The cannabis market is maturing, and with that growth comes many changes for cannabis operators who are merging, adjusting, and reorganizing to improve their operations. Labor costs – employee wages, payroll, benefits, and taxes – can total up to 70% of total business costs. When a cannabis operator reorganizes, either after a merger/acquisition or to become more efficient, labor costs are one of the first areas where businesses seek to save.
Last month, MedMen announced it would lay off 20% of its corporate workforce – more than 190 employees – in an effort to improve its solvency. Canndescent, a large commercial cannabis cultivator based in California, recently laid off 14% of its workforce and froze hiring for another six positions due to their lack of funding. Reorganizing is a difficult and painful process, but it’s sometimes necessary for a cannabis operator to survive.
If you’re faced with the prospect of downsizing or merging with another cannabis business, there’s a good chance you’ll need to decide who to make redundant – and who to keep on. During rapid expansion, especially in the explosive growth of startups, it’s easy to hire people that duplicate work and in the grand scheme of the business, that can cost you money that you don’t need to spend. Firing people can be painful – but necessary. The right people are imperative to a business’s success: which is where functional interviews come into play.
What is a functional interview?
A functional interview is used to assess an employee’s or candidate’s knowledge, skills, and experience. Many companies use functional interviews during the hiring process to ascertain if a person has the capabilities to perform a job function. Functional interviews contrast with the culture fit interview, where questions are designed to see if a candidate’s personal and work style is a good fit within the hiring organization’s culture.
Functional interviews are simply to learn what people do, how they view their job or work environment, and what value they add to the business. Cannabis operators use a functional interview to find out who to keep on board. Usually, an outside consultant, management, or the HR team from an acquiring company will conduct the functional interviews.
Why should you do functional interviews?
As the cannabis industry matures, many businesses will have to sell out and be acquired by other companies. Positive cash flow is hard to achieve in this market, for a variety of reasons. Some cannabis operators may choose to tough it out and seek a creative solution to reduce their burn rate. Whatever the reason, reorganization can give cannabis businesses a better cash flow position.
By the end of a functional interview, the business must clearly understand what each employee does on a day-to-day basis. How well does each employee perform their job? How does the team work together, and how do employees perceive each other? Throughout the process, use functional interviews to find:
- Any unnecessary overlap in roles between team members
- Gaps in processes that need to be filled
- Ways that the company could be improved from the perspective of the employee
Each stakeholder in the business will have their own unique take on how operations can be improved. Entertain every idea, weigh each opinion’s merit, and implement the ideas that seem most helpful. Make sure you have an end goal in mind before starting the interviews; this way, you can assess each idea in relation to where you hope to end up. Having a goal will offer guidance as to which questions to ask. Do you hope to recover a certain amount of salary back into your budget? Are you looking to close a certain area of business and redistribute talent, or let people go?
Finally, make sure you have each employee’s job description before you begin. This will give you a way to compare their actual work against their assigned responsibilities to objectively measure performance. The best end result may not be to fires someone: can you move a team member to a different role where they will thrive? Are there other job functions that you can assign to help the team reach its goals? Will re-writing job descriptions set people up for success? Keep these questions in mind as you assess your onboard talent.
Functional Interview Questions
Our experts have helped clients perform functional interviews. In the process, we’ve learned some questions that can help assess on-the-job performance. Depending on your end goal, here are some things you may ask an existing team:
- How long have you been with the company? (Start with the basics, build some rapport and trust. Don’t dive into the heavy stuff right away.)
- What is your current title?
- Do you like working here?
- What is a typical day/week for you? (Get an understanding of how an individual uses their time, what tasks they complete, and whether or not that matches with their job description.)
- How does your job add value to the business? (Do they understand how their role contributes to the business?)
- What do you think you’re being measured on by your manager?
- If you’re speaking to a manager, learn if/how they measure their direct reports.
- See if the subordinate knows what they should be focused on, and if the manager is actually looking at the right KPIs of their team.
- What is the hardest part of your job? Easiest? (Learn about what they find challenging to uncover any issues with certain processes or job functions. For example, if three out of five people bring up not being able to keep up with all of the clients they work with, maybe it’s time to implement a CRM system.)
- What’s working at the business or division you are in? What is not working? (Find general improvements that can be made for the business and what you can double down on.)
Final Thoughts: Reorganizing Your Cannabis Company
After you get all of the information from functional interviews, triangulate your data with the end goal. Will you be cutting a certain amount of salary costs? If yes, collaborate with your senior team to choose who stays, who goes, and who gets reallocated to another function.
If the goal was to improve the systems of your business, take time to collectively understand the interview responses. See which processes need to be optimized and what tools need to be purchased or consultants brought in.
In 2019 alone, we've helped multiple companies reorganize and optimize the financials of their business. If you are going through a transition in your cannabis company and need to go through functional interviews and optimize your cannabis business, then please reach out to us.