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Managed by Q: No 1099

Wednesday, March 18th, 2015

managed-by-q

I’m not a lover of the so-called 1099 economy, primarily because I think the concept and the unicorns it’s spawned have been successful at gaming the system — so far.

But that’s unlikely to last.

More importantly, a company called Managed by Q is proving it doesn’t need to.

Managed by Q provides on-demand cleaning services for offices using an iPad, which it installs for free, and also offers other services like restocking the fridge or office supplies. With on-demand and subscription services for customers — and now 150 cleaners in New York — its services have become pretty popular: They’re used by other startups like Flatiron Health, Elite Daily, and Uber.

Managed by Q hires its “operators,” as it calls them, as employees, offering full-time and part-time employment with benefits and stock options. The work is flexible, and Managed by Q works with operators’ schedules.

I find it ironic that Uber, poster child of the 1099 model, hires a company that proves you can make money and still do traditional hiring, treat all employees well, draw investment and make money.

I’ve said it before and will continue saying it because it’s true, a company is like a three legged stool with investors, customers and employees being the legs. If one leg is longer or more robust than another the stool will tip over.

Managed by Q is part of the minority of on-demand services that is paying attention not just to its clients, but to the people carrying out its day-to-day work. And that’s what sets it apart.

Sets it apart, gives people a future, isn’t looking at lawsuits and seems to have missed the startup greed train.

All I can say is read the article and three cheers for Q, the anti-1099 heroes.

Image credit: Yelp

How Do People Know Their Salary Is Fair?

Monday, March 2nd, 2015

https://www.flickr.com/photos/tomsaint/3385894038/

What exactly do people mean when they say they want to be paid fairly?

Generally speaking, people define “fair” relative to themselves and those around them.

Developers working in a small company don’t compare their salaries to the developers at Google or even to their bosses.

The comparison they do typically has two steps.

  • First, they compare themselves to their peers, i.e., similar job, background, title, company, industry and location.
  • Second, they compare their salary with the salaries of those they see as peers.

The comparison is possible because, no matter what company policy says, compensation is never really secret.

As long as salary differences are based on factual points, as opposed to charm, politics, or managerial whim, people will believe they’re being treated fairly.

Because they are.

Flickr image credit: Rennett Stowe

The Uber Worms Are Turning

Wednesday, February 4th, 2015

http://401kcalculator.org

As has been pointed out in every media outlet on the planet, Uber is arrogant, pugnacious, obnoxious and plays fast and loose on matters from privacy to government regulations to customer charges to “contractor” relations and compensation.

Uber, in the person of CEO Travis Kalanick, has so enraged various officials that the company has been kicked out of cities, domestic and foreign, and entire countries.

Even Matt Kochman, Uber’s founding general manager in New York, left in disgust.

“Discounting the rules and regulations as a whole, just because you want to launch a product and you have a certain vision for things, that’s just irresponsible.” 

Kalanick pushed, denied problems and claimed that everything that disagreed with Uber’s plans was anti-progressive or nit-picking.

But in January the tone changed.

In January, Mr. Kalanick delivered a speech in Munich filled with talk about compromising with regulators he once sparred with, wanting to “make 2015 the year where we establish partnerships with new European cities.”

A couple of weeks ago I wrote of clouds on the horizon in the form of a class-action lawsuit from 2009 that could affect not only Uber, but every business based on so-called contractors.

Turns out they weren’t clouds, but a full-fledged storm.

A legal storm.

The Boston law firm representing Uber and Lyft drivers, Lichten & Liss-Riordan, won a 2009 decision that Massachusetts exotic dancers were employees because the club could set their shifts, and fire them. Judges in New York and Nevada followed that reasoning last year.

It will be interesting to see what happens in the California courts.

If the drivers win, it will be even more interesting to see how all the startups based on the 1099 business model play when the field is level.

Image credit: 401kcalculator.org

A Hitch In The 1099 Economy?

Wednesday, January 21st, 2015

https://www.flickr.com/photos/headovmetal/2264140208

Last fall I asked if the 1099 economy might crash and burn considering the IRS rules governing freelancers and contractors.

I think that companies, like Uber and Instacart, etc., whose success is built on the basis that their workers aren’t actually employees are in for a shock one of these days.

But it’s more than my opinion.

Way back in 2013 a group of strippers brought a class-action lawsuit claiming employee status — and won.

Rick’s, a chain of “upscale adult nightclubs serving primarily businessmen and professionals” based in Texas, argued that its dancers were independent contractors, more akin to stand-up comedians than fry cooks. But Judge Engelmayer was not persuaded. He said the list of rules Rick’s laid down could be described as “micromanagement.”

Rick’s provided “Entertainer Guidelines,” including required heel height and when to strip; the company also set prices.

Uber tells its drivers what to wear, car requirements and sets prices, as do other 1099 employers.

One day soon, a few fed-up drivers are going to file suit and their lawyers will likely cite the judgment against Rick’s.

When that happens, compensation will change, as it did years ago with Microsoft’s contract developers (who were also awarded stock retroactively), and, hopefully, the playing fields will be leveled.

I, for one, am looking forward to it.

Image credit: HeadOvMetal

If the Shoe Fits: When “Caveat Emptor” Becomes “Operarius Emptor”

Friday, November 7th, 2014

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mThe so-called 1099 economy, where your workers aren’t actually employees, brings up questions.

  1. Is worker welfare a valid consideration in terms of the bottom line?
  2. How fair is it to reduce compensation, but maintain publicly that earning power is the same?
  3. How ethical is it to encourage workers to take on substantial debt based on those unlikely earnings?

If you answered 1) not really, 2) fine, 3) no problem then you’re in line with Uber management.

…reliably ruthless Uber is in the thick of it. Two “partners” in Uber’s vehicle financing program are under federal investigation, but Uber hasn’t slowed its aggressive marketing campaign to get drivers with bad credit to sign up for loans.

Following in the footprints of the mortgage brokers who sold houses to people who couldn’t afford them, thus creating the subprime housing mess, Uber is aggressively pushing new cars and subprime auto loans to its drivers with bad/no credit.

One comment stood out for its clarity and applicability to Uber and the rest of the 1099 world.

Uber corporate gets venture capital and stock options. Uber drivers get subprime loans. Sound like pretty standard American-style capitalism. –buonragazzo

Sound familiar?

Image credit: HikingArtist

Kip Tindell and The Container Store

Wednesday, October 29th, 2014

https://www.flickr.com/photos/tomergabel/4963539052

The hourly base wage for fast-food workers in Denmark is $20USD, yet McDonald’s, Burger King, etc., are still profitable.

Try to sell a minimum wage increase to just $15 and you’ll be told that it would destroy jobs and close businesses.

But, as the song goes, it ain’t necessarily so.

Despite starting out with just a $35,000 investment in 1978, The Container Store founder and CEO Kip Tindell has grown his business to one that has 67 US locations and rings up annual sales of nearly $800 million.

Equally impressive is the fact that he’s done all that while paying his retail employees nearly twice the industry average.

So what does Tindell know that other bosses of retail businesses don’t? You get what you pay for…

  • “The 1=3 rule,” i.e., one great employee is as productive as three OK employees, so he gets three times the productivity of an average worker at only two times the cost.
  • Turnover is lower substantially reducing hiring and training costs.
  • Annual raises up to 8% of their salaries, based on performance, but
  • encourages managers to evaluate employees based on their value to the company.

The result is the average Container Store retail salesperson makes nearly $50,000; about double the national average for retail.

When it comes to wages, Kip Tindell is the Twenty-first Century’s Henry Ford.

Ford astonished the world in 1914 by offering a $5 per day wage ($110 today), which more than doubled the rate of most of his workers. (…) The move proved extremely profitable…

The minimum wage war should become a lot more interesting when Tindell takes over as chair of the National Retail Federation.

It’s a lot harder to argue with success.

Flickr image credit: Tomer Gabel

The Destruction of American Workers

Monday, October 20th, 2014

https://www.flickr.com/photos/dpurdy/2954271099What’s going on?

Why is there such a disconnect between management and minimum wage workers?

A disconnect that goes beyond all logic.

A disconnect that treats low wage workers more like serfs.

Two weeks ago it was Walmart’s efforts to enforce a dress code at their employees’ expense.

Now it’s companies such as Jimmy John’s sub shops requiring minimum wage workers to sign noncompete agreements.

But who knows, perhaps there is a proprietary trick to spreading mayo that I’m not aware of.

California outlawed most non-compete clauses on the basis that people have a right to earn a living.

And then there is the sexual harassment of low wage women workers.

The study showed that women reliant on tips made up the highest share of those who had experienced harassment and that those who lived in states where the tipped minimum wage was $2.13 an hour (the federal minimum for tipped workers) were twice as likely to experience sexual harassment as those who lived in places where a single minimum wage standard applied to all workers.

Whether large corporation or small business, it seems that those in the upper levels, who are financially secure, place little-to-no value on those who actually keep their company running.

And as for morality, well, that comes down to whether more employers decide that basic human decency requires viewing their workers not as interchangeable cogs to be paid as little as possible and worked to the bone but as valuable partners in building a company for the long term.

Centuries ago, when describing the actions of leaders, Lao Tzu ended by saying,

To lead the people, walk behind them.

Today it reads,

To lead the people, walk upon them.

Flickr image credit: Derek Purdy

Is the 1099 Economy Sustainable?

Monday, September 29th, 2014

http://401kcalculator.org

$97 million doesn’t sound like much today, but it was a lot 15 years ago when Microsoft lost a lawsuit and was forced to reclassify it’s contractors as employees.

Back then Microsoft called them “permatemps.”

These days startups of all kinds are relying on freelancers to drive their growth, so many that a new term was coined.

They’re called 1099 contractors and the over-all approach is termed the 1099 economy.

“The most famous examples of 1099 companies are on-demand car providers like Uber and Lyft, but there are dozens of others: Homejoy, Handy, Postmates, Spoonrocket, TaskRabbit, DoorDash, Washio.”

The Feds, in the person of the IRS, are very particular when it comes to classifying employees as independent contractors or freelance.

Behavioral control refers to facts that show whether there is a right to direct or control how the worker does the work. A worker is an employee when the business has the right to direct and control the worker. The business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work.

The financial control factors fall into the categories of:

  • Significant investment
  • Unreimbursed expenses
  • Opportunity for profit or loss
  • Services available to the market
  • Method of payment

I’m a long way from being an expert, but after reading through the IRS information at least some of these companies are going to be in trouble.

Uber sets prices, discounts, doesn’t reimburse expenses and terminates drivers who also work for any of the competition.

That’s a lot of control in the light of the IRS rules.

Obviously, any company that can eliminate payroll, taxes and benefits is going to be super profitable—at least until they have to follow the rules like everybody else.

Flickr image credit: 401kcalculator.org

Ducks in a Row: Private vs. Public

Tuesday, August 26th, 2014

https://www.flickr.com/photos/dkeats/6520047059/

Ask people what they do in private and you’ll probably hear far more detail than you want, but ask what they earn and they’ll either freak out at the question or be very insulted.

What they probably won’t do is tell you.

Sex used to be personal, but these days it is often broadcast to anyone who will listen, but not finances—although older workers are less likely to discuss either of them.

Companies are even more paranoid about keeping salaries confidential—sharing compensation information is a firing offense in many of them.

Usually, the more a company insists that the numbers are private the more likely people are to assume that something is rotten—or unfair.

After all, gossip tends to exaggerate things. Professor Lawler says studies show that when pay is confidential, workers often believe the salary distributions are more unfair than they really are.

That’s why Dane Atkinson, chief executive of SumAll, a data analytics company, does things differently.

When he helped found the company about three years ago, a decision was made to disclose all salaries and equity shares. (…) “In this way, more money goes not to those who negotiate better, but those who work the hardest,” he said. The people who resist making salaries more transparent, he said, “are usually those who think they’re making too much.”

The other people who resist are the bosses who are playing games with compensation.

You know, the ones who make the lowest offers possible and/or play favorites.

Compensation, whether salary or stock, should make sense to everyone; it should be plausible and accurately reflect the person’s contribution to the company’s success—not their charm, personality, looks or threats to leave.

Flickr image credit: Derek Keats

Ducks in a Row: Making Employees Happy

Tuesday, January 7th, 2014

http://www.flickr.com/photos/cityskylinesouvenir/4427873040/Company culture has been jerked around ever since a few pundits decided that “fun” was the primary component to having happy employees.

Worse, “fun” was equated with silly stuff, such as games, pranks and goofs.

While these things do energize some employees, they don’t do it for long and certainly not alone.

It’s well-proven that happy employees are more productive, but creating happy requires substance.

The components of long-term happiness are things such as challenging work, continued learning, opportunities to grow, clear communications, fair bosses, etc.

All of these require more thought, effort and skill from managers than installing a few foosball tables or gamifying the project.

Flickr image credit: CityLineSouvenir

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