Building a business is tough. Building a business in the yet-to-be-defined cannabis economy is even tougher. One of the biggest conundrums in the cannabis industry is talent acquisition and culture clash between legacy cannabis purveyors and formalized business structure.
In this episode, Fran Racioppi lights up the challenges and opportunities in this fast-moving industry. He’s joined by Bryan and Jessica Passman, Founders of Hunter + Esquire, a leading cannabis executive search and consulting firm, to discuss how cannabis companies recruit, assess, select, and retain top talent. They also highlight the barriers preventing elite talent from entering cannabis, the preconceived notions around the industry, the cultural challenges faced by operators, and the paths to becoming a successful founder in the industry.
—
Hunter + Esquire is the leading executive search and consulting firm focussed solely on the Cannabis and Psychedelics Industries. Founded in 2017, their experienced team is dedicated to providing a full-service, white-glove approach to every one of our clients. Their deep industry expertise, in combination with decades of talent acquisition experience and advisement, makes them an integral and trusted partner for cannabis and psychedelics companies looking to establish themselves as leaders in these burgeoning markets.
Bryan Passman is the Co-founder and CEO of Hunter + Esquire.
Jessica Passman is the Co-founder, COO, and General Counsel of Hunter + Esquire.
—
My biggest leadership challenge in running a cannabis company was blending the legacy culture of the cannabis plant with formalized business structure and process. In this episode, I want us to discuss the rise in the cannabis industry, the opportunities it’s created for businesses and business leaders of all shapes and sizes, and the risk of jumping headfirst into a still federally illegal line of work. Like any other industry, people are the foundation of cannabis companies.
I asked the Founders of the talent acquisition firm, Hunter + Esquire, Bryan and Jessica Passman to join me as we unlock the unique people challenges in building your cannabis company. We noted that builders would thrive but maintainers should steer clear and those entering this dynamic space should not be unscathed. Bryan also coined the term pivotability and admitted there are no perfect snowflakes.
Bryan and Jessica Passman are the Cofounders of Hunter + Esquire and The GIGG where they provide executive-level search placement and staffing in the cannabis industry. Prior to starting both companies, Bryan served as the Senior Vice President of Recruitment in med tech pharma and biotech, as well as the food and beverage consumer packaged goods industry. Jessica is a Florida Bar Certified Attorney who, in addition to running her own law practice, has held roles as Chief Operating Officer and General Counsel. Jessica and Bryan enter the chaotic and fast-paced cannabis industry to drive talent management impact and process and is still an undefined territory. Their advisory expertise includes organizational structuring and restructuring, human capital evaluation, and attracting and retaining talent. Bryan is a member of the Forbes Human Resources Council.
—
Jessica and Bryan, welcome to the show. We have gotten to know each other over the last couple of years as I work to structure a vertically integrated cannabis company. I’ve always been impressed by your approach and the reach that you’ve had as you’ve built out your company. As I built out this show as conversations with trailblazers and transformative leaders, I thought about the companies in the cannabis industry and how everything seems to be trailblazing because it’s undefined. There’s this chaotic world that lives out there and everybody’s trying to figure out how it’s going to work together and what their place is.
Talent acquisition and talent management in this space are incredibly challenging. In my experience of being in the industry, it was probably the single most challenging thing that I face every single day. I wanted to sit with you and talk about how you approach these things and talent management. There’s no structure there. There are a few regulations and rules on how to conduct business. You have to build relationships with legitimate organizations as well as these nefarious actors who have worked in legacy cannabis for years and decades. You have these people from Wall Street banks who are sitting in the room with black market cannabis farmers.
While you have this race towards legalization, there’s a massive injection of funding from both the public and the private depending on which country and which district you sit in. There’s also significant competition in both the market for the elite talent required to put the right team together and within these individual companies. You guys jumped right into the middle of this and you searched for the highest caliber talent to fill critical roles in the industry at the leadership level and from a staffing perspective across the entire organization. We’re going to talk about the cannabis industry, how you recruit, assess, select and retain top talent in the industry and how you’ve built the company together as a husband-and-wife team in this crazy industry while raising two children. Thanks for joining.
Thank you for that intro. It’s great to be here with you. Thanks for the invite.
Thanks for having us. We’re looking forward to this.
Let’s talk about cannabis writ large. Cannabis is still federally illegal in the US. In fifteen states in DC, there’s been the legalization of recreational cannabis. Meaning that anyone over the age of 21 can go in and buy it. Thirty-six states have legalized medical use so that requires a prescription. Different countries have different laws and regulations internationally. Every state has different laws, regulations and compliance requirements.
There’s a tremendous amount of broad support for the cannabis industry yet there are remains also an equal amount of staunch adversaries to legalization. That’s created some stigmas around the industry like, “You have to be a drug dealer in order to be in this industry. You have to be a drug addict. You have to consume the product all day long or you can’t be effective in any position especially as a leader if you don’t understand the effects of what you’re selling.” Once you go from the mainstream industry of cannabis, you can’t go back. Jessica, imagine that entering the cannabis industry is a one-way door and you have to get comfortable with that possibility. What are the barriers to recruiting top talent into this industry? Can you talk more a little bit about the stigmas that might exist?
I’ll answer that because I live on the phone with talent here on our side. Jessica is the magic behind it all. You hit the numbers right on the head and I’ll add further to that. Something 320 million of our population, 90%-plus of our population has some degree of access to legal cannabis. Ninety-plus-percent of our country supports the legalization of cannabis. We like to inspire confidence in talents that think about how long the will of the people of this country will be out of congruence with federal laws. We all know cannabis wins elections. We saw a green sweep in the election. If for nothing else, politicians and legislators are supporting it for self-preservation.
We like to talk about these things and other pluses that come with the cannabis industry beyond the economic benefits, all the tax revenue and the great infrastructure. The improvements you see in states that legalize it is there’s a lot of socio benefits such as decreasing youth usage and drops in DUIs and vehicular manslaughter. It increases home values when dispensaries pop up in your neighborhood and a whole slew of other positive ripples from legalization. Our recruitment process is built heavily around education. One thing we agree to do and we do not do is we do not talk anyone into entering the cannabis industry. We will not twist someone’s arm. We will not talk them into it. We will educate them on the watch-outs, the good and the other ones.
It is true, you should consider your entry into the industry as a one-way door and that’s it. You’re blocked out of other mainstream and highly regulated industries. It’s good to talk about that. The truth is for us, we receive extremely little pushback from the candidate pool. Talent from any industry and from any discipline walk of life is at varying degrees of interest in entering the industry. There are negative stigmas that we’re working against a century of negative stigmas put up against cannabis and its use. Most people understand now that that was racist, rhetoric and utter nastiness. They see the benefits.
It’s touching so close to many people directly to their family members or otherwise. We don’t receive a lot of pushbacks. We inspire people to think about the downsides of entering the industry as it relates to not being able to get another job out there. That next company you want to work for outside of cannabis might be run by a conservative group of people who will hold a stigma against you for working in cannabis. You must ask yourself then, “Do you care? Do you align well with those people? If they still hold that negative stigma, does that even matter to you?”
The industry has gone so far as to hiring mainstream elite talent. For many years now, you see that elite talent having worked in the industry like you then exiting out and working in the mainstream. In some cases, it’s easier to land a gig in some industries like adult beverages, tobacco or other dynamic, highly regulated industries. We have to be pivotable and adaptable because if you thrive at a high level in the cannabis industry, you can argue that you can thrive anywhere. I’ve supported a lot of industries and people are not working harder in other industries than those who are thriving in cannabis.
There’s a lot of education we build into it, including the watch-outs. Our stick rate for our placements is high. More than 90% of our placements stick in their leader roles in the companies we placed them in because it’s educational and not convincing. We put the bar high and we set a rigorous test for candidates to go through in order to enter. It’s a constant line of questioning of why. Why do you want in? Why do you believe you’re a fit? Are you sure you want to do this? Have you spoken to your friends, family and anyone in your circle of love and trust? Your pastor, rabbi, HOA, banker?
There are a lot of things to think about as it relates to your personal life. Are you going to have to take out a home loan or borrow money for any reason from a major bank? If your income is coming directly from the cannabis industry, you’re probably going to be in some trouble and struggle to get that loan from Wells Fargo or Bank of America. There are a lot of things to think about. We love educating. We don’t want to enter everyone into the industry. We want to enter the right people. If someone’s not right for the industry because they’re concerned about it, it doesn’t make them a bad person. It just means it’s not the right time.
I always think about this and what I would tell people when they would ask me that question is, “Do you think that the people who go to work at Budweiser and Jack Daniels all day long show up and begin drinking from the minute they show up in the morning?” The answer’s no, they don’t. Even if you produce protein shakes, do you go there and drink protein shakes all day long? No. Maybe you have one later on in the day. You’re not there to consume a product. You’re there to run a business.
It’s interesting you say that because, in my past life, I spent a few years with a big CPG search firm running the adult beverage side of client relations for them. Brown-Forman, a huge brand owner of the adult beverage space was a client of mine. I went to visit their operations in Louisville, Kentucky and they have a great restaurant on-site on their campus. I sat with the head of talent and HR for brunch. Every employee who has lunch there can consume one adult beverage at any time of the day. You’ve got people sitting around 11:30 AM, 12:00 PM, 12:30 PM having a whiskey which I thought was interesting.
That is not happening in the elevated and serious business cannabis companies. There is a zero-consumption rule. We’d even narrow it further to the side of, “Let’s not play around. Let’s try to get it right.” You’ve got different cannabis cultures. On the West Coast, you do have some big companies that have smoke rooms. I do not endorse that but for the most part, you don’t see consumption on the job in this industry.
It’s similar to prohibition as well. If you think about prohibition back from the 1920s and 1933, there’s this push to legalize alcohol. Depending on where you live or where you work, these things were approached differently. California legalized medical marijuana in 1996 then recreational in 2016 and it took effect in 2018. Colorado legalized recreational use in 2012. I remember when Colorado did this because I lived a couple of blocks from a dispensary that opened. During the day, the line was all the way out the door and around the corner.
They were getting robbed every night because they had these stacks of cash but they couldn’t put the cash into the banking system. All the thieves knew, “They have tons of cash in that place so I’m going to rob that place at night.” The cops didn’t know what to do because they were saying, “Now what do we do? This is federally a crime to even sell this stuff. Now they’re filing a police report. Do we even go look for the thieves who stole the money because the money technically is federally illegal to even have in the first place?” You end up in this crazy world where nobody knows what to do.
You look at states in the Midwest and the Northeast that, only in the last couple of years, have started to push towards legalization. We sit here in New York and Connecticut. Those are on the immediate horizon in the near future for recreational legalization. The markets range from extremely established like California and Colorado and mature, operating CPG firms, big tobacco or big alcohol. You have extremely immature markets in their infancy that are operating the Wild West with no rules and no regulation. Everybody is just trying to grab a piece of this thing. Competition is established in mature markets. We’ve seen price compression and huge margins go down to nothing but then in the immature markets, you still have these huge margins that exist.
It’s important to note too that as a Federally illegal product, cannabis goods in any form can’t be moved across state lines. You have entire supply chains that have to exist within the state borders at least at the plant-touching parts. Because they’re contained in that state, you have these micro-ecosystems that have to exist. Companies have to operate across a wide range of maturity in both their business activities and in their supply chains.
Large public companies with millions of square feet and thousands of employees exist in California but then you go to the Northeast and you have something like a 2,000-square-foot garage with a single owner-operator. As you approach talent management, you think about recruiting for this wide spectrum of maturity in the industry. How do you develop a recruiting plan that addresses both of those types of companies?
That’s where a service provider like us being a boutique firm comes into play where we’re focused on the industry and small because we’ve got our finger on the pulse of what is fitting culturally market to market from one region to another. We’ve been able to compartmentalize and understand when we’re recruiting for that New York City-based client that’s run by bankers from Goldman Sachs. We’re looking for a different profile. It’s different than when we’re helping that client out in Oakland, California, that’s run by people of a different type of professional background if they have any professional background at all outside of legal and illicit cannabis cultivation processing and sale.
Creative entrepreneurs.
It’s important to be able to be a chameleon of sorts and have conversations across both demographics. The reality is in the cannabis economy, as I like to refer to it because there are a lot of industries within it, you do need those cannabis OGs, the suits and everything in between. As companies scale and some of these operators scale coast to coast, border to border, it’s inevitable that the New York company needs OGs in their operations in Colorado and California. It’s not the same hiring. You have to figure out how to hire people that can get along together. There’s a whole slew of traits that these people must possess regardless of their role and background. These are the essential soft skills that you could develop through any professional background or just personal walks of life. We vet for those things.
Companies in this space can’t establish a national supply chain. They run their operations market to market if you’re one of these multi-state operators like a wholly-owned subsidiary in each market where you’ve got to have a leader owning a P&L and have your own culture in that market. It has to align with the overall culture of the organization. One of the big struggles in the industry is standardizing your culture and all of your processes especially as it relates to people. The core of what we’re here to talk about is your human capital which is your most valuable asset and in most cases, if not all, your only appreciating assets.
Doubling down on how you identify talents to bring to the organization, how you bring them in and then how you treat them when they come in is massively important. It’s one of the big industry fails because this industry has the least amount of strategic human capital leaders per capita than any other industry. The struggle is bringing more strategic human capital talent into the industry because the people’s challenges are unique. They are more unique in this industry than any other. If you coupled that with the fact that we have the least amount of strategic HR leaders per capita in this industry, that’s a recipe for disaster. The companies you see thriving are those that have hired that type of person and built out a strong shared service backbone in their organization.
Let’s talk about that industry experience piece. You referenced the OG, the people who have been in the industry for decades, operating back in the day solely in the black market and now have crossed into the more mature mainstream market. I remember I met many of these people in my time in the industry. I met somebody who had a hat on that said OG and being new to the industry, I looked at him and I said, “What does your hat mean?” He laughed in my face and I said, “I don’t understand. What’s so funny?” He says, “I’m OG.” I’m like, “What’s OG? I don’t know what that means.” He said, “It doesn’t matter what it means. I used to do things you don’t need to know about.”
He asked me, “What did you use to do?” I said, “I used to be a Green Beret in the Army Special Forces before I transitioned into the corporate world.” He looked at me and said, “I did what you did but I can’t talk about those things.” I looked at him and said, “I don’t like to talk about a lot of things I did either so why don’t we just leave it at that?” I went about the rest of my day. These people are critical. Industry experience is something that we’ve talked a lot about on the show and in the Talent War Group. The fact that you can come into industries not exactly having a tremendous amount of industry experience if you have a requisite experience that you can translate in. We call that hiring for character and training for skill. We’ll talk about the characteristics that make for a good candidate to come into the industry.
In episode one, we spoke with Mike Sarraille and George Randle authors of The Talent War. They laid out this hiring for character training for skill. This reference that people can come into any industry as they do in Special Operations, anyone who’s recruited into Special Operations was not previously in Special Operations. Yet they come in and they’re assessed, selected, trained and then we create some of the most elite organizations in the world.
Neither one of you had experience in the cannabis industry and I didn’t have experience in the cannabis industry but we came in and have been successful in doing things in that industry. Can you talk about the ideal level of industry experience or non-industry experience that’s required to enter into this space? Is there a value in bringing people from the mainstream into cannabis? What’s derived out of that? How are they being received on the other side from the OGs of the world?
Let’s work backward. The reception of those people coming into the industry by those legacy industry people varies and it depends on how that person entering the industry from the mainstream is doing it. Are they showing respect for what has led up to this point? A lot of people have risked a lot to get the industry to where it is. Those OGs have been incarcerated and had everything taken away from them. They fought long and hard to help get us to this place. The first thing people from the mainstream coming in must do is show respect to what’s transpired to get us to this place because it’s not just been lobbyists and people on Capitol Hill fighting. The fights have been in Mendocino and elsewhere.
You have to show that respect. You have to demonstrate some passion for the plant and for the success of the industry. You do not have to be a consumer to be an effective leader in the industry. You must respect other people’s consumption of it and appreciate the fact that this is a consumer good or medicine that must be delivered with the highest level of attention to its quality. Be obscenely passionate about how you’re getting to that point of delivering a quality level of service to the consumer.
There’s an opportunity in the cannabis industry for anybody from anywhere. It’s finding the right role at the right company at the right time. It doesn’t matter what industry you’ve worked in or what your functional background is. There is a spot for you in the cannabis industry. There’s a tremendous need. As supply chains do mature, there are opportunities to move products. We have some clients that are into the creation of water-soluble cannabinoids through nanoemulsion and they have certificates of free trade where they can move their cannabinoids over state lines or even international borders. You have other ingredients companies that are producing bulk wholesale and they can move.
There is some evolving of these supply chain challenges and technological challenges. We have three searches for chief tech officers of cannabis companies. These are mainstream tech and CIO leaders who are going to come into $250,000 salary jobs in the cannabis industry with millions of dollars worth of equity and other short-term incentives. That’s because technology is progressing rapidly in the space. As regulations evolve, there are a lot more lawyers. We completed a general counsel placement in building a small law firm for one of our clients. We brought some talented lawyers into the space.
You have a lot of that coming in from outside. There are always going to be roles in cannabis where you do want to hire from that legacy personnel where a lot of those roles are closer to the plants. Your cultivator, lead grower, facilities leader, in some cases types of roles or even where the magic happens where product meets the customer. Your budtenders, patient coordinators or whatever you want to call them in your retail environment.
Assuming you can find those people who are going to present professionally and educate the customers. You don’t just want to hire those legacy OG types that work behind the counter and try to sell the most potent product to the grandma that came in for some CBD oil or a Vapen and leaves with the alts of 20%-something THC flower. It’d be a long night for grandma. There’s a place for everyone. Everyone needs to get along. We have a lot of friends who are OGs. I tend to get along with the ones that appreciate the fact that they also have to welcome those people coming into the space from the mainstream and work with them. It’s reassuring to see a lot of those legacies.
People take it upon themselves to level themselves up to go for continued education and hire executive coaches. We have some friends on the West Coast that meet regularly. They invest a lot of their personal time to receive executive coaching because that is a dilemma in the space. You have a lot of first-time founders that have never led a team before and now they might be a CEO of what’s rapidly becoming a company doing tens or even hundreds of million dollars in revenue. There’s a lot of emotional maturity, emotional intelligence and things that come with needing to be successful in that role. Coaching is big.
Let’s dig in on the culture because there is a big cultural divide. A company’s culture is what sets the foundation for so many elements of success and it can also drive an organization into the ground if people are not aligned. When you have these cultural differences between legacy cannabis and mainstream cannabis purveyors, that divide can be visceral and it can be strong. I’ve seen that misalignment firsthand where you have the legacy cannabis about more plant-touching. There’s more of a feeling of intimacy with the plant, the feelings around the plant and how it makes you feel personally.
You look more mainstream and you see the financial side of things, the business model in the organization. You have this divide between how you embrace the plant and what you get as a reaction from consuming this product versus, “How do I make a business out of this and make as much money as possible? It also is important to note that in finding that common ground, I have found that money may be the common denominator of both of these sides.” How do you bring that organization together and culturally create an environment where it’s collaborative?
It does come down to the money. The sooner a legacy cannabis entrepreneur learns and it’s typically the hard way that selling $1 million worth of weed is not the same as building a legally sustainable $1 million cannabis business. Those are two different things. Learning through the struggles and hopefully having self-awareness that I’m banging my head to figure it out with my friends and family who I trust. I know that I can trust these men and women to be in the trenches with me because we used to sell a bunch of weed together or I went to school with them. Moving on from that to say, “I need to try to put my trust in others that have the requisite experiences to get my business to this next level.”
Assuming that person is interested in having something sustainable because the reality is there are a lot of people in this industry that are trying to grow enough good products and build up their brands well enough so that they can quickly sell. They just want to cash out or maybe quickly go public. It’s a race to a transaction event to monetize it in a lot of cases, not all. There are some people that want to build a nice tidy little cannabis operation they can run forever and earn a good living. It’s dangerous for those people unfortunately because the industry is shrinking. There’s a lot of consolidation.
Those craft shops and mom-and-pop shops struggle to compete on pricing and all the digital growth solutions bigger companies are investing in to beat them out and build their brands more effectively through other means that are not just guerrilla warfare growth like most cannabis businesses have grown. The sheer theme is wanting to be able to earn a good living and aligning yourselves with those people you’re bringing into your organization that have that same vision and representing it truthfully.
If your vision is just to build a nice tidy little $5 million cannabis operation but you need financial help, don’t go get yourself a high-powered CFO that’s going to want to build a $100 million company and try to push you to an exit for multiple if that’s not what you want. You have to represent truthfully, candidly, transparently, honestly what it is you’re driving towards and hire someone that’s aligned with you on whatever that role is you’re hiring from the outside to level up in that department.
There are a lot of people who have been in the legacy industry who have made successful transitions over into the mainstream but these nefarious actors do still exist out there who have different intentions. They continue to straddle what I call the gray area. In the morning, we’re going to have reasonable conversations about running a business. In the afternoon, we’re going to push the product out the back door and sell it into the black market. What effect do you think the black market has on the legal marketplace, specifically the taxation piece of this?
As I’ve looked at the business and understood the business model, the taxation piece at the state level creates a lot of challenges to run an efficient business at a profitable level. If I throw out a couple of numbers to quantify that, if you look at the audit that was done in late 2019 to early 2020, there were 184 licensed cannabis retailers in Los Angeles. The highest number there was 189. Weedmaps, at one point in 2019, crackdown and booted any illegal shops off the platform. Immediately after that, they still had 400 locations on their site in Los Angeles. That audit showed that there are about 1,600 cannabis retailers in Los Angeles. Why would a consumer go and pay 30% to 40% more on that taxation premium that’s put on there when they can go to 1 of these 1,400 other stores and buy at a discounted rate?
There are a lot of snakes in the cannabis garden. It’s certainly not just an industry of friendly people trying to do right, holding hands, smoking weeds and singing Kumbaya together. There’s a lot of bad actors in the space. I have some friends at Weedmaps so I won’t be too disparaging towards them here. We can also highlight what’s going on with the Eaze. They’re a big company and their founders are facing money laundering charges because they tried to create a work for consumers to pay with their mainstream credit cards for cannabis. If anyone out there thinks that you can grab one of your mainstream credit cards out of your wallet and purchase cannabis at a dispensary that way, you’re wrong. Whoever is behind the scenes facilitating that is breaking Federal Law, going to get caught and going to go to jail.
The illicit market does something good for cannabis consumers that want to go legal. The existence of the illicit market keeps costs down for consumers because it’s extremely expensive to operate a legal cannabis business. You touched on banking. There’s this 280E Tax Code that handicaps cannabis companies in a major way. Essentially, that leads to a situation where cannabis businesses are paying an average of 3.5 times more taxes than any company in any other industry to compete with the illicit market. On top of that, you have to pay for lab testing.
There’s a whole slew of things that the illegal cannabis business has to do that your dealer from the corner doesn’t have to do. Why would you do it as a consumer? For myself and for many people I know, there’s convenience. If you ever had to deal with your guy pre-legal, it could be a headache. If you’ve got a store on the corner and you know the store hours. Since COVID, there’s been a lot of online ordering, curbside pickup, delivery to your home and it’s well managed. There’s a convenience and consumer health factor.
There are plenty of big operators in the space that are selling cannabis products that are not high quality and are only passing lab tests because of some shady dealings with those labs. For the most part, as a cannabis consumer, you would pay a premium to buy through a legal route to have a higher level of assurance that you’re getting a clean product. That doesn’t include heavy metals, nasty pesticides and other things in it. Ideally, you’re getting something that’s organic and good for you. Those are reasons outside of the fact that you probably want to reduce the number of reasons you might get sent to jail. It’s safer to go to a store on the corner than meet your guy. There’s always that.
Let’s throw back to some of the characteristics and attributes that you look for. In the show, we talk about the nine Special Operations Forces characteristics of elite talent and that’s drive, resiliency, adaptability, humility, integrity, team ability, effective intelligence, emotional strength and curiosity. The theory is that in order to be an elite performer, you have to exhibit all of these traits. You’re not going to exhibit all of these traits at any one time and there are certain situations where you’re going to exhibit some over others.
Generally, as a person and what we call the whole man concept, you’re going to exhibit all of them to become a dynamic leader. I know that I was challenged each and every day across each 1 of these 9 character traits in my time in cannabis. I’m interested in your perspective on what are the characteristics and attributes that you look for in candidates that give you reasonable assurance and confidence that they’re going to be successful in this industry?
We look for all of those traits. We don’t look for someone that’s going to score 10 out of 10 on all of those but as a whole, we do look for those. One of my favorite new words, if it’s even a real word, is pivotability. It’s something we look for. There are some real ways that we gauge that such as looking at has the person succeeded across different industries? The truth is if someone’s had a nice cushy career, lived in their bubble working years and decades at a PepsiCo, the Gap or other corporations where certainly they’re challenged here and there.
There’s a good chance they haven’t taken the bumps and the bruises that prepare them for working in the industry and had to deal with dramatic changes with their environment, different people, systems, evolving regulations and all the other dynamics that come from not just changing companies within your industry but changing industries and having to figure out how to thrive in retail or consumer packaged goods then tech, gaming, tobacco or some other space. We look for people with a compliance mindset. We’d like to hire from heavily regulated industries. That’s a big deal for us. We look for people that have had to create, build or save a company in some way and understand what their role was because we specialize in leadership placement. You could divide leaders into two groups. You’ve got your maintainers and builders.
Maintainer leaders should probably steer clear of the cannabis industry. This is an industry where we’re building the plane every day as we fly it. There’s an opportunity around every corner to creatively solve an old problem in a new way or solve a new problem no one’s ever had to solve before. If you’re not used to having to work in a constant state of flux and have every day be different from another, it’s probably not the right industry for you. You can’t come in unscathed. I like to talk about snowflakes. If you’re a perfect snowflake, you’re going to melt in a hurry in the cannabis industry.
I like this theory you put out here about maintainers versus builders because you advise companies on their leadership capacity and you assess their executives and boards, if they have boards, as they grow and mature as organizations. There’s an evolution of the businesses in the lifecycle of the company. There’s a lot of companies in cannabis and supporting companies in cannabis that aren’t exactly plant-touching but they produce products that then the plant-touching side has to use within the supply chain.
The federal classification as an illegal product has fragmented this market because it’s harder for conglomerates to jump in without having to establish state-level entities and operate at a regional level. That has allowed a lot of space for small businesses to step in and thrive. A lot of those small businesses are run by people who’ve made the jump from the black or gray market into the mainstream. There’s also been a tremendous amount of money that’s been thrown into the industry. Those have been public and private funds depending on where you are. There’s been a tremendous amount of money that’s been lost.
The days of get-rich-quick are probably over especially in the mature markets like California and Colorado. Maybe they’ll exist for a little bit longer out in the Northeast but that goes away quickly once everybody starts jumping in. The money can provide the resources but as I saw firsthand, it won’t solve your problems because it’s the good people that have to solve the problem. You have to build that organization in that manner. There’s this rapid maturation of the industry that has now forced businesses and founders to quickly adapt, grow, scale and mature in ways that as organizations and specifically their leaders and often in this industry, young leaders haven’t been prepared and trained for it.
They haven’t had the experiences that have scaled them to then take a step back and say, “I’ve experienced this before. Now I know how I can mold this organization to get to the next level.” As we understand, the business evolution cycle and the business growth cycle require different leaders at different points. There are these inflection points that mark the start and finish of these phases. It’s what I call, “What got you here won’t get you there.” It looks like a bell curve. It’s this old business school model of business growth. You have phases 1 through 6. You have existence, survival, early success, rapid growth, maturity and then this decline or relaunch.
As the company goes through the first couple of phases of existence, survival and early success, there’s this focus on initial leadership, founder-driven leadership. The great ideas come to people in the night. They wake up and say, “I’m going to execute on this,” and then they have this success. As you get into success and rapid growth, there’s a level of autonomy that these founders push down to the teams that they build around them. Rapid growth into maturity creates a level of control and established mature companies create what we call red tape. Everything is systematized and formalized.
Much of this industry, let alone the businesses themselves are in the startup phases, that 1 through 4, existence, survival, early success and rapid growth, especially in the newer markets. In the established markets, we have seen companies go into 5 and 6. They’ve operated at mature levels then they failed and declined. We’ve seen brands have to relaunch. MedMen which is one of the biggest national brands, has had to go through some identity crisis. You mentioned troubles with Eaze. Eaze was in a position where they needed funding and they had to think about their business model. They had to look at ways in which they were going to decline or relaunch. I’m interested in learning how you define this business growth cycle in cannabis and what you have seen from companies who haven’t been able to effectively mature and have now been on the decline or forced to rebrand.
MedMen is probably the best example of not reeling everything in. When you reach that critical mass and becoming this billion-dollar valuation company starting to do the things you should do, which are elementary. To people reading this, mainstream sound silly but treating your people with respect and having good corporate governance in place. Do not fire people without cause when you’re operating out of California and most of your employees are in California. Firing people without cause within days of their equity vesting.
In this industry, there’s a greed factor that too often is shielded by, “This is my baby. I’m passionate about it. I don’t want to let it go,” but it’s more ego and greed. When you see some of these companies reach a stage where they’re a decade old now, they’re 2,000-plus employees and publicly traded with a $1 billion-plus valuation, your same leaders are in place not leading effectively and driving the company towards this downturn, this other ugly side of your bell curve, you need a strong board. Hopefully, your board was built in a way where it’s not just your friends who are yessing and supporting you in everything that you want to do and perpetuating this downward spiral. You need to properly build out a board. Ideally, with a third-party expert like Hunter + Esquire or similar.
This is a good time to talk about diversity and inclusion in the workplace. Go out and get people from not just different industry backgrounds but people of different racial, national and other backgrounds who will bring different sets of thought to the boardroom and your leadership team. Also, challenge on why we’re doing these things. Not leveling up talent but getting a different train of thought and creating that healthy friction in your organization. A lot of times, that happens. It’s happening with a couple of our clients as we help them build out their C-suite.
Bringing it back to us, a lot of times about the money and the smart founder leaders in the space understand that when it comes to time if they’ve built their board the right way as a couple of our clients working within this way have, they’re told, “Mr. and Mrs. Founder/CEO, go out and get yourself a real CFO, a real CTO because we’re getting ready to go public. It’s time to seriously entertain the acquisition offers that are coming our way. If we want to properly monetize this thing, we need to level up.”
If you’re a company that has gone from a $90 million to $700 billion valuations as one of our clients has, you’re rapidly going towards a public offering and you’re still working off of QuickBooks, you need a proper CFO that’s gone through the process of taking a company public before and knows what it takes. You need people telling you to do that be it a third-party expert, your board or your spouse. Listen and open your ears. Self-awareness in these industry leaders is key and also lacking in large part. If you can check your ego and listen to what those around you are guiding you, not necessarily do everything and fall victim to that shiny object syndrome, do everything and chase everything everyone tells you to do but consider those opportunities, vet them and talk them through then you’re in a better place because none of us know it all.
I’ve done all the talking here but I wouldn’t be doing any of this or learned any of this if not for Jessica. She totally talked me into doing this and thank God I listened to her. A perfect example for us right here. I wanted to do it but I didn’t know how to do it and I was afraid to. She laid it out. She had the back-of-the-house skills to handle all the administrative, contractual, legal, and all of the stuff that freaks me out. It would have prevented me from helping to birth this thing that we’re doing. Listen to those around you that you love and/or trust.
Jessica, how do you position that conversation? That’s a tough conversation to have with Bryan, your husband, and business partner. That’s difficult to have with somebody that you don’t even know that well, who’s a founder, a young leader, built an amazing company and has had all this success. You got to sit that person down and say, “You’re not the person anymore. We have to bring somebody in.” We speak so many times about getting comfortable having uncomfortable conversations and that truly is one. How do you approach it?
One, the person does have to be open-minded. They have to be willing to listen to you and trust you to some extent to give you that time. Doing it in a respectful way, honest and coming from a good place is key. You’re talking to them for the right reason and not trying to push them out or put them in a bad situation. You’re just being open and honest with them. That’s the key in a respectful, open, honest way.
I would add that you would want to assure them that the way that we’re going to move in this direction is with all due respect to what you’ve done and to figure out a way to keep you involved. In the case of replacing a founder/CEO, understand that that person wants to be involved in the business and help them craft a way where they stay connected to it as a special advisor or in a board role. They move into your chief revenue officer role if that’s their background. Ensure that the person that is hired to support them or replace them is someone they love and is going to not only trust the keys over to but enjoy working with.
Last but not least, have your other stakeholders be a part of that decision-making, the people that have put all their blood and sweat into it over the years getting you from then to now. As you look to bring in new leaders to get from now to where you’re going, have those people play a role. Assuming you trust them to play a role in evaluating talent and consulting with those people outside as well. If you’ve got not the whole village participating in the decisions, you’re going to probably end up in your paralysis by analysis and too many cooks in the kitchen syndrome.
Have some of your key stakeholders you trust be a part of that because then you’re increasing the odds that that legacy and all that intimate knowledge that you need to retain is going to stay with you if they’re part of that decision. It’s far too painful and risky to change out yourself and your old guard with all new people and experience all that brain drain. You’ve course-corrected too far out over your skis and you’re in trouble.
That’s a great point because you don’t have to kick them out. They still have value. These are people who still made a tremendous impact in the business. They had the vision, executed it and did amazing things. There’s still value there. Getting the organization and the people to understand that, it’s not that you’re out. You just have to be aligned to a role that better suits your skills. That’s the conversation to have.
If you’re a VP of finance that has put in 80-hour weeks week in and week out for the past six years for you and is going to be hired over by CFO, ensure you’re clear on what the skill gaps are that you’re filling. Get that CFO that has that strong separation from your VP of finance and is clearly bringing those skills to the table to demonstrate like, “You are no longer in that top finance fund but it makes perfect sense this person’s coming in because you’re going to learn from them. By the way, you’re probably a big shareholder in the company. The wealth creation you’ll enjoy one day will be increased because we have this person here.” Connecting those white dots and filling the right skills gaps with those new hires.
I like this theme of communication that you’ve brought up here because it’s something that you’ve both spoken about a lot and said that direct, detailed, clear communication leaves nothing to interpretation or confusion. That should be the goal of every communication. Most people don’t communicate that way. What is it about how you approach communication whether it be in your personal lives or in the business world that creates an effective collaborative environment?
I’m an over communicator. I’m chatty. I like to spell things out. I’ve gotten good at doing it in a way where it doesn’t turn anyone off because you can fall into the trap of mansplaining. Regardless of what gender is on the other side of the line or table, you don’t want to fall into that trap. One of our strengths is to over-communicate in a smart way and layout, “This is why we’re doing this thing and here’s why. Here’s how we’re going to do it.” We build a lot of accountabilities into the work that we do. We tell our clients what we’re going to do, when and how it’s going to happen.
We give them a clear line of sight directly into how it’s happening. We share a link to Google Docs so they can see our workflow and how we’re getting to the point of delivering talents. We also ask for that in return. We want them to commit to a process because we’re not working with every company in the industry. We’re certainly not working with those who are not process-oriented, which is tough. It narrows the field a lot for us because there’s not a lot of processed out cannabis organizations. It’s a lot of planning, 1 to 2 weeks out, best case for a lot of companies in the space.
Also, transparent in a respectful way of communication. I do want to know what Jessica has to say about it. I’m going to put her on the spot because we’ve talked about this a lot internally in how we hire and how she communicates. My background as a career headhunter and hers as a lawyer are extremely different communication styles. It’s been an evolution for us here where she’s had to pull the reins back on me a bit. I’ve hopefully helped out on how we communicate to each other and to our clients together as a unified front.
I’ve always been an under indicator if that’s the best way to describe. My goal has always been to provide the least amount of words to be the most concise to get to the point, summarize it in the best way I can and give you the information that you need to know. It’s a need-to-know basis. I live in a world of trying to over-communicate and be as detailed as possible in my communications. It is a better way to be. There’s less back and forth with emails. “Here’s all the information. Here’s what you need to know. This is where you need to be. This is how you need to do it. This is the background of this person.” Everything is in one place. It’s fantastic and everybody appreciates it. It’s been a struggle for me to get there. I am still working on it. It’s the way to be. I completely agree.
You have to evaluate Bryan.
His over communication style, when we work with a piece of writing or something we’re working on together, I do pare it down and edit it because he does use a lot more words and sometimes it’s unnecessary. Our communication combined is perfect.
If you were on LinkedIn now, it’s a great example. Thankfully, LinkedIn has a character limit because I can probably write a novel on their daily and I shouldn’t spend my time that way.
Keep it concise. Jessica, I’m going to keep you on the spot for a little bit longer. You worked many years as a Chief Operating Officer and General Counsel of a company called FemCity, which is a members-only community created by women for women. You’ve spoken a lot about gender parity in the industry. Bryan brought up the fact that the industry has done a good job of diversity and inclusion and it’s something you guys focus on. You have been quoted saying, “The cannabis industry is being built from the ground up as an example of how great an industry can be when it brings in more women executives than any other mainstream industry.”
I want you to expand on that and give some credit to my colleague at the Talent War Group, Lisa Jaster, who speaks a lot about Delete The Adjective. Lisa is a Lieutenant Colonel in the Army Reserves. She was the third female to ever graduate from the US Army Ranger School in quite a feat. She speaks so much about removing the term woman from founder, COO, or GC because it’s not about being a woman. It’s about being an executive. It’s about being a leader. Can you talk more about that and how it’s applied in the cannabis industry and the way the industry is approaching gender parity?
I agree with her 100%. Sometimes, people will note themselves as She-EO or they add the women founder. It takes it away from the accomplishment of being a CEO. She’s a CEO. She’s not a She-EO. There’s a huge cry and push for diversity for women and for women in leadership roles. I see and hear it. Our clients are all trying to make that happen and looking at things in a great way. It comes down to diversity, not having the same type of person in every leadership role because that is not a way to make things happen, make changes and be successful.
There are also the companies that are focusing on more optic hiring and choosing to hire a woman for the sake of hiring the woman and then they’re not even giving her the chance to do anything amazing in that role or have a voice at the table. The focus needs to be on generally hiring, having diversity in leadership, women, minorities, and all different backgrounds. Your clients and customers are diverse. Your leadership should be the same.
Our clients have been demanding for years, now diverse slates. None of our clients want to sleep full of the pale male candidate profile. They want women and people of color in diverse backgrounds and that’s great. The best way to get there whether you use a search firm or your internal resources is you have to treat it like a numbers game. You don’t want to hire the first great qualified woman, a person of color applicant, or an internal referral that comes your way in the cannabis industry especially for any key leadership role.
If you’re hiring for optics and trying to diversify the leadership page on your website for any reason and you hire someone who’s going to have a muted voice at the table then you’ve wasted your hire. If you hire someone less than qualified because of the optics of the hire then let them do their thing and they’re not qualified to do it then clearly your business is going to be in some trouble. At the end of the day, hire the most qualified person and hopefully, that means you’re hiring a woman or person of color where you can build out your team if it needs further diversification.
They have to be the best possible fit for the role in this industry. The depth of functional experience in any role is most important. The deeper the experience you can get, the better regardless of what continent or planet that person came from or the color of their skin. You’re selling yourself short, robbing your shareholders and ultimately, shorting your consumers who might be at a disadvantage because your cannabis business failed and they relied upon you for their medicine.
This industry is changing fast in terms of diversity and inclusion and market evolution. COVID has rapidly advanced this industry in 2020. The cannabis legalization argument has come essentially front and center during the pandemic. In 2020, the cannabis stores were the only thing open on Melrose in LA because it was designated critical infrastructure in the first days of the lockdowns. If you look at some of the numbers about how quickly things have moved forward, in 2020, California hit $4.4 billion in cannabis sales. That’s compared with $2.8 billion in 2019 and $1.4 billion in 2018.
Colorado, Oregon, Washington and Illinois have all surpassed $1 billion in annual sales for the first time in 2020. When you look at most of the states that have recreational and medicinal, year-on-year growth is somewhere between 40% and 60%. That’s tremendous growth. Massachusetts and Nevada are expected to pass the $1 billion mark in 2021. I’m wondering from your perspective how you believe the pandemic has changed the industry in terms of the consumer and the business operator. How much of this growth do you attribute to COVID and organic growth that was already planned in the scaling of this industry?
The industry did well and many of our clients did extremely well. Despite it all through the pandemic, we have clients that doubled revenues and headcount, build teams remotely, hired dozens and hundreds of people without anyone meeting in person for an interview. You had a lot of people sitting at home and there’s a lot of boredom or sadness. You can’t crack open a beer all day or a bottle of whiskey or wine every night. At our house, cannabis consumption went up quite a bit during the pandemic. That goes for many millions of households out there.
The essential status that the industry got was great for everyone. Beyond that, on the front end of the pandemic, you had a lot of first-time leaders. CEOs open their wartime CEO playbook and out of sheer freak out of, “This is happening.” They immediately went to the chapters saying, “Hang on to cash. Be liquid.” You saw a lot of companies shed their highest-paid people regardless of how critical they were to the business. If it wasn’t the founder, it didn’t matter who it was, the next highest-paid person had to go because they couldn’t keep a $200,000 salary or whatever it was on the books. Who knew what was going to come?
You had a lot of that and you had a lot of companies layoff a lot of junior and middle management people with what I call a rightsizing effort. It was called downsizing by a lot of these companies but leading up to the pandemic there was a lot of frivolous hiring. There’s a hiring frenzy. A lot of cannabis businesses are staffed up for what may be. It was built it, hire the people and the business will come. There wasn’t a lot of calculated methodical, thoughtful hiring of what the actual business needs were. We saw a lot of rightsizing and the fortunes that were spent on building growth, marketing teams and brand-building efforts, which is how a lot of cannabis businesses run investor relations. It’s hiring marketers that can create sexy brand campaigns.
You saw that rightsizing leads to a shift in the mindset of leaders in the space where hiring is more calculated and more mindful. It’s more about, “What does the business need? Let’s think more carefully about what the desired profile is, what skills we need and how this person’s success is going to be measured.” They either learn that they should hire that way or investors are demanding that they scale their organizations that way. Let’s remember that COVID came right on the tail of the 2019 capital crunch that hit the cannabis industry hard. All of that together created this smarter, more demanding discerning investor that wasn’t just saying, “Another weed business to invest in. Here, take all my money.”
Let’s talk about that risk. Normally, you look at these numbers and you say, “There’s tremendous upside potential in this opportunity. We’ve got to go all in.” There’s a tremendous amount of risk in this industry. I came into the industry as a chief security officer. Quantification and calculation of risk are critical. Jessica, you’re an attorney. You look at risk all day long and advise leaders on risk tolerance levels and acceptable levels of risk tolerance. How do you think through execution plans based on opportunities that come from your risk assessment?
There is financial, operational, reputational, professional and personal safety risks a lot of times in this industry. There are so many people who were going all in 2018 and 2019. You referenced the capital crunch. Everybody started seeing market compression and the margins reducing tremendously. Where we sit is almost swung the other way. We had an election in which we saw Joe Biden come in and there’s been this thought process that there will be a move towards legalization.
I was talking to people in September and October 2020 who were building cannabis companies in Massachusetts and in other places on the East Coast that were moving towards legalization and what they thought was going to be 5 to 6 years. We’re getting ready to write checks for big denominations. The election happened, put the pen down and they’re out. They’ve said, “We don’t want any part of this thing.” Moving forward after this, where’s it going? Where do you foresee the next steps? Is the risk versus the reward from an investment perspective at this point in the industry?
It’s a risky business industry. The list of risks is long in this space for sure. Legislatively, we’ve got some things to look forward to that people could look to get more comfortable with the risk associated with their investment, be it as an investor or as a candidate risking their career. To some degree in entering the industry, I don’t think we’re anywhere close to cannabis being removed from this forsaken schedule 1 status and federal prohibition being lifted. We’re close to some legislation as it relates to banking. We have the SAFE Banking Act and MORE Act which are key pieces of legislation that most would agree in the industry will pass in 2021.
That brings the industry far along, corrects a lot of the pains and helps subside a lot of the risks that are associated with working in the industry. Everyone’s paying close attention to that and rooting for it. Most of the cannabis space is rooting for those things more so than Federal prohibition being lifted because the reality is there are a lot of risks to a lot of cannabis businesses. Especially those out West in the more mature markets that operated with a different level of a compliance mindset, in some cases, no attention to being compliant.
When federal prohibition is lifted then the FDA steps in to regulate, there are so many cannabis businesses that are not prepared for an FDA inspection. They’re barely passing their state-level inspections that haven’t even been happening to a large degree during COVID. A lot of cannabis businesses have been enjoying a free ride and operating way out of compliance. They’re in trouble when the FDA steps in after we go Federal.
There’s a lot that is not rooting for that at all. That’s their risk. We have clients that have an Encyclopædia Britannica. It’s like a which-way book to deal with the risks if this happens or that happens. Those companies are elevated. Those are more of your mature companies run by risk experts. Those are bankers and lawyers running those companies. They’ve got a contingency plan for everything. We’ve got Jessica here to guide us internally on risks associated with signing this agreement and whatnot.
Explain what an Encyclopædia Britannica is because so many people don’t know what that is anymore.
It’s an excellent resource book. Everybody should have one especially if you have kids. As far as the legal climate, we’re moving in the right direction. Our risks and any risks associated with investing or starting a new job, taking a job with a company, doing as much research as you can on the company and the people, you have to believe and trust the people. They are going to be our clients and we’re going to do business with them. You should have a lot of faith in the leadership if you’re going to invest in a company or if you’re going to marry your career up to that company. There is a risk but you can get to a good comfortable place if you vet the company well and you know the people. It’s about the people. That’s what it comes down to, at least for us.
As we close out, I speak with my guests about the Jedburghs, how they operated in World War II and the fact that they had to do three things every day to be successful. What I mean by that is if they did three foundational things effectively, what I call shoot, move and communicate, it didn’t matter what challenges were thrown their way and what problems they had to solve. This was the foundation of everything they did and they could tackle any problem. What three things does each of you do every day that make you successful and push you to win no matter the challenge?
I’m a morning person. The first thing I do to attack every day is get up early. Getting my attack organized is huge for me. Depending on the workload, I’m up at 3:00 or 4:00 AM. I’m not endorsing that or suggesting it. I’m not of that overwork culture. Endorsing is my way. I’m a morning person naturally so getting ahead of it makes me feel good. I’m obscenely organized. We have a lot going on and I don’t like to leave people hanging or be caught off guard. That’s a first for me. Second, communicate extremely well. I have to steal that one. Candid, transparent, clear communication. Don’t bog people down with unnecessary details that over-communicate. Don’t try to impress with big words and confuse the reader or the receiver of that information. Communicate clear, concisely, candidly.
I’ll steal another one but I’ll phrase it differently. Instead of shoot, I’ll say act and be in motion. I’m like a shark. If I’m not moving around, hunting, doing something, if I’m feeling comfortable, I’m uncomfortable. Be in action. Our business is an action business. You can’t hide behind a screen and just email. You’ve got to be on the phone. You got to move and shake, communicate with people and move the ball forward. Especially in this industry where there are a lot of question marks and everything is new. Always being an action and inspiring action. Organize, communicate and act.
Jessica?
I have to get ready for the day. Before I leave my room, I brush my teeth, wash my face, get dressed, and make our bed every day. If I don’t do those things, I don’t feel right. I have to get my mind right. Every day is different. Some days, I’ll do a morning meditation. It depends on the day but I have to get my mind right, get myself prepared for the day mentally and then I have to get organized. Figure out what I need to do that day, how to tackle my day and have some plan. I make lists. The lists are just for the purpose of writing them and crossing things off which is another thing that I like to do. It’s not to keep me organized but it’s getting my mind organized, my day organized, and getting prepared for the day physically.
I appreciate you both coming on the show whether you slept in separate beds or the same bed. We spoke about the nine characteristics as defined by Special Operations Forces for elite talent. Those are drive, resiliency, adaptability, humility, integrity, team ability, effective intelligence, emotional strength, and curiosity. I assign at the end of each one of these shows what your core characteristic is and you exhibit all of these at times because you have to be successful in this crazy industry.
I look at team ability when I speak with you two and I think about the definition of that. It is to prioritize the organizational need ahead of oneself to work as a cohesive unit towards winning with a multiplicative attitude. That’s what I see when I speak with you. You’re operating in this crazy, fast-moving cannabis industry. Every challenge and dynamic is being thrown at you. You have to work together. You’ve done that as trailblazers in this industry professionally. You’ve done it personally as husband and wife. I applaud you for that. I appreciate you taking the time to join me on the show. I enjoyed this conversation. I look forward to many more with both of you and we’ll see what this industry brings.
It’s a great compliment coming from you, Fran. We appreciate you for what you’re doing, having us, what you did in the industry and what you’re doing now. Thank you for the opportunity.
Ditto. Couldn’t say it better myself.
