According to a press release emailed this week, ASTM International’s subcommittee focused on cannabis, D37, is in the midst of developing two new standards surrounding cannabis safety and education.
One standard, WK84667, is designed to “help document engineering controls for air filtration and person protective equipment (PPE) in cannabis processing facilities,” says ASTM member Trevor Morones. The premise of this standard appears to be employee safety; with proper, standardized air filtration and PPE, the standard will help companies keep their workers safe and prevent inhalation of potentially harmful particles, like cannabis dust, stalk fiber, florescence and crystalized dust. “We are working to develop a robust community of cannabis professionals who can share their experiences in workplace and personnel safety,” says Morones.
The other proposed standard, WK84589, seeks to develop a uniform metric for “determining the intoxication level of a cannabinoid.” Initially focusing on delta9-THC, the standard will help raise awareness and promote public health and safety by informing consumers how intoxicating a cannabis product is for the average adult.
ASTM Pamela Epstein says this standard will hopefully develop a form of measurement akin to ABV in alcoholic drinks, allowing consumers to see how potent a certain cannabis product is. “Beyond providing consumers with a complete assessment of a product’s total intoxicating/impairing effects, the proposed standard may provide regulators with a methodology to meaningfully account for public health and safety,” says Epstein. “The specification can unify consumer awareness and can be used across all product types and jurisdictions.”
Figure 1: Precision aeroponics at FarmaGrowers GMP Facility, South Africa
Every objective has to have a vision and a vector of where you want to go and what you want to achieve. “Winging it” is okay for an innovative artistic endeavor where creativity is spontaneous and one-of-a-kind art is produced. Unfortunately, that is not how one creates a top-quality cultivation operation.
Customers expect guarantees of consistency; quality assurance means a purchase is safe to consume. Medicinal products around the world require Good Manufacturing Practices (GMP) certification. These are really just SOPs that document repeatable procedures to guarantee that the most recent batch offers the same results as the first certified effort. This brief covers the importance of documented operating procedures for a successful grow business with high quality customer results.
Figure 2: The objective – trichome covered flowers, DanCann, Denmark
Almost nobody gets excited about discussing quality, but experienced manufacturers know that quality control reduces waste and improves operations. Everyone learns that they have to implement feedback, improvement and quality control procedures to guarantee profitability and longevity in any business.
So, what is an SOP? A standard operating procedure defines ‘a task’ to be performed ‘at a location by a person or a role on a specific schedule.’ These definitions will include role definition, responsibilities, personnel training, equipment & service procedures, material handling, quality assurance controls, record keeping, approved procedures & instructions, documentation, references and appendices, all of which define your business and how it is to operate.
Now, you might ask, we are just growing plants, is all this really necessary? The short answer is, it depends. If you expect to export globally, do business in Europe and other markets, get licensed by Health Canada or some day be approved to ship to other States, then yes. If you are a regional craft cannabis supplier, maybe not, but there are many tasks that are required to grow where a better documented process can benefit your operation and the quality of the product delivered to your consumers.
Figure 3: Flower maintenance, DanCann, Denmark
We provide a bulleted list of recommendations in the full white paper but to touch on a few highlights that every operator should keep in mind, SOPs define the following structures for your business.
Personnel training is done for ‘this task, in this way’ & ‘this role is responsible’
Job descriptions reduce misunderstandings and increase worker ownership in your facility. Documenting your activities minimizes task overlap and conflicts that can lead to no one executing on something that may be important but not urgent. You want to eliminate employees thinking “I didn’t know it was my responsibility.”
Consultants or visitors must be aware of and follow the same requirements as your employees if you are to maintain the quality of your grow. Specific training should be given to anyone that handles or works around toxic chemicals. Safety sheets are not just paper; They keep people alive.
Equipment & Service Procedures
Be direct and specific in your task definitions, i.e., “Use 5ml of soap, clean until no plant matter or debris remains.”
Figure 4: Full GMP certified facility, FarmaGrowers, South Africa
Ideally, grow facilities, equipment and access will be designed with cleaning in mind from the start. This is not always possible but it is the mark of successful manufacturing or production companies.
Cleaning, cleaning, cleaning: think sterile, food safety and consumer consumption protections. SOPs should define cleaning methods and materials. This cleaning is done on schedule and aligned to your preventative maintenance and calibration requirements. Precise results require precise structure for any long-term operation.
We recommend that you integrate pictures and videos in the instructions for your procedures and training so that nothing is left to chance or misinterpreted.
Material Handling, Containers, Labels, Quality Assurance
Personnel contamination/cross-contamination are the death of any grow operation. Do everything you can to limit stray or wandering plant material, dust or debris from migrating from one grow room or area to another. Isolation is a good way to limit outbreaks to a specific room to minimize losses.
Figure 5: Documented SOPs must be followed & reviewed regularly
If something nasty happens to one of your rooms. Good labeling enforced by your quality assurance team is a simple way to increase the likelihood that employees will do a task as intended. This adds to your repeatability as people change jobs or roles are redefined.
Approved Procedures & Instructions
Quality assurance is all about repeatability and intended outcomes. Documenting procedures and intended use enables every new employee to follow the experience of the masters and duplicate their success. Testing, sampling and logging your results along the way enables you to know that you are on schedule and on process, so you can predict your results every time.
Part of your continuous improvement approach will be to deal with exceptions that are not covered by your procedures. Learning about those exceptions and capturing your experience with an improved method will lead to better outcomes the next time around.
Documentation, References, Appendices
Figure 6: Flower sealed & ready for export, DanCann, Denmark
You’ve done all of this hard work to capture your operation, so you need a complete library of your reference work and approach that employees can access. It does your operation no good if you capture your methods and no one ever looks at them again. Training cycles and reviewing your defined procedures is key to a consistent high-quality result.
Hero Award
Standard Operating Procedures (SOPs), Good Manufacturing Procedures (GMP) and Good Agricultural & Collection Practices (GACP), are all terms that will become more familiar as cannabis production joins into one global market. Professional results will be required and national or international certifications will be the guarantees that any global customer can trust that a product meets the standards they expect.
We have many customers in North America and around the world. but DanCann Pharma is the most aggressive when it comes to meeting international standards and results. Producing flower that is so pure that no irradiation is required for export, the DanCann operation is fully certified for production throughout Europe and they are sold-out of capacity for the coming year. They are currently expanding their operations in Denmark and are a solid example to follow for a well-defined repeatable operation. FarmaGrowers in South Africa is a close second in this race with multiple export certifications of their own. The future looks bright for both of these global operations.
In 1996, the Harvard Business Review published an article called Making Differences Matter: A New Paradigm for Managing Diversity, in which the authors argued that companies should adopt a radically new way of understanding a diverse workforce. Instead of hiring employees of different backgrounds and asking them to blend in, or limiting people to areas of work based on their identity, they suggested embracing and bringing together the varied perspectives and approaches to work that members of different identity groups bring. Since then, a steady stream of companies – from GE to PricewaterhouseCoopers to cannabis companies – have implemented several new practices, initiatives and programs under the category of Diversity, Equity and Inclusion (DE&I).
DE&I has become highly important over the last few years, and many companies are seeing the benefits. Today, 83% of professional investors are more inclined to invest in stock of a company well-known for its social responsibility. On the other hand, a company that is seen as not responsible stands to lose as much as 39% of its potential customer base, with one in four consumers telling their friends and family to avoid it. As these benefits draw more companies to focus on DE&I, it’s important to remember that your plans should ultimately be centered around uplifting employees from all backgrounds.
“Listen, test, learn and then listen again!”While still relatively new to the cannabis sector, one DE&I initiative that is making some headway towards that goal is the Employee Resource Group (ERG). Essentially, it’s a group of employees who join together in their workplace based on shared characteristics or life experiences. ERGs work to create communities which bring people together, with internal and external partnerships to support those groups, and they are gaining popularity. In fact, according to a Bentley University report, almost 90% of Fortune 500 companies utilize them. They’re often used because issues are addressed from within an organization by the people who are most directly impacted by them. They can also serve as a direct pipeline of communication between employees and employers, as well as a place for new ideas and solutions to problems to blossom.
When it comes to recruiting and retention, ERGs have their own specific benefits. According to a survey conducted by Software Advice, 70% of respondents between 18 to 24 years old and 52% of respondents between 25 and 34 reported they would be more likely to apply for a role at a company that had ERGs. With regards to retention, 50% of survey respondents across all ages stated they would remain at a company because it had an ERG.
While some in the cannabis sector have already implemented ERGs, this new practice is one that all cannabis companies should consider – particularly as this industry grapples with its own unique DE&I challenges and history. To that end, check out the tips below to help get you started.
Gauge interest: Many ERGs start organically. The first question you need to answer before you can start building an ERG is to ask if your employees want one. The statistics indicate they likely will, but it’s important to establish that leadership is willing to listen. Employees should play a major role in this process from the beginning. However, remember that the DE&I strategy is not their responsibility, and ERGs should be a part of a more comprehensive plan.
Find the willing and work with them: You’ve got to find the people that these topics matter to and embrace them. Participation is key, and if the topic at hand is one that someone is not personally connected to, your ERG may not live up to its full potential. ERGs are a significant time investment, so you have to make sure those taking part are ready, willing and capable of balancing their job responsibilities with their additional role in the group. Participation goes both ways, too. You have to make sure that managers are aware that someone is in an ERG. “Be open to making mistakes and learning from them, and then changing for the better.”
Use executive sponsors: An essential piece of successfully incorporating ERGs into your organization is recruiting executive allies from the corporate side to serve as sponsors. This can help break through barriers, get decisions made, and keep all parties organized. Executive sponsors are also great for employee development, as they can see firsthand the talent in the organization and become a mentor. Executive sponsors are often an important request from ERGs, and they are worthwhile to recruit for. Sponsors don’t have to be from the same affinity as the group, and in some ways, that can actually be a good thing. Solidarity is another important factor to company health, and allyship is imperative for solidarity.
Set goals: Define a mission early on. It’s important for ERGs to have a strong mission statement with core goals that the group is formed around achieving. Keep in mind, these need to be tangible goals with specific benchmarks. It can’t just be “increase diversity in hiring.” Set a number you’d like to reach and a date you’d like to reach it by. Having clear objectives keeps a track record for your ERG, and is the foundation for success. These will also ensure that your ERG is not just for marketing purposes. Achieving substantive goals will keep the group going, as confidence gets built on the inside and from the outside.
Be clear: ERGs are all about communication, so clarity has to be a top priority. None of the above tips work without that. You have to make sure the groups are not questioning what is expected of them, what resources they have to work with and what goals they are working towards. It’s always going to be a learning process, and there will certainly be unforeseen challenges, but being on the same page from chapter one will make the process that much more beneficial to all involved.
As stated above, ERGs are still new, just like the industry we want to bring them into. Be open to making mistakes and learning from them, and then changing for the better. That process is what ERGs are about at their core, after all. Listen, test, learn and then listen again!
Even for the soaring cannabis industry, recruitment and retention of a qualified workforce remains a significant challenge in 2022. Although a tight labor market was not a new situation for many industries, the COVID-19 pandemic made it much worse and widespread, and the pain has yet to subside. In 2021, 47 million workers voluntarily left their jobs and nearly half of small businesses are experiencing worker shortages.
About 43% of workers who quit their jobs cited inadequate benefits as a factor in their decision. Among workers who cited benefits as a top concern, more than three-quarters said retirement plans are a “must-have” benefit. Most small businesses in the U.S. (74%) of 50 employees or fewer, however, do not check that box on a potential hire’s requirements list.
Offering a 401(k) plan, therefore, can help any company attract and retain workers. Even companies in emerging fields like cannabis can add 401(k) retirement savings plans to the roster of benefits for its employees.
In addition, there are tax benefits for the company should it offer a 401(k) plan and also match employee contributions. Employer contributions are deductible on the employer’s federal income tax return, so long as those contributions stay below the limitations described in section 404 of the Internal Revenue Service’s Internal Revenue Code.
Given the complexity of the cannabis industry and its hazy legal status in the U.S., however, it can be more challenging for cannabis companies to find benefits providers willing to create a program. Finding the right partners to navigate the process will help cannabis companies provide this significant employee benefit package.
Cannabis organizations have run into similar roadblocks finding banks and payroll providers willing to partner with them, and some large financial firms that offer retirement plans often decline to work with cannabis companies as well. But a growing number of boutique firms offer 401(k) programs and other benefits for this industry — it just requires the right partners to find the right plan.
Four tips for creating a 401(k) for cannabis workers
These four tips can help cannabis companies offer a 401(k):
Plan Structure and Objectives: Outline the goals of the 401(k) plan and how it will be set up, including how employees will be rewarded for participation. Consider developing a formal investment policy statement that includes monitoring the plan.
Matching Contributions and Auto-enrollment: Offering to match employee contributions tends to increase participation in retirement plans and increase employee satisfaction. There are a wide variety of paths the company could follow, but a good example would have the company matching 50% of salary up to 6%. Regarding automatic enrollment of employees into the plan, such a policy has shown to increase both participation and engagement.
401(k) 101: The company may need to educate its employees on the basics of a 401(k) plan if one was not offered previously. Employees may be unfamiliar with how these plans work and how to optimize their investment choices. Cannabis companies need to offer clear information on the benefits of the program, including information on managing their portfolio. This approach will make workers feel more comfortable with their investments and encourage engagement.
Partner with 401(k) Experts: Emerging industries like cannabis can be complex. Cannabis companies that want to implement a 401(k) should partner with consultants who understand the intricacies of the sector and know what retirement benefits companies cater to the industry.
We know a thing or two about scaling a cannabis business. While we don’t own a plant-touching business ourselves, we have helped companies like Tokyo Smoke, Superette and Northern Helm to open dozens of dispensaries in less than 3 years as their IT company. Here are some of the things we’ve learned along the way.
Find reliable partners
You can’t do it all alone. Especially when you’re trying to grow fast in a new industry like cannabis. Find reliable external partners you can depend on in areas like construction, design, staffing, financing, legal, real estate, accounting, HR, IT and security. If you’re just starting, consider dividing the work between competing firms, then committing to the one that performs the best.
Maintain consistency
You don’t want to reinvent the wheel with every new location. Develop standardized processes, procedures and equipment as early as possible. This is critical for aspects of your business like efficiency, profit margins and brand awareness.
We work with our clients to develop a standard IT stack (all the same hardware, software and configurations). This makes setups quicker and cross-location management easier and can make you eligible for bulk purchasing discounts.
At the same time, if any of them don’t work out, switch them out as soon as possible. Don’t compound the error by sticking with what isn’t working.
Develop standardized processes, procedures and equipment as early as possible.
Also don’t be afraid to try new things here and there or make each location unique in more subtle ways. Our clients at Superette are a great example of keeping their brand consistent enough across their locations that you know it’s a Superette store just by looking at it; at the same time each store is just a little bit different so that each location is a unique experience.
Leverage multi-site tech
Most cannabis software is web-based and lets you manage multiple different locations in a single platform. Make sure to make good use of this and not use different software for different locations.
This goes for a lot of non-cannabis-specific software too, like Sage, Office 365, Google Workspaces and Solink (a platform that lets you manage all your surveillance systems in one dashboard, and integrates with your POS or ERP).
Use compliance and licensing software
Cannabis regulations can vary widely not only state by state but city by city. Keeping up with all these regulations can be difficult even if you already have a legal expert to rely on.
Compliance software like Simplifya, ProCanna and BuildMySOP let you quickly figure out what the regulations are in a given area, which can make it easier to find a good location, get set up and stay compliant. These applications, along with licensing trackers like Cannabiz Media, can also help you find where cannabis license opportunities are available and send you alerts whenever a state or city is accepting new applications.
Buy materials ahead
This is especially important now with the supply chain crisis still going on, but in general it’s a good idea to start gathering all the materials you need as soon as you’re certain about expanding. In IT in particular, pretty much everything including cash drawers, receipt printers, tablets, POS terminals, firewall appliances and laptops has been in pretty short supply. We’ve heard that it’s the same for just about all materials that go into setting up a new cannabis location whether it’s a dispensary, cultivation, distribution or manufacturing facility.
In IT in particular, pretty much everything has been in short supply.
We’ve stayed on top of it and avoided delays by buying months ahead, purchasing a surplus of product and maintaining close communication with our vendors and distributors; we suggest you do the same for any products you’re purchasing internally.
If you’re buying online and the store says “in-stock,” you may want to contact the store/vendor to double-check that it’s accurate. Sometimes you buy it and you find out that “in-stock” means its parts are “in-stock” in a factory in Asia somewhere and your product is still months away from being manufactured, shipped and delivered to you.
Promote from within
When you’re growing is a good time to promote the all-stars already on your team, giving them a chance to expand their skills and take on greater responsibilities. We’ve seen this with some of our clients where they promote their star budtenders to shift leads or managers at their new stores, and store managers to district managers in new territories. It works out for everyone – the employee gets a raise and a step up the ladder, and you ensure you maintain your company’s culture and fill important positions with people you already know and trust (not to mention it’s often more cost-efficient to hire from within like this than to bring in someone new).
Hire from without when necessary
Sometimes promoting from within isn’t an option, like when you need someone with a particular skillset or level of experience.
Maybe your current COO has done a great job opening and operating 5 stores, but what about 50? If you want a sure thing, you’ll want to hire someone that’s already shown they can handle 50 or more stores, and most likely you’ll have to look outside the cannabis industry to find it.
You’re seeing this more and more in the cannabis industry – some are promoting from within, but many are also hiring experts from other companies and from outside the industry, including lots of people with strong retail, food manufacturing, merchandising, packaged goods and highly regulated goods (especially alcohol) backgrounds.
This can be more expensive than promoting from within and can potentially have a negative influence on company culture and morale, but on the other hand you’re getting valuable expertise that can help you take your cannabis business to the next level; and plus, you may even be able to hire these people at a relative bargain since there are many out there that are eager to work in such an exciting, new and high-growth industry.
Be ready for things to break down
Even if you’re fully prepared, you should still expect some kind of hiccup or hurdle with any new location rollout. It’s just the way it is on projects with an ambitious timeline and a lot of moving parts. The usual culprits are routine construction delays, cable companies and other utilities screwing up, storms, and having to adjust your schedule according to government inspectors on short notice. On some of our jobs in Canada, for example, we’ve run into a few blizzards and cameras and wires getting knocked out/frozen over; and on one occasion we were moderately inconvenienced setting up a store just up the street from the 2022 Ottawa trucker protests.
Don’t panic, don’t get frustrated. Your careful planning will at least ensure that most things go right, giving you the flexibility to react to the things that don’t.
Consider avoiding unlimited license markets
Even if you’re fully prepared, you should still expect some kind of hiccup or hurdle with any new location rollout.
There’s a reason many MSOs avoid unlimited license markets like Oklahoma and Oregon. Limited license markets provide protection against competition. Unlimited license states are often free-for-alls and a race-to-the-bottom on pricing. They’re much tougher markets.
Have a vision
Rather than just wanting to grow and make a lot money, it can be helpful to have a unique, compelling and somewhat clear vision for your company, like Superette’s “making buying cannabis as fun as using it.” This helps you motivate your team, maintain your focus and cohesiveness as you add lots of new people, and differentiate yourself in a crowded market.
Consider franchising where it’s legal and makes sense
Our client Tokyo Smoke has opened over 80 locations in just over 3 years of operations. If that seems like too much growth for one company, you’re sort of right – some of Tokyo Smoke’s stores aren’t company-owned, they’re actually separately owned and managed franchises.
Now franchising a cannabis business isn’t legal everywhere at the moment, but where it is legal it’s a time-tested method of growing your brand and company footprint fast, and establishing dominant mindshare and market share that can’t easily be challenged or reversed.
Consider M&A
Sometimes M&A is the only option for breaking into a new market, like if the market is already oversaturated or not accepting new applications. Established cannabis businesses can start at $1-$10 million per location depending on the situation. Don’t quote us on it, but with some markets becoming saturated and sales declining in areas like Oregon and Canada, you may be able to get a good deal from someone that wants out of the business before things gets worse – assuming you’re bullish on a market rebound or think you can perform better in the market than the current owner.
Benjamin Franklin famously advised fire-threatened Philadelphians in 1736 that “an ounce of prevention is worth a pound of cure.”
With industry growth and maturation comes increased opportunities and challenges. As the cannabis business matures and spreads into new geographic regions, the industry can take advantage of larger markets; however, it also faces increased risk and litigation across a myriad of its operations. This article identifies some of those growing pains along with suggesting how to avoid the more obvious and typical types of issues before they become a problem.
Contracts/Commercial Agreements
One source of emerging trends in cannabis litigation notes that about 1/3 of litigation in 2022 could be classified broadly as commercial disputes. As the various state laws allow for expansion of legal cannabis operations into more states, operators will enter into more commercial agreements to grow and scale operations across the United States.
I am surprised by how many companies do not adequately document their commercial agreements. A host of issues too numerous to discuss in depth here should be addressed in a commercial agreement depending on the type of transaction. In short, make sure agreements are in writing, signed and include an effective date. They should be complete and unambiguous, allocating responsibilities and risk as intended.
Fundraising
When fundraising, whether as debt or equity, a company must comply with complicated and technical U.S. and applicable state securities laws. These laws and regulations require either the registration of the securities offering, which is very expensive, or an applicable exemption from a registration. Failure to comply could lead to lawsuits filed by investors trying to recoup all their money, even if they have no damages, along with possible fraud claims or fines and penalties imposed by applicable federal or state agencies.
Landlord-Tenant disputes
When renting commercial real property, create agreements that address the major issues in writing in case of disputes with property owners. Understanding the lease terms and requirements, as well as tenant rights and duties under state and local law, are essential. Pay attention to lawful uses, minimum term and renewal options, operating expenses and tax requirements, tenant default issues, base rent and other rental charges, common area maintenance charges, maintenance and repair, tenant improvement requirements and allowances, sublet and assignment, and requirements for the refund of the security deposit.
Employment
A common area of misunderstanding that leads to disputes is the law governing employee relations. Companies often misclassify employees, creating valid claims for past due benefits, fines and other damages for failure to classify correctly. In California, for example, correctly classifying a worker as an independent contractor is difficult. Some common mistakes to avoid include:
Designating non-exempt workers as exempt and misclassifying employees as independent contractors.
Failure to pay required minimum wages or overtime.
Not providing required meal and rest breaks.
Failure to keep accurate time records for non-exempt workers.
Inaccurate and noncompliant payroll records (aka “wage statements”) with all the required information.
Improperly administering leaves of absence, especially for employees with medical conditions or disabilities.
Not carefully documenting performance issues by using performance reviews, or “writing up” poor performance, etc.
Failure to have a written employee handbook covering important policies such as vacation and required conduct, as well as misapplying those policies, can lead to disputes. Pay attention to state and local employment laws that apply at the different stages of development and growth.
Intellectual Property
Protecting the company’s intellectual property is important to maintain the goodwill and value of a business. Carefully evaluate the requirements for any patent, trademark, copyright, and/or trade secret protection and come up with a plan to implement and monitor the applicable intellectual property assets. Do not disclose possible patentable intellectual property and inventions before filing a provisional patent application, or the ability to obtain patent protection will be destroyed. Before using a tradename or trademark in commerce, investigate if anyone else is using a similar name for similar goods and services. Failure to do so could lead to claims for infringement and a judgement requiring the company to stop using its preferred name or logo after investing time and money in creating the brand. Consider registering at the state and federal level the name and logo to secure your rights in the brand. What and where a cannabis company can register its brand name and logo for protection are currently limited, so be advised registration can be tricky.
Trade secret protection attaches to valuable information not readily ascertainable by lawful means, such as a formula, pattern, method, device, compilation, program, technique, or process that is secret. Protection afforded to trade secrets does not expire if the information is kept secret. For instance, the Coca-Cola formula has been kept secret for over 100 years, thus maintaining its value. Companies must also implement and maintain appropriate measures to protect the inadvertent disclosure of the information in order to maintain an asset’s status as a trade secret. Before disclosing any confidential information, make sure to have a proper written confidentiality agreement in place with the recipient, or you may lose the protection afforded by trade secret law.
Hiring the right workers to develop valuable intellectual property is important to the success of any business. Make sure to have employees and contractors assign their interests and ownership rights to the work they create, and develop a written invention-assignment agreement in favor of the company to avoid ownership disputes. Interests in copyrightable works created by service providers must be assigned in a written agreement. Failure to do so could diminish the company’s value.
Taxes & Licensing
Sometimes a business unavoidably gets behind in paying its taxes. Failure to pay taxes on time leads to penalties and fines and possible expensive audits by the tax authorities. In addition, personal liability can attach to directors and officers for failure to pay employment taxes. Cannabis companies may have several licensing requirements as well that are important to track to stay in good standing.
Insurance
Adequate insurance is a must-have for every business. Conduct a periodic checkup of the company’s insurance coverage. Consider directors’ and officers’ insurance, general commercial liability and property, products liability, workers’ compensation, employment practices liability coverage, cybersecurity, and business interruption insurance. Those types of coverage are important protections for the risks related to any business that sells a product or service, has employees, deals with the public, or could lose income from unanticipated events like fire, natural disasters and civil interruptions. Discuss your particular insurance needs with a qualified insurance broker, as one size does not fit all.
Consult with Qualified Legal Counsel
Consult with legal counsel to analyze and prepare for the risks noted in this article and other common legal issues to protect the company’s assets, avoid disputes and build and maintain company value. Otherwise, you may find that, as old Ben Franklin noted, you’ll spend many pounds to try to cure problems that could have been avoided with just an “ounce of prevention.”
Anyone in cannabis will tell you that complex transportation and supply issues are stalling industry growth and impacting employers’ ability to hire teams for the critical roles that keep product moving on schedule.
Since the onset of COVID-19 in March 2020, global and domestic supply chains have suffered bottlenecks caused by ever-changing public health policies and ongoing materials and labor shortages. While the status of transportation as an essential business kept other essential sectors, such as cannabis and grocery, chugging along, the current situation is still challenging.
Transportation remains the biggest supply-side problem, with the American Trucking Association reporting a shortage of an estimated 80,000 truckers in October 2021. The Bureau of Labor Statistics also continues to report high numbers of job openings across supply-chain jobs such as warehousing and transportation.
Cannabis businesses, from multistate operators to distributors to delivery service startups, are hardly immune to these issues. In fact, they face the additional hurdle of restrictive federal regulations, including the illegality of transporting cannabis across state borders. For example, this stipulation means that the over-saturation of flower in California cannot be addressed in a naturally symbiotic manner by shipping to states whose markets demand more flower, such as Arizona and New Mexico.
In the aggregate, these challenges impact employers’ operational and logistics goals and diminish candidates’ interest to work in a highly scrutinized industry. Many trucking companies have found it a challenge to attract drivers. Low pay, grueling schedules, and zero-tolerance cannabis testing for drivers despite legalization have led to an exodus of truckers in the U.S. and Canada.
Despite these obstacles, cannabis employers can still embrace smart strategies to attract quality employees and create much-needed stability to thrive in the rapidly changing marketplace.
Cannabis, COVID & the Great Resignation
In recent months, when it seemed America was finally emerging from COVID’s long shadow, the Great Resignation dampened business optimism. Employee turnover hit cannabis hard—especially in California, where other challenges like a thriving illicit market, high taxes and wholesale price compression have impacted companies’ ability to operate smoothly. Transportation and supply issues compound the problems.
For example, even transporting federally legal hemp in California and elsewhere has its headaches. Our company’s trimmer certification course uses hemp for training purposes. We ship the hemp directly to students’ homes so they can participate in virtual training sessions. Although our company has certified that the course packet contains only hemp, the U.S. Postal Service (USPS) will not ship it, regardless of whether the delivery location is in or out of state. We therefore must rely on a private carrier to transport the course packets to class participants, which is more time consuming and costly
Staffing Strategies for Transportation & Supply Jobs
Cannabis employers have several traditional and non-traditional tools at their disposal to address transportation and supply-related staffing.
While standard ecommerce jobs are synonymous with turnover, here lies an opportunity for cannabis operators to differentiate themselves. This is the cannabis industry, after all, and plenty of individuals who might not normally be interested in the transportation or supply aspect of ecommerce, might be far more open to those types of roles if they know the jobs involve cannabis.
What can employers do to attract these more receptive candidates to their organizations? Hone in on workers who have a passion for the plant. In job descriptions, position cannabis messaging front and center and conduct outreach through LinkedIn groups and other social media platforms to groups and individuals that have a cannabis focus.
Salary and Benefits
These days, a competitive salary simply is not enough to entice the right employees. A solid benefits package goes a long way to establishing trust between employers and employees and provides employees with a level of comfort and reassurance that they are supported during these tumultuous times. For example, companies must prioritize healthcare benefits and consider including coverage for part-time workers on the supply side of the cannabis industry.
Bonuses
Bonuses are another great way to catch the eye of potential employees, but bonuses must be developed within a framework designed for retention. Cannabis employers who establish performance bonuses and loyalty bonuses also increase that ever-important aspect of trust within their companies.
Safety
A transparent and robust HR plan that addresses safety concerns—COVID and beyond—can affect employees’ comfort for certain supply or transport positions that may involve increased public exposure or enhanced personal safety risks. Be clear with employees about the system that’s in place to support them in the event of unforeseen emergencies or injuries.
Procedures
Cannabis employers should also be aware of the importance of having compliance-focused internal transportation standard operating procedures and protections for employees. These policies can be a key factor in attracting both drivers and additional transport and supply experts from other regulated transport industries such as food, agriculture and pharmaceuticals. Candidates without a cannabis background will be more drawn to companies that provide a well-developed and safe infrastructure.
Smart Cannabis Staffing Solutions: The Time is Now
Federal cannabis legalization is coming, and with that nationwide sea change other issues in cannabis supply and transport will emerge. How will cannabis transport consolidate? Will the nation’s top carriers simply take over?
Regardless of what those answers might be, the need to embrace smart staffing solutions now is imperative. Providing a solid base wage with health benefits, and making it clear to current employees and job candidates that there’s an internal infrastructure of support—from HR to loyalty bonuses—is the best way to tackle the transportation and supply issues to position your company for future success.
At first glance, the layout of a grow room and a factory production line might seem to have little in common. But whether a facility is producing plants or parts, adopting good manufacturing practices (GMP) can benefit plant quality, harvest consistency and production economics.
What is GMP?
Simply defined, GMP refers to a production system made up of processes, standards and safeguards designed to consistently meet a defined quality standard. In the grow house, establishing, documenting and implementing GMPs can help guard against problems ranging from plant contamination to inconsistent harvests. GMPs can be organized into five key categories, each which contribute to cultivation:
People: The people working in the grow house understand their responsibilities
Processes: Production processes are clearly documented and consistent across harvests
Procedures: Guidelines are documented and communicated to all employees
Premises: Grow rooms and equipment are clean and maintained
Products: Materials used in cultivation (fertilizers, lighting, growing media, etc.) are assessed
Optimizing each of these five P’s in production can help cultivators protect their business and their margins even as flower prices in both legacy and emerging states continue to trend downward. Below, we look at four GMP insights that can help cultivators coordinate the five Ps to achieve quality, consistency and economic objectives harvest after harvest, without massive investments in capital, even during turbulent market conditions.
#1 Know your numbers and their value
Avoid the temptation to lump production costs into very broad categories, i.e., “cost of goods.” Understanding the exact cost of all inputs that go into a grow is a precedent to cost-effective production. The price of the plant material, energy consumed, labor, nutrients, fertigation and other inputs involved in the grow should be calculated to determine the actual cost of a grow room. If rooms are set up consistently, you can multiply to get an aggregate production cost across the facility.
Growing media
Look beyond the price tag when calculating costs and consider the value each input brings to the grow. Nutrition is a good example. Understanding the concentration of specific nutrients in a product can be a better way of evaluating its value than simply looking at the cost of the goods. And consider whether added nutrients are actually adding value to the product produced. More isn’t always more. In most cases, simple salts will supply the plant with what it needs to grow.
Growing media is another opportunity to evaluate the cost/benefit of cultivation inputs. How much yield can be achieved with a particular medium compared to a different choice? For example, a bag of coco may initially appear to be the low-cost choice for cultivation. Upon a deeper evaluation, though, the cost per plant of coco is generally higher when you factor in the amount of media used for each plant (and that doesn’t even factor in the labor to fill the pots).
# 2 Reduce time waste
Among the various inputs in each growing cycle, labor represents a significant cost. Are labor hours being put to the best use and not wasted? American industrialist and innovator in mass production Henry Ford stated, “Time waste differs from material waste in that there can be no salvage. The easiest of all wastes and the hardest to correct is the waste of time, because wasted time does not litter the floor like wasted material.”
One way to see the cost of wasted labor dollars is to set up a camera and record a day of activity in the grow room during each step of a grow cycle. Or simply observe the responsibilities that are requiring workers’ time on a typical day. Watching employees’ work in the grow room may reveal how a room’s set-up is contributing to or hindering production. Are employees spending their time on tactics that add value or are they being slowed down by manual processes, such as filling containers, watering and relocating plants in the facility? Are there steps and process that could be automated, such as fertigation? Seeing how employees’ time is being used can identify opportunities to direct efforts toward functions that add value or cut costs. What would be the economic benefit of reducing a half-day of set-up time in the grow house or automating some processes?
Beyond better allocation of human capital, understanding how time is used in the growing operation can suggest changes to materials used in the grow. For example, selecting a growing media that comes in plugs and blocks with pre-drilled holes for efficiently dropping in new plants can reduce time spent filling pots or configuring containers. Automating functions like fertigation and watering can not only reduce labor time but increase the precision of delivery when it comes to water and nutrients.
#3 Introduce incremental improvements
Many manufacturers rely on pilot plants to mitigate risk before process scale-up takes place across an enterprise. The same approach can benefit the grow house. Resist the temptation to overhaul the system and instead focus on introducing one change at a time. This disciplined approach will allow you to evaluate if a change is actually delivering value and should be applied more broadly. The wisdom of a cautious approach to improvements is reflected in a quote by innovation magnate Steve Jobs, co-founder of Apple. Observing that not every innovation will be a win, Jobs stated, “Sometimes when you innovate you make mistakes. It is best to admit them quickly and get on with improving your other innovations.”
When introducing a new element into the grow, pilot it in one “sample” area before adding it to the entire operation. Then give the innovation time to be evaluated before deploying it more widely. This measured approach can help reduce the risk that accompanies making a change to processes and will allow you to evaluate the relative benefit of any change or innovation. And as changes are introduced one at a time, it is easier to determine which changes are contributing value.
#4 Satisfy the market, not just the spec
Regulatory bodies set the compliance criteria for purity or quality standards in manufacturing, but the ultimate mark of approval is awarded by customers in the marketplace. A harvest may meet all of the quality specs, but if customers don’t want to buy it, achieving GMP metrics is a moot effort. The marketplace will always have the final say on a product’s commercial viability.
Understand what the market wants and be able to replicate it consistently harvest after harvest. Manufacturing a product that meets the market’s desired performance attributes is essential to sustaining and growing operations. Production quality is only as good as the last harvest and any degradation in product quality will diminish buyers’ trust. History shows that the challenge of achieving consistent production quality and reliability isn’t just a problem for cultivators. Among several factors that doomed the short-lived Edsel sedan introduced in 1957 were problems arising from assembly workers having to use different tools and techniques. A lack of consistency in producing cars or cultivars can turn off customers and profitability.
A tension exists between achieving production consistency and the opportunity to introduce changes that improve the grow. By integrating improvements into the production system one measured change at a time, cultivators can assess which improvements to continue and what needs to be tweaked. But as manufacturing has long demonstrated, continuous improvement is an ongoing journey.
As cultivators consider the 5 Ps of people, processes, procedures, premises and products, applying these four GMP insights can help growers in emerging and legacy markets navigate changing market conditions and drive continuous improvement.
The hiring process is evolving: major U.S. employers are reconsidering the significance of higher learning. An employer’s undue emphasis on university education while hiring is called “degree inflation.” As the hiring manager for NisonCo, a cannabis public relations, marketing and SEO agency, I have learned a college degree is not the best predictor of employee success.
NisonCo was established during the dawning of the modern cannabis legalization movement. At the time, our small staff included individuals with and without college degrees. I evaluated both groups of employees and learned they gave equal contributions to the team. Limiting our pool of potential candidates to university graduates would have hindered the growth of our company.
Accordingly, at NisonCo a college degree is not required to work. We believe degree inflation impedes hiring, increases payroll, encourages turnover and perpetuates social injustice. For these reasons, NisonCo encourages your cannabis company to emphasize a candidate’s skills and drive during the hiring process rather than their education.
Degree Inflation Increased in the Aftermath of The Great Recession
The Great Recession in 2008 caused a massive downturn in the U.S. economy. By 2010, the workforce had lost nearly 9 million jobs. The unemployed entered a tight labor market, and employers had the luxury of limiting potential candidates to college graduates. After the economic downturn, the number of employers requiring a college degree increased by 10%.
Employers added degree requirements to positions previously staffed by high school graduates. In 2015, 67% of job postings for production supervisors required a degree, while only 16% of current production supervisors possessed degrees. The Great Recession pushed Americans without a college degree out of the labor market.
Technological Advancements and Social Movements Confront Degree Inflation
The importance of technical skills began declining when automation entered the workforce in the 1980s. Employers suddenly required soft skills like relationship management to serve customers and resolve conflicts with partners successfully. A technologically advanced economy requires problem-solving and people skills. These skills are not usually acquired while attaining a college degree.
Most employers confirmed degree inflation prevents them from hiring equipped employees.
During the Covid-19 pandemic, companies laid off millions of employees. Many unemployed people reconsidered their relationship with work and decided to leave unfulfilling jobs. Employers are now in dire need of staff, and they no longer have the privilege of requiring a college degree during the hiring process. This degree inflation prevents recovery from the economic downturn caused by the pandemic.
The Black Lives Matter movement highlighted the need to deliver social justice to historically marginalized communities. Americans are learning these communities need economic opportunities to achieve social justice. For this reason, employers are reexamining hiring practices and identifying barriers to equity. Employers like NisonCo have recognized since company inception that degree requirements impede social justice.
Degree Inflation is Bad for your Cannabis Business
The Harvard Business School polled business leaders on their perception of the performance of employees with and without degrees. The polling revealed the hidden costs of degree inflation: pending positions, payroll premiums, poor productivity and high turnover. Undoubtedly, degree inflation is not suitable for your cannabis business.
Most employers confirmed degree inflation prevents them from hiring equipped employees. They admit that candidates without degrees may possess the skills needed to thrive in most positions. Often, degree inflation prevents the discovery of competent candidates without degrees.
Most respondents revealed that degree inflation places a premium on wages for college graduates. Many respondents also confirmed those with and without degrees provide equal contributions to their teams. Degree inflation adds unnecessary payroll and training costs to a company’s budget.
Many employers believe staff members with university degrees demand higher salaries and benefits than staff without degrees. Additionally, most respondents admitted employees with degrees demonstrate low productivity and experience high job dissatisfaction. As a result, employers witness increased turnover among college graduates. In my experience, degree inflation can prevent employers from finding productive, satisfied, and loyal employees.
5 Ways Your Cannabis Company Can Oppose Degree Inflation
Review Your Company’s Job Descriptions and Assess Contributions to Degree Inflation
I recommend reviewing your company’s positions and determining if they are prone to degree inflation. Evaluate job descriptions written by leaders in the cannabis industry to understand if your degree requirements contribute to degree inflation and consider dropping degree requirements for positions that are common contributors to degree inflation.
Identify the Technical and Soft Skills Needed for Positions in Your Company
I advocate for analyzing the technical and soft skills needed for positions in your cannabis company. Review your job descriptions to determine if they require soft skills a candidate without a degree could possess. Delete degree requirements from job descriptions that do not need technical education provided by universities. Additionally, review the vetting process for candidates and remove onerous education requirements for positions requiring additional soft skills.
Analyze the Costs of Your Company’s Contribution to Degree Inflation
Understanding your cannabis company’s contribution to degree inflation lowers the costs of sustaining it. Developing metrics for evaluating contributions to degree inflation helps assess the charges to your company. Realizing your company’s potential cost savings helps maintain a commitment to combating degree inflation.
Develop Your Company’s Pipeline of Non-Degree Employees
Your cannabis company should develop alternative talent pipelines to attract non-degree employees. Investments in training create talent pipelines that give your company access to new pools of competent and productive candidates. Investments in training attract employees without college degrees and confront degree inflation.
Expand Your Company’s Territory for Recruiting New Employees
I recommend expanding your company’s geographic footprint while recruiting. Establishing relationships with partners in new territories provides access to new pools of non-degree talent. Expansion of your recruiting territory withstands degree inflation.
The Cannabis Industry Should Commit to Combatting Degree Inflation
Legalizing cannabis began as a social justice movement to benefit historically marginalized communities, and the maturation of our industry can deliver social justice to these communities. The cannabis industry has a prime opportunity to be an excellent example for other sectors confronting degree inflation. Our industry must demonstrate how different sectors can resist the urge to support it.
As a fast-growing cannabis company, ensuring your business stays compliant with regulatory agencies of all kinds—planning departments, the U.S. Department of Agriculture (USDA), Occupational Health and Safety Administration (OSHA) and so on—is critical for survival. But is your business also compliant with temporary and part-time employment regulations? Violating these often-overlooked regulations can land your company in hot water at best and force you to shut your doors at worst. Here’s what you need to know about risks, regulations, compliance issues and more.
The 30,000-Foot View: Part-Time and Temporary Employees
Cannabis has proven itself to be a high-turnover industry. But in the ever-shifting, post-COVID landscape, many cannabis employers are seeing the financial and logistical benefits of hiring part-time and temporary workers.
Though the terms “part-time” and “temporary” are sometimes used interchangeably, the fact is, there are legal differences in the definitions of part-time versus temporary work. For starters, temporary employees must work for less than a year at a specific organization, and their work must have a defined end date. Temporary employees, or “temps,” often fill vacant roles in a temporary capacity, such as roles previously occupied by someone on parental leave.
Many full-time employees in the cultivation space are defined as “agricultural workers”
Part-time employees, on the other hand, can work indefinitely for a company—but they must work less than 40 hours per week. And, side note, if a part-time employee works more than 1,000 hours in a calendar year, they could be eligible for retirement benefits—so hiring managers, bear that in mind.
For employers, there are some tangible benefits in hiring part-time or temporary workers. For starters, there are often fewer upfront costs associated with hiring part-time workers (like workers’ compensation and healthcare). Establishing a strong part-time and temp employment strategy also allows for employers to quickly scale up or down based on market tendencies or shifts.
Understanding the Risks of Hiring Part-Time or Temporary Workers
While hiring part-time and temporary workers can help businesses stay agile and responsive to market demands or fill vacancies created by recent resignations, many businesses hire these types of employees without a full understanding of associated regulations. And it can get even trickier: many full-time cannabis industry workers in the cultivation space aren’t considered “employees” at all—they’re defined by the federal government as “agricultural workers.”
It’s essential that businesses classify part-time workers and independent contractors correctly. Attempting to claim a worker is part-time when they’re really a full-time employee (a practice known as “misclassification”) can save a business tax dollars in the short-term but lead to sanctions and hefty penalties down the line. For example, if a worker is misclassified and the Department of Industrial Relations finds out, they can sue the former employer for unpaid wages.
Potential fallout from noncompliance with classification or wage and hour issues includes massive fines, potential litigation and more. Federal agencies are extremely sensitive to cannabis business regulatory violations, it’s vital to adhere to proper staffing regulations and compliance. The wrong kind of attention can tank your business’s reputation and halt your operations altogether. I’ve personally worked with numerous cannabis businesses in their hiring and payroll initiatives, and I’ll say this: It may seem like a headache to cross all the “Ts” and dot all the “Is” in the beginning, but it will make a massive difference down the line.
Understanding the Regulations for Hiring Part-Time or Temporary Workers
All employers must adhere to the regulations set forth by the Fair Labor Standards Act, which mandates that part-time employees must be treated the same as full-time employees. That means they must be paid minimum wage, be paid overtime should they exceed their determined hours, have the opportunity to take job-protected unpaid leave, and so on. I really want to stress how essential it is that employers classify their workers appropriately.
It’s also worth noting that many states have specific regulatory structures for employment, both full- and part-time.
In the heavily regulated cannabis industry, employers must exercise strict due diligence to meet all OSHA standards. Additionally, they must identify all occupational hazards and account for employees’ overtime and double time. Grow operations must also adhere to the Field Sanitation Provisions of the Occupational Safety and Health Act, which includes providing toilets, drinking water, hand sanitation facilities and hygiene information.
Avoiding Compliance Problems with Planning and Diligence
There’s a lot more to hiring workers than businesses realize, especially in cannabis. Most companies don’t intend to be noncompliant with regulations—they simply don’t know the regulations, or they’re overwhelmed by hiring and growing so quickly. To make sure you’re compliant, you might consider building out your HR team, educating yourself as the business leader and reaching out to staffing and HR professionals in the space who can answer your questions. In this rapidly growing industry, which seems to shift and change every day, planting your feet firmly on solid regulatory ground will serve to benefit you in the event of federal legalization, massive business growth or initiatives you may want to undertake in the future.
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The other proposed standard, WK84589, seeks to develop a uniform metric for “determining the intoxication level of a cannabinoid.” Initially focusing on delta9-THC, the standard will help raise awareness and promote public health and safety by informing consumers how intoxicating a cannabis product is for the average adult.
