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What’s Happening on Capitol Hill? Part 3: The Medical Bills

By Brian Blumenfeld, J.D., M.A.
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This article continues the bill-by-bill review begun in the August 1st article on cannabis reform legislation proposed in the 115th Congress. In the next article and final piece in this series, we will examine the banking and tax reform bills related to cannabis.

Medical Cannabis Reform Bills 

S. 1008 – Therapeutic Hemp Medical Act of 2017

HR. 2273 – Charlotte’s Web Medical Access Act of 2017

Policy: These bills would amend the CSA to end federal prohibition over all CBD products and all hemp plants with THC content levels of below 0.3%. In other words, people and businesses would be free to grow hemp and/or manufacture CBD products without any fear of federal prosecution. These products would most likely then fall under the regulation of other federal and/or state agencies, but the bills do not specify what agencies they might be or what controls might be put in place.

Impact: The impacts from these bills nationwide have the potential to be massive. Hemp is a plant that can be put to highly effective use in many different industries, from textiles and construction to foodstuffs and seafaring. The efficiency of its growth and the breadth of its utility will make it a highly valuable commodity and a competitor with many other raw materials. For state-legal cannabis businesses, the legalization of CBD and hemp at the federal level could fundamentally change the market for those products. States that legalized cannabis already have provisions in place dealing with hemp and CBD—sometimes alongside their cannabis laws, sometimes handled by a separate state agency—and they could either leave those as they are or open up those markets to interstate activity. In states that have not legalized, CBD and hemp are typically included in the state’s definition of cannabis, and therefore they will remain illegal under state law unless further action is taken. Most likely, if federal prohibition ends on hemp and CBD, state prohibition will follow suit. Because legalization at the federal level will allow for interstate commerce in hemp and CBD, expect the emergence of a nationwide market, driven by online sales and interstate marketing, and developing independently from a cannabis industry still constrained to in-state activities.

Procedural Status:

Senator Cory Gardner (R-CO) Photo: Gage Skidmore, Flickr

S. 1008

  • Introduced: May 2, 2017 by Senator Cory Gardner (R-CO)
  • Cosponsors: 7 Republican, 4 Democrat
  • Referred to Senate Committee on:
    • Judiciary

 HR. 2273

  • Introduced: May 1, 2017 by Representative Scott Perry (R-PA)
  • Cosponsors: 10 Republicans, 10 Democrats
  • Referred to House Committee on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Energy and Commerce
      • Subcommittee on Health
    • Financial Services

S. 1276 – Cannabidiol Research Expansion Act

Policy: This bill would accomplish two objectives: First, it would open channels for researchers to access and experiment with cannabis and cannabis extracts. Second, it would initiate the process at the end of which the Attorney General must make a determination as to which Schedule of the CSA is most appropriate for cannabidiol (CBD).

Impact: The impact on this legislation to state-legal cannabis businesses is rather remote—in both time and practice. The research access provisions will certainly create an uptick in medical and psychological research activity, the outcomes of which will add to our knowledge of how consuming cannabis in different forms and amounts effects the brain and body. This type of government-regulated research takes many years to process and complete, as both bureaucratic and scientific standards must be met. As for initiating the re/de-scheduling review process for CBD, this is a direct response to the 2016 denial by the DEA to re/de-schedule cannabis. That determination, published in the Federal Registrar on August 12, 2016, was made following a comprehensive study of the medical benefits and harms of cannabis conducted by the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA). Although such an in-depth study and its resulting negative determination pronounced so recently would normally rule out the chances of success for another re/de-scheduling attempt so soon after, the DEA did leave the door open with its statement that it “did not focus its evaluation on particular strains of marijuana or components or derivatives of marijuana.” It is just this door that S. 1276 seeks to exploit. By focusing the re/de-scheduling process on CBD specifically, the presumption is that the outcome of the scientific CBD studies would have a far better chance at satisfying the re/de-scheduling criteria set forth in the CSA. If such a determination was made, then the impact would come in two potential varieties. One, CBD would be rescheduled and become available for medical use according to FDA rules applicable to other prescription drugs. Two, CBD would be descheduled and would fall under the prerogative of the states, in which case the above analysis for S. 1008 and HR. 2273 would pertain.

Senator Dianne Feinstein (D-CA)
Photo: Daniel Torok

Procedural Status:

S. 1276

  • Introduced: May 25, 2017 by Senator Dianne Feinstein (D-CA)
  • Cosponsors: 3 Republican, 2 Democrat
  • Referred to Senate Committee on:
    • Judiciary

S. 1374 – Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2017

HR. 2920 – Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2017

HR. 715 – Compassionate Access Act of 2017

HR. 714 – Legitimate Use of Medical Marijuana Act (LUMMA) of 2017

Policy: All four of these bills would make an exception to the CSA for state medical cannabis laws. Federal prohibition, in other words, would end for medical cannabis in those states that have legalized, and it would be left to those states to devise how it would be regulated. In states that have not legalized, both state and federal prohibition would remain. The companion CARERS Acts in the House and Senate, along with HR. 714, would also amend FDA rules to widen access to cannabis for research purposes.

Impact: The impact of these bills on the rules for state-legal medical cannabis businesses would be relatively minor in terms of functionality. This is so because they leave not only the determination to legalize up to the states, but they leave the design of the regulatory system up to the states as well. In other areas, however, big changes will be seen that benefit the industry: banking will open up for state medical businesses, and so will the opportunity to write-off ordinary business expenses. Investment risks over legality will end, making for easier access to capital. Questions about contract enforcement and risks of federal prosecution will become moot, and when state regulatory bodies make decisions on how to govern the industry, they will no longer have to concern themselves with U.S. DOJ enforcement and/or prosecutorial policies. Enactment of any of these bills would be a big win for medical cannabis.

Senator Cory Booker (D-NJ) Photo: David Shinbone, Flickr

Procedural Status:

S. 1374

  • Introduced: June 15, 2017 by Senator Cory Booker (D-NJ)
  • Cosponsors: None
  • Referred to Senate Committee on:
    • Judiciary

HR. 2920

  • Introduced: June 15, 2017 by Representative Steve Cohen (D-TN)
  • Cosponsors: 1 Republicans
  • Referred to House Committee on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Energy and Commerce
      • Subcommittee on Health
    • Veterans’ Affairs
      • Subcommittee on Health

HR. 715

  • Introduced: January 27, 2017 by Representative Morgan H. Griffith (R-VA)
  • Cosponsors: 2 Republicans, 1 Democrat
  • Referred to House Committee on:
    • Energy and Commerce
      • Subcommittee on Health
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations

HR. 714

  • Introduced: January 27, 2017 by Representative Morgan H. Griffith
  • Cosponsors: 1 Democrat
  • Referred to House Committee on:
    • Energy and Commerce
      • Subcommittee on Health

HR. 2020 – To Provide for the Rescheduling of Marijuana into Schedule III of the CSA

Policy: As its wordy title indicates, this bill would bypass the schedule review process and by legislative fiat move cannabis from Schedule I to Schedule III of the CSA.

Representative Matt Gaetz (R-FL)

Impact: Businesses handling drugs in Schedule III must register with the DEA and comply with DEA record keeping and security requirements. Doctors would be permitted to prescribe cannabis products. Importing/exporting will become available by permit, which would bring state businesses into competition with foreign cannabis firms. The biggest impact will be that cannabis sold pursuant to federal law will have to undergo the FDA’s New Drug Application process conducted by the Center for Drug Evaluation and Research, the largest of the FDA’s five centers. This includes clinical testing and a comprehensive chemical/pharmacological review. The drug would then be subject to FDA regulation for marketing and labelling. For states that wanted to maintain their legal medical cannabis systems, a conflict would remain because cannabis cultivators and dispensaries could operate in compliance with state law while simultaneously failing to meet new FDA and DEA requirements. States will then have a choice: bring state laws into line with federal laws, creating all of the advantages of federal legality discussed above, yet causing major disruptions to the industry; or retain the status quo, allowing the industry to grow as is with all of the in-state advantages but without the advantages of federal legalization. This all would of course leave behind recreational cannabis which would remain in the legal gray zone.

  • Introduced: April 4, 2017 by Representative Matt Gaetz (R-FL)
  • Cosponsors:
  • Referred to House Committee on:
    • Energy and Commerce
      • Subcommittee on Health
    • Judiciary

HR. 331 – States’ Medical Marijuana Property Right Protection Act

Policy: Section 881(a)(7) of the CSA subjects to federal forfeiture all property involved with cannabis activities. This bill would make an exception to that provision for all property in compliance with state medical cannabis laws.

Impact: Although not legalizing medical cannabis, this bill would be a strong step in the direction of legitimizing state-legal medical cannabis businesses. As a result of the property forfeiture clause of the CSA, two impediments faced by the medical cannabis industry is that investors are hesitant to invest and land lords are hesitant to lease or otherwise engage the medical cannabis market. By eliminating the risk of such property loss due to the federal-state conflict, this bill would have the very welcomed impact of easing access to capital and expanding opportunities for land use.

  • Introduced: January31, 2017 by Representative Barbara Lee (D-CA)
  • Cosponsors:
  • Referred to the House Committee on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Energy and Commerce
      • Subcommittee on Health

Q&A with Adam Smith, Executive Director of the Craft Cannabis Alliance

By Aaron G. Biros
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The Craft Cannabis Alliance is a values-driven industry association whose mission is to define, promote, and celebrate authentic Oregon craft cannabis. Though it has only recently launched, it already counts many of Oregon’s most important local brands among its members, and looks poised to help lead a craft cannabis movement both within the industry and among consumers.

When recreational cannabis was originally legalized in Oregon, according to the Portland Mercury, there were residency requirements for obtaining a license, but in 2016 those rules were removed. In the wake of that decision, Adam J. Smith, founder and executive director of the Craft Cannabis Alliance, saw the prospect, and, increasingly, the reality of out-of-state businesses with deep pockets buying up local cannabis businesses, expanding out of state brands into the market, or financing new brands here. It was quickly apparent to Smith that the big money threatened to overwhelm the market, push Oregon-owned companies off of shelves and eventually dominate Oregon’s much-anticipated export market.  In May, drawing on his experience as an organizer and drug policy reform advocate, as well as several years working in with Oregon craft industries, he launched the Craft Cannabis Alliance.

Adam Smith, founder & executive director of the Craft Cannabis Alliance

Smith has a long history of taking aim boldly at seemingly implacable interests. In 1998, Smith launched the Higher Education Act Reform Campaign (HEA Campaign), which successfully won back the right to federal financial aid for students with drug convictions. That campaign led to the founding of Students for Sensible Drug Policy, now the world’s largest student-led drug policy reform organization, active in more than 40 states and 26 countries. Since then, he has participated in a number of public policy and civic engagement campaigns and organizations, serving on the  founding boards of the League of Young Voters and the Oregon Bus Project. He’s also written for dozens of publications on drug policy.

The Craft Cannabis Alliance is a membership-based industry association of cannabis businesses with like-minded values, who believe that cannabis is, in fact, Oregon’s next great craft industry.  And they want to make sure that means something.  We sat down with Smith to learn more about his organization and why he wants to fight big cannabis.

CannabisIndustryJournal: How exactly do you define craft cannabis?

Adam Smith: In the beer industry, the Brewers Association defines a craft producer as one who produces fewer than 6 million barrels per year, and is not more than 25% owned by a larger brewer.  And that’s fine for beer, but with cannabis just emerging from its own prohibition, there are broader concerns that we believe a craft industry needs to be responsive to.  So we’re less concerned with the size of a company’s production than how it’s producing that product, and how it’s contributing to communities and a healthy industry.

Here in Oregon, there’s a core of the cannabis industry that cares deeply about people, place, planet, and plant. As someone who has spent considerable time writing about and organizing around ending the drug war, it is important to me that cannabis’ first foray into the post-prohibitionist world is not only successful, but that it reflects a shared set of values.  When I started talking with people in the industry who take their values seriously, I asked a lot of questions. I wanted to go from “we know it when we see it” to something that could be defined and therefore legitimately promoted.  Pretty soon, it became clear that there were six major areas of agreement.

  1. Clean product
  2. Sustainable methods
  3. Ethical employment practices
  4. Substantial local ownership
  5. Community engagement
  6. Meaningful participation in the movement to end the disastrous drug war.

The first three requirements, clean, sustainable, and ethical employment practices, are pretty obvious core values for craft producers, and we believe for many Oregon consumers as well.

Substantial local ownership, particularly in a place like Oregon, is an essential component of what the Alliance is trying to organize and represent. We grow some of the finest cannabis in the world in Oregon, and while we’re a small market, we know that eventually, probably sooner than most people realize, the federal walls will come down and we’ll be able to export our products to other states and internationally.  At that point, Oregon will be home to a multi-billion dollar industry. The question then, is who will own that?

We are already seeing big out of state and international companies and investment groups buying up brands or starting their own brands here.  With tens of millions of dollars behind them, they have the marketing and distribution muscle to push locally owned companies, even those producing superior product, off of shelves.  And if foreign-owned companies are dominating shelf space here when those federal walls crumble, those are the companies that will own the export market, and who will ultimately own the Oregon Cannabis brand globally.  And if that happens, we will never buy it back.

Southern Oregon, in particular, is a region that has seen little economic growth since the waning of the timber industry.  The communities there have a huge stake in how this plays out.  Will the cannabis industry build wealth, and economies, and institutions here? Or will Oregon become a low-wage factory for out of state and international corporations.

Beyond local ownership, community engagement is another important component of craft cannabis. The industry, which still faces PR challenges, many of them well earned, needs ambassadors who can demonstrate what a healthy cannabis industry looks like, and who will build the relationships and the credibility necessary to gain the loyal support of their neighbors, local media, and public officials.

Finally, participation in the anti-drug war movement, beyond the self interest of simply opening up the next market, is a must. This industry stands atop a mountain of eighty years of ruined lives and destroyed communities. If you are in the industry, and you are not looking for ways to support drug policy reform, you are profiteering, plain and simple.  The drug war is teetering on the brink of the dustbin of history, but it is not over yet.  The very existence of a legalized industry is the product of decades of work by many, many individuals, most of whom will never earn a dime from the end of prohibition, and never intended to. We view a healthy legal cannabis market as an important platform for social progress on this front, and we are going to use it.  

CIJ: Doesn’t capitalism guarantee that the big money will win out? That striving to maintain one’s values in the face of competition that is laser-focused on profits above all else is inefficient and doomed to failure?

Adam: Believe me, when your name is Adam Smith, you spend a lot of time thinking about capitalism.  Let’s be clear, our members are committed to profits. We just don’t believe that nihilism is going to be a profitable strategy in Oregon cannabis, nor should it be.  Our goal is to monetize our values by offering a win-win proposition to consumers, opinion makers, political leaders, and everyone else who will benefit from a visionary, responsible, and successful Oregon industry feeding into the local economy.

The choice is not between capitalism and something else.  It is between an extractive model of capitalism and a value-adding model of capitalism. Between an industry that seeks to bleed value from the earth, and communities, and employees, and consumers, and one that adds value to everything it touches at every level while producing the best cannabis in the world.  

In the end, consumers are the key.  If we can be the coolest thing happening in Oregon cannabis, if we can bring consumers into this movement, we will succeed.  There’s simply no reason for Oregonians to be buying cannabis grown by a Canadian bank account, even if it’s physically produced here.  That is SO not cool.  And what’s cool in Oregon will be what’s cool and in demand nationally and internationally as we are able to expand the reach of the legal Oregon industry.

We believe that offering the world’s best cannabis, grown responsibly, by Oregonians who are actually committed to the environment, to their communities, and to social justice is a going to be a powerful marketing proposition here.  More powerful than having a famous person on your label or weak attempts at greenwashing.  

Within the authentic Oregon craft universe will be super high-end products, as well as more value-oriented offerings, and everything in between. We’re going to make it easy for Oregonians to recognize and support the kind of industry that we’d all like to see here.

CIJ: Why do you think this could be successful in Oregon? Is the industry receptive to this idea?

Adam: Not only the industry, but the media, elected officials, and most importantly, we believe, consumers.

Oregon sees itself, not unjustifiably, as the birthplace of the craft movement in America. Our craft beer, artisan wine, and craft distilling industries are world-class by any standard, and are very well supported locally.  Include in that list our local food scene and the myriad artisans of all stripes who ply their trades in the region, and it’s pretty obvious that there will be strong support for a values-driven, locally owned cannabis industry.

Craft is about people making something they love, as well as they possibly can, for themselves and their friends, and to share with others who will love it too.   It’s not a coincidence that those products tend also to be of the highest quality.  

The key, as I’ve mentioned, is for craft cannabis is to build a partnership with consumers. Let them know who we are, and what we are trying to build, which is an authentic, and authentically Oregon craft cannabis movement.

There are quite a lot of people in the Oregon industry who share this vision, including many of the best and most important brands in the state. The are people who got into cannabis for the right reasons, with a craftsperson’s dedication to quality and mindfulness on all fronts.  To truly be a craftsperson is not only to make an exceptional product, but also to be cognizant of the historical and social context of your craft, with a respect for what has come before, and a commitment to setting an example for those who will follow.

Those are our people, and they are well represented in the industry here.  Our goal is to organize them and help insure a path to their success.

CIJ: Tell us about how you are educating the industry, consumers and political leaders.

Adam: Well, we launched at the end of May, from the stage at the Cultivation Classic, which highlights and honors the best cannabis in Oregon, grown sustainably and regeneratively. That was a great opportunity for us to introduce ourselves to the part of the industry that we’re targeting, and we were very grateful to Jeremy Plumb of Farma, who is also an Alliance member, and who puts on that incredible event, for that stage.

Right now, we are still a manageable group, size-wise, and we are doing a lot of personal networking in the industry, seeking out the right people to join us.  It’s been a lot of “who do we like and trust, who is making great product?”  As a long-time organizer, I believe in starting out by putting together the strongest possible group of leaders who are also good people and fun to work with.  I’d say that that’s going very well, since we have just an incredible group, who I am honored to stand beside.  Over the past several weeks, as we have started to be a bit outward facing, we have had more and more folks in the industry reaching out to us, rather than the other way around. So we’re in a great spot to grow.

On the political side, we really launched the project at the very end of the most recent state legislative session, and so we purposely did not engage that process this year. But over the past several months, we have been seeking out and introducing ourselves to key public officials.  Their response has been extremely positive.  Here we are, a group of companies who are substantially locally owned, and committed to being transparent and accountable to the health of our employees, our communities, and our state.  In an industry that is still very chaotic, and not well organized, with plenty of shady players, I think that they see us as a compelling partner going forward.    

CIJ: Some of these standards seem pretty difficult to quantify. How do you expect to judge new member businesses?

Adam: Well, in the areas of clean product, sustainable methods, and ethical employment practices, we will adopt standards being developed and promulgated by third-party certification efforts such as Resource Innovation Institute (energy, water, carbon footprint) and the Cannabis Certification Council (“organic” and fair labor standards).  There are others as well, some that exist, things like Clean Green, and some that are still in development.  We are beginning to meet with these folks to gauge where they are, and to give input on their standard-setting processes. In the end, hopefully within the next year as more third-party standards come online, we will choose which of those standards to adopt or accept.  

Community engagement and anti-drug war participation will be things that we undertake as an alliance, as well as providing support for our members to do these things individually behind their brands

As for “substantial local ownership” we are already discussing the parameters of what that means.  Certainly, here in Oregon, there is a need for outside capital.  We are not going to fund a robust industry, especially one that is prepared to take advantage of the coming interstate and international markets, with all local funding.

That said, there is a huge difference between having an out of state partner who owns a piece of a local business, and having an out of state or international corporate overlord with a 90-100%  ownership stake.  And the distinction is important for the future of the industry and for Oregon’s economy.  

The temptation is to set the bar at 50% in-state ownership. But what if you are a large cannabis brand, selling in four or five or six states, that is 35% or 40% Oregon-owned?  That would likely meet the definition of “substantial.”  It is a difficult line to draw, in some sense, but not impossible.  As we move forward, we will develop guidelines on this, and we will have a membership committee that can look at an individual company and say “yes, you are substantially Oregon-owned” or “not you are not” as well as a process in place to insure fairness in that decision.  Right now, every cannabis company in the Alliance is majority Oregon-owned, and I would expect that to continue except in very rare cases.

CIJ: One of your standards for membership requires participation in the movement to end the drug war. Some might see this as a given, but could you shed some light on this?

Adam: As I mentioned earlier, we see reform movement participation as a moral imperative, and since a lot of my background is in drug policy reform, it’s important to me personally.  As an alliance, we hope to partner with organizations like Students for Sensible Drug Policy and NORML, and within the industry with groups like the Minority Cannabis Business Association to both advocate for broad drug policy reform,  and hopefully to provide opportunities and support for communities that have been most negatively affected by Prohibition.  We believe that those of us participating in the legal, regulated cannabis market have both a responsibility and an opportunity to use our voices to point out the difference between the chaos, corruption, and violence of prohibition, and the the sanity, humanity, and opportunity of a post-prohibitionist world.

Soapbox

Cannabis Business Owners: How To Legalize It!

By Kay Smythe
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If you have never heard of the terms social capital or social homophily, you are not alone. To many in the cannabis space, these terms are quite foreign to them, but as we’ll find out, also quite crucial to them.

That’s okay. You’re not a social scientist, human geographer, macro nor micro sociologist, so why would you? However, I can guarantee that your life has been influenced by these two sociological paradigms, and if you’re a working member of the cannabis industry, these are the two theories that could result in your business failing, you ending up in jail or even bankrupt.

Don’t like capitalism? Tough.Let’s talk in layman’s terms.

Social capital: this wonderful theory can, in its essence, be described as the science behind “street cred.” Social capital refers to the lived social networks and relationships that you are a member of. Examples include: family, friendship groups, work colleagues, et cetera.

Social homophily: this even more excellent theory decides your social groups before they solidify. Homophily is the ability of the individual to only associate, and subsequently bond with, those that have similar interests, passions…

Together, these two theories work together to first decide upon your social groups (homophily), and subsequently lead to the building of tighter social networks (capital).

So, how does this relate to cannabis?

Unfortunately, like any other billion-dollar industry, cannabis will eternally depend on politics, the economy and men in suits. For want of a more succinct phrase, the cannabis industry depends on capitalism. Why? Because it’s a business, just like any other, and businesses live and die by whom you’re friends with.

Don’t like capitalism? Tough.

Herein lies the issue with the big players leading the cannabis industry: you guys play horribly with the people that control your fate.

The easiest way to normalize a trend is to have all of the most important people in the world doing itCannabis is still federally illegal, and the general belief is that it has remained this way because the United States government does not yet have a big enough reason to legalize it. Ask any left-leaning sociologist, economist, or political scientist and they’ll tell you the honest truth: the people who run the cannabis industry do not have any influence over bankers, oil tycoons, major industry leaders, or any of the men in suits that you need to be friends with to get anything done in this country.

Think of it like this: the argument for the legalization of cannabis in Europe centers around alcohol. If you were walking home one night and you cut through an alleyway, who would you rather bump into: a drunk looking for a fight, or a stoner looking for a box of chocolate cookies? It’s a logical argument that plays to both the lowest common denominator, and the highest ranks of British government.

The thing is though; as we discussed in my last piece, cannabis is normalized across Western Europe, and so we don’t have the same issues as the United States.

In the United States, the sensible person wouldn’t walk down the alleyway in the first place. Therefore, we have to first normalize cannabis with normal Americans, and then look to legalize.

The easiest way to normalize a trend is to have all of the most important people in the world doing it. However, the cannabis industry is wrought with incompetence that consistently marginalizes the space from societal norms, which is precisely why cannabis is still illegal, and why you’re killing your future business endeavors before they’ve begun.

The End Goal

I was recently told that I didn’t know enough slang to write for a cannabis company. Firstly, I had actually taken all of the slang terms from another member of the company (which was just plain embarrassing for the wannabe industry leader, but I wasn’t surprised – I mean, this is what I do), and secondly, can we all please read the article I wrote a couple of weeks ago about how using slang is one of the most detrimental moves that the cannabis consistently makes that further reduces legalization efforts.

Put on a suit, talk to your local councilman, pay your taxesDo you see HSBC or Chase using slang in their advertising campaigns?

What major political leaders have you seen trying to create divisions between them and those not “cool” enough to be in their gang?

I have no evidence to back this up, but I’m fairly confident that the Koch brothers have never used a skateboard as a consistent mode of transportation to or from work.

As a macro and micro sociologist, I can’t stress this enough: if you want your business to become legitimate, then you have to stop being legit. Most folks in the cannabis industry don’t want to be friends with big bankers, oil tycoons and billionaire businessmen, but creating such an inherent divide between the cannabis business and the rest of the working world ensures that our children will still go to jail in more than half of US states just for smoking a joint.

Time to Swallow Your Pride?

If you are reading this, and are currently an active member or leader in the cannabis industry, then please put your version of ‘street cred’ to the side. Your actions are the reason that most of your businesses fail, the reason you get robbed and don’t have the law on your side, why we have such huge numbers of minority men in our prisons, and more importantly its the reason that the rest of the real world sees you as irresponsible potheads, and not the innovators you could be.

You have the tools to make one of the biggest political changes for two-thousand years, so why not grow up, take one for the team, and have you and your business’s legacy revolve around the good you did for your fellow man, not as the ‘cool kid.’

Social homophily: You and the big business world want the same thing- legalization. Even Monsanto is getting in on the cannabis game, and I’d rather work for them and see actual change than sit in a room full of men smoking at their desks while they sell cannabis from a dark, illegal dispensary.

Social capital: Unfortunately, the big business world wins here. Put on a suit, talk to your local councilman, pay your taxes, realize that the world doesn’t revolve around you, but it will if you play by their rules. You can still be a weekend hippy, but stop doing it in public. The world isn’t ready… yet.

Massachusetts Recreational Consumer Council Launches Education Program

By Aaron G. Biros
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The Massachusetts Recreational Consumer Council (MRCC) is an interesting nonprofit that recently launched an educational campaign, called Consume Responsibly Massachusetts. For many cannabis advocates who watched their states legalize the drug, consumer education is a very important part of moving forward. As states across the East Coast implement regulatory frameworks for the cannabis industry, there is a sense of urgency to make sure the rules are right the first time, and that cannabis businesses become responsible stewards of their new market.

In the wake of pesticide recalls in the west and related public health concerns, the issues surrounding consumer safety and how states protect that are now front and center. “The purpose of Consume Responsibly Massachusetts is to keep adult-consumers informed of their rights in the state,” says Jefferson. “It’s also an ongoing effort to bring consumers into the world of cannabis politics and science.”

The MRCC’s mission is to help protect the safety of recreational cannabis consumers by bridging the information gap between businesses, legislators and communities. “We work at the state and local level advocating for sensible recreational marijuana policy and regulations,” reads a press release. According to Kamani Jefferson, president of the MRCC, bridging that gap requires a lot of community engagement. “I was a field organizer on the Campaign to Tax and Regulate Marijuana here in Massachusetts so this is extremely important to me,” says Jefferson. “MRCC participated in this year’s Cambridge 5K Freedom Run.” He says getting out in the community like this is one of many ways to help provide educational opportunities, help promote local cannabis businesses and get rid of the “lazy stoner stigma.”

Kamani Jefferson, president of the MRCC

For the MRCC, the issue of craft cannabis is a significant part of the organization’s philosophy, in addition to product safety and others. “Craft Cannabis will benefit the consumer in an entirely new way,” says Jefferson. “Members of the community will have a chance to provide products and directly affect the economy.” Because local owners tend to be more involved in their towns, Jefferson says residents will get to make more of an impact than nonlocal owners. And he’s right- small, local businesses contribute substantially more to local economies and communities than large companies. Between 1993 and 2013, small businesses created roughly 63% of all new jobs in the United States. With the new cannabis market comes a promising opportunity for local economies.

“The Massachusetts cannabis industry is developing and growing fast,” says Jefferson. “Aside from the medical marijuana production sites, the new recreational marijuana law grants production participation in the regulated recreational marijuana industry to farmers, in the form of craft marijuana cultivator cooperative systems.” While he thinks this is a good opportunity for small businesses and communities alike to gain a foothold in the market, Jefferson is hesitant to endorse Massachusetts’ regulatory policies. “A lack of regulatory oversight from the CCC [Cannabis Control Commission] places the cannabis industry in a vulnerable position,” says Jefferson. “If we want clear, consistent standards for clean and safe products prioritized, then we need consistent testing data.” Jefferson is arguing for more regulatory oversight for safety issues, such as contaminant testing. This is one of a handful of issues they are pressing for sensible cannabis policy in Massachusetts.

Here are some of the issues they support:

  • Local Cannabis: Equitable licensing for small and medium sized local businesses from members of the community.
  • Quality Control: Access to a variety of clean and safe cannabis products in retail dispensaries, tested for harmful contaminants, mold, pesticides and fungicides.
  • Responsible + Safe Consumption: Access to educational materials about proper dosage, methods of ingestion, quality analysis, understanding product labels and general cannabis information.
  • High Potency Flowers, Edibles, & Concentrates: Access, non-restriction to high potency marijuana products of all forms.
  • Home Grow: Ability to grow at least 6 plants per person, 12 per household as stated in Question 4.
  • Social Use: The ability to consume in designated establishments outside of the household.
  • Expungement: Sentence commutation and record expungement for convictions involving non-violent marijuana charges that are now legal.
  • Research: University supported biological, behavioral and cognitive marijuana research to further our understanding and capabilities of the cannabis plant.

Wana Brands Dominates Oregon Market, Expands to East Coast in 2018

By Aaron G. Biros
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Wana Brands launched their products in Oregon’s market in July 2016, about a year ago. Since then, their brand presence has grown considerably and their products are now in 240 of Oregon’s 375 dispensaries, according to a press release issued this morning.

Wana Brands is an infused products company; they make sour gummies, hard candies and caramels. The business originally launched in Colorado back in 2010 and as of 2016, they own 23% of the market share and had the most sales revenue of any edibles company in Colorado, according to BDS Analytics. The next closest competitor owns 12% of the market share.

Nancy Whiteman holding a batch of cannabis gummies

According to Nancy Whiteman, co-founder and co-owner of Wana Brands, becoming a market leader in Oregon is a result of their product’s consistency and taste. At the end of last year they launched in Nevada and this year they will launch in Arizona and Illinois. In 2018, they expect to make a big East Coast push, expanding into Massachusetts and Maryland as well.

Election Day last year legalized recreational cannabis in a number of states, including Massachusetts, Maine and Nevada. About a week before Election Day, we interviewed Whiteman about those states coming online and her drive to expand. She said she saw a lot of potential in those markets and she was right. Nevada witnessed a massive surge in demand with the opening of recreational sales in the beginning of July and Massachusetts is expected to be another huge market potential.

In that interview, she explained a bit of their growth model: “The model we are pursuing is a licensing agreement where we partner with existing or new license holders in their state,” says Whiteman. “In many ways they are doing the heavy lifting, but we are providing an enormous lift by licensing our intellectual property to them.”

Now that her company has found enormous success in established markets like Oregon, Nevada and Colorado, they want to make a big push in those fledgling markets on the East Coast. “In both markets [Massachusetts and Maryland], we will be working with a partner who will be licensing our products,” says Whitman. “I think the East Coast is a huge opportunity.  There are major population centers in New England, New York and Florida and the markets are almost completely undeveloped at this point.” Wana Brands is also currently entering talks with partners in California, Florida and Maine.

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Cannabis Industry Needs Leadership, Not Pesticides

By Ben Ward
5 Comments

The medical cannabis sector is currently attracting increased attention, as patients, doctors, regulators and investors take a closer look at our industry. There is a lot for them to learn and to benefit from as our industry matures under the glare of the proverbial spotlight. And there’s a lot for those of us in the industry to be proud of. We’re helping patients manage pain, for example. We’re helping them get their lives back.

But that same spotlight is also revealing some problems in our industry.

Take ingredients for example. When I look at the ingredient list in my natural medicines, I don’t expect to see Myclobutanil, Piperonyl Butoxide, Pyrethrin, Bifenezate, and Avermectin listed. Yet, that’s exactly what some licensed producers of cannabis in Canada and some cultivators in California have been selling to their patients. You have to ask yourself why, when pesticides are the only toxic substances released intentionally into our environment to kill living things. Patients don’t take cannabis to harm themselves. They do it to improve their quality of life.

Yet some cannabis companies have violated their patients’ trust in supplying them with something that could harm them. Indeed, recalls for cannabis, unfortunately, are now becoming somewhat commonplace on both sides of the border. These licensed producers – audited and approved by government – are entrusted to produce safe, reliable, consistent medicine for patients. They are entrusted to put safety at the core of their business at all times. But that is clearly not the case in certain circumstances.

In the past year, a few of the 52 licensed producers in Canada have been found to have pesticide contamination in their cannabis products. From what I can see, the explanations given for the presence of these pesticides don’t make sense. Pyrethrin, for instance, has been found on some medical cannabis products shipped out of certain growing facilities. However, pyrethrin does not naturally appear on plants. It has to be intentionally applied, accidentally or otherwise.

That means, in cases where this pesticide has been found on products after they left the growing facility, two things had to have happened. First, someone introduced it onto the plants to deal with an insect infestation. And second, lax quality control standards – perhaps influenced by a short-term focus on profits over patients – allowed infected products to enter their supply chain and, in many cases, to be consumed by patients.

When revealed, those responsible for companies using pesticides such as pyrethrin say they are “shocked”, publicly declaring that they have no clue as to how these toxic substances entered their cultivation processes. The fact is, if you don’t test your inputs, if you fail to test your outputs, and if you manage your business for short-term profits, you shouldn’t be producing cannabis.

There’s no place in healthcare for people who disregard a patient’s well being, because – from a patient’s perspective – what you don’t know could hurt you. No one who grows something can absolutely guarantee that a mistake will never be made, granted. But as the cannabis sector expands, experienced cannabis firms know there’s a direct correlation between attention and leadership: as the world pays more attention to our sector, the onus on us to be stewards in and for our industry also rises.

That means putting patient safety at the centre of everything we do. And that means ensuring patients are consuming safe cannabis produced by licensed companies that are committed to the long-term health and prospects of our growing industry.

Marketing Automation for Dispensaries

By Arnab Mitra
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What is Marketing Automation?

Typically when most people think of marketing automation, they imagine a platform that automates activities such as lead scoring, customer segmentation, cross-selling and campaign management. Well that type of automation is primarily for B2B companies, who are looking to reach a mass audience at once. Plus, B2B marketing automation platforms usually only provide one channel, which is email, to reach their customers.

B2C companies are looking to grow their brand and reach their customers through personalized messages. A B2C marketing automation platform helps businesses understand where each individual customer is in their journey and determine what actions need to be taken to move each customer forward. Plus they get the option of multiple channels to reach their customer, including email, text message, IM, push notifications and more.

Why is Marketing Automation Important for Dispensaries?

The first obvious reason why marketing automation is important is for the simple fact that reaching your customers is now automated; you don’t have to send out messages yourself. Thus helping save time and scale your reach at once. But marketing automation is much more important than the simple reason of saving time and scaling your reach. At SailPlay, we believe the automation of these activities helps dispensaries be able to deliver the right message at the right time to the right customer, helping the long-term success of the business.

For example, knowing where each of your customers are in their journey helps you to not only segment them into different groups, but also create specific campaigns per group. Through marketing automation you will know if you have a new lead, repeat customer and loyal customer, helping you tailor a campaign for each group.

New Lead Campaign

Each time a new lead visits your dispensary or your website, run an email or SMS campaign to provide them with a discount code to entice them to make a purchase. And after their first purchase, send a communication one day later to ask them about their experience and the product purchased.

Repeat Customer Campaign

For any repeat customers, you know which products they have purchased in the past. Run campaigns that are specific to the product groups they have purchased before. These customers are more likely to engage in your campaign if they are interested in the product.

Loyal Customer Campaign

For loyal customers, run exclusive campaigns based on their specific past purchases. For example, if John prefers to purchases edibles, run a campaign for John about an exclusive offer on a new edible.

The more personalized your campaigns are for your customers, the more engagement you can expect. According to Experian, there is a 26% increase in engagement with a personalized campaign when compared to a non-personalized campaign.

Plus with more engagement, your chances of increased sales greatly rise. According to a VB Insight study, 80% of businesses that use marketing automation have seen an increase in leads, with the majority being quality leads.

What Dispensaries Should Focus On For Marketing Automation 

With there being so many marketing automation software companies to choose from, we thought we would help you focus on a couple of key features.

B2C Marketing Automation

Be sure to choose a B2C marketing automation platform. When you search for “Marketing Automation” through Google or any search engine, you will find many B2B marketing automation platforms. B2B marketing automation platforms are different because B2B platforms are interested in bulk marketing and messaging, while B2C platforms are focused on the personalization and customer journey. And as an FYI, some B2B platforms will say they have a B2C platform as well, but they will be focusing most of their features to B2B since there are more B2B companies using marketing automation.

Selecting More Than Just an Email Service Provider

If your goal is to just send out emails, then choosing an email service provider is the way for you to go. But if your goal is to go beyond that, then choose a B2C marketing automation platform. With a B2C marketing automation platform you should expect the following:

  • Loyalty Platform: Through a loyalty platform, you can build out a customer loyalty program that will help increase customer retention. Through the loyalty platform, you can create a rewards system, providing your customers for points for various actions, including purchases and social media actions.
  • Communication Platform: Within the communication platform, you can create powerful email, SMS, IM and push notification campaigns to reach each customer with the right message at the right time.
  • CRM Platform: The CRM platform helps you manage your entire customer list from one place. Through the CRM you can create customer segments, dive deep into each customer and more.
  • Analytics Platform: Within the Analytics platform, you can analyze your clients’ actions, their purchases, and socio-demographic data. Plus you can measure the effectiveness of your loyalty program, marketing campaigns, promotions and more to improve future results.

Before it gets too saturated, dispensaries need to invest in marketing automation. As stated, marketing automation can help your dispensary create a personalized experience for each of your customers, leading to higher engagement and ideally more sales.

Cannabis M&A: Practice Pointers and Pitfalls When Buying or Selling a Cannabis Business

By Soren Lindstrom
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The Stage is Set

According to the Marijuana Policy Group, the U.S. cannabis industry is expected to reach more than $13 billion in sales by 2020 and create more jobs than the U.S. manufacturing industry. According to Viridian Capital’s Cannabis Deal Tracker, there were close to 100 M&A transactions in the U.S. cannabis industry in 2016 and approximately $1.2 billion was raised in equity and debt. As the cannabis industry has grown more mature and businesses begin to have more capital available, the M&A activity within the industry is poised to grow significantly over the next years to assist businesses gain necessary scale and take advantage of synergies and diversification.

The Obvious Wrinkle

U.S federal law has prohibited the manufacture and distribution of cannabis since 1935. The U.S. regulates drugs through the Controlled Substances Act, which classifies cannabis as a Schedule I drug (i.e., drugs determined to have a high potential for abuse with no currently accepted medical use and a lack of accepted safety regarding their use). Yet, more than 25 states have by now legalized cannabis for medical and/or recreational purposes and, as a result, there is a clear conflict between such state laws and existing federal law. To possibly help bridge that conflict, the U.S. Attorney General’s office in 2013 issued guidance directing the federal government not to intervene with state cannabis laws except in specific, limited circumstances, but, contrarily, the DEA has shown no desire to re-classify cannabis. To add to the confusion, President Trump and the new U.S. Attorney General have provided mixed statements and signals about their positions.

All of this means that it continues to be risky to acquire cannabis businesses. The requirements to legally grow, distribute, prescribe, and use cannabis for either medical or recreational purposes vary widely by country, state, and local jurisdiction, making it tricky to determine whether such businesses can be legally combined, in particular, across state lines.

Pick the Right Team of Advisors

When preparing to sell or buy a cannabis business, it is important to pick the right team of advisors. Your regular legal counsel, accounting firm or CPA may not be the right advisors for a cannabis M&A transaction. Choose a legal counsel that not only has experience with cannabis laws and regulations, but also has cannabis M&A experience and can offer expert advice on areas like IP, employment, tax matters, etc. Similarly, verify that your accounting firm or CPA has real experience with financial and quality of earnings analysis and due diligence.

Conduct Gating Due Diligence Up Front

In any contemplated M&A transaction, it is wise to prioritize your due diligence investigations. There will always be some more prominent risks and business objectives in a particular industry or with respect to a specific target business. It will be more cost and time effective if those specific risks and business objectives are prioritized early in the due diligence process. These can dictate whether you even want to pursue the target further before you dig into a deeper and broader due diligence investigation. Conducting gating due diligence up front is even more important in an industry like cannabis that contain complex and thorny regulatory hurdles.

So, before you spend money and time on a broader legal, business and financial due diligence investigation, have your legal counsel analyze and confirm that the potential transaction is feasible from a regulatory perspective. This will include whether it is possible to obtain or transfer necessary local and/or state licenses and whether a combination or sale can occur across state lines if necessary. Early on in the process, It is also advisable to request that the target business complete a legal compliance questionnaire or discuss with the target its regulatory compliance program, policies and training. Such up front due diligence will either clear a path to negotiations and broader confirmatory due diligence or flush out “red flags” that may kill a possible deal or require the buyer to investigate further before proceeding.

Important Terms and Pitfalls in the M&A Agreement

Generally, a sale or purchase agreement for a cannabis business does not appear to vary much from a similar agreement in any other industry. However, the complex environment and the premature nature of the industry impacts certain deal terms and processes in different ways from most other developed industries.

Here are few examples to keep in mind when preparing and negotiating a sale or purchase agreement:

  • Third Party and Governmental Consents: Buyer’s legal due diligence must focus on the consents that may be required from seller’s suppliers, customers, landlords, licensors or other third parties under relevant contracts. Additionally, the due diligence should focus on consents and approvals required by local and state regulators as a result of the sale. The M&A agreement should contain solid seller representations and warranties about all such consents and approvals and any such material consents and approvals should, from a buyer’s perspective, be a condition precedent to closing of the transaction.
  • Legal Compliance: A buyer should not agree to a boilerplate seller representation about the target’s compliance with laws. Be specific and tailor seller’s legal compliance representation to relevant state and local cannabis laws, regulations and ordinances. From a seller perspective, be careful and thoughtful about any appropriate exceptions (including the federal prohibition) to be disclosed to buyer in the disclosure schedules underlying the sale or purchase agreement.
  • Financial statements: The cannabis industry is very fragmented and consists of many small businesses. Many of these small businesses do not have financial statements prepared in accordance with GAAP and may consist of only management prepared financials. In that scenario, a buyer should have its financial advisor do an analysis of the financials available and ask seller to provide a representation and warranty about the accuracy and good faith preparation of the provided financials.
  • Escrow: Typically, a buyer will request some part of the purchase price be placed with an independent financial institution for a period of time post-closing as a source of recovery for losses as a result of breaches by seller of any of the representations and warranties in the definitive sale or purchase agreement. Due to the federal cannabis and banking regulations, many of the larger commercial banks will not provide financial services to cannabis businesses, in particular if the business touches the plant. The parties must therefore consider alternatives, including local financial institutions with more relaxed compliance requirements or perhaps place the escrow in a trust account of a law firm or other independent party.
  • Working Capital Dispute Procedures: Similar to the escrow, larger accounting firms generally do not provide services to cannabis businesses. Due to the rapid evolution of cannabis related regulations, if the terms of the transaction include provisions for a post-closing working capital/purchase price adjustment and related dispute procedures, it is advisable to not name an arbiter in the agreement. Instead, parties should agree to mutually select the arbiter if and when a dispute should arise.
  • Indemnification: Because of the tricky legal environment of the cannabis industry, it may be prudent for a buyer to request, at the very least, that certain parts of seller’s legal compliance representation and warranty not be subject to the “regular” caps, deductibles and other indemnification limitations. Also, if a buyer has unearthed a significant issue in its due diligence investigation, it should consider asking seller for a special indemnity for such issue that would be indemnifiable regardless of buyer’s knowledge of the issue and not be subject to the general indemnification limitations.
  • R&W Insurance: If there’s a lot of competition for the purchase of a target, particularly in a bidding process, it is now common for buyer to offer to purchase a representation and warranty insurance policy (“R&W Insurance”) to possibly gain an advantage by limiting the seller’s post-closing indemnification exposure. The good news is that many of the R&W Insurance carriers do offer such insurance in connection with the sale and purchase of cannabis businesses. However, typically, R&W Insurance cannot be obtained for insured amounts of less than $5 million. Experienced M&A counsel can advise of the advantages and disadvantages of R&W Insurance and assist in the negotiation of the related terms.

The above are just some examples of what to expect in a cannabis M&A transaction. Every M&A transaction will have its unique issues that will need to be appropriately reflected in the sale or purchase agreements and good M&A practices will continue to evolve with the industry. If you are an owner of a successful cannabis business, buckle your seat belt and be prepared for an exciting ride as the industry gets closer to significant consolidation.

Human Resources and the Cannabis Workforce

By Aaron G. Biros
1 Comment

Cannabis businesses encounter a variety of problems when hiring and managing employees. Some of those are issues that every business runs into and some of them are quite specific to the cannabis industry. Chris Cassese, co-founder and managing director of Faces Human Capital Management, has some solutions for cannabis businesses facing seemingly daunting workforce management issues.

Cassese co-founded Faces HCM with Caela Bintner after two decades of working in the human resources and sales strategy across a variety of financial institutions. He oversees software platform development, daily operations, sales, and business development for their organization. Before co-founding the company, Cassese held a variety of operational and product development roles during his ten-year tenure at Merrill Lynch, worked in marketing at HSBC and was a sales and performance advisor at Insperity, a professional employment organization. Faces HCM is a professional employment organization that handles workforce compliance, education, and other HR needs for cannabis companies. They work with companies like Dixie Elixirs, LivWell and Women Grow, among other cannabis businesses.

Chris Cassese, co-founder and managing director of Faces Human Capital Management

According to Cassese, the cannabis industry faces a roughly 60% turnover rate, which is on par with the turnover rates in retail and call centers. Those are industries that typically have high turnover rates simply because the nature of the business. However, Cassese says it doesn’t have to be so high for the cannabis industry. “It is easy to say it is just high turnover by nature, but we found there are some steps that we can put in place that seem relatively easy, but are key tenants of Fortune 500 companies’ hiring strategies,” says Cassese. “Engaging in a needs-based analysis with companies will help us figure out exactly what’s going on.” They start by looking at the onboarding process, or what happens immediately after an employee is hired. “We start by looking at their pay rate, employee handbook and the paid time off policy, which are some of the points that a lot of the owners are familiar with coming from other high-end industries outside of cannabis.” He says things like swag bags, free ski passes after reaching quotas and other perks can keep employees engaged on the team. “Things like that go a long way and can reduce turnover by up to 20 or 30 percent,” says Cassese. “Sometimes [business owners] are so stressed with regulatory compliance that they don’t have time to tackle these issues so employee dissatisfaction often starts with onboarding procedures.” That can include anything from analyzing the overall compensation structure to making a video displaying the company’s vision, mission and values. “There is no panacea for reducing turnover. It requires conducting a needs-based assessment, taking pieces of what we know works well in other companies and bringing that to the cannabis industry.” Making an employee feel like they are part of the team can help boost retention and keep turnover low.

One area they often help companies with is performance reviews. “Performance reviews are a big part of any business,” says Cassese. “You can’t make progress if you don’t know where you’re going. If you don’t know how you’re doing you can’t get better.” Looking at the supervisor level, they have often found employees have never given a performance review before. “We implement processes to teach them how to deliver positive or negative performance reviews and help make them feel comfortable delivering that,” says Cassese. They might have employees perform a DISC analysis (dominance, influence, steadiness and conscientiousness), a personality test akin to the Meyers-Briggs test. “From this we can help figure out the stressors and motivators of people and create effective teams,” says Cassese. “If an employee might be more outgoing or humble, high-spirited, results-oriented, analytical or good working on teams.” These are approaches to workforce management that have been adopted from Fortune 500 companies.

Caela Bintner, Co-Founder and Managing Director of Faces Human Capital Management

Cassese says one of the most overlooked items for companies are proper I-9 verification forms. This goes back to basic record keeping and documentation, but if overlooked, companies can get hefty fines for improper record keeping. “You are supposed to have a separate binder, in a separate locked drawer where your I-9 forms are housed, but a lot of people don’t know about that, which could come back to bite them in the form of large fines” says Cassese. “Businesses can’t afford to have sloppy record keeping. We help businesses take a look at their process and how they put their files in the cloud or physical locations, which is an area where companies often need guidance.” Civil fines can reach up to $20,000 for mistakes on I-9 forms.

Employee education is another crucial aspect of managing the workforce. Faces HCM has a learning management system that gives companies the ability to push education to their employees. Education is of course a broad term and can cover a wide variety of needs for employees. “We can help them take leadership, teamwork, excel, OSHA, safety classes and more,” says Cassese. “Training that shows you active listening, empathy skills and other types of training can really help budtenders deal with customers appropriately.” They have developed customized training programs for cannabis companies expanding beyond their own state too. “As you find certain cannabis companies growing in different states they want to create a repeatable, consistent and predictable experience,” says Cassese. “Putting those standard operating procedures online is important to streamline the process and ensures that you are creating a learning or education plan to meet your employees’ needs.” That can look like requiring employees to take an online course once every quarter, or offering them books on subjects pertaining to their specific job function.

Little things like improving the employee experience, implementing an education program and keeping up with employee records can make or break a business. They all add up to solid workforce management, which if done correctly, can enhance a business’ bottom line and keep employees working for you.

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When the Company’s Revenue Drops, Who’s to Blame?

By Dr. Ginette M. Collazo
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The ultimate goal of any business is to produce and generate revenue. Now, when the company’s revenues drop, who’s fault is it? This question, though silent, is in the minds of everyone in an organization, especially when things start to become difficult.

Working as a consultant in productivity with different industries around the world, I have come to realize that question is not openly discussed, but everyone wants to know the answer. To answer it, we will explore the most common areas of opportunity related to this problem.

When we talk about productivity, we are talking about final tangible results, because of the production process and the effort made by each one; when speaking of income, we are talking about the difference between the purchase price and the cost of entering the market. Seeing these definitions, we might conclude that the increase in income is directly related to the increase in productivity.

On the other hand, we must not lose perspective that the increase in productivity is also directly related to the decrease of losses.

First, we have to put into perspective the goals and objectives that a business or organization may have. Many companies go on believing that everyone is clear about the goals and organizational objectives and what is expected in each one of those roles that compose the organization. The reality is that, if we do not know where we are going, the chances of reaching the goal decrease.

When organization’s objectives are properly communicated, and documented, in such a way that the evaluation of the performance is directly linked to the expected results, the chances of success increase substantially.

On many occasions, I have heard phrases such as: “we work hard, we spend many hours, all sacrifice ourselves… we should be more successful”. The question then is: what are we encouraging, efforts or results?

It is hard for organizations to translate or differentiate between organizational goals and individual objectives (expected results) for each of those roles in the company. We all agree that we want to be the first in sales, the best in service and produce the highest quality, but how is that done?

To be the first in sales, what do I have to do as a seller? Get three customers in a three-month period? As secretary, process the orders in the first three days of receiving them? As a carrier, suggest three ideas be more useful in daily deliveries? How does that translate into individual performance?

We focus too much on telling people what they must do, but we forget to be clear on what we expect them to achieve. Hence, the effort versus result dissonance. The success of an organization is the collective behavior that arises from the conduct of individuals. If we align people, we align the organization.

Other elements that we must ponder, and that are directly related to productivity, are: how much of what we do holds value? How much of what we do does not have value? Moreover, how much of what we do, though it has great value, shall be performed by the requirements of law or regulation?

An analysis of productivity is critical, particularly in a time when we want to do more with less. Lately, an area of great success for many organizations is to streamline processes to make them more simple, efficient and with less risk of error. Human errors generated many losses. Defects, the re-process, the handling of complaints and lawsuits are costing companies money equivalent to the salary of 7,200 employees every day (according to statistics in the United States).

Human errors can be avoided. The idea that to err is human has led us to ignore this problem. We think that we can do nothing and lose an infinite number of opportunities for improvement that can help us to increase our income, reducing losses.

Only 16% of organizations measure the cost of human error. The remaining 84% do not measure it and are paying a high price without knowing it. In Puerto Rico, there are no statistics that could shed light on how many local companies lose because of human error, but it is very likely that the numbers are alarming. Human error can be reduced by 60% in less than a year when an intervention is done on systems. Approximately 95% of human errors are due to the design of the company’s systems, and they can be the simplest errors even in the most complex processes.

Today, we have more information, and we know that errors are symptoms of deeper problems in the processes created by the organizations. People play a crucial role regarding how robust methods are, but, we must not lose perspective that human beings operate according to the policies, procedures, and instructions which the same organization designs. Then, if people work according to the designs of the organization, is it not easier to modify designs than eliminating people?

So, who’s fault? Organizations are responsible for providing clear guidance to individuals in the right direction, and individuals have the responsibility of translating their efforts into results. Both have to work with the same objective in mind, and both employers and employees should communicate openly about these objectives. Only by working in partnership will achieve success. Forget who is to blame and focus on the processes and goals that help us be successful.