Q&A: Navigating cannabis’s talent complexities
It’s been well documented in recent months that labor shortages coming out of a global pandemic have been a real issue for employers. This has forced companies across industries to compete vigorously for talent, necessarily pulling out all the stops to attract and retain the best, from extending work-from-home policies to adding new perks and even increasing total compensation packages. To preserve margins, many companies have passed on those additional costs to consumers, ultimately driving up prices – but as we’re now seeing, that can only go so far.
The cannabis industry has not been unaffected by these macroeconomic dynamics. However, as is usually the case, extrapolating macroeconomic realities onto the cannabis industry requires a bit more nuance, given an onerous regulatory environment and the relative immaturity of the legal cannabis industry.
We sat down with CohnReznick’s Cannabis and Consumer Products Advisory Leader, Jeff Wissink, to get his take on current labor trends, how they are impacting the cannabis industry, and how to best navigate them to build a workforce that helps your company thrive.
Q: As it relates to the much-hyped topic of the current competition for talent, what’s different about cannabis companies as opposed to their more traditional consumer products counterparts?
JW: It’s important to remember that while the cannabis industry has been around for hundreds (some might say thousands!) of years, it has of course only become legal in the United States since California became the first state to legalize medical cannabis in 1996. In that context, the rollout of the legalized cannabis market has actually evolved fairly quickly, to the point where the U.S. legal cannabis market is projected to reach $42 billion by 2026. That kind of growth is going to be messy. Since those early days of legalization, tens of thousands of cannabis companies have sprung up across the U.S., and all of them need people to operate them.
Any time you’re building a company, you’re looking for people with a mix of passion and experience to do a job. What’s particularly interesting when it comes to cannabis is that because the industry is emerging from illicit markets, at least some of that experience will necessarily come from people who have historically worked in those markets. You’ll then be mixing in people who are newer to the cannabis industry, perhaps coming from adjacent industries or even completely unrelated ones. When I worked in the industry, I always said, “Cannabis has been legal in this state for five years. The best salespeople in the industry have been selling it for 15 or more.”
What you end up with is a really interesting culture of people with more traditional business backgrounds working arm-in-arm with people who worked in cannabis before it was technically legal to do so. It creates a leadership and cultural challenge that permeates just about everything, but particularly roles and responsibilities and decision-making. Cannabis companies must be mindful of this dynamic as they’re developing talent strategies.
Q: There’s also been a lot of recent discussion and trending toward unionized labor lately. How is this affecting the cannabis industry?
JW: Unions are cool again! There have been lots of high-profile stories over the past year of labor organization occurring in companies and industries where that has not historically been the case. Younger workers entering the workforce, in particular, seem to be resonating with the idea of organized labor to drive higher wages and better treatment, especially emboldened by tight labor markets and the perception, at least, of the high-profile billionaire using their fortunes to enjoy extravagant lifestyles on the backs of the people who worked for $15/hour to get them there. Cannabis companies have not been unaffected by this trend, and some states, like California and New York, have even mandated labor peace agreements. Other states are considering it. It’s a trend to watch as organizations such as the Teamsters and the United Food and Commercial Workers Union (UFCW) race to organize workers across the cannabis value chain.
Q: Another talent-related topic that’s particularly relevant to the cannabis industry is diversity. Why is this the case?
JW: It is, of course, a delicate subject, but an important one to talk about. Diversity is important for all businesses, and we’ve thankfully seen an awakening in corporate America in recent years that has pushed this conversation to the forefront. This topic is even more important to address in the cannabis space. It is well documented that the U.S.’s historic War on Drugs has disproportionately affected people of color, and as cannabis legalization has gained momentum in recent years, disparities have persisted. For example, one 2021 report noted that despite Black Americans representing 13% of the national population, they represented only 1.2% to 1.7% of all cannabis company owners. There’s a lot of work to do here, and thankfully large legislative and economic efforts – albeit imperfect – are starting to address these complicated issues. For now, every cannabis company has an ethical responsibility to understand the history of the business they’re working in, and to do more than simply pay lip service to topics around diversity, equity, inclusion, and belonging (DEIB). I think we all look forward to a day where DEIB is not viewed as a topic or an initiative, but rather just an ordinary and proper way that businesses work: explicitly folding diversity into hiring and retention practices, vendor management, and really across the entire business. I think most cannabis companies understand this, although some are left with some hand-wringing as to how to best start. Experienced advisors can help cannabis companies build these practices and policies into their operating DNA.
Q: It sounds like the overall labor shortage in the United States is just part of the problem for cannabis companies.
JW: 100%. I view the overall labor shortage in the U.S. as simply a macroeconomic backdrop for cannabis’s own ongoing fight for talent, with its extra complexities around professional backgrounds, the organized labor movement, and DEIB. The best cannabis companies form their talent strategies around these concepts, and those that don’t are definitely feeling the effects in both explicit and more frustratingly, insidiously subversive ways – poorer company culture and employee engagement, high turnover, and ultimately rising operating costs.
Q: Given all this, what practical advice would you offer cannabis operators to build the right team while managing all of the other unique factors at play here?
JW: The first step is recognition. Understanding – and embracing – the idea that your company will operate at its best with a mix of people from various personal and professional backgrounds is essential. Filling a company with people who look alike, think alike, and have similar professional backgrounds is problematic for a lot of reasons, not the least of which are network access, groupthink, and lack of a healthy, diverse corporate perspective. I’ve seen companies dismiss this line of thinking as a necessary operating procedure that they can simply discuss then move on, and I think that’s short-sighted. Building a company with people with diverse backgrounds is not only the right thing to do from a corporate responsibility perspective, it’s also good business. And this idea starts at the top – if your leadership team is perceived to not prioritize these concepts, don’t be surprised if they don’t permeate the rest of the business.
Conversely, managing a business with such a diverse population can come with its own set of challenges, an experience that I’ve also witnessed firsthand. Clear definition of both individual and team roles and responsibilities is even more important. It can be too easy for people to talk past each other or dismiss each other’s perspectives, which, if allowed to fester, can create rifts in corporate culture – see the previous point on engagement, turnover, and increased operating costs. If managed correctly, though, a well-varied workforce can be a tremendous opportunity. Creating a culture of what I call “constructive dissent” is the best of all worlds – soliciting real input from people, taking all perspectives into account, but then quickly making and respecting the decision. Be open. Be ruthless in hiring people who embrace the culture, and quickly root out people who don’t. It will admittedly take time to navigate, but just like in cultivating cannabis, careful attention right from the start will set you up for abundant growth.