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Real Deal

When a Client Asked to Swap Her Diamond for a CZ, Did This Retailer Do The Right Thing?

When a jeweler acts according to her conscience, she is sued for breach of confidentiality.

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Tina Keller opened her studio more than 20 years ago. Over a relatively short period of time, the right combination of innovative marketing, great product instincts, a commitment to creating an extraordinary service experience and a superior talent for custom design made TK Creations the “go to” place for engagement rings and contemporary fashion jewelry in her town. Tina joked that she’d lost count of the number of engagement rings she’d personally sold over the years — and she thought she’d probably seen it all with the couples coming through her door.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.

ABOUT THE AUTHOR

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at kate@performanceconcepts.net

Several months ago, Tina took a call from the son of an old high school friend who had recently transferred back to the area to take a job with a growing tech firm. Derrick told Tina that he had met his soon-to-be fiancée Nicole while they were both in graduate school back east and that he was delighted she agreed to move back with him. He wanted an appointment to look at diamonds and to talk about designing a ring. He said that Nicole had some ideas about what she wanted, and that he needed to stay in the $20,000 range for the ring. The appointment was set for the next day.

The conversation began well enough, with Nicole showing Tina some pictures of rings she liked, and Tina showing a few models and sketching some concepts. When it came time to look at diamonds, keeping in mind the general type of setting Nicole liked and Derrick’s budget, Tina started with a mid-quality 1.50-carat. Nicole very quickly made it clear that the diamond was not at all what she had in mind, and insisted on looking at a minimum 2.50-carat. Tina could sense that Derrick was getting more and more uncomfortable as Nicole continued to make choices that raised the price of the ring well out of range. He made several references to expenses, budget and practicality, but Nicole went on with increasing her demands until she had settled on a diamond she could “live with” — right at 3 carats.

Tina agreed to hold the diamond for a week while she worked on finalizing design concepts for the couple to review. She prepared the designs with flexibility for diamond size, in the hope that Derrick might take the time to explain his budget concerns to Nicole and get her to make things a bit more reasonable for him.

When they came back in the following week, Nicole selected one of Tina’s designs and Derrick asked if they could see one of the diamonds they had looked at previously — just under 2 carats — to put into the ring. By the time Tina brought the diamond out, it was clear that Nicole was in full “persuasion mode,” explaining why she really did deserve the 3-carat. She looked at the smaller diamond, but after a lengthy (and miserably uncomfortable) discussion that included begging, pleading, smiles, thinly veiled innuendo and a commitment to contribute $5,000 toward the ring, Nicole talked Derrick into the 3-carat — and a $30,260 total tab.

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Tina felt less than great about having witnessed the whole process, but she also recognized that her job was to deliver what her client asked for. The dynamic of the relationship — and the depth of Derrick’s savings account – were none of her business. She wrote up the sale (in Derrick’s name), putting a $5,000 deposit on Nicole’s credit card. When the ring was finished several weeks later, Derrick picked it up and left her a cashier’s check for the balance. He loved the ring and told Tina all about how he planned to present it to Nicole at dinner that night.

About a month after the engagement dinner, Nicole came to Tina’s studio alone and asked Tina if she could remove the center diamond and replace it with a CZ. Tina said it could be done, but suggested that if travel or security were issues, Nicole might consider having her make a high-quality silver and CZ replica of the ring and not compromise the integrity of the original. Nicole politely disregarded the suggestion, saying that she just wanted the diamond loose and the ring with a CZ in it at that point. She offered no other explanation.

Tina agreed to take the ring in and do the job, giving Nicole a due date of a week. As soon as Nicole was gone, however, she took it upon herself to call Derrick. After a minute or two of chatting (which gave Tina the impression that Derrick was still very happy), she asked if he was aware of Nicole’s request to take the diamond out of the ring. He was unaware and totally shocked. He asked that Tina not do anything with the ring till he could find out what was going on. Derrick called back the next day to tell Tina that Nicole came clean — that she was planning to break off the engagement, give him back the ring, keep the diamond and move back east. He was obviously devastated and asked Tina if he could get a refund on the ring.

Tina decided to make an exception to her “no refunds” policy. She refunded Nicole’s credit card and Derrick’s check and assumed it would be the end of the story … until 3 weeks later when she got notice that she was being sued by Nicole for damages related to breach of client confidentiality.

The Big Questions

  • Does Nicole have a case?
  • Who owns the engagement ring when both parties have some stake in paying for it?
  • Did Tina do the right thing by contacting Derrick?
  • Is it ever OK to follow your gut and NOT make a sale when you know it’s just not right?

Expanded Real Deal Responses

Robert L. New York, NY

Derrick gave Nicole the ring as “consideration” for her agreeing to marrying him. If she broke off the engagement she would have to return the ring to Derrick in any case and probably he would need to refund to her the $5000 she paid and take full ownership. If she had gone ahead and married him she would then own the ring.

Nicole has no case for client confidentiality. A jeweler is not a professional who has a personal responsibility toward clients to maintain other than ethically and honestly representing the products she sells. The fact that Nicole was going to perpetrate a fraud relieves Tina of any cause for concern for telling Derrick. In fact if she didn’t tell him she would be complicit in the fraud as it had to be obvious to a professional that she was up to no good. 

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Sandra R. West Chester, PA

I would have done the same thing! In some states the ring belongs to the person who gave it and must be returned if the engagement is broken. If it went to court I would want to believe a judge would see that this women had intentionally tried to deceive everyone.

But who wants to have to defend themselves for doing the morally correct thing, the guy is lucky he didn’t marry her a divorce would have cost him even more. 

Marcus M. Midland, TX

Nicole does not have a case. In fact the police should have a case against her for conspiracy to commit fraud. Nicole is shady and her actions are down right criminal. She got her 5k back and needs to walk away from this situation before she finds herself in hot water. Tina definitely did the right thing by contacting Derrick. Can you image what would happen if Nicole got away with this and Derrick found out that Tina knew what was happening? That’s a whole new can of worms! Tina did everything right here. Even though she was uneasy about the situation to begin with she still couldn’t reject the sale. At the end of the day she really didn’t know the dynamics of the relationship until Nicole revealed her true conniving self. 

Daniel R. Nashville, TN

Nicole does not have a case. There is no breach of confidentiality between the parties. Their relationship was that of consumer and business, no confidentiality exists at law. I would not have called, like Tina did. Nicole’s motivations were not of Tina’s concern. Nicole will not win. We don’t know what financial agreement the parties have as it relates to ownership. Looking at it on its face both parties have an interest in the ring. 

Bruce A. Sherwood Park, Alberta, Canada

Tina handled this brilliantly and is a credit to our industry. She went miles beyond what was required when she refunded the full purchase to each of the two clients. No law has been broken unless Tina’s repair tag on the HOLD, tied her to a specified confidentiality agreement. I would never casually suggest a retailer use a court room to settle a dispute with a client but in this case, Tina needs to complete the journey under the umbrella of high professional standards by which she governs herself and her business. Tina should have her lawyer respond with an acknowledgment that TK Creations will defend this action by their client. 

Steve F. New York, NY

When doing the right thing becomes the wrong thing to do, the problems of our industry and our nation are far worse than i ever imagined. 

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Joseph C.Huntington, NY

First off we would not change out the Diamond with out both parties being aware & we would of told Nicole to please have Derrick call us & to let us know he was ok with this first, store owner should of put Nicole’s back to the wall & she most likely would not be in a position to be sued or liable for her actions. I believe Derrick still has some owner ship & doesn’t fraud on Nicole’s part stand for anything, she convinced the store owner to be deceitful as Nicole was. Good lesson for the store owner, two parties came in to purchase so two parties should be on board. 

Michael B. Graham, NC

Yes, I believe Tina would be a participant in a case of fraud. Derrick was the majority owner, and since Nicole was going to break the engagement, she would be the one to return the ring for not completing the marriage contract. If Derrick had found out and had the courage to file a fraud case Nicole would have a felony conviction for fraud. 

Pam S. Boston, MA

Good job Tina..I think she did the right thing and after Derrick heard the real story from the slimy ex that she was planning on scamming him I do not see her case! Derrick you are a lucky guy to have gotten away from this horror. 

Adrienne R. Los Angeles, CA

Nicole has no case. In most states, if not all, there is no legal concept of breach of confidentiality between a customer and a retailer. Unfortunately Tina will have the cost of defending the lawsuit, even though she will probably prevail. (By doing so, she can gain Derrick’s lifetime loyalty and that of his friends and family.) Nicole no longer has a stake in paying for the ring, since her deposit was refunded in full. She is a fraudster, and in all likelihood will be treated as one in court. Tina did the right thing by contacting Derrick before compromising the ring, as she needed to be sure that he, her primary customer and the son of a long time friend, was authorizing this request.

The question remains if the ring was a completed gift, or if accepting it was a promise to wed.

In my opinion it is always OK not to make a sale when you know it’s just not right. 

Ira K. Tallahassee, FL

1st—-If the sales slip has Derrick’s name on it, the ring belongs to him.

2nd—-Yes, Derrick is the buyer of record and; of course, the son of a friend.

3rd—-Always correct to believe in your gut feelings. It might cost you a sale or two, but you’ll feel better by doing the right thing. 

Aubrey M. Norfolk, VA

I would tell her no way unless both parties come into the store to have this done. Never go against your policy even for one person. Happy shopping days. 

Jake J. West Des Moines, IA

Tina was in the right to alert Derrick as this transaction smelled of fraud. It’s very suspect when the blushing bride comes in wanting to swap out the center for a fake. Nicole should be arrested for attempted fraud. I would fire back a letter stating the store policy in this situation that both parties must be contacted to make sure one isn’t trying to commit fraud against the other, which would make the store party to an illegal transaction. While it is technically her ring, depending on state laws, the intention of returning the ring with a fake center without Derricks knowledge is where the illegal action takes place. In the future, Tina should alert Nicole to the policy that she needs to contact Derrick to make sure he has knowledge and is agreeable to it.

Chuck K. West Des Moines, IA

First, I’m not an attorney but I have been in the business of selling engagement and wedding jewelry exclusively for over 25 years. The correct answer to your questions varies from state to state. In some states, the engagement ring is the consideration in the contract to marry. If the man breaks the engagement, the woman gets to keep the ring because he broke the contract. If she breaks the engagement, he gets the ring back. In other states, the ring is considered a gift so the woman gets to keep it either way. But If the ring was sold to him and she was trying to pull a fast one by taking the diamond out without telling him, then she might actually be breaking the law. It’s called “Fraud In The Inducement” I believe. Again, I’m not a lawyer, but my gut tells me she doesn’t have a leg to stand on. It’s an interesting case study though and I plan to ask our company attorney about it. 

James L. D. Kingston, NH

Tina followed due process and protected the rights of Derrick, the owner of the ring. An engagement ring is not the bride’s property until after she says “I do”. Had Tina done as Nichole requested it would have been business suicide… Tina could lose her sterling reputation as word spread that she sold a CZ as a diamond and the ensuing legal suit for fraud. If I were Tina I would be advising Derrick to have Nicole arrested for her actions. 

Sid S. Albany, OR

She has not a leg to stand on! The ring belonged to both of them. 

Herman G. Cedar Rapids, IA

If she paid 5-figures for an item she wasn’t budgeted for and for nothing she needs for stock, max she should do is give in-store credit for amount paid. 

Gabi M. Tewksbury, MA

Tina had no right to call Derrick, even if it was the “right” thing to do. Although he had more stake in the initial purchase, Nicole is now Tina’s sole customer in this new job take-in. That being said, there was probably no “customer confidentiality”, so Nicole probably doesn’t have a case. She should have gone to another jeweler! 

Mark B. Wausau, WI

First it is my understanding that the ring is a commitment to marry, and if she brakes up with him she has to give the ring back. She is only entitled to the 5,000.00 dollars she put down on the ring if the store takes the ring back. I would never remove one stone for a CZ with out both people knowing what is going on. I feel Nicole has no case, and I would have let Derrick know what is going on. 

Etienne P. Camden, ME

It seems pretty simple to me in that the ring was originally sold to Derrick any work done to alter the original ring that was sold would void the warranty. For this reason, Derrick had to be notified.

I doubt that the lawsuit will be taken seriously in the courts. 

Everardo C. Santa Barbara, CA

Tina absolutely did the right thing, Sales are great but we have to also have morals and trust our instincts. In my opinion, the engagement ring ownership would come down to majority owner like a tradable company, whoever holds the higher “stock” will be able to make the majority decision in favor of Derrick. So I feel that it was definitely his call on what to do. Nicole was basically going for a money grab and basically was going to finess her way back home and pocket cash. Moral of the story- Think with your brain not your heart. I hope that Derrick will make better selective decisions in the future. 

Daniel S. Cambridge, MA

My understanding is that engagement rings go back to the purchasers if the engagement is broken off. Admittedly the woman paid a small percentage of the cost but the bulk of it was paid for by the gentleman. The ring should have been returned to him by his fiancee and he should have given her the $5000 she put in for it . However I don’t think that’s what is going on here. I think she was taking him for a ride from the beginning. She obviously planned to screw him out of the diamond so he couldn’t get back the $25,000 and she figured she could go sell it and make a profit on his misery. She was a gold digger and what she was doing was stealing from him which is illegal. He should be bringing a suit against her for attempted theft of property, The jeweler should have an attorney tell hers this is what was going on and she has no role in it except to prevent a theft from happening. 

Kent C. St. Simon’s Island, GA

It’s Derrick’s property. The store was not involved with the gift to the gold digger.

A judge will rule, I don’t know how the store could do anything different.

It’s unfortunate the store will have to defend itself and unlikely recover court and attorney expense. 

Jay F. Apple Valley, MN

There is no confidentiality here. Instead it is solid good business and etiquette to be confidential until a crime is involved. Nicole was about to fraud Derrick, he could have called the police upon finding out she did not return the ring whole. He could also sue her.

There is implied confidentiality but it is not a legal one. I would counter sue Nicole for distress and her intent to involve Tina in a crime. 

Amy C. Grove, OK

Tina shouldn’t worry about this. Get a lawyer to fight first, then relax. The confidentiality seems to cover all three people in the situation together. I can’t picture a judge allowing her a privacy cover for what is essentially a deception. She did the right thing for all, especially that poor man who nearly married the wrong woman. He should be a customer forever! 

What’s the Brain Squad?

If you’re the owner or top manager of a U.S. jewelry store, you’re invited to join the INSTORE Brain Squad. By taking one five-minute quiz a month, you can get a free t-shirt, be featured prominently in this magazine, and make your voice heard on key issues affecting the jewelry industry. Good deal, right? Sign up here.

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at kate@performanceconcepts.net.

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Texas Jeweler Knew He'd Get Only One Shot at a GOB Sale, So He Wanted to Make It Count

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Real Deal

When Nature Strikes, Should This Owner Take Care of Her Employees or Her Business?

A longstanding tradition of holiday bonuses and raises is threatened.

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ROBIN SAGER OF GULFSHORE Jewelers had worked with her mother and father for more than 10 years before their 2015 retirement, and she helped to build the business from a small repair shop into a regional powerhouse. Her dad had always talked about “taking care of those who take care of you.” He was proud of his longstanding friendships with a number of sales reps and of his loyal and long-tenured staff. Once she bought the business and took over day-to-day operations, however, Robin quickly saw that what she had always considered her father’s admirable loyalty was really just his way of avoiding difficult situations with vendors, customers and employees — all of which would need to be handled if Gulfshore Jewelers was to be restored to sustainable health. With a firm commitment to the future, Robin laid out her priorities and chose to deal with the issues decisively yet slowly to minimize disruption.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.

ABOUT THE AUTHOR

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at kate@performanceconcepts.net

Within the first year of her tenure, Robin took on the problem of shrinking margins and obsolete inventory. In some cases, that required severing vendor relationships that her father had maintained for years and building new ones with suppliers of more current lines at more advantageous prices. She also re-evaluated the store’s pricing strategy, re-tagging existing inventory using consistent markups and eliminating large-scale discounting. As expected, several of Gulfshore’s older customers were unhappy when they could no longer claim their usual 30 percent “friend of Joe’s” discount. When the “regular” sales reps stopped visiting and new product started arriving, a number of employees were openly critical of Robin and of what they saw as a betrayal of the friendships that were so important to her father. Much of the grumbling subsided over time as the new product caught the attention of regular customers who recognized the fair pricing.

In 2017, Robin chose to address the issue of the store’s often inconsistent business practices. She worked with an industry consultant to develop an Employee Manual that clearly defined performance expectations and with her (somewhat reluctant) team to implement a mission statement and service standards based on a forward-thinking “extraordinary customer experience” philosophy. By the end of 2017, despite some lingering staff grumbling about missing Robin’s dad and the way things used to be, Gulfshore’s volume had stabilized a bit, and the bottom line was looking healthier.

Robin knew that the last big issue she had to deal with was the store’s payroll. It was clearly high as a percentage of gross profit and was out of line for the store’s volume. She looked at a list of eight employees who had all been with the company for 10 years or more. Each was paid a salary that had been automatically increased by 3 percent per year regardless of store performance to accommodate cost of living increases. They also got a Christmas bonus each year that ranged between $1,000 and $2,000 per person (based loosely on hours worked) because her father had always believed that honesty and loyalty should be rewarded.

There were no sales goals or productivity standards in place and no commissions attached. It was easy to see that some people worked harder than others. Some were really good at their jobs (jewelers and salespeople with solid relationships in the community) and some simply did a good job of being nice to the people who came into the store. Overall, they all got along well, though — and since it seemed that things were picking up a bit, Robin decided to leave the structure as it was for one more year while she worked on designing a new plan that would be fair to everyone, including the business. Everyone got their 2017 Christmas bonus and a 3 percent raise going into 2018.

Much to Robin’s delight, business continued to improve through the first half of the year. Traffic in the store and in the town overall was up, and everyone’s comfort level with the new product, policies and procedures seemed to be increasing steadily. It all hit a major stall in the fall though, when back-to-back hurricanes blasted through the region, creating major issues for local residents and wreaking havoc on the tourism industry in the area.

By the end of the year, sales had dropped nearly 30 percent, and the bottom line Robin had worked so hard to recover was decimated. Looking at the numbers in December, Robin realized that there was no way she could afford to pay out the usual Christmas bonuses. On one hand, she hoped the staff would understand, since they could easily see the circumstances, but on the other hand, she knew that they were all impacted by the storms as well and that they were likely relying on the money for their own families’ Christmas celebrations. She also knew that without a doubt, there would be no salary increases for the coming year, and that the base plus incentive compensation plan she’d worked to develop would be an absolute necessity.

Though she knew she could stand to reduce staff overall, Robin hated the idea of making life any more difficult for her people and was terrified with the prospect of damaging her reputation.

The Big Questions

  • Are there options that Robin is missing with regard to the holiday bonus?
  • Should she find a way to take care of her people and pay it as usual, even if it means borrowing more money from the bank?
  • Is there a way to change a longstanding (and generally unreasonable) compensation plan without losing long-tenured and community-connected employees?

Expanded Real Deal Responses

Jillian Hornik
Jae’s Jewelers, Miami, FL

Are there options? Yes, she can openly address the current financial strain placed on the business due to the inclement weather. Meet with each employee to discuss the impact of receiving a bonus versus receiving a pay increase. From there, the employees should understand the reasons behind a pay change. In my opinion, she has to choose bonus or pay increase; can’t take away both.

Should she find a way? Not as usual, but yes, she should pay. Whether it is a bonus without a pay increase or no bonus with a smaller pay increase, it wouldn’t be too much out of pocket. If all the improvements increased business as stated, the store’s bank account will be healthy again in only a month or two.

Is there a way to change? Possibly. If those same employees were to look for a similar job now, they would see what compensation structures are currently available. If those other available jobs are all commission-based and more demanding, your employees will fuss, but most likely stay.

Carolyn Warnke
Gunderson’s Jewelers, Omaha, NE

Assuming Robin has already cut her own wage, she cannot currently afford the entire bonus payout this year. Recommend to her employees that they receive what she can pay, whether it be 30 percent, 50 percent, or 80 percent, and when the rest of the funds are available, she donate them toward hurricane rehabilitation efforts. This will help build rapport with the community and economic recovery as well, meaning there will be less delay in sales coming back into the store and making Gulfshore Jewelers a household name for consumers.

As far as the 3 percent increase to yearly pay, if Beth had not yet announced the reformatting of her bonus and wage system, now would be the perfect time. While everyone is struggling financially and emotionally due to natural disasters, having this as news would show there’s hope for the future and better times ahead for the town and the company.

Overall, these recommendations should at least pacify her workers, prevent layoffs and greater debt, and in the end, benefit the community to some degree.

Tim Soulis
Golden Classics Jewelers, Harrisonville, MO

A bonus should be contingent upon performance of the employee and the business — not guaranteed. Explain the challenge of a 30 percent drop in business, ask for buy-in to weather the storm.
US Consumer Price Index for Urban Consumers shows inflation was 0.7 percent in 2015, 2.1 percent in 2016, 2.1 percent in 2017 and 1.9 percent in 2018. The historic 3 percent raises paid have outpaced inflation. Eliminate this expectation.

Manage employees according to performance or lack thereof. Employees who are not in alignment with the “team” and “business” may need to find new homes. Keep good faith, be honest. Lead with optimism and fairness. Evaluate performance, conduct difficult conversations, set goals and motivate the team. Convert to base plus incentive pay in lieu of automatic raises and bonuses going forward. Bonuses can be used privately to reward exceptional individual results.

Focus on employees who are generating the most revenue. Keep their buy-in, ask for more. Reward results. The community cannot run the business. Eliminate entitlement mentality. Complacency cannot persist. Take courageous steps now to be stronger when the whole economy sees recession.

Marc Foster
Plaza Jewelers, Houston, TX

When the “expert” was making the policy book, a section on “Emergency Preparedness” should have been included. We have had to respond to several natural disasters. Robin should call each employee and let them know the situation. Set a sales goal, and if they meet that goal, they will be rewarded with a bonus. This way, they will feel like they are getting something for hard work. She should not bring up the automatic pay increase; just address it privately if asked.

Valerie Naifeh
Naifeh Fine Jewelry, Oklahoma City, OK

This is Robin’s opportunity to do three things: inspire her staff, change the automatic bonus structure, and be a local hero. Don’t borrow any money. Share the news of the 30 percent drop in sales with the staff. Explain it‘s not possible to give the bonus; however, a bonus can be paid monthly or quarterly if the following happens: the sales staff calls clients every day about upcoming anniversaries, birthdays, holidays, wish list items and add-on sales, and these result in measurable sales at the expected profit margin. The jewelers need to complete repairs and custom jobs on time so delivery is not delayed. Robin can negotiate new terms for merchandise she can’t pay for. Most vendors will give extended terms with no interest or take product back with a minimal restocking fee. In the end, the staff who prove to be “rainmakers” stay and those who don’t are gone. Now the new bonus system is in place! You produce, you get a bonus! And the company survives.

Jennifer Farnes
Revolution Jewelry Works, Colorado Springs, CO

This may be the year for Robin to pick one versus the other … and to communicate transparently with her team. People understand numbers when It is laid out in black and white. Share a sales report of year-over-year numbers showing a profit and loss history, and give each team member the option of either a cost-of-living increase or a one-time bonus. If she truly can’t afford to do either, then it is time to make the decision to let go of under-performers or abstain from the wage increase/bonus altogether and let team members leave on their own. If they see and truly appreciate how much the business was impacted, she won’t lose anyone and they will band together to recover together. If the recovery is huge, she needs to be fully prepared to pay it forward to them all in the following year.

Robert Cohan
Craig Brady Jewelers, Montclair, NJ

Difficult situation; however, her team has been there for years and should know the facts as to the unavoidable downturn in business. It’s not a change of policy implementation without basis.

Her team needs to be introspective. They’re not being “punished.” Unless she makes some changes, the store’s future could be devastating, and that would affect them all, long term.

Her loss is their loss, inevitably.

The “winners” will stick around and fight to put it back in good shape, day by day. Their livelihood depends on their commitment to success.

What’s the Brain Squad?

If you’re the owner or top manager of a U.S. jewelry store, you’re invited to join the INSTORE Brain Squad. By taking one five-minute quiz a month, you can get a free t-shirt, be featured prominently in this magazine, and make your voice heard on key issues affecting the jewelry industry. Good deal, right? Sign up here.

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Real Deal

When a New Competitor Enters the Store and Attempts to Poach Employees, the Owner Reacts

But should he retaliate?

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MIKE CALLAHAN WAS PLEASED with the way things were going. Since taking over Commonwealth Jewelers from his dad more than 20 years ago, his business had grown significantly, and he’d built a profitable in-house shop, employing five highly regarded jewelers who handled Commonwealth’s repair, custom and production work as well as a good number of trade accounts. Mike couldn’t help but think about how much of his time was invested these days in hiring, training and managing his current six-person team.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.

ABOUT THE AUTHOR

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at kate@performanceconcepts.net

There was no doubt that his next hire would need to be a sales manager.

While out on the sales floor one day, Mike was a bit surprised to see a trio of well-dressed executive types walk into the store. When he greeted them, one of the men introduced himself as the regional VP for a major jewelry chain, the woman with him as the district manager for the area and the other man as the newly appointed manager for the freestanding store they were scheduled to open across town in two weeks. The RVP told Mike they were having lunch at the restaurant next door and decided to stop in to say hello to Julie McManus, one of Commonwealth’s top salespeople. Julie had been hired eight months ago by Commonwealth after taking a year off of work to care for her newborn daughter. Prior to her leave, she had worked for the chain for five years.

Mike welcomed the trio to his store and after explaining that Julie was at lunch, offered to show them around. He was polite and informative, telling them about his family’s history in town and about the capabilities of the Commonwealth shop. He let them know that he worked hard to maintain good relationships with his competitors, and he offered his trade shop services should they ever have need.

A short time later, after Julie had returned and joined the conversation, Mike went back into his office to take a phone call. He wasn’t concerned about Julie being vulnerable to their poorly disguised poaching effort, as she had made it very clear when she was hired that she had no interest in returning to the company and had commented on many occasions that she was beyond grateful for the opportunity at Commonwealth. She was making more money while working fewer hours with no nights or Sundays.

Mike expected the trio to be gone by the time he finished his call. Instead, he came back out onto the floor to see Julie with a customer, the RVP and store manager near the front door deep in conversation, and the DM handing her business cards to two of the store’s jewelers who had stepped out of the shop to go to lunch. He promptly interrupted the DM and asked her to leave — but not before letting all three of the chain managers know that he was disappointed and disgusted with their abuse of his hospitality and their blatantly unethical behavior. As soon they were gone, Mike talked with his jewelers and confirmed his suspicion that the DM had waited for them to come out of the shop and then approached them about coming to work at the new store. They assured her that they were not interested and that they were firmly committed to Commonwealth.

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The next morning, Mike drafted a scathing email to the CEO of the chain describing the incident in detail and asking what action the CEO would take to ensure that his company representatives would behave in a more respectful and professional manner. A week later, he had not yet received a reply.

The Big Questions

  • Was it appropriate for Mike to throw the competitors out of his store?
  • Was there a better way to handle the situation?
  • How can an employer ensure that associates are not vulnerable to poaching without bankrupting the business?
  • Should Mike make an effort to fill his new sales manager position by recruiting from the chain’s new store?
  • What (if anything) should the chain’s senior management do about the behavior of their field managers?

Expanded Real Deal Responses

Jennifer F.
Colorado Springs, CO

Honestly, if an employee is unhappy and wants to leave, there is no way to keep them. But if they love everything about the business they work for, then “poaching” is a non-issue. Was it inappropriate? Absolutely. Did he have the right to throw them out? You bet! The best thing they can do as a team is have a meeting and get it out there … have the salesperson who once worked for them talk about why she is so happy now! Joke about it collectively and come to an agreement about how to handle it as a team next time.

Gabi M.
Tewksbury, MA

I’m assuming that the chain’s senior management advised the field managers to do exactly what they did. If not, Mike probably would have received a reply by now. He definitely should’ve thrown them out; they were rude and on his property! I think he should leave it alone and just focus his energy on growing his business and loyalty with his staff.

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Kevin P.
Newak, OH

I would do exactly the same thing. There is never a guarantee your employees will continue to work for you. Employees are on a path, side by side with you as long as that path leads in the same direction and is beneficial to both parties. When that is no longer true, you part company. If an employee is unhappy, they will look elsewhere and find another position. For a competitor to come into your store and solicit them is plain wrong and completely unethical. I had a goldsmith leave a month before Christmas. The competitor would only hire him if he left immediately. They let him go in February. Of course, he wanted a referral from me. All I would say is that I would not rehire him under any circumstances. Treat your employees as you would want to be treated, and employees, treat your employer as you would like to be treated. That is the best you can do.

Joel W.
Tulsa, OK

We had the same thing happen in our store several times over the years. After 15 years of this happening, they have taken two from me and both times it was a blessing. Richard Branson says train an employee so they can leave and treat them so they never will. I believe we have the best place to work in the country, and not everybody is cut out for that kind of environment, or sometimes they don’t deserve it. I am very protective of my staff, but I don’t own them, and when my competition is always after my employees, it lets me know that I am doing something right. You will always have a target on you when you are working to be the best!

Tom N.
Spencer, IA

I would most likely have done the same thing. What they did is unacceptable to do in his store, in my opinion. That being said, it does not surprise me that a) they acted in this way, as I’m sure their “corporate training” was a huge part of it, and b) the CEO never responded. That to me says quite a bit about that chain and that CEO.

It sounds as though he has loyal and pleased employees, though, so he should feel very good about that. I’m sure his employees would be very disappointed if they did leave for a corporate chain job.

Jim G.
Champaign, IL

I think asking people to leave the store was in line, as well as writing the letter to the corporate office. I would also advise my employees that a company that uses such tactics will continue to poach and will likely replace anyone they feel is not up to their expectations. A job with them is not secure and solid. I realize this method of finding employees is common, but it is not ethical, at least not the way I was brought up in the business world.

Marcus M.
Midland, TX

It was not only appropriate but necessary for Mike to throw them out. And he was way more cordial about it than I would have been. I would have told them to leave the moment they walked in. He should have known what they were up to. I don’t know how you actually stop other companies from poaching employees because I feel like that happens a lot. Just build a culture within your store where your employees are happy and satisfied and hopefully won’t leave. Also, if I was Mike, I would not seek out hiring a manager from the chain store. You’re only asking to start a war when it’s not necessary. There are a lot of good businesses to draw a sales manager from that won’t result in a counterattack. As far as the chain’s senior management, I don’t think they would do anything, but if they had any respect and class, then they would condemn the actions of their management and apologize to Mike.

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William C.
Paterson, NJ

A photo of the individuals from the chain store while inside the jeweler’s store should be posted in the jeweler’s store with the caption: “Even our competition shops here while trying to steal our employees.”

Andrea H.
Chicago, IL

I think Mike’s behavior was professional and appropriate. When it became clear that the chain-gang was abusing his hospitality, he was right to ask them to leave.

The only way to reduce employee vulnerability to poaching is to create an exceptional work culture and environment. Pay fairly, offer ample opportunities to learn new things, be direct, professional, and kind to your employees, and praise liberally and often.

Also — run a good business. Employees know when they are working for someone who is running a good business and when they are working for someone who’s just phoning it in — and they like working for winners.

Jim A.
Salt Lake City, UT

You cannot prevent poaching. Businesses are free to recruit and employees are free to shop their services elsewhere. But you are certainly under no obligation to make the job of the poachers easier. I agree that the behavior of the chain execs was unprofessional and unethical. Throw the bums out! Sounds like Mike did it as well as it could be done.

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Real Deal

When an Employee’s Social Media Reveal an Enthusiasm for Marijuana, How Should This Retailer React?

Here’s how Brain Squad members responded.

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Published

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JANELLE AND TIM O’NEILL LOVED their hometown and took great pride in knowing that O’Neill’s Diamonds was one of few independent jewelers still operating in the area. In his role as marketing manager, the challenge of keeping up with strategies to attract the town’s millennial bridal customers while continuing to appeal to their long-established older customer base fell to Tim. After much conversation with industry colleagues and experts, he and Janelle decided to hire someone to handle the development and growth of O’Neill’s social media presence. Growth in the business had already created the need for additional help on the sales floor, so they chose to look for someone who could handle both jobs.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.

ABOUT THE AUTHOR

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at kate@performanceconcepts.net

They were fortunate enough to attract several qualified applicants for the position, including Grace Matthews, the 21 year-old recent college graduate daughter of a family friend. She was articulate, bright and eager to learn, and most importantly, she was totally familiar with building a presence with Instagram, Facebook and Pinterest. Grace’s references checked out and she was brought on board.

Grace started strong. She was pleasant and personable on the sales floor, and she seemed to be learning quickly about the store’s products and services. She was also creative and enthusiastic working with the store’s social media. Her posts were generating interest within the first few weeks.

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About six weeks into Grace’s employment, Janelle held a store training meeting on the importance of demonstrating O’Neill’s core values — honesty, integrity, responsibility, professionalism and dedication to service — both inside and outside of the store.

She knew they had been fortunate in that they’d never had an issue with an employee creating image problems in town, but she also believed that regular discussion of the topic was part of the reason for that.

The day after the meeting, Linda Weiss, one of the store’s more senior employees, asked to speak to Janelle in private. She said that her son knew Grace casually through friends, and that he’d come to her several weeks ago with concerns about Grace working in the store. He was concerned that her public presence reflected badly on the store, since everyone in town knew she worked there. Linda showed Janelle an Instagram post her son had brought to her attention — Grace’s personal page. From every indication, in her personal social media world, Grace was a stoner, posting regularly about all things marijuana-related, including notes about paraphernalia, varieties, qualities and suggestions for where and how to buy the product. Janelle thanked

Linda for bringing the matter to her attention.

Later that day, Janelle discussed the matter with Tim, and they agreed that neither had noticed any indication that Grace was ever high while at the store. They also looked through her personal pages carefully and were sure that she did not mention being an O’Neill’s employee anywhere. They agreed that despite the fact that times were changing, in their state, marijuana possession and use was still a criminal offense (misdemeanor or felony, depending on quantity), and that they really needed to take some kind of action.

The Big Questions

  • Since Grace’s discussions about marijuana were limited to her personal social media accounts (to which, technically, Janelle and Tim should not have had access), can the O’Neills take action based on the content of those pages?
  • In the bigger picture, does an employer have the right to monitor and/or regulate what an employee posts online if the content has nothing to do with the store and does not violate client or business confidentiality in any way?
  • In a small town where everyone knows everyone else, does the employee have an obligation to restrict public behavior on personal time to conform with the conduct policy of the business?

Expanded Real Deal Responses

Sue F.
New York

From a legal standpoint, this is a tricky situation. State laws vary on employee rights outside of work time, so one answer may not be valid in every state.
Situations like this underscore the need for Employment Practices Liability Insurance (EPLI). A good EPLI insurer provides access to free consultative services with attorneys who can provide practical information about topics such as this. Your insurer also should provide access to a Workplace Risk Solutions Website where you can research your state’s legal requirements, find model workplace policies and forms, tap into a library of workplace-related articles, and access web-based training on topics such as preventing discrimination and harassment, as well as other employment issues.

Deric M.
Oceanside, CA

Janelle and Tim are not in a difficult situation here. What constitutes a PR problem is how it is received and Grace isn’t attaching herself to the store with her pro-marijuana posts. Janelle and Tim never appeared to have even asked themselves if the marijuana consumption is recreational or medicinal — an important distinction — and more information is needed.
Since cannabis appears to be illegal in their state for recreational use, however, Janelle and Tim should have a chat with Grace to tone it down because of how it could become a PR problem. If Grace is otherwise a positive influence on the store’s traffic and bottom line, this is an easy matter to resolve.

Joe K.
Lantzville, BC

First let me say that I am in Canada, and we have just legalized recreational use of marijuana for the entire country. I am also in British Columbia, where it has been said that pot is our largest cash crop. There is a right place and time to use pot and a wrong place and time; the same goes with alcohol consumption. I think monitoring your employee’s recreational behavior and online presence away from the workplace is a breach of her privacy. If she doesn’t come to work high or use pot at work, I don’t think there should be a problem, especially if she’s a competent asset and representative for the business. Having said that, we might be a little more lenient here, and attitudes toward marijuana will be quite different in the US Midwest.

Brenda R.
Honolulu

I would not want to be in that situation. There are risks involved with any kind of drugs, legal or otherwise. Does the company have a formal drug policy? One needs to know the local, state and federal laws and work policy to comply with. Was there a stated probation period to see if the employee “fits” with the requirements of dress, being on time, and client interaction? If there are red flags, the person may have to be let go.
What they do at home is their business and should never impact the requirements and expectations of the job they were hired for. Proceed with caution.

Stuart S.
Egg Harbor City, NJ

The employee needs to be taught how to transition from the fantasy fun land of college to the real world. As long as she is responsible and doing a great job, her personal life is not the store’s concern, but when her actions can potentially alienate any customers, it is. Any controversial posts need to be avoided and eliminated. The posts were obviously on her pages before being hired, so the potential repercussions were never considered. Teaching her about why they are no longer appropriate is more important than just having them eliminated. This is all about grooming her to be a valuable asset to the store, and just as importantly, teaching her to grow as a person!

Gabi M.
Tewksbury, MA

My family and I work in a small town, and I know we all watch what we put on our personal social media accounts (mostly political discussions) because we know that we represent our business 24/7. I think they simply just need to talk to Grace and tell her that her posts aren’t acceptable for someone who works for their business. It should be an easy solution, such as just making her accounts private to the public — and if she has a problem with it, then that’s a whole other underlying problem with having her as an employee.

Marcus M.
Midland, TX

This is a tricky one. Really, an employer should not be able to judge an employee about what they personally post, as long as it doesn’t mention the store, her profession or have violent content. But at the end of the day, she does reflect the store no matter what, and they do live in a small town, so people know where she works. They’ll judge your store as they judge a person’s social media. Maybe have a chat with her and just ask that she consider how her post will look on her career and see if that helps. She’s obviously not very conscious of how her post about pot looks, or maybe she really just doesn’t care, so either way, it’s a bit of a red flag for me. I don’t know … maybe she’s just still young and immature and needs a little guidance, and I think that’s acceptable to give out.

Jane H.
Highland Park, IL

It does reflect upon the credibility and integrity of the business. Unfortunately, it appears that anyone can do anything and it’s their right, blah blah blah. Since Grace was already hired and during the interview there was no discussion of “life outside the store,” it may become a situation they will need to accept until something happens. There are plenty of employers that check out a potential employee’s social media posts (when possible) for any red flags, and in my opinion, this would influence the decision to hire or not. The jewelry business is based on trust and honesty, especially an independent brick and mortar store. One incident would be tough to overcome for the store’s reputation.

Also, unless you know the personality of someone when they’re “high” or not, the only way you might find out is from someone’s observation. If Grace is “selling,” you are giving her a ready-made customer base. Sorry if I sound extreme and tough, but it’s hard work and devotion to stay in the jewelry business. Grace should go.

Jim D.
Kingston, NH

Obviously an employee who engages in criminal activity would quickly become a former employee. While I know there are those who condone drug use, excuse it and work to decriminalize it, it is still illegal. A jeweler’s reputation is a precious thing and needs to be protected. How many repair clients would want to hand over their treasures to a known criminal? If followers of her social media start hanging around, it could lower the tone of the store, possibly bringing in undesirable elements. Worst case would be a front-page newspaper picture of an employee being taken away in handcuffs and your store-front in the background, after she sells some pot to an undercover police officer.

What’s the Brain Squad?

If you’re the owner or top manager of a U.S. jewelry store, you’re invited to join the INSTORE Brain Squad. By taking one five-minute quiz a month, you can get a free t-shirt, be featured prominently in this magazine, and make your voice heard on key issues affecting the jewelry industry. Good deal, right? Sign up here.

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