, because I think that it’s a statement of faith and a statement of the kind of relationship I want to have with my employees at a moment when, for the person who’s thinking of joining us, it’s a big risk. They don’t know what they’re walking into.

So if the boss is right there saying, “I think you’re gonna be great. And I want to give you more, and I have faith in you.” And the next thing I say to them is, “Okay, I’m gonna pay you this. And if it turns out I’m mistaken, I’ll get rid of you. And so it’s on you now.”

Loren Feldman:
There goes that goodwill.

Paul Downs:
Well, no. It’s being honest. It’s just like, I’m not going to let someone take advantage of me. But I will—

Loren Feldman:
But do you need to say that to them? Do they need to be told?

Jay Goltz:
Do you actually use that language? Or do you say, “Listen, if it turns out, you’re not worth it, it’s not gonna be working for either of us, and you’re probably going to leave”?

Paul Downs:
No, I say, “We’re gonna give you all the support.” We have written down new employee guidelines that tell them exactly what they need to do. And I say, “We’re making an investment in you. But if it doesn’t work out, I will fire you. It won’t last long. So first thing: show up, act interested.”

And I just give them what’s going to happen. I don’t like to sugarcoat stuff, or be vague about something that I have in my mind as a possible course of action. And I’ve had, as far as I know, very little negative reaction to that. Because again, it’s establishing a relationship, an honest relationship, right from the get go.

Jay Goltz:
There’s also a benefit to that, that if they end up coming in late, you can go, “You know what, Bob? I made it perfectly clear when I interviewed you that that wasn’t going to be an acceptable thing.” I do think it’s fair to tell them the way the deal is, so they know what they’re getting into. Like, “If you have a hard time getting up in the morning, this isn’t the right place to work.” That is playing fair.

Paul Downs:
Well, we have a policy of flex time just to handle that. That’s part of what we tell them. It’s like, “Okay, whatever you’ve got to do in the morning to get your kids to school, whatever. Figure it out. We just want you to figure out when you can be here and then to be here consistently.” That’s the policy.

Sarah Segal:
I think that your policy works well for certain industries. But like, I don’t think I would ever implement that in a professional services industry. Because I don’t want someone coming to work for me just for the paycheck.

Paul Downs:
Well, you’re not hiring blue collar then, because that’s a whole different ball game.

Sarah Segal:
No, it’s not about the hourly rate. It’s about the opportunity: what I can teach them, what they’ll do, all of that kind of stuff. And the pay should be fair, but the opportunity should be awesome.

Jay Goltz:
And in your business, there’s a huge difference. They could come to work for you and really learn the industry and the business and get involved with different aspects. Or they could go to some bigger place and have just one job all day long. So I think that’s a huge difference.

Sarah Segal:
It’s a huge difference. I talk to people who have worked for the huge conglomerates, and their entry-level people are building media lists and taking inventory of coverage for clients.

Jay Goltz:
And getting coffee.

Sarah Segal:
But they’re not even on client calls. They’re not doing anything. I don’t care what your title is. If you want to try something, for sure. Generally in most PR businesses, to do new business and start putting together proposals, you need to be a director level, if not vice president level.

I brought a junior level person on a call with me with a restaurant group this week just so she could take notes and listen in. She’s really good at certain aspects of grand openings and restaurant PR, so I thought it’d be good for her to kind of listen to the conversation. We got off the call, and I was like, “Do you want to take first crack at putting the proposal together?” And she looks at me and goes, “That was gonna be my Q3 goal. I would love to do that.” I’m like, “Go for it.”

Jay Goltz:
That’s a huge advantage for them to take a job with you. In my business, just not cutting their hours is a huge advantage. There are places like mine where if business gets slow, they think nothing of saying, “Oh, you’ll have to take off Thursday and Friday.” And they have their hours cut.

I just had someone leave who was complaining about how much money she made. And the fact is, we just looked at her LinkedIn connections. She went to work for a company, when you Google it, they only hire freelancers. Well, I can assure you that her hours are going to be—these people need to pay their rent.

And like, when we get slow, even if we don’t have a backlog, we find stuff for them to do because we know they’ve gotta pay their rent. And that’s a huge advantage for someone who works in a factory. So it depends on what business you’re in, but those extras are not in the ad, necessarily. But to be able to make a proposal with you, that’s worth a zillion dollars. To not be laid off on Thursday and Friday is worth it. So it depends what business you’re in, but we can all, as small business owners, offer them some real advantages that are valuable to them.

Sarah Segal:
We’re seeing a large trend of people who have been freelance starting to go back for full-time jobs, because of that inconsistency, where they want to be able to have the reliability of a paycheck.

Loren Feldman:
I want to hit a couple more topics before we go. Paul, we’ve been tracking the time and money you’ve been investing in a marketing campaign. You recently introduced a new website that you’d been telling us about. Are you happy with it?

Paul Downs:
Yeah, so far. I mean, nobody’s seen it yet.

Jay Goltz:
I saw it.

Paul Downs:
Well, okay, we have not made the connection to our target market yet. But everybody who’s seen it says it looks nice. I realize it’s missing some information, so I’m going to be building it out over the summer. Our first real event where we’re going to be trying to meet people and get them to use the site is in the fall. So there’s still content to be put in. But I’m pretty happy with it. I’m happy with the process.

Jay Goltz:
I looked at it, and I think it looks great. If I was looking for a custom-made conference table, I don’t know why anybody would go anywhere else. I think you hit all the points.

Sarah Segal:
Paul, how much did you spend on your new website?

Paul Downs:
Oh, I think that the money I paid to the web guys was something on the order of $22,000. And the amount of time I put in: priceless, right?

Jay Goltz:
What about the photography?

Paul Downs:
The photography, some of it came from The Bowstring, a different media company that we engaged. And I think that cost me maybe $35,000 for the entire package, which included some photography, but had a lot of other stuff as well.

Sarah Segal:
It’s a good investment.

Paul Downs:
I hope so. It’s actually cheaper than hauling conference tables around to furniture shows, which would be the other way to meet people.

Jay Goltz:
I didn’t ask that question by accident. I know that photography is a critical piece. And this isn’t obvious to most people. I had to learn it. Photography is a critical piece to having a great-looking website. And I knew that wasn’t going to be cheap.

Paul Downs:
The photography was part of a package of services that included sort of strategic thinking, the market research—including interviewing the target market—and developing various campaign strategies. And photography was maybe half the cost of that.

But what these people could do that we can’t do is come in and take really nice videos. And so they spent a day shooting in the shop, and I used a fair amount of that content in the site. I also shot a lot of videos myself. And it’s surprising how much you can get done with an iPhone these days. But it’s not nearly as beautiful as the videos they shot. So I featured that on the homepage, and a couple of other places.

Loren Feldman:
Did you learn anything? Did anything surprise you in the process?

Paul Downs:
I guess the most surprising thing was something that happened when they showed up to film, which is, in the world of video production, there’s a fairly large number of people involved who seem to do nothing all day. And they’re just standing around, like getting a cup of coffee or whatever. And to my workers, it was like, “What are those people doing? Are we paying for that?” And I’m like, “Yeah, we are.”

Jay Goltz:
I know exactly what you’re talking about.

Paul Downs:
That’s kind of how it goes.

Jay Goltz:
I also look at this and I’m thinking, “Really? What are all those”—but I’m sure they’re doing something.

Paul Downs:
I’m not so sure they were doing something because it sure didn’t look like they were doing anything. But it wasn’t my thing to try to reinvent the way video is produced. So I just said, “Okay,” and shrugged.

Loren Feldman:
Paul, I think you said there’s an event in the fall that you’re tying this to. What’s the event?

Paul Downs:
Yes, it’s sort of like a show except it’s not quite a show. What it is, is we’re trying to target a very discrete group of clients with this new site, which is high-end corporate architects and interior designers. And this event is actually a kind of get to meet these people, where a company identifies the top people from the client side—the architects and interior designers—and I presume either pays them or offers them some goodies to show up at a resort in San Antonio for a weekend. And then me and other people like me pay some pretty big money to sit down and have half-hour conversations. I think we’re booked for 20 different people.

Jay Goltz:
Wow, like speed dating.

Paul Downs:
It’s sort of like speed dating, slow-speed dating. But it’s getting around all the defenses and all the bullshit and just getting right to the people we want to talk to. And I’ve been talking to this company that runs the event for four years now. And we were just about ready to do it in 2020, believe it or not, and then that went down the tubes for a while. But I have a limited number of places that I can consider to meet my target audience. There just aren’t that many shows.

The big furniture industry show, Jay, was just in Chicago last week. It’s an enormous production, and it would cost me $100,000 to do it. So I’m willing to spend—I think I’m in for $21,000 for this weekend—and then we’re gonna devote a lot of resources to the follow-up and making sure that we’re putting physical objects in these people’s hands every few months from there on out. Because I think that’s the only way to actually make an impression these days.

Now, my marketing firm had thrown out a digital strategy where you start with just ad buys and try to zero in and then get the target audience to call us. And I’m going to try that. But I don’t have much faith in it, because I think you’re starting with too broad a funnel. And so yeah, that’s what I’m doing.

Loren Feldman:
All right, I want to talk about something that’s been in the news recently, which is that two employees of the lululemon retail chain recently tried to stop a robbery. And in return for doing that, the store immediately afterward fired both of those employees, which produced a big public backlash.

It kind of became a bit of a PR nightmare. People were outraged that the store would fire people who tried to save it money. The company doubled down afterwards and said, “You know, they didn’t do what they were trained to do. So we fired them.” I’m curious if you guys have any thoughts about that.

Sarah Segal:
I’m not surprised. I mean, most companies—retail companies—have it in their policies that you’re not allowed to run after anybody walking out the doors. Apple is very well-known for that. And there’s a huge epidemic of smash-and-grab here in California, at least. And it’s a bigger liability for an employee to be trying to police that kind of thing than it is to just let the people take the items out.

So they violated, probably, company policy, and they lost their jobs because of it. And honestly, they have to protect themselves because of that. Yeah, it’s a PR nightmare. Because people are like, “Oh, they lost their jobs because they were trying to do the right thing, this and that.”

Jay Goltz:
That’s the problem. But that’s the problem: It wasn’t the right thing. The problem is, they’re trying to save people from getting killed in their stores. And this policy wasn’t just made up for nothing. They have the responsibility of protecting the lives of all of their employees. They made a policy with that in mind. And these people decided they knew better, and it’s a problem.

Now, the question is: Was it crystal clear to these employees? Did they absolutely know? Should they have suspended them perhaps, instead of firing them, for the PR angle? But I certainly can understand where if somebody would have, God forbid, got shot and killed, then it would be all over the news: “What terrible management it is.” So like, they’re trying to protect your employees, and I can understand why they fired them. It’s unpleasant, but that’s tricky.

Paul Downs:
I’m just gonna throw something out there, though, which is that: I don’t disagree with what either of you said. And if I had to write a policy for my employees in retail, it would be the same policy. It’s simply not worth anybody getting hurt over a couple of shirts, or whatever it is. However, the flip side is that when it’s absolutely crystal clear in policy that nothing’s going to be done, you’re inviting a lot more theft.

And it’s difficult for people to feel like they’re part of an organization that’s telling them, “Hey, people can come into your place of business, where you work, and do whatever they feel like, and you’re not allowed to do anything about it.” It’s very corrosive.

And I don’t think there’s a simple answer, because really, the police should be on this. But clearly, that’s not happening. So when you see a rising tide of disorder and crime sweeping through the whole country, it’s very distressing for people. It’s distressing to hear about it. It’s distressing to watch it. If someone came into my shop and started stealing stuff, it would be a horrible thing to watch. Very difficult to not feel like, “Oh, why would I come back the next day, anyway? My bosses are saying it’s a free-for-all here. People can do whatever they feel like.”

Jay Goltz:
So would it have been a smarter thing for them to send out a memo to every employee saying that, “This is what happened. We have a policy. This is why we have a policy. And while we appreciate the well-intentioned efforts of so and so, we can’t emphasize enough: This can’t happen again.” And then not firing them? Would that have been smarter perhaps? Probably.

Paul Downs:
Everything about that incident sends a message to the current employees, which is: “We don’t care. We care about you in a way that’s only self-serving. We don’t care about your state of mind. We care about the company.”

Loren Feldman:
Wait! It’s saying they want you to stay alive.

Paul Downs:
I think that they make it pretty clear the only reason they want them to stay alive is because they don’t want to pay for the consequences. If they were really interested, they would hire security, right?

Sarah Segal:
This is probably not the first time it’s happened. Other employees have probably tried to stop shoplifters. And, you know, they made an example of these two people.

Paul Downs:
Okay. I’m curious, those two people are now in the job market. If they showed up, Jay, to your door and said, “Hey, I got fired because I gave a damn, and okay, I may have made a mistake,” would you see that as a positive or a negative?

Jay Goltz:
First of all, I would ask them, “Did you know what the policy was? What were you thinking?” I would certainly have a conversation about it.

Loren Feldman:
The statement from the company was that they knowingly broke the rule.

Paul Downs:
Of course the company is going to say that.

Jay Goltz:
To Sarah’s point, to be clear, it’s not that it just happened. When you think about it, this literally has to be happening every week, if not every day. They have enough stores. This isn’t a one-a-year. It must be happening every single day.

What we don’t know is: How clear did they make the policy? How reinforced is it? That we don’t know. And that’s why I’m not playing judge and jury. I’d want to hear more details: “Did you know the policy? What were you thinking when you did that? Blah, blah, blah, blah, blah. Was it a kid who you could clearly see didn’t have a weapon?” I mean, I’d want to—

Loren Feldman:
So you might hire the employees.

Jay Goltz:
Maybe, maybe, maybe.

Sarah Segal:
Well, people are allowed to make mistakes.

Jay Goltz:
Right. That’s my point.

Sarah Segal:
This is not going to live with them forever, in terms of their career opportunities. At least, it shouldn’t. But you know, the company had the absolute right to enforce its policy. Even if there was an option of just giving them a slap on the wrist, I bet you anything they’ve given a hundred, if not thousands, of slaps on the wrist for similar things. And they finally were just, “Listen, if we don’t do what we say we’ll do when people do this, it’s gonna keep happening.” And it’s a huge liability that’s going to cost them so much money if anything were ever to go wrong.

Jay Goltz:
That’s all true. But the only problem with it is they were trying to do something for the benefit of the company. And that’s what’s really is just… ouch. And I will tell you, I have an example of what’s happened to me. I once had someone working for me who would get in fights with customers, because, “We didn’t do that!” And I go, “Don’t fight with a customer over $50. Just smile and take care of it.” And this individual could not stop themselves from doing it. And finally, we had to fire the person. Because at some point, even though they were well-intentioned, we know what a liability that is.

So that’s why I say: I’d like to hear the entire story, a little more detailed, how many times were they warned? Now, would it maybe have been smarter to suspend them for a week and say, “Why don’t you take a week off and decide whether you can work in an environment where you can be able to control yourself if this happens again?” Would that have been smarter? I would think: probably. But then to your point, Sarah, maybe they already tried that. I don’t know.

Sarah Segal:
If you have rules in place, and you don’t enforce them, then people are going to consistently go around them or break them. And it weakens the credibility of your business. For example, we have policies where we don’t work with jerks. Recently, I had to have an offline conversation with a client and basically say, “You know, we’re going to drop you if things don’t change, because you can’t be sending those kinds of emails to my employees. If you have issues with anything we’re delivering, you can call me up. Here’s my phone number.” And they stopped. If we had left them, they would have been in trouble, because they had a big thing coming out that we were supporting them on, and they didn’t have time to switch horses. So I had the leverage there. But you have to enforce the rules.

Jay Goltz:
The problem with being in business is: What defines a jerk to you is not necessarily what defines a jerk to me. There’s some black and white. They grab someone’s arm? Okay, done. They say, “What kind of bullshit is this?” Okay, I don’t call that abusive. They call you way worse? Okay, there’s a line there. So it’s not always black and white.

Loren Feldman:
We have just a minute or two left. I want to get to one more question, which is a reader question that I thought was a good question. The question is: How do you know when it’s time to give up on something—a project, an expansion, a business, whatever it might be? Anybody got some advice?

Jay Goltz:
I’ve held on too long, for sure. And I think you have to say to yourself, “If I knew what I know today, would I have done this?” And if you say probably not, it’s probably time to pull the plug on it. You’re talking to someone who has spent six figures that I shouldn’t have, that I should have realized this wasn’t going anywhere. And I just kept going, “Oh, I’m gonna fix this thing.” And it was delusional. And I think I’ve gotten better since then.

Paul Downs:
I would say there are two scenarios that I’ve experienced. One is just a project I’m trying, like this whole marketing thing. I’m throwing a ton of money at it. I don’t know whether it’s gonna work. And if it doesn’t, I’ll stop throwing money at it. The other one that comes up all the time, though, is whether you should get rid of an employee who’s trouble. And almost always, I’ve found that—well, in the first decades of being a boss, I was too slow to do it. And now I know what to watch for. And I’m quick to do it.

Jay Goltz:
I’ve learned that when you start questioning it, it’s time. Because I have played the game, literally 50 times. “Oh, I give it 50-50.” I have never won that bet. Never. Not one time did this person all of a sudden, “Oh my God, lookit. That was a good gamble. They ended up saving them.” Never has happened.

Sarah Segal:
I believe in two things. One: Follow your gut. If your gut says no, then drop it. Like, your intuition, your gut is the most powerful thing. And the second one is: If you’re starting to feel physical stress, because of a situation where, you know, your neck is tight. You’re anxious. It’s causing you a physical impact. It’s probably, whatever you’re doing, is not worth it.

Jay Goltz:
And I want to publicly say that my gut has been wrong many, many, many times. So it takes a long time to get a sophisticated gut, but every good thing I’ve ever done and every bad thing I’ve ever done has come from my gut. So it did take me a long time to develop the skill-set. With the employees, it’s easy. Here’s my best one: If the person came in tomorrow and quit, would you be relieved?

Sarah Segal:
That’s good, yeah.

Jay Goltz:
It works. And I use it myself. I ask my manager, “Listen if she quit tomorrow, how would you feel?” “Uhhhhh.” And then that’s really the greatest gut check, because your emotions know that it’s time for it to happen.

Sarah Segal:
That can be like projects. If the project all of a sudden was taken off your plate, would you be bummed out? Or would you be relieved? And if you’re relieved, then maybe it’s time to wrap that up.

Jay Goltz:
The worst misquoted quote ever is Winston Churchill: “Never never, never, never give in.” They left off the other half, which is, “unless in good judgment,” That’s a bad thing to live by. Yeah, sometimes it’s time to move on. There’s no question. Sometimes it’s time to move on.

Loren Feldman:
It’s time to move on right now. [Laughter]

Jay Goltz:
Nicely played, Loren. Nicely played.

Loren Feldman:
My thanks to Paul Downs, Sarah Segal, and Jay Goltz. And to our sponsor, the Great Game of Business, which helps businesses use an open-book management system to build healthier companies. You can learn more at Greatgame.com. Thanks, everyone.