The marijuana industry has grown large enough to attract the attention of mainstream managers and executives when cannabis recruiters call.
“I have yet to have someone say, ‘I couldn’t work in cannabis.’ That threshold is crossed within the first 10 seconds,” said Ed Schmults, former CEO of the FAO Schwarz toy company and current CEO of Calyx Peak, a Massachusetts-based multistate marijuana operator.
Scott Wells, chief people officer at Chicago-based multistate operator Cresco Labs, agreed. “I’d say less than 5% of the time, people respond and say, ‘Cannabis is too risky; I’m not interested,’” said Wells, who has held senior HR positions at financial services firm Aon and management consultancy The Novo Group.
While the stigma of marijuana is no longer a major barrier to recruiting, finding the right executives and managers is still a challenge. Growing cannabis companies must identify the skill sets executives will need to navigate their phase of growth.
Is it a newly cash-positive company just exiting the startup phase, a small- to medium-sized company or something bigger? Whatever phase the company is in, it might be necessary to look outside the cannabis sector for talent—and that can mean competing against mainstream businesses and other cannabis companies for top leadership. And although companies are more cautious now with how and whom they hire, they are hiring nonetheless.
“The fervor of 2017-18 has calmed down a little bit, but companies are going to grow very strategically and be focused on upgrading their talent as they continue to grow,” said Liesl Bernard, CEO of CannabizTeam, an executive staffing firm in San Diego.
How to Win
Competitive salaries are critical to luring top-notch talent, but compensation packages that are too high are not only money recklessly spent but likely a turnoff for investors. Still, crafting a compensation package that is reasonable yet compelling enough to attract talent from well-paying, stable, mainstream jobs is possible. The keys are:
- Identifying your company’s needs.
- Identifying the skill sets needed to fulfill those needs.
- Using internal and external recruiters.
- Structuring compensation packages so that base bay, bonus pay and equity are tailored to candidates’ individual needs—but without busting the budget.
- Understanding that health plans are expected, while 401(k) plans and similar benefits are also increasingly the norm.
If a cannabis company can follow these principles, they will be able to build management teams with skill sets well-suited to the challenges of 2020 and beyond—but at a price that satisfies both the executive being hired and the one doing the hiring.
“We look at where we are today and where we want to be in the next 24 months. We look at the growth of the industry and then look at candidates that don’t just fit in our model today but would have the capabilities to lead the charge 24 months from now, when we’ve reached a certain size and more complexity in our operations,” said Peter Bilodeau, who was appointed interim CEO at Oakland, California-based Harborside in October. “We can offer wages that are pretty competitive within the mainstream industry and the cannabis industry. … Between base pay, bonuses and stock options, there’s an attractive plate of income for somebody to come in and help build us into a bigger company.”
After finding good potential recruits for your company, persuading them to leave a stable and lucrative post doesn’t always require a higher salary than their previous position—at least in terms of base pay.
“Every situation is unique. You could certainly find situations where we have paid less, equal to and more” than a new hire’s previous employer, Wells said.
Determining how much to offer—and how to offer it—requires research into each candidate’s salary history, market salaries for similar positions and understanding what combination of base pay, bonus and equity is best for the candidate yet doable for the company.
“You first look at the comparable salaries for this job. You want to know if this person was making X at their company, and they are probably interviewing at other companies that pay Y. So we have to ask: Are we close to that? Are we competitive?” Schmults said. “It’s tough to get this information, but you can get it.”
Larger cannabis companies typically offer some combination of base pay, bonus and equity.
“On base salary, you have to be competitive. The thought that you can convince somebody to take significantly less money and base if you give them a big equity grant that provides them with longer-term (compensation) … that may have been the case earlier in the industry, but that’s not a sustainable model,” said Steve Hardardt, senior vice president and chief people officer at New York-based multistate operator Acreage Holdings. (See “Weighing Your Options.”)
Acreage, Hardardt said, pays “competitive” base salaries but also offers annual bonus opportunities that get paid in cash.
“It starts as a target, which is a percentage of their base salary,” Hardardt said. “Someone can make $80,000 base and have a 10% bonus target. And at the end of the year, that bonus target would be based on how the company performs against targets and how the individual performs against targets.”
He added: “I don’t think we consciously reduce those in any such way and say, ‘Oh, if we (reduce) that, we can make up for that with more equity.’ We really take a more measured approach and say we want to pay competitively around cash, which is base and an annual incentive. And then we give people equity awards that are reasonable and meaningful for the level that they’re at.”
Wells agreed that cannabis companies are decreasingly in positions where they offer executive candidates compensation packages long on equity but short on base.
“The Greg Butlers of the world don’t pick up and make a move for nothing,” Wells said, referring to Cresco’s new chief commercial officer, hired from Molson Coors in February. “You have to show some level of competitiveness with the CPG or with the adult beverage environment or industry from which you’re recruiting.”
Less Is More
But other executives said ideal candidates need to understand that they are joining young companies with limited cash but long-term potential that, if fulfilled, will result in an even sweeter equity payout.
Margot Micallef, CEO at Gaby’s, an infused cannabis products company with headquarters in Santa Rosa, California, and Calgary, Alberta, said people coming into the marijuana industry routinely take base pay cuts in exchange for more equity. To illustrate the point, she referenced a recent hire whose base pay is 30% less than at his previous company.
“He’s taking a much smaller cash position but looking at the upside of where he thinks the shares are going to go. When you’re a startup, you can’t pay people what a large, mainstream company that’s well established is going to pay,” Micallef said. “Generally speaking, I think they’ll get paid no more than what they’re making in mainstream (companies)—and, in some cases, less.”
What candidates want in terms of base pay and equity also is a good litmus test for whether the candidate has the right mindset for the company, Micallef said.
“We tell them what the value of the package is, then we ask them how they want it broken up,” Micallef said. “The more equity they want, the more suited they are for the space and for this business.”
She added: “To a degree, it’s their call. It’s a mutual coming to terms. As long as it’s within reason, we will let them choose the percentages that they want. But it’s also a bit of a test to see if they have the right mentality for the post.”
Many senior employees split their base pay and equity 50-50, but “some really gutsy people who really get it and who have done startups before and understand what the industry is going through and really buy into the vision, they’ll do 70-30.”
“It all depends on their circumstances,” Micallef added.
“If you hire a family person and they’ve got kids at home or in college, they’re going to need to have a bit more cash up front if they haven’t managed their shares. 50-50 is generally a really comfortable place to meet in the middle, if you will.”
And if a candidate—even “somebody you want really badly”—demands too much base pay, it’s better to not hire them, Micallef said.
“If you want somebody really badly, and they’re holding out for too much money, you just don’t hire them. If you can’t afford to, that’s the reality there,” she said. “There’s a cap on what we can offer because we are a startup, and investors don’t look favorably on companies that pay high salaries.”
Schmults agreed, noting that many cannabis companies that lured top candidates with high base salaries find themselves struggling now.
“If your senior team is making way above-market salaries, it’s tough to survive. At any company, people figure out what other people are making,” he said. “We work hard to have a tight range of clear delineations and keep people within that range. If I bring someone in at a much higher salary level, it usually doesn’t work out well and often causes all sorts of secondary issues. So the people coming here, if you look at total comp, equity is a big piece of that.”