Sharon Juergens said being a small business owner during the COVID-19 pandemic is about resilience and adaptation.
The chef and managing partner at Diamond Jim Brady’s in Novi is like many other small independent business owners in Michigan finding new and creative ways to adapt to unknown and unpredictable circumstances, especially as the Delta variant takes hold, cases rise, and people begin to worry again for their health and safety.
Juergens said small businesses continue to deal with multiple challenges that are different from earlier in the pandemic including hiring and worker retention challenges. She also mentioned issues with the supply chain and higher wholesale food prices, which are out of businesses’ control.
“The unknown is the biggest problem for me,” she said. “I mean, there’s just a level of stress. We don’t know if the pandemic is going to roll back around and if there are going to be any more shutdowns. Staffing is an issue for the industry as a whole. I see it as a long-term problem. It’s still super challenging. It’s just not that normal. I don’t know if we will ever go back to normal.”
The state’s leisure and hospitality sector has been very slow to bounce back with 391,200 workers employed statewide in July, still down from July 2019 when the number totaled 460,900 workers.
To attract more workers, she increased wages like many other small businesses, but was fortunate enough to only lose one employee in the kitchen who left for another job opportunity with advancement. She has used most of the $100,000 in federal assistance she received to pay salaries and overhead costs.
Compared to March 2020, wages averaged 6.5% higher in March 2021 for Michigan businesses with fewer than 100 employees, according to BLS data. Employment for businesses with 10-99 employees decreased 5.4%.
For a kitchen staff the size of her’s, losing one employee was “detrimental.” Along with higher wages, she also closed on Sundays and Mondays, and certain holidays, to help enhance the quality of life for her employees and allow them to spend more time with their families.
For some restaurants, decreasing the hours that they’re open has been another way to help cut costs and make money amid the rising prices of food, especially for meat.
“We have also learned that quality of life counts a lot,” she said. “ People always talk about wages as being the only problem, but I think that the restaurant business is tough on your quality of life. During the pandemic, I think a lot of people learned that they didn’t want to give up those things and I think they realized the value of that wage.”
In Oakland County, the challenge for small businesses continues to be improving talent retention and attraction.
Jennifer Llewellyn, the county’s manager of workforce development, said the county’s rate of economic recovery will sound different depending on which business owner you talk to.
“We’ve talked with so many businesses small and large and the range is just absolutely extraordinary,” she said. “Some small businesses have said they’ve never had a better year. On the flipside, a restaurant owner said if they don’t start getting some additional staff they’re going to have to close their doors. It depends on the industry.
Between January and March, the county’s total employment increased from 668,279 to 679,595, a 1.6% increase. The number is still lower than 732,300 in March 2019 and 733,300 in March 2020.
Businesses that have received state and federal assistance while creating innovative and creative business models have prospered, said Llewellyn, whose staffing, available talent, health and safety concerns, and costs are hitting businesses hard..
“These were pain points before the pandemic, but they were only painful for certain occupations and certain industries,” she said. “Now, these are pain points for everyone and because it hurts everyone, it’s much more of a topic of conversation.”
In October, the county will host a forum in Pontiac on the restaurant industry and how employers can get creative to find and retain talent to avoid costly employee turnover.
Statewide, hiring and retaining workers, and higher increasing product costs, are the biggest challenges small business owners are facing right now as state-mandated pandemic restrictions have expired. It’s now being left up to individual business owners to decide how to best navigate this pandemic for themselves, their employees, and their customers.
According to Bureau of Labor Statistics (BLS) data, employment is increasing across all Michigan industries, but still below pre-pandemic levels. As of July 2021, statewide employment totaled 4,487,565 while the labor force totaled 4,715,003. Both numbers are down from 2019 around 5.4% and 4.8% respectively.
Brian Calley, president of the Small Business Association of Michigan, said lack of available employees statewide, rising costs, and supply chain disruptions continue to be the biggest challenges facing the state’s small businesses community.
He believes it’s important for businesses to prioritize and balance staffing levels and hours to ensure they can continue to provide a high-level of service when they are open. He added that businesses should not try to do too much with the employees they do have, which could lead to burnout.
“There’s only so much you can ask of the workers,” he said. “Tensions are higher and customer service is more challenging than it has been in the past. There’s an apprehension to trying to stretch your staff too thin, even if they are willing, in order to make sure businesses are not creating an environment where there is a big incentive to go find something easier to do.”
The state’s labor force participation rate, the percentage of Michigan’s population that is employed or actively seeking work, was 59% in July, down from 62% in July 2019. The issue remains not the number of jobs available, which stood at 1.1 million nationwide in July, an increase from 713,700 available jobs in July 2019, but the slow trickle of people entering the workforce and the number of people leaving.
In July, 397,700 American workers quit their jobs, the highest of any month since at least December 2000, according to the BLS. The number of hires made totaled 666,700 nationwide.
For someone who oversees an organization with 28,000 small business members, Calley describes the economic recovery as uneven with some industries bouncing back better than others. He said it will be that way for a while.
Professional and business services, and construction industries have recovered nicely, said Calley, but small retail, leisure and hospitality industries haven’t been as lucky in the number of jobs recovered.
From July 2019 to July 2020, the state’s professional and business services lost 64,600 workers from 643,400 to 578,800. As of July 2021, there were 621,800 workers.
Michigan’s construction workforce totaled 188,000 in July 2021, more than 2,000 over July 2019 levels.
“The vertical line of business has a lot to do with the rate of recovery,” he said. “In manufacturing, it’s really about supply chain component disruption challenges. In hospitality, it’s about people being comfortable enough to go out. Those are challenges that are in many ways outside of the business owners’ control with the recovery process having been that much more difficult…There are some industries fully recovered and some who aren’t even close.”
Although statewide pandemic restrictions around capacity, hours, and masks have been lifted, giving business owners freedom to respond how they want to to the pandemic, it’s those external challenges outside the realm of their control that have been very frustrating for many business owners across all industries.
Industries that rely on direct in person contact for their success are struggling more than others and surrounded with more uncertainty. This includes retail, restaurants, lodging, and entertainment who were the last to reopen and the last to bring back employees in person.
Justin Winslow, president and CEO of the Michigan Restaurant and Lodging Association (MRLA), said businesses are trying to meet pre-pandemic customer demand with 100,000 fewer workers as labor and product prices skyrocket. He added that these persisting challenges are just as or more severe than during the early stages of the pandemic.
In August, the MRLA released results of a statewide hospitality industry survey nearly two months after statewide COVID-19 restrictions were lifted.
“Just shy of 90% of full-service restaurant operators reported closing early during the day as a direct result of inadequate staffing to meet demand,” said Winslow. “Restaurants just cannot find workers no matter how much they are paying and what other incentives they are offering to meet that demand. I think burnout is very real and it’s why you are seeing diminished hours.”
Although restaurants are doing what they can to survive in the immediate term, including increasing wages to attract workers, decreasing hours, and cutting menu items, those aren’t “long-term strategies for success.”
“When restrictions went away, (restaurants) needed to capitalize on that demand that was there so they paid people in absurd amounts to make sure that they were staffed in a non-sustainable fashion. Now that we’re past that peak summer surge, your overhead costs are now exceeding your ability to generate revenue and you are in a dangerous place.”
The report also revealed that 9 in 10 Michigan restaurants and nearly every hotel is operating with inadequate staffing to meet consumer demand.
“Even for restaurants that are doing great on sales, how are they doing on profit margin?,” he said. “Because profitability has been a real challenge. Even the most successful restaurants in terms of guests have been struggling on the profitability side.”
