It’s not something that’s usually covered in quarterly earnings reports, but company culture can have a big impact on employees, customers, business performance, and the company’s stock price. This week on the pod, we’re joined by Renee Conklin, founder of RC HR Consulting, to talk about company culture – how to assess it, its impacts on business results, and what companies can do to attract and retain talent. Also, we chat about famous CEOs, the Great Resignation and driving tractors!
- Websites such as Glassdoor can give prospective employees and investors a view on the workplace culture but there are issues over the validity of the reviews and potential manipulation of ratings. Glassdoor is a starting point, but the information should be checked against other review sites and information sources.
- Workplace culture can have a significant impact on the stock performance of a company. The stock performance of the Fortune 100 best companies to work (Aug 2021) outperformed the broader index of the Russell 3000 by 16.5% in 2020 and had a cumulative return of 1,709% since 1998 compared to 526% for the index.
- Following the upheaval of the pandemic, we are in the midst of the Great Resignation, where employees are quitting in record numbers. It’s currently a workers’ market and there are many different reasons contributing to this trend.
Renee Conklin is the founder of RC HR Consulting based in Hong Kong, which works with small-to-medium businesses to optimise their HR practices, and also with individuals to help them achieve their career goals. Renee can also be found on LinkedIn.
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Transcript
Albert: Hi, this is Albert.
Luke: And this is Luke.
Albert: Today is Monday the 18th of October.
Luke: Welcome to the Telescope Investing podcast.
Intro
Albert: When we research a company as a potential investment, one of the lenses that we use is to look at the leadership. Who are the key people in the organization driving the business forward? Do they have a bold vision for the future of the company? Do they have the experience to execute well? And do they have skin in the game? Are their incentives aligned with the shareholders?
Luke: Also, what about the company culture they’re fostering. Company culture is not something we talk about much on the pod, but it’s probably one of the largest influences on a company’s success. So today, we’re delighted to welcome our good friend, Renee Conklin to the pod to discuss all of this. Renee is the founder and CEO of RC HR Consulting in Hong Kong. Welcome Renee.
Renee: Thanks Luke, thanks Albert. Long time listener, first-time guest. Great to be here.
About Renee
Albert: Renee, you’re my go-to person for all things people management, but why don’t you start by telling us a bit about yourself and the work that you do?
Renee: Sure, thanks Albert. My background is in HR recruitment, so I’ve spent about 15 years in that field in the US and here in Asia Pacific. I’m based in Hong Kong. About three years ago, I founded our RC HR Consulting and our mission is to partner with small and medium-sized businesses here in Hong Kong on their HR strategy. And I’m also an executive and career coach working with individuals to optimize their lives at work.
Luke: Renee, we know you very well, but to introduce you to our listeners, tell us something fun about yourself.
Renee: So something fun about myself is that recently I had the opportunity to learn how to drive a tractor. So I live in Hong Kong, which is a very urban place, and this summer I had the opportunity to visit my mom and stepfather in Upstate New York. And they live in the country and my stepfather has a tractor that he allowed my husband and I to drive around on his property, which was exciting to learn how to do that and help him cut the grass. So as I always say, always be upskilling and learning new things, including fun things like how to drive a tractor.
Luke: And I bet your stepfather’s now having the fun of trying to repair his lawn.
Renee: No, we did a great job and by the way, he only let us ride the small tractor. He actually has a much bigger tractor that we were not allowed to touch.
Luke: Maybe next time.
Renee: Maybe next time. That’s what I’m aiming for.
Assessing company culture
Luke: But enough about tractors, let’s talk corporate culture and I’m going to just dive us straight in. So you might be familiar with our investing lenses and the different aspects we look for when we’re trying to analyze a company. And really drilling into something Albert introed us with, we try to understand what do employees say about a company and the lens we use for that currently is the Glassdoor rating and their CEO approval rating on Glassdoor. Try and read a few reviews, see what people are saying about the company. So as a HR professional, what are your thoughts on Glassdoor? Do you think this is useful?
Renee: Ah, the Glassdoor debate. So, I have listened to your podcast since episode one, and I’m very familiar with the lenses that you guys use to assess companies. In fact, I’ve always thought that the sort of culture lens is probably the weakest one of your methodology. That’s of course no fault of your own. It’s because the data and information either is not there, or it’s very difficult to measure. So using something like Glassdoor is an obvious choice because it’s one of the most well-known employer review sites out there. It’s very US-centric, so if you’re looking at companies that are in Asia right, so I’m out here in Hong Kong, it’s definitely not as useful. And in fact, I don’t really think anyone’s using it out here. There’s different types of sites that people use. And in specific countries, there’s actually sites that are specific to that location.
But if you’re thinking more about US companies, which is where you guys spend a lot of your time, then Glassdoor is useful to an extent. I guess the issue with Glassdoor is that it’s very difficult to know whether or not the information there is actually accurate because the employees who are going to go online and write reviews are usually falling into one of two extremes. They either had a really terrible experience working in that company, or they had a really positive experience. So you’re getting these two extremes. You’re not necessarily getting everyone else in the middle. And then although Glassdoor tries to make sure that the reviews are real, they do have a number of different ways that they try to do that, it’s not always the case. So if I try to log in and look at something in Glassdoor, it will ask me to update my profile, upload my resume, submit a review of another company, submit my salary information. Every time it’s asking me to do something like that so that I can then look at its data. But most employees are regular people are not necessarily incentivized to do that. So they might just be putting in false information so they can get in there and look at the data that they want to see about a specific company.
Then I’ve worked at employers in the past where they’ve had really negative Glassdoor reviews and that has impacted the way that they go about recruitment because candidates would always ask, why do you have these negative Glassdoor reviews? So companies can also try to game the system and get their own employees to go on and write sort of fake Glassdoor reviews. So of course, a lot of this can be mitigated, the more reviews that you have, right. If you’re a much larger company, then you’re getting a lot more data and then that tends to even out. But there can be a lot of discrepancies, particularly regionally, or it can be discrepancies around the front office businesses, so kind of the revenue-generating pieces of the business, versus people who are sitting and maybe IT or operations, they might have very different experiences. So that’s not really necessarily being captured. So all in all, I think it’s a useful tool and that it’s a starting point, but I probably wouldn’t stop there in your analysis of a company’s culture as one of your investing lenses.
Albert: Yeah, as you said, we use Glassdoor, mainly for the reason that there’s not many other choices. So apart from Glassdoor, what are some other good ways to assess the company culture?
Renee: So there are a couple of other sites that have come up over the last couple of years. So there’s another site called comparably.com. And again, it’s US-centric, but I think that they have better metrics than Glassdoor. They have a lot more comparison points for you as an employee or you as a potential investor. There’s another one called careerbliss.com. And then as I said, if it’s a company that is in Germany or in Hong Kong, then they’re going to have specific sites that are similar to Glassdoor, but they’re for that location. China also has their own called maimai.cn, which is used quite frequently in China to talk about what’s happening at Chinese companies. So I would say to dig another layer, maybe cross analyze with some of these other sites instead of just relying on Glassdoor.
Luke: Do you think it’s hard to form an objective view of the quality of a company’s culture?
Renee: Yeah, I definitely think it is. Because if you’re looking at a firm’s quarterly reports or their annual reports, there is no predefined pre-agreed metric on culture. They don’t report out on what’s happening with our company culture in a way that you can easily compare against one of their competitors. And the thing about company culture, particularly if you’re… say in a company where the culture is known to be toxic, for whatever reason, it takes a long time to change that, right. And the number of different measures and steps that need to be implemented.
Culture is a long-term strategy. It’s not just about the quarterly earnings report for that particular quarter, which I think is good because that actually is aligned to the way you guys think about companies and think about investing from a Telescope Investing point of view, which is that it’s all about the long game. But trying to measure what culture actually means over that period of time is really challenging. There’s a number of different ways that companies go about trying to do it, but it’s not static and uniform.
Albert: As you know, Renee, I’m quite cynical and often the things that companies do do not align with the things that they say. How often have you heard companies say things like our most valuable asset are our people, and then they make them sign waivers on say, working hours. Is that a fair assessment of corporate culture or am I being too cynical?
Renee: I think that the corporate culture is not just in the words that a company puts up on its website. It’s also in the actions, particularly of its senior leadership, but also its employees. And then when things happen, how senior leadership responds to those things.
So you asked me before about what are some good ways to assess company culture. I think if you’re inside of a company or you’re a consultant looking at a company, there’s a number of different things you want to look at. Most publicly traded companies will have details about their vision, their mission, their values on their website and in their annual reports. They will do things like bringing in external consultants to conduct focus groups with employees. They will do engagement surveys with their employees. So that’s something that used to just be done once a year at a lot of companies. Now they’re being done once a quarter or even once a week, so they can get that quick pulse. What are employees thinking? How can we change and react?
Luke: My eyeballs just rolled so hard as someone who’s coming out of the formal workplace right now. It’s painful enough doing that annual survey. To do one weekly? Oh my God, that’d be bureaucracy gone mad.
Renee: So the weekly one is normally like two questions. Be something timely related to something that’s gone on that week or a new initiative that’s been introduced by the company. Particularly last year with the Black Lives Matter movement, a lot of companies realized, gosh, we’ve got to get a lot more nimble about how we’re reacting to the way our employees are feeling about this. And of course COVID, right. So all these layers of things and employees really struggling. Companies needed to understand better how their employees were thinking and feeling so that they could react. So there’s a number of different practices that companies will have throughout their processes, from how they interview, assess, onboard, reward, and recognize talent.
And I know we’re going to talk a little bit around compensation structures and people having equity in companies and whether or not that makes sense, but there’s a couple of things that you can look at. I think a good example is a company like Netflix. So Netflix is very famous from an engagement and people perspective for their Netflix manifesto, which they’ve got posted on their site. There’s been books about it, there’s TED talks about it. There’s rules but they’re kind of loose rules and everybody has their own responsibility and it’s this kind of instant feedback culture, and you know where you stand and they give people these generous severance packages if they don’t fit in, they don’t want to work there. And so, something like that is very telling about the type of culture at an organization. So I think trying to maybe connect more data points might be helpful for you guys as investors.
Albert: Yeah, it’s interesting that you mentioned Netflix as it’s gotten itself into a bit of a controversy over the recent Dave Chappelle comedy special. I think they’re getting some backlash over the way they’ve handled the situation, but do you think their manifesto indicates that as a company, they’re trying to do the right thing?
Renee: Yeah look, I think it’s really challenging for companies and they’re so many examples of things like this, where companies will say one thing and then when something happens, they don’t necessarily respond in the right way. So this Netflix thing with Dave Chappelle is unfolding, right? That some employees are unhappy with what he talked about during his special, and then the Netflix leadership is backing him up. But they’re tons of examples like this. Companies can’t always get it right. They’re not always going to get it right every time. I think that they try, keeping in mind the interests of all their different stakeholders. And what they have publicly said that they believe in, again from a vision, mission, values perspective, but companies aren’t perfect just like people.
Impact on stock performance
Luke: I think Albert said it well, that it’s kind of what you do, not just what you say to do. And clearly that’s driven by the culture and the leadership. How important do you think culture is though to a company’s stock performance. If we’re being really laser-focused on investment returns?
Renee: There is some research that shows that there is a correlation between a company’s culture and how well they perform financially. The best examples of this is if you think about these hundred best companies to work for lists, right. I think everyone is familiar with these. There’s a number of different ones, but I think the most famous one is the Fortune 100 best companies to work for. They update it every year. They did some analysis, actually, that came out during the pandemic and then one year later, around how their hundred best companies were performing. Out of their index, their companies outperformed the broader market by 16.5% in 2020 and they returned 37.4% compared to 20.9% return for the Russell 3000 index. So overall they found that the companies in their index had a cumulative return of 1,709% since 1998, compared to a 526% return for the Russell 3000 index for that same time period.
Luke: It might be a bit of a virtuous circle going on there as well though. If you’re one of the best companies to work for, presumably the company has plenty of revenue. They can invest that back into incentives and employees’ benefits and just make it like a more fun working environment, as opposed to everyone having their head in their hands and shouting at each other because the business is going down the pan.
Renee: Yeah, it is a bit of a chicken or egg scenario, which one has come first, right. The good culture, or does a good culture then perpetuate more and more things that employees like and appreciate. I don’t think that you can solely link stock performance to company culture, but I do think that there’s enough evidence that shows that having a strong company culture can contribute to better stock performance.
Luke: So Renee, I guess we’ve thrown stones at tools like Glassdoor. What other techniques can companies use though?
Renee: Yeah. So at the risk of sounding like I’m jumping on the bandwagon, I think big data is important here. I know that for you two, you may not have these types of tools available to you, but things like web scraping or sentiment metrics are really useful to try to identify trends in a company’s culture or their values, and how those are rated over time compared with their peer firms. So being able to use tools like this, particularly if there’s say, a CEO change or there’s some kind of reorganization or restructure, you’re being able to tap into that and utilize that big data as part of how you’re looking at the culture of a company, I think would be useful and more reliable than just looking at one page on Glassdoor.
Luke: Pretty cool.
Stock-based compensation
Albert: One of the ways that companies reward their staff for being at the company is with stock, having ownership of the company itself. Have you seen any studies on the impact of stock compensation? Does having a financial stake in your workplace actually make you more motivated?
Renee: I’ve seen studies on it. I’ve had personal experience with this as well. I think it really depends on what type of stock compensation we’re talking about. So my background is coming from working in an investment bank. So I worked in HR at Barclays, which is a British investment bank, and then also UBS, which is a Swiss investment bank. And I think, obviously during that time period that I worked in banking, the regulatory environment changed a lot post the GFC in 2008. Particularly for senior bankers, their compensation became more and more tied to the organization and more of their bonus structure was provided in equity, which at first was given to them over three years and then in some cases, even five years. And the idea was is that, if it’s long-term, that they would be more committed and they would make the right kinds of decisions on behalf of the bank. So all a good idea in theory, but in practice, what ended up happening is that you have.a lot of these people kind of hanging around, waiting for their stock to vest because they can’t go anywhere else because no other company will hire them because they’re too expensive or they don’t want to walk away from the potential that they would get from this equity vesting. So that’s not a good environment. You don’t want to have a bunch of people hanging around at your company who don’t want to be there.
So that’s one extreme, right. I know that doesn’t apply to every industry. I think on the other side of it, if your kind of company ethos is that you give equity to all or most of your employees, right. That it’s an option for them to have, voluntary or some kind of opt-in scheme, then that is shown to have a positive impact on morale. Those types of employees tend to treat the organization more like they’re an owner and they put in more discretionary effort and we’ll have more ideas around innovation and how to improve the business.
So for example, there’s a company here in Hong Kong where they have a co-ownership scheme. So a really large percentage of their employees are co-owners. They actually are not called employees, they’re called co-owners. Then that’s sort of what they walk around calling themselves. And so that makes it impact on their morale, their engagement as employees. And in terms of looking at studies around this, there was a 2017 study in Harvard Business Review that showed exactly this. If the stock compensation is equitable and fair, the mechanism for distributing that out makes it equitable for everyone, then your employees are more likely to see the benefit and then have that subsequent feeling of job satisfaction, being committed, having more trust in management. But that’s the piece that’s important is that it’s something that’s an option for everyone, right. Start-ups is the same, right. Most start-ups, when you hire, you’re bringing people in, you’re giving them equity and they’re helping to build out your business. So that’s something that they value and frankly expect as well.
Luke: There’s another very famous example in the UK of a large chain retailer called John Lewis, and they’ve had famously for a long period of time now a partnership model. So all nearly a hundred thousand of their staff members are actually partners in the company and they kind of co-own it. And they’re always a good example of very strong culture, particularly in a quite cut-throat business like retail.
Renee: I think that’s similar to in the US, they also have ESOP programs. So ESOP is the employee stock ownership plan and there are a number of companies that are entirely employee-owned, and they have, again, a high level of success in motivated employees who are involved in these stock ownership plans. They’ve got that opportunity to become owners. And that makes a big difference in terms of their output.
Albert: In my own career in working at international institutions, whenever I got stock as part of my compensation, I couldn’t wait to sell it and buy something else. I feel that says more about me than the companies I worked for. But it’s interesting that you mentioned ESOPs because we had an angel investor on the podcast a few weeks ago, Prantik Mazumdar and he said one of the things that he looks at when evaluating a company was the equity structure amongst the founders and whether all the founders were equally incentivized. And he mentioned ESOPs specifically as an important way to attract and retain key staff. One that is used well in the US but not so well in Southeast Asia. Is that what you’ve seen as well?
Renee: To be honest, I haven’t seen really a lot of examples of it in this region other than the one I gave earlier and then just start-ups as well, but I haven’t seen a lot of examples of that being a popular model in this region.
Luke: Maybe coming away from ESOPs a little bit and just down to actual compensation. There’s a really interesting story I’ve been watching for the last couple of years. There’s a CEO, Dan Price who founded a credit card processing company called Gravity Payments. And they started off like any other company paying a minimum wage of, I think like $35,000. And then quite famously actually, about five or six years ago, Dan cut his own salary from a million dollars down to equalize with everybody and he uplifted all the staff members’ salary to like 60 or $70,000 and everyone was paid the same. I saw a recent update that his staff was so happy and so pleased, they bought him a Tesla as a gift, as a thank you from the company. And I think the company is doing brilliantly and he’s still on that same equalized salary with everybody else. It’s a real stark contrast to what’s happened in big organizations in technology, but actually across every sector where typically, CEOs are paid hundreds multiples of the average staff salary. There’s some really shocking examples I’ve seen of the gap between the lowest and the highest-paid employee in some companies.
Renee: Yeah, I love this story about Dan Price actually. I remember when I read it last year, I posted it out on all my social media and we shared it around amongst our friends and thought that he’s quite a unique example. There’s some stats about how well his company is doing now, and how committed his employees are, and how low the turnover is, and all those sorts of things. So of course, it’s just one example, right. You can’t necessarily normalize that out, but I think he’s someone that’s trying to make change. And what that does is, I’m sure that they’ve had a huge uptick in applications of employees who want to come work for them, right. And make that 70K minimum wage in the US. But yeah, and the second point about CEOs and that kind of multiple of their salaries versus employees. Yeah, that’s a well-known fact, that gap has been widening over the past couple of decades and I think that’s just outrageous, but I don’t expect that Jeff Bezos to be doing the same as Dan Price any time soon.
Leadership styles
Albert: Well, speaking of CEOs, some CEOs are quite well known. They are even considered celebrities, people like Jeff Bezos, as you say, at Amazon, Jack Dorsey at Square and Twitter, Reed Hastings at Netflix. and of course, Elon Musk at Tesla. But do you think it’s important to have a well-known high-profile CEO at the helm or is it actually more of a liability and a risk? And when I say liability, I think we know who we mean.
Renee: Are you talking about Luke? Or…
Luke: Luke’s favorite CEO.
Renee: I know we can’t get through this episode without mentioning Elon Musk, for sure. Look, founders and CEOs, they have a huge influence on their organizations, but that doesn’t mean that they need to be like these examples that you’ve just given, really sort of larger than life figures. There’s a number of CEOs who you won’t even know their name because they practice a different kind of leadership, right. They practice servant leadership or they’re just introverts. They’re not out on Twitter all the time like Elon Musk, inadvertently impacting the stock price of Tesla. But they don’t need to be well-known and high-profile to run a successful company. In fact, the opposite is often more impactful.
Luke: If it’s not about being famous, what would you say are some of the traits or signs of a good strong leader?
Renee: So I mentioned this idea of servant leadership, which is not a new idea. It’s been around for a long time. Leadership gurus like Ken Blanchard and Stephen Covey should be familiar names, they talk about this. Instead of this really pyramid, very strict hierarchy, it’s actually about putting your employees at the top and your leaders at the bottom. So, instead of this command and control mindset of being a CEO, it’s more about serving, showing humility, what’s the purpose of the organization, how can I help my employees to unlock their potential? And thinking about your employees as future leaders of your organization, and always having talent and talent development as a focus of what you’re trying to achieve.
I think a good example of this, so a couple of years ago, I had the pleasure to see the Logitech CEO, he was in Hong Kong, Bracken Darrell, and he gave a talk to my MBA class. And he gave this example of how every couple of years he will fire himself and then rehire himself. Essentially ask himself, am I the right person to lead the business forward over the next five years? If we were going to hire a new CEO, am I the profile of the guy we would hire if we were starting from a blank page? So he goes through that process and basically talks to his board to see whether or not they would rehire him. And he’s been there I think, 11 years or so, I can’t recall, but he’s been there quite a long time. And Logitech, they did amazingly well during the pandemic, of course, because everybody was working from home, had a need for their products, they’re very big in gaming now. So they have a very strong run there at Logitech, but I think he’s an example of this sort of servant leadership that I’m talking about.
Albert: When Bracken Darrell fires and then rehires himself, isn’t that just an excuse to give himself a pay rise?
Renee: That’s a great question, Albert! He doesn’t elaborate on that part when he tells this story. Maybe I’ll send him a tweet and ask him.
Luke: I think the world does change though. And actually what a company needs from their CEO can vary and perhaps not year to year, but over decades. I worked for a global bank that’s got more than 150-year history. And suddenly when the industry went through the financial crisis, it was important to appoint a leader who was able to be a kind of wartime CEO and lead us through that period. But then you don’t need that skill set later, you have a different focus. So that is an important role the board plays, to exercise that judgment and governance and make sure they’ve got the right CEO.
Renee: Yeah, absolutely. I think the pandemic was an unprecedented thing, right. There’s a lot of unknown unknowns. So a CEO, their board, what they need to do is to steady the ship. That’s their first imperative. So that is a different set of skills right there than versus what I was just talking about around servant leadership. You’re not going to people and be, oh, what do you need? You’re giving them direction because that’s what the moment calls for. So certainly, in terms of culture, CEOs need to be flexible depending on what the situation is, what the complexity is, and what’s demanded of them.
The Great Resignation
Albert: I’ve read that there’s a huge shortage of workers at the moment and many companies are struggling to hire enough people and appears to be happening in more industries, such as restaurants, retail, finance, and even technology. And wages are rising to encourage more people to return to work but they’re not coming back. No doubt the global pandemic played a big part, but what are some of the other reasons that this is happening?
Renee: Yeah, there’s no surprise here that this is happening. So these kinds of jobs that you just mentioned, retail and F&B restaurant workers, these are hard, taxing, low-paid jobs, even before the pandemic and during the pandemic, those people doing those roles were being asked to put in Herculean efforts to do their jobs and putting themselves at risk. Oftentimes without the appropriate support from their employers, appropriate PPE, without healthcare coverage, being scared every day to go to work. And they just got burnt out. And it’s not just those types of employees. It’s not sort of blue-collar employees, it’s white-collar workers as well, who were sitting behind their computer at home for many more hours than they normally would in the office, juggling childcare, juggling having a spouse or partner at home and trying to both work in small spaces. Being scared, not being able to go out and employees are just burnt out. A lot of times expectations from their company or their boss didn’t change or didn’t change fast enough. And the support mechanisms that people needed around mental health, for being able to take a break or being able to take leave holiday, again, weren’t there, didn’t come into place quickly enough.
And what the pandemic gave, I guess the silver lining of the pandemic was that people had time to reflect on things that were important to them. And maybe having an hour commute or going in and working with a bunch of people you don’t really like that much in the office anyway, or realizing that you can get your job done just as well at home was a big revelation to people, or maybe that they were doing something they really just didn’t want to do. And so, yeah, the Great Resignation is real, particularly in the US. I think here in this region, it is an employee-driven market. I would say that now, but it’s not to the same extent that it is like it is in the US. In the US, there’s just a number of different societal economic factors that have come together to bring people to this breaking point.
Albert: I do wonder whether this change is permanent. For example, I read the article recently called “Time Millionaires” in The Guardian about how the pandemic made people reevaluate their lives, to work less and to have more leisure time. And being able to do that is obviously a privilege and not everyone can do that, but I think it is a temporary reaction to a world-altering event like a pandemic. And I think once the pandemic starts to fade in memory, we will all go back to the way it was. What do you think about that?
Renee: I’m not sure about that. I haven’t read that article, but as you’re telling me about that, the thing that pops into my head is the FIRE movement in the US right? The financial independence retire early movement. And the idea that all these Gen Z are working for a year or two, saving up, and then maybe they’ll take a year off to do something fun that they want to do. And then they do that again and then they take another six months off and then maybe they do a project. And they don’t think about their careers in a linear way. They don’t think about loyalty. I think loyalty is the other thing that’s really been broken. Trust is absolutely been broken in this pandemic because so many employees didn’t feel supported by their employers. And so employees are just saying, well, if I can’t trust my employer, then I need to trust myself, right. I know that I can go out and make money doing this other thing, or I know I can be okay for six months, or maybe I’ll get unemployment benefits for a bit of time, or maybe I’ll move to the Philippines and live more cheaply for a while, or whatever it is, but I just need something to be different. Will people go back to the way things were with the new normal? I don’t know, I don’t know about that.
Luke: I think it would be a shame if the world did go back to the way it was pre-pandemic. And then certainly, if we just think about the flexibility of doing a job these days, it’s been transformational in terms of jobs that can be done remotely. Every company has had to adapt to that. If some companies, and I know my wife’s bank are pushing in this direction, if some companies do go back to a 100% work from the office lifestyle, I think they’re going to suffer. They’re going to lose some of their best people. Because people, as you say, Renee, do want to continue the flexibility and a bit more of the work-life balance that they might get back from getting rid of that two-hour commute each day, whatever it might be.
Renee: Yeah, that is one of the other factors contributing to the Great Resignation. So as employers are asking employees to come back into the office, some of them are just saying, nope, you know what? I don’t want to come back into the office and they’re just quitting because they know they can get another job and they know they can find a remote-only job. I’ve got a client now who is looking for a job and he’s only open to looking at remote jobs. And again, this is more US-centric, but now there is that possibility more and more than there was previously. So employees have a lot more options.
Luke: And there are some countries that are taking advantage of this. I’ve recently noted that Croatia are offering a visa to digital nomads, kind of recognizing that some people are basically able to do their job on the road now, whether that’s working for a company or working for themselves. And so countries or geographies that have perhaps a really good lifestyle are trying to make themselves very accommodating from a business and a tax perspective to those individuals, try and capture some of that wealth and talent.
Renee: I guess the flip side of this is that for employers, there is some advantage here also. If employers are willing to think more strategically, they now actually have access to a much bigger talent pool than they ever would have had in the past. If they were like, oh, this role is in Baltimore and the person must be in Baltimore, they should always be asking themselves, does it really need to be in Baltimore? Or actually, could this be a hybrid role or could we actually have this person be remote? So you are opening up maybe to a whole US-wide talent pool, a whole Asia-wide talent pool, or even a global talent pool, of course, bearing in mind time zones. But I think it also opens up opportunities around things like diversity and inclusion, so candidates who might not have applied for a role before, maybe cause they’re differently-abled, they might do so now because maybe they can do the role from home. Or a mom that’s returning to work might not have applied for a role that had an hour commute, but if it’s remote, she’d be more likely to try it out. So I think that there is some upside here to employers too, but it’s just up to them to get that mindset shift, and particularly for large employers, it’s challenging to do that.
Luke: I guess, linking back to the top of the episode, companies with good leadership and a good culture are going to capitalize on that and use that as an advantage, as opposed to a potentially disruptive force for their business.
Renee: During the early days of the pandemic, I had a lot of these types of conversations with clients, when things were very dicey, revenues were certainly falling off a cliff and it was just a lot of uncertainty. Let’s try to steady the ship, right. In six months’ time or 12 months’ time, when you look back on this time period. What will you be the most proud of that you did as an organization. And the employers that try to remain loyal to their employees and treat their employees right during this time period are the ones that will reap the rewards at this time, and that is what we’re seeing.
Hiring trends
Albert: The work from home or more precisely, the work from anywhere trend is one of the things that we invest in. For example, one of the stocks in our portfolios is a company called Fiverr that links employers to contractors or freelancers. Do you see this as a trend happening right now? Where companies are using more of these services rather than hiring people directly.
Renee: I think a lot of companies, again, if I think about kind of multinationals, I think a lot of them are thinking about how they can have more flexible workforces. I think a lot of large companies are still stuck in the mindset of you’re either a permanent employee or you’re a contractor. They don’t have any sort of third category or multiple different types of categories. I think if you’re a younger, more nimble organization, then yes, I think using services like Fiverr, or bringing people on just for a specific project, or having enough pool of freelancers, as opposed to having maybe three full-time employees is absolutely something that companies are doing. It gives them more flexibility and may help to reduce costs as well. And I don’t necessarily think it’s just a trend. I think it is the direction of travel.
Luke: I guess Albert’s starting to talk there about alternative hiring practices and a traditional way to fill a role is to post it on LinkedIn or Monster, and actually, quite interesting as an investor because sometimes you see quite an interesting leak about a company strategy just based on the jobs they’ve posted. But Renee, what sort of options are open to companies? What are the trends right now in attracting and retaining talent?
Renee: Yeah, I think that the example you just gave is a total schoolboy error, right. Of posting a role, uh, you know, that says, oh, we need someone with expertise in expanding our markets in Southeast Asia and then obviously that gives the game away. So you do need to be a little bit more cognizant around things like that. But I think similar to what we’ve already been discussing, which is to be more flexible in your thinking around hiring and attracting and retaining employees and listen to what your employees want. I know I talked about the surveys and doing them more frequently, and surveys don’t always work depending on the size of your organization, right. I mainly work with small and medium-size companies. Surveys don’t work for those kinds of companies because it’s too small. People don’t feel comfortable but conversations do. Previously companies kind of had this one size fits all. Here’s our employee benefits scheme, this is what you get. And I think now employees are expecting to have more pick and choose, more customized to me. Same way I’m going to go onto Netflix, and Netflix is going to recommend things for me based on what I’ve chosen in the past, I want my employee benefits or the wellness benefits to be the same. I want them to be tailored to what I need as an employee. And so there’s a lot of HR tech start-ups that are looking at things like using AI engines to try to have better matches for employees so that they feel like they’re treated as individuals.
Albert: Yeah, I remember you telling me about applicant tracking systems a few years ago, Renee and I had no idea how pervasive they were and how much the companies were using them. And I’d read a few weeks ago that these automated hiring systems are rejecting millions of viable candidates. So it seems that resumes are as important as ever, but how do you see hiring practices changing in the internet age?
Renee: Yeah, I read that article too, Albert and I had a lot of problems with that article. I think it really misrepresented applicant tracking platforms. However, one of the things often say is that technology has made it easier to look for a job, but harder to actually find one. And that really is related to applicant tracking systems because of the fact that so many candidates don’t know what a big role applicant tracking systems play in their application process. And they don’t know that their resume is likely being screened out or being rejected in the first round, and then it’s never actually being seen by a human. So there’s a number of different methods that candidates can use to make sure their resume gets to the right person, referrals and reaching out and networking and all these other things. But I do think that ATS platforms have made it more difficult for candidates.
Of course, they’re advantageous to employers because they make the process more quick, more streamlined, more data, more reporting. But for candidates, it makes things more challenging. And that is, again, the way things are moving. So another example is things like video interview systems that use AI to essentially look at your micro-expressions, your tone of voice. So there’ll be a couple of interview questions that the system asks you. You record yourself and then they use AI to basically assess that, and that’s part of the assessment process. So that’s used by a lot of the banks or a lot of the graduate programs. And I know from working with some of the universities here in Hong Kong, that students really hate that. But I do think that’s something that’s going to become more of a trend, right. You can’t fake it with AI.
Luke: I haven’t read the article, but I suppose one potential benefit of introducing AI and machine learning into the process is, to some extent, it might reduce unconscious bias. I remember a while ago and hopefully, this doesn’t really happen so much anymore, I remember reading stories about studies where two identical CVs were sent for a job. One had an English-sounding name on one had a non English-sounding name, and then the English-sounding name got the interview, the other one didn’t.
Renee: That is a big part of the argument with ATS platforms as well as that they are meant to eliminate that unconscious bias. Because even me as a recruiter, I’ll have my own unconscious biases that I’m not aware of when I’m screening resumes. But if the ATS is doing that first-round screening for me, and I’m not looking at them at that point in time, then theoretically, that is more fair and more equitable to candidates. But however, it depends on the dataset, right. There’s that example from a couple of years ago with Google. The data set they were using was basically generating all sorts of white males to be their engineers, and then they cut that project because they realized that that was problematic. So it’s still not there yet, but yeah, I take your point.
Albert: Being interviewed by an AI robot seems quite scary and I guess people have to get used to it if it’s being used more often.
Renee: Yeah, so in China, there are companies that interview via essentially text message, WeChat. So again, it’s all automated, just an auto bot. And these are for roles like warehouse employees, or you’re opening a store and you need 500 employees. They’re just asking the standard set of questions. You could get a job with never actually talking to anyone.
Luke: This is awesome. Do you remember that story, Albert, of the guy who completely outsourced his job to a guy overseas and he shipped him a token so that the guy could basically log in and do his work? Imagine if you could at scale, apply for thousands of jobs, get them all remotely, never have to go into the office and eyeball your colleagues and outsource them all. You could turn a non-scalable job into a massively scalable industry.
Renee: No, there’s been a couple of articles about that in the last month or so about people having two full-time jobs during the pandemic, because they don’t have to be in the office. And so they’re just managing two calendars and managing two jobs and getting two salaries, which most of the time is not good. Most people’s employment contracts don’t actually allow that to happen, but people are doing it. And again, it goes back to the point around loyalty. People are just relying on themselves. This is my chance to make some money, maybe learn some new skills. And if I can manage these two jobs, I’m just going to do it. So people are actually holding down two full-time jobs.
Albert: Well, apart from being illegal, if they can hold down two full-time jobs and nobody realises it, why not? I think that takes a lot of skill.
Renee: I think what they do is, to Luke’s point, they outsource a piece of it. So they’ll hire like a virtual assistant or something who will manage their calendar and say to them, oh, you need to jump on this call, oh, you need to be on this call. And then they’ll have like two sets of computers and all that kind of stuff. Too complicated for me and definitely too complicated for you Albert!
Luke: As the one person on this call who currently does feel like they have two jobs, my main one that pays me and then Telescope Investing, I will say it’s been unsustainable. It’s forced me to choose actually. And so I think, as we’ve said in previous pods, I’ve chosen Telescope over my formal employment. I’m wrapping up the job in November. I’m looking forward to going full time on the podcast.
Renee: Alright. Exciting. Good for you, Luke.
Albert: Hope it goes well, Luke.
Luke: As our corporate culture. If you quit, I’m screwed.
Renee: Maybe Albert can give you some advice, Luke.
Luke: Fill out this survey.
Wrap-up
Albert: Actually Renee, if you don’t mind us asking, how do you invest?
Renee: Oh, I’m really a very boring investor. So a couple of years ago, I read this book called “Millionaire Expat: How to Build Wealth Overseas” by Andrew Hallam. So as I said, I’m based in Hong Kong, as you can probably tell from my accent I’m American. And so as an American, I have a lot of restrictions around how and what I can invest in. So I’m a couch potato investor. So I just have a small portfolio of ETFs and index trackers, and I go in every month and just balance it. And I don’t look at it. Besides that my husband also works at a bank and so, we’re restricted in terms of buying single stocks. And then lastly, I just am a generally risk-averse person. So I know I listen to Telescope Investing and I kind of keep a mental list of different stocks that I’m interested in based on what you guys talk about. Just a sort of boring couch, potato investor.
Luke: Well, you know, that’s the weakness of that cultural lens that’s held you back perhaps. If we can improve our measure of culture, perhaps you’ll jump on board with some of our model portfolio selections for 2022.
Renee: Yeah. Maybe that’s it. That’s it.
Albert: I was going to suggest that you should trademark that term “couch potato investor”, but sorry, I just checked, it’s already taken.
Renee: Yeah, it is actually. Andrew Hallam actually talks about it in his book. It works well. It’s what you guys always say, right. You buy the stocks and then you really shouldn’t be looking at them all the time. Because if you look at them, then you’re more likely to make rash decisions. So you just buy and hold and that’s it.
Albert: Absolutely right, Renee. I only look at my stocks twice a day.
Luke: Hey Renee, that was great. You’ve definitely given us some food for thought around that leadership and culture lens that, joking aside, we can definitely apply when we start to think about our new model portfolio for next year. So we’re really grateful you joined us on today’s podcast. If listeners want to get in touch with you or find out more ways to understand and improve their own corporate culture or enhance their leadership, maybe even just to diarize a one-on-one coaching session, how would they find you?
Renee: Yes, so I’m really active on LinkedIn, so you can find me by just searching Renee Conklin on LinkedIn, connect with me. And also you can check out my website at rchrconsulting.com.
Investing quote
Albert: Yeah, thanks Renee. And we have a quote to close out the episode and Brian Chesky, the CEO of Airbnb. He said, “You’ve got to build a team that’s so talented. They almost make you uncomfortable.”
Luke: Albert, you make me uncomfortable sometimes with your cutting insight.
Albert: Likewise, Luke. Well, that’s all for this week. Thanks for listening.
Luke: If there’s a future topic, you’d like us to cover, you can message us on Twitter. I’m @LukeTelescope.
Albert: And I’m @AlbertTelescope, or you can email us at feedback@telescopeinvesting.com.
Luke: We say it every week, but just a reminder and this is really important for us. One of the best ways you can show support for the podcast is to leave us a review on Apple Podcasts. Guys, that number hasn’t moved in the last week. Are we shouting into the void?
Albert: We may be, Luke, but we could also ask them to send a friend a link to the Telescope Investing podcast if they think they will also get value from us, and that would be really helpful to us.
Renee: I sent it to my mom.
Luke: Awesome. Is your mom on Apple?
Renee: I’ll remind her.
Luke: Well, thanks Renee and thanks Albert.
Albert: Thanks Renee.
Renee: Thank you guys.
