As recreational marijuana buds into a legitimate billion-dollar business from its seedy past, talent professionals are encountering business challenges that are both familiar and new.
by Max Mihelich
May 30, 2017
[byline id=”22987″] In states with legalized recreational marijuana, business is blooming.
Since Colorado’s landmark vote to be the first state to legalize recreational pot in November 2012, seven more plus Washington, D.C., have followed suit. Regulated marijuana sales in North America totaled $6.9 billion in 2016, a 30 percent increase from 2015. Sales are projected to increase to $21.6 billion by 2021 representing a 26 percent compound annual growth rate.
With that much green, the recreational marijuana industry is attracting entrepreneurs and deep-pocketed investors. Since 2014, public and private companies put $1 billion in capital to work in the cannabis industry, according to a recent report published by Arcview Market Research, a research firm dedicated to the marijuana industry.
But behind the large sums of investment money pouring in and media excitement about this budding industry, marijuana dispensaries must tackle the same problem any new business faces: getting started.
“A lot people have trouble setting up their company correctly from a corporate structure,” said Allan Golod, chief operating officer at Diego Pellicer, a high-end recreational marijuana dispensary based in Denver. “The initial fringe appeal that brought people to the marijuana business has given way to trying to figure out how to be a full-on, legitimate industry.”
As the production and sale of marijuana moves from an illegal, underground endeavor to a legitimate multibillion-dollar industry, employers are encountering challenges similar to any other business when it comes to recruitment and workforce management.
Additionally, since marijuana remains an illegal Schedule 1 drug under the federal Controlled Substances Act, and state laws allow employers to maintain drug-free workplaces, recreational marijuana dispensaries struggle with the ambiguity that governs the industry.
From this perspective, recreational marijuana dispensaries face common, difficult challenges to operating a successful business.
HR Adapts to an Unknown Industry
As cannabis continues to expand into the consciousness of corporate America, human resources professionals also are learning how to navigate in a relatively unknown industry with strict regulations that vary by state.
In a sense, HR professionals moving to the legal weed business are trailblazers of a final business frontier, as the policies and procedures developed over the next few years as the industry grows could set the precedent for how HR departments of dispensaries are run for years to come.
“You can’t take a blueprint from the retail industry and graft it onto the cannabis industry,” said Keegan Peterson, founder and CEO of Wurk, a Denver-based workforce management software provider that specializes in recreational marijuana. Wurk’s platform aims to help dispensaries succeed by baking state marijuana regulations into the software platform, therefore easing the compliance burden for dispensary HR pros.
Peterson, who began his career as a consultant at workforce management software company Kronos Inc., said compliance is critical to success in the legal weed industry.
“How do you hire people correctly? How to make sure you’re paying them correctly? Compliance is at the forefront of this industry,” said Peterson. “The companies that put it at the front of their business are growing.”
However, growing dispensaries are finding it difficult to find the right people to hire. As a result, many HR pros at dispensaries are wearing many hats, according to Peterson.
Sometimes the rigorous background checks required by states like Colorado turn up information that bars an individual from being able to work in marijuana — information that would likely have no impact on working in a more traditional line of business.
Likewise, dispensary hiring managers are receiving “interesting résumés that have people admitting they’ve committed felonies or weren’t caught committing felonies,” said Evan Nison, marijuana legalization advocate and founder and owner of NisonCo., a public relations firm dedicated to the marijuana industry. This situation can put dispensary owners in an awkward position of not being able to hire people with past experience growing and selling marijuana.
Other times, hiring obstacles arise when applicants are unaware of state-mandated prerequisites needed to obtain a job at a dispensary, leading to many résumés being disqualified immediately. And like any other industry, many résumés simply lack the minimum experience required for the job opening.
Entrepreneurs in the industry have responded to hiring challenges by developing marijuana job-hosting sites similar to Indeed or Monster. A quick look at CannaStaff, a popular marijuana job site, corroborates expert claims that dispensaries are hiring for positions ranging from security to culinary assistants.
Others still are taking a different approach to hiring the right people. Diego Pellicer’s Golod, for example, is tackling this challenge by looking at people outside of the industry who have the right skill set who can adapt to working at a dispensary.
“Hiring growers is the most unique challenge. It’s not a person growing weed in their house or yard anymore. There’s an agricultural aspect to it. We’re trying to do this as legitimately as we can,” said Golod. “Any grower will tell you there’s a thousand different ways to grow product, and none of them are the best. Can this grower adapt to our way of doing it? Is it a match? Is the skill set a match? Do past results dictate future success?”
From Golod’s point of view, every position has its own unique challenges. As such, somebody with no experience in cannabis but a long career in commercial agriculture may be the best fit for a production chief at a growhouse.
“Part of the reason I look outside the industry is because they haven’t developed any habits within the weed industry. They have their own abilities that translate to a new industry,” said Golod. “Hiring good managers who aren’t overly passionate about the product, say, but about doing the work. I’ll get a lot of résumés from people who are passionate about the industry but don’t have a lot to offer. There’s a gap in professionalism.”
Compliance: Devil’s Lettuce in the Details
In addition to hiring challenges, many dispensaries struggle with payroll issues, due largely to the fact that marijuana is still classified as a Schedule 1 substance — equal to drugs like heroin and LSD. In other words, while eight states and Washington, D.C., have legalized marijuana, it is still illegal in the eyes of the federal government.
This initially prevented banks from working with dispensaries. The industry’s banking situation appears to be improving. Just two years ago, the U.S. Department of the Treasury permitted banks to work with cannabis businesses, provided they follow a series of guidelines. In 2014, only 51 banks and credit unions worked with cannabis companies; that number rose to 301 in 2016. While this is an improvement, it represents less than 3 percent of the nation’s 11,954 banks and credit unions, according to the Arcview Market Research report.
It’s still common for employees to get paid in cash, which can potentially create dangerous situations for dispensaries and its workers. But entrepreneurs like Peterson are developing products that aim to bring stability to the industry and make it safer by partnering with banks and credit unions to provide electronic payroll options that allow dispensaries to pay employees through options like direct deposit.
According to Peterson, the key to dispensary payroll is staying on top of industry compliance trends and being able to “communicate changing regulations clearly and automatically” to clients.
In addition to banking and payroll, the disparities between state and federal laws regarding marijuana also create legal ambiguity when it comes to unionization within the industry. According to Gina Roccanova, principal and chair of the Labor and Employment Practice Group at law firm Meyers Nave in Oakland, California, trying to find clarity within this issue from a federal standpoint is a growing industry trend.
When recreational marijuana becomes legal in California on Jan. 1, 2018, dispensaries will be required to remain neutral toward union campaigns, explained Roccanova.
“But there’s a question mark about laws at the federal level. It gets trickier when you’re looking at union campaigns because it’s federal enforcement and this administration is hostile toward it,” she said. “Nobody knows what will happen if there’s a dispute. You can be welcoming to employees, but from time to time there will be differences in opinion.”
Administration Concerns
The November 2016 election results lead to the legalization of marijuana in Arizona, California, Maine, Massachusetts and Nevada — big wins for legalization advocates. However, the presidential election results has lead to uncertainty within the industry, as Attorney General Jeff Sessions made comments about recreational marijuana that can be interpreted as hostile, leading many to fear an administration crackdown on the industry, which could chill investor activity.
“A lot of the industry is supported by investors right now. There may be setbacks if raids start to happen,” said Nison.
However, experts point to the fact that while dispensaries are nervous about the path the Trump administration may take, the success of recreational marijuana in Colorado, legalization wins in five states, plus the billions of tax dollars generated, it will be difficult to shut down the industry.
The Trump administration is “a lot more against what we do and trying to limit or get rid of what we do,” said Golod. “I think that will be more difficult, though, given new recreational gains. If the biggest markets in the country, like New York, Texas or Illinois go that way, it will be impossible to shut down the industry, if not improbable.”
It is important to note that, despite past comments about marijuana, the attorney general recently acknowledged the validity of the Cole Memorandum, which provides a series of guiding principles that businesses must address to avoid federal intervention. If businesses follow the laws of the state, do not divert product out of state, keep product out of the hands of children, do not support cartels, and do not launder funds, then the federal government will take a hands-off approach to cannabis law enforcement.
From this perspective, one can see the critical value HR can bring to the recreational marijuana industry through compliance.
“There’s a real opportunity for the HR world to take part in this industry,” said Peterson. “People and workforce management are at the forefront of this industry and it wouldn’t happen without that.”
Max Mihelich is a writer in Chicago. To comment, email editor@talenteconomy.io.
