Committee Blog: Employee Recruiting and Retention are Expensive… Training is Not

by NCIA’s Education Committee

Profit margins are tight for every business in the cannabis industry. From plant through product development to retail sales at a dispensary, keeping a keen eye on costs and managing those costs can be the difference between profit and loss in any given month. The concept of investment – in employees, in technology, in building a culture for success – can also be elusive in an environment when private equity wants their multiple and the taxman is always around the corner. However, successful companies invest in their people and successful teams drive revenue growth. This is as true in the cannabis industry as it is in every industry.

Employee expenses, including salary, are significant for every company in the cannabis industry. A line-level employee costs about $4,100 to hire and onboard according to the Society of Human Resource Management. Senior-level leadership is exponentially more expensive.  According to the 2022 Cannabis Industry Salary Guide, “the costs of acquiring and keeping quality team members keep rising fueled by competition for available talent and nationwide salary inflation. Cannabis salaries rose 4% on average in 2021 with compensation for senior executives rising as much as 10%.” Salary is just one component of a successful employee/employer relationship. Hard costs such as benefits as well as soft costs such as culture, training, and long-term development need to be factored into the decision to hire an employee.  

The savvy business owner realizes that hiring is just the first step in developing a successful employment program, and just the beginning of the investments required. Training and developing your employees has significant benefits for your corporation. Business owners will reduce turnover, increase sales, and improve morale – all key components of driving profit – through investing in their employees. Let’s outline a few key benefits of training employees with a specific focus on cost and lost revenue:

• Every new hire from entry-level to your most senior strategist takes time and distracts your team from completing their most important roles. From interviews through onboarding, employee churn cuts productivity and distracts your entire team from their best and highest use.
  
• Unhappy employees make mistakes, are careless, and create risk, which can lead to legal action (for example, employment and harassment, product or financial theft, trade secrets, and investigations by the DOJ, SEC, and IRS are just a few of the types of litigation a company can possibly expect). Lawyers are expensive, and lawsuits take the attention of leadership away from their focus on generating revenue. Well-trained teams implement processes designed to avoid risk and therefore minimize litigation.
  
• Satisfied employees seek investment from their employer. Investment can be monitory, but it also is training and professional development. When you demonstrate an interest in your team members, they will be happier and your business will grow as they repay that investment through their tangible and intangible efforts.
  
• People want to belong. We are pack animals by nature, and investing in training demonstrates to employees that you want them to grow and stick around – be part of your pack.
  
• Unsatisfied employees may steal or take your trade secrets to your competitors. Employee mobility is a drain on the brain power of your teams, and opens your company’s risk profile in ways you have not imagined.  

Paying competitive salaries may seem like enough to keep a happily employed workforce with your company, but it’s not enough today. Easy employee mobility and the expectations younger generations have of their employer require a more nuanced approach. The risks of not investing in your employees’ future are analogous to buying a car and never changing the oil. Complete engine failure is exponentially more expensive than adhering to the maintenance schedule. Your employee relations are similar. Providing training, development, and growth opportunities may have a short-term cost, but the long-term benefit is that your cannabis company will produce revenue for many years to come.

As the cannabis industry matures, more and more training resources become available to enrich your staff, invest in their professional development, and educate them so they are able to perform at their highest level onsite. As an NCIA member, your company has access to a plethora of blog posts, webinars, podcasts, and in-person events which can be shared with employees. Utilizing these readily available resources will bolster company culture and impress upon workers their value and importance to your business.  

NCIA’s Education Committee assists with the design and development of educational programming for NCIA, and helps identify emerging topics in the cannabis space. Learn more about our members here. 

Post 2 – Strong Brands are Led by Strong Employee Development

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Brand drives revenue.  Companies – in any industry – with a strong brand are able to sell their product at a premium price over the non-branded (or perhaps generic) products in their market or sector.  Think of a few of the household names with strong brands (e.g., Apple, Tide, Chevron, or Peet’s Coffee).  These companies have direct competitors but they are able to charge a higher price point because of their brand and the loyalty that comes with a positive brand experience.  The companies also draw customers for repeat business every time they are in the market for the product.  Loyalty drives repeat business.  Revenue increases from investing in your brand far outweigh the costs, and many of those revenue increases are rewarded directly from training and developing employees.

Continuing our theme from (insert link to prior post), investing in your employees has a direct correlation to building a strong brand, which leads to increased profits.  Brand for most consumer products is experiential.  Your customer has an experience from which they establish their association with your brand – both positive and negative.  The experience may start with where the purchase was made, how the employees (e.g., budtenders) explained the product through the experience of using the product and finally disposing of the product.  Each touchpoint creates a personal brand experience and demonstrates the importance of training your employees throughout the sales and use cycles to provide exceptional customer service and education.  Some key reasons cannabis employers should invest in their employees with the focus on brand include:

• Brand drives loyalty, which is derived from the experience your customers have with the product from purchase to disposal.  Loyalty drives increased pricing. 
• Developed, well-trained employees have relationships with customers that resonate beyond the transaction.  Friends support friends.
• From seed through product sale, well-educated employees will increase sales volume by gaining the trust of your customer who may need education about your product and its benefits or differentiators from the product’s competitors.  Trained employees build trust which leads to increased sales.
• At the retail level, educated employees will create a better customer experience, and therefore will drive brand loyalty to the dispensary increasing return sales and referral sales.  High traffic retailers have strong brand loyalty, which increases sales of your products on their shelves.
• Educating employees in retail locations will increase sales volume by cross-selling other products in your brand portfolio.
• Customers seeking a specific brand will drive dispensaries to seek out and stock those brands.
• Educated employees will be proud of their employer and its products and therefore go the extra mile to ensure their success and the success of their employer.

A strong company culture of collaboration, employee investment, and thoughtful branding increases your product’s value in a highly competitive market.  Customers want to invest, via their purchase power, in businesses who value their employees through commitment to the personal and professional success of their workers. A company that is able to and focused on enriching their staff is reaping the benefits of flourishing profit margins.  The cannabis industry, and general industry as a whole, needs to focus beyond a feast or famine mindset.  Investing in your employees builds trust, respect, and loyalty; this can be translated to customers.  Building a stable and balanced community of educated employees and happy customers that is sustainable provides repeat sales.

Well-educated and trained employees work as teams, supporting each other and your business.  They give back to their employer in many ways both tangible and intangible.  For example, they will go out of their way to assist a customer, work a little faster towards the end of the day to get through the line of customers, or help to recruit their friends to work at your company minimizing hiring and onboarding expenses.  Invest in your employees, and your teams will succeed.  Training doesn’t require extensive budgets.  Check here for access to a set of learning tools offered by NCIA.  Team members will help each other, not let others fail.  They will also drive product recommendations to the products they know (e.g., have been trained on the benefits).  Happy employees reward their employer with increased profits by creating a positive brand association to your customers.

NCIA’s Education Committee assists with the design and development of educational programming for NCIA, and helps identify emerging topics in the cannabis space. Learn more about our members here. 

Post 3 – Employee Retention Creates Your Success

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How does a company grow without growing their employees?  This question may be obvious to some business owners and antithetical to others.  Every company has a culture which affects how your employees interact with each other and, more importantly, with your customers.  Investing in your employees will reap tangible and intangible rewards with a direct impact on your bottom line.  A negative culture breeds toxicity and resentment, leading to turnover, lost profits, and potential for costly litigation.  

Companies must provide new employees with proper onboarding and a clear, transparent path to growth. They must invest in their existing employees through ongoing training and development.  These opportunities do not require costly investments (i.e., NCIA has an entire resource center [NOTE INSERT LINK TO RESOURCE CENTER] that is included in your membership), many of your service providers will offer education in their areas of expertise (e.g., legal, accounting, human resources, production machines or technology), and formal education at local community colleges.  Successful employers demonstrate to employees that a career at your company is possible, and is your expectation as the business owner. Setting, and proving, the expectation that learning is a requirement for success at your company can put the onus of meeting learning objectives on your employee, as well.  In a prior blog, we discussed how teams in successful organizations support each other, and training is a perfect opportunity to share knowledge internally among your employees.  Those businesses that do not focus on employee investment and advancement will find themselves in an ongoing battle for talent, and open themselves to the potential for costly employment, trade secret, or fraud litigation.

Continuing our theme from (insert link to prior post), employee training is a key element to successful businesses.  Not only do employees want to feel supported, but engaged employees (i.e., well trained) will develop new or enhance standard operating policies using best practices from their learnings to create efficiency, cut operating costs, and train their peers.  Below we outline some key benefits for cannabis employers to invest in their employees.

• Toxicity and poor management affect culture and employees, which drives costly turnover.  An unhealthy work environment charges employees to leave, often in droves, and inhibits hiring quality talent at all levels of your organization.
• Minimizing employee churn (from entry level to senior management) cuts recruiting costs and creates opportunity to focus hiring teams on other, higher value projects.
• Small increases in employee retention rates spreads the expense and time of onboarding over several months versus focusing costs on hiring an individual employee.
• Educating your employees and creating a career path drives loyalty, increases retention rates, and has the intangible benefit of turning your employees into recruiters sourcing employees from their friends and business networks.
• Younger generations (Millennials and Gen Z) require a transparent career path or will use their leverage and find another employer – probably your competitor.
• Educated and engaged employees reduce workplace injury.
• Committed employees follow workplace rules, which minimizes potential for litigation or investigations requiring lawyers or other outside resources.

Whether an entry level employee to your most senior member of the management team, employees at all levels want to work where they are supported.  Employees want to know that they have someone looking out for their best interests, building a career path for them and creating opportunities for personal growth.  This could come from a direct manager, a human resources team, or a dedicated professional development role, but employee growth is part of successful corporate culture.

A company’s growth in profits is directly related to the success of its human capital program.  Team members want good leadership, and leadership requires training. Support comes in many forms, and should focus on training, development and career path.  Maintaining a keen eye on these three management tools will drive revenue, and increase your bottom line.

NCIA’s Education Committee assists with the design and development of educational programming for NCIA, and helps identify emerging topics in the cannabis space. Learn more about our members here.