Connect with us

Real Deal

This “Real Deal” Jeweler’s Nightmare Scenario with Lab-Grown Diamonds and How Retailers Suggest He Handle It

Should this retailer agree to his client’s demands?

mm

Published

on

A lot had changed in the four years since Keith Thomas took over the day-to-day operation of The Gem Vault from his mom. Volume and profits were on a steady incline. The Vault ’s bridal business had nearly doubled over four years as Keith’s new ideas began to take hold. 

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

Keith felt especially grateful for his dad’s early jump onto the “we buy diamonds and gold” train. Nearly 20 years’ worth of his dad’s sharp eye and good deals left the store with a great selection of diamond qualities and sizes, and often made them price-competitive with internet sellers. 

When a diamond jewelry rep who had been visiting the store since Keith was in high school stopped by about 18 months ago, Keith made time to listen as he made his best pitch for his new lab-grown diamond line. Keith had done some homework on the “lab-grown phenomenon” and believed that it was here to stay. He also knew that his mom and dad were both firmly opposed to carrying synthetics in the store. But the rep was able to counter every argument. He talked about the need to service today’s eco-minded and socially responsible consumer and pointed out that all of the stones were clearly inscribed, making inventory mistakes unlikely. He offered to leave Keith with a 25 stone memo complete with a cool in-store display and iPad to tell the story. Keith agreed — and after six months, lab-grown diamonds represented nearly 35 percent of loose diamond sales at The Gem Vault.

Keith was on the floor one day several months ago when Ian Sandren came in looking for an engagement ring. Ian had just moved to town for a job as the new art director at a local marketing firm and had been sent in by a colleague who was a long-time customer of the store. He said that he had seen information on lab-grown stones on the store’s website, but that he was only interested in seeing natural diamonds. He said that while he didn’t have a problem with the concept in general, he didn’t feel at all comfortable with the idea of a synthetic in his fiancée’s engagement ring. Keith assured him that all of the lab-grown stones in the store were clearly marked. He pointed out that reports from independent grading services were available if Ian chose, and that his engagement ring would be accompanied by a detailed appraisal that included a statement of natural origin. 

After spending several hours with Keith over the course of three visits, Ian chose a 0.98-carat round diamond (G, VS2, ideal cut) from the store’s stock and a beautifully designed platinum and diamond mounting with a total price of $9,200. The center diamond did not have a grading report, but Ian was comfortable with the grade assigned by the store’s appraiser. The finished ring was delivered two weeks later, and Ian loved it. 

Advertisement

That was the last Keith heard from Ian until last week, when he signed for a registered envelope addressed to him personally. In it was a letter, along with a copy of a GIA report. In his letter, Ian said that his fiancee’s father — an insurance broker — highly recommended that his daughter get a GIA report on the diamond and took her to a local jeweler friend who agreed to help. The diamond was taken out of the mounting and sent to GIA New York. When the diamond and report came back, GIA had identified the stone as laboratory grown. Grades for color, clarity and cut (near colorless, very slightly included, XXX) did match those assigned by the Gem Vault appraiser.  After receiving the report and before resetting the stone, the jeweler took the mounting to a nearby manufacturer who, with proper screening equipment, was also able to identify four of the 20 melee in the setting as synthetic. 

Ian made it clear that he believed Keith and the Gem Vault had been either terribly careless or deliberately fraudulent. He said he had to assume that he was not the only customer who had been sold a synthetic under the guise of a natural diamond. He demanded that Keith supply documented natural diamonds of the quality for which he’d paid to replace the synthetic stones, and that the Gem Vault refund the price paid for the ring to compensate for his and his fiancée’s stress and expense.

Keith was mortified. The only possible explanation he could come up with was that the synthetic center had been purchased by the store in an over-the-counter transaction and that the supplier of the mounting was far less cautious than they claimed. He was committed to making it right with Ian — but it was clear that he was staring down a potential public relations nightmare. He had no way of knowing how many other synthetic melee or larger non-disclosed loose diamonds had been bought and/or sold by the store, but he didn’t think he could live with the idea of not finding out.

The Big Questions

  • Should Keith agree to Ian’s demands? If he does, is it appropriate to ask for a confidentiality agreement?
  • Is there a way to ensure that he identifies any other synthetics that he might have unknowingly sold without incurring overwhelming expense and/or creating a public relations nightmare?
  • Should he stop selling synthetics and adhere to his parents’ recommended “natural only” strategy?

Expanded Real Deal Responses

Ira K.  Tallahassee, FL

Keith is probably not the first and certainly not the last that this will happen to, but if he doesn’t mind a $5,000-$7,000 loss, he can pay Ian off. Offer Ian either a refund or a new ring with natural GIA-papered diamond, a discount on his wedding rings and a sincere apology.

As a thought: how do we know that someone couldn’t or wouldn’t switch a natural for a synthetic and then work this as a scam?

Bruce A. Sherwood Park, Alberta

Keith should obviously supply his customer with the same or better quality diamonds as those for which he was charged. That makes the purchase complete and it should not be accompanied with a refund of the original sale. Do not ask for a confidentiality agreement because any fallout from this client will be best handled confidently and professionally if and when it surfaces. He must recheck all of his diamond inventory, whether it is expensive or not! As for carrying synthetic alongside natural, he will face the same dilemma we all do when we weigh the decision regarding synthetic. This problem was not caused by him carrying synthetic, so it should not enter into how he proceeds in future.

Advertisement
Marcus M. Midland, TX

In my opinion, buying diamonds off the street has always had its risk and been a tricky game. Now, with lab-grown diamonds in the mix, forget about it. I never buy off the street and refuse to buy into the lab-grown diamond business. Am I missing out on some sales? Maybe, but I’m also safeguarding myself from potential disasters like this. Keith absolutely has to make this right for Ian and he needs to make it very clear that it was a careless mistake on his end but that he would appreciate keeping it confidential. And I don’t know what he can do about ensuring he didn’t do this to other customers, but he better get on top of it quick. He should also really think about going back to his original family business plan and stick to selling naturally grown diamonds. Good luck Keith.

Rex S. Houston, TX

In today’s environment, it is almost negligent to sell a center diamond over a half-carat without a recognized and respected independent lab report. They represent a minute cost compared to the item. We have almost exclusively used GIA after we have all the diamonds we buy from the public recut to ideal proportions. Through this process, we have two outside layers to examine and verify our diamonds as not being treated or lab-grown. At JCK last year, I put a deposit down on the GIA id100 and received it yesterday. Last week, our entire staff was trained on the device at the IJO show. It is the only device to quickly test for lab-grown HPHT and CVD; all of the other machines only test for HPHT. Get the machine test for everything, always!

Daniel S. Cambridge, MA

Not only should he immediately do what the customer asked, but he should go over and above that. Give him a large credit to be used at the store or give him back 20 percent of the price on the diamond purchase as well. He’s screwed up big time and he’s responsible. And yes, he should go back to selling naturals only, have all the stones in the store certed, refuse to buy from the supplier of the mounting anymore and tell him to take back any other goods of his that they have and refund the money for the setting. It’s all on him. A costly lesson, but one that more jewelers today should be paying attention to as well. Know your suppliers. Insist they take responsibility and don’t buy off the street. It’s a whole new world out there now.

Stacey H. Chicago, IL

1) Keith should call his lawyer! There’s an excellent chance that some kind of fraud has taken place, and that the real victim is KEITH! Way too many other people handled that ring for Keith to be certain that the other jeweler did not swap out the stone to make him look bad and steal the sale.

He should not admit any kind of guilt; he should tell Ian that he will look into it and get back to him later in the week. If Ian wants a refund, he has to prove that the stone he is returning is the one he bought.

2) Keith should call the GIA and arrange to have his whole loose inventory checked, graded and inscribed ASAP. The appraiser at the store should be sent for more training to recognize synthetics!

Advertisement

3) Keith should call the supplier for the band and tell that guy he wants a full refund on every piece he has left, and return them all! Maybe his lawyer will write that letter for him!

Michelle S. Towson, MD

Disclosure, disclosure, disclosure. A client can’t get enough of it. In addition, making everything right as far as the client who didn’t get the genuine diamond is a must!

Emily J. Minneapolis, MN

First and foremost, Keith should contact a lawyer for advice. This could have major consequences on his business and he needs to get all the facts before he acts. I would also ask to see the grading report and confirm with the GIA that this was a legit report. I would be more likely to offer a full refund on the ring and take it back, OR replace the diamonds with natural diamonds at no cost and then throw in a free wedding band or another similar bonus. But I don’t think giving the customer an entirely free ring would be my first choice; that’s why a lawyer could be handy to confer with.

Going forward, I would not stop selling lab-grown diamonds, but I would stop stocking the store with them. Have a few rings with lab-grown as examples in a special location, clearly tagged and then just bring in loose lab-grown diamonds by request for custom work.

Susan G. New York, NY

Keith must admit fault and accept responsibility. It’s unfortunate that this happened, but it did and he has to make the necessary changes so that it doesn’t happen again.

Going forward, he must continue to sell natural and synthetic diamonds and make sure he knows what he is doing. His diamond suppliers can help him to identify natural from synthetic. There are also trade organizations and labs that will identify a diamond and colored stones for that matter. Maintaining proper record keeping is important as well.

Mistakes happen; dealing with them is critical to the future of the business.

Jim A. Missoula, MT

The moral of the story is stay as far away as possible from synthetic diamonds. Short-term profits aren’t worth the long-term hassles.

Mack T. Walterboro, SC

First thing I would do is express how deeply sorry I am that this happened and explain to him where the diamond was purchased from and how I too had unknowingly purchased and sold a lab-created stone. I would then replace the lab-grown with naturals of equal grading with GIA reports to accompany them. I would not give a refund, but I would make it right. If explained correctly, the customer will understand and be sympathetic. After all, Keith is just as much the victim as the customer in this situation.

Shari L. Georgetown, KY

I would not give in immediately to his demands, but yes, this needs to be made right. Honesty is best policy. This is a nightmare that I am afraid will become a familiar story.

 


The Rest of the Story: More Insights From Kate Peterson

As many of our Brain Squad members pointed out, Keith had two critical priorities in this situation: To protect himself and his business and, as Ira Kramer (Diamond Exchange of North Florida, Tallahassee, FL) said, assuming he was not being victimized himself, to make his client whole.

Keith called Ian immediately after receiving his letter. He offered a sincere apology for the inexcusable mistake, assured Ian that he would make things right, and asked Ian to bring the ring back to the store as soon as possible. Ian seemed to be reassured by Keith’s immediate response and genuine concern. They set an appointment to meet a week later.

During that week, Keith took a page from Rex Solomon’s (Houston Jewelry, Houston, TX) play book. He researched the synthetic screening devices on the market and after much discussion with his parents, decided to make a major capital investment in a highly rated scanner that works on both loose and mounted goods. The initial expense (nearly $18,000) was painful — but he was thinking forward both to his plan for resolving his current situation and to ensuring that he could use this experience as a powerful brand positioning tool going forward. He took the time to check out the jeweler who handled things for Ian’s fiancée. He learned that the store was very highly regarded in the community and was a part of several major trade organizations. Keith called the owner of the store, Warren Barret, to confirm the details of the situation. He explained how it all happened, and was quite surprised when Mr. Barret said, “You know, this could have happened to any of us. No one on my end caught it either until we saw the GIA report. There is a lesson in this for all of us.” By the end of the conversation, he felt confident that Barret’s was not simply trying to take the sale and that they were not part of any sort of scam. Moving on to the stone in question, Keith examined the GIA report carefully, and verified that, as closely as he could tell, the plot on the report matched the plot done by his own appraiser. By the time they met, Keith was sure that Ian’s story was accurate, and the problem was his to deal with. He had a new diamond (1.02ct, F, VS1, XXX, with a GIA report) as well as four matched melee with an affidavit from the supplier verifying natural origin, ready and waiting.

As Mack Thomas (Infinger’s Jewelry, Walterboro, SC) suggested, during their meeting, Ian was far more understanding and reasonable than Keith expected. He said that Mr. Barret had called him and explained that he believed this really was an honest mistake, and asked that he give Keith an opportunity to make it right. In the end, Keith replaced the synthetic stone with a more valuable diamond, replaced the synthetic melee in the ring, paid for all costs associated with getting the GIA report on the synthetic and gave Ian a $500 gift card to use toward his wedding bands. Ian was happy, and by his calculation, the hard cost to the store for resolving the immediate issue was about $2500 all in (plus whatever they paid for the synthetic originally).

Once the situation with Ian was handled, Keith contacted his sales rep for the mounting manufacturer, explained the problem, and let him know he was returning all remaining stock and discontinuing the line. He also laid out a schedule for checking every piece of diamond jewelry in the store with the new screener he ordered. Keith was still left with the task of working out a plan to examine as many of the diamonds sold by the store over the past five years as possible (discretely, of course). He asked his marketing company to come up with a ‘complimentary service’ promotion that would encourage customers to come back into the store once his new screening device was up and running. He didn’t really expect to find more problems, but he was prepared just in case, and he felt much better knowing that he was making an honest effort.

Whether or not to continue carrying synthetics is a question still in discussion for Keith and his parents. Keith is considering whether the brand value of saying (legitimately) ‘all naturally sourced and verified’ is bigger than the potential business loss associated with not offering the alternative for interested customers. His bigger concern lies in how he might deal with the customers who purchased lab grown diamonds from the store over the past year.

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.

Advertisement

VIDEO HIGHLIGHT

Wilkerson Testimonials

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

Most retailers only have one GOB sale in their lifetimes. This was the case for Gary Zoet, owner of Shannon Fine Jewelry in Houston, Texas. “Wilkerson has done thousands of these sales,” says Zoet. “I’ve never done one, so it’s logical to have somebody with experience do it.” The result exceeded Zoet’s expectations. Wilkerson took care of everything from marketing to paperwork. When it’s time for you to consider the same, shouldn’t you trust the experts in liquidation?

Promoted Headlines

Want more INSTORE? Subscribe to our newsletter.

Comment

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.

mm

Published

on

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.

Continue Reading

Real Deal

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

But should he retaliate?

mm

Published

on

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.

Advertisement

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.

Advertisement
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.

Advertisement
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.

Continue Reading

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.

mm

Published

on

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.

Video: Why Your Digital Marketing Doesn’t Work Like the Experts Say It Should
Jim Ackerman

Video: Why Your Digital Marketing Doesn’t Work Like the Experts Say It Should

Video: Don’t Miss the Biggest Opportunity to Improve Profits in Your Jewelry Store
Jimmy Degroot

Video: Don’t Miss the Biggest Opportunity to Improve Profits in Your Jewelry Store

Video: Gene the Jeweler Hired His Nephew … And at Least Insurance Covered the Damage
Gene the Jeweler

Video: Gene the Jeweler Hired His Nephew … And at Least Insurance Covered the Damage

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.

Continue Reading

Advertisement

Advertisement

Advertisement

Subscribe


BULLETINS

INSTORE helps you become a better jeweler
with the biggest daily news headlines and useful tips.
(Mailed 5x per week.)

Latest Classifieds

Most Popular