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Last week, I wrote about how the business case for investing in workforce isn’t the most compelling thing to actual businesses because the “savings” don’t feel real. I noted that we need to show the costs in more tangible, immediate terms.
One company is doing that for one particular batch of workforce issues. It’s just a slice of the overall picture on employer investment in workforce, but it’s a useful pathway for the type of business argument that would be helpful to make.
You may have heard about Escalate on NPR or CNN. The company provides an app for employers with hourly staff that helps those workers get to work.
Below, I talk to Escalate co-founders Sienna Daniel and Sean Segal about their model and how and why they founded the company, as well as the challenges facing hourly workers. We also have an interesting conversation about wages. While I always favor more living-wage jobs as a matter of policy, Sean and Sienna gave me plenty to think about around the holes in our current social safety net and how those holes make it harder to get ahead.
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An interview with Escalate’s Sienna Daniel and Sean Segal.
Sienna Daniel and Sean Segal co-founded Escalate.
This interview has been edited for length and clarity.
Nick Beadle: I'd love to start by talking about your company’s origin story. I think it says a lot about some issues we’re seeing in workforce and employment that still seem very hard for some people in this space to process.
Sean Segal: We both were teachers early in our careers in low-income areas. Then, after teaching, [we] transitioned into workforce development because we saw the importance of people having stable jobs with a good income and how important that was for the youth that we worked with and their whole family. [We ran] workforce development nonprofits for the last 20 years and [got] to know this population really, really well.
In our last job, we were training unemployed and underemployed folks for jobs. We would get them placed in jobs, and what was frustrating was we would see them lose the job within 90 days a lot of the time. We spent a ton of time talking with the folks that we had trained and placed about why they were losing their jobs so quickly or leaving their jobs so quickly.
It boiled down to a pretty straightforward thing, which was they lacked a safety net. For you and me, if our car breaks down or our childcare falls through, we have a backup plan. For these hourly workers, they really don't.
In the 30 to 90 minutes before they're supposed to go to work, when one little thing breaks, it prevents them from getting to work. They call out. Repeated callouts mean turnover because either they know that they're going to get fired or they get fired because they've missed too much work.
Four and a half years ago, we left the nonprofit space and launched Escalate because we realized that this is a problem for businesses. Missed shifts are expensive. Turnover is even more expensive. It’s a real problem for the workers because these are the folks that need to be at work the most. They need the paycheck. So we built an app that tries to fix it.
Nick: How does it work?
Sienna Daniel: It’s a pretty simple app for the employee. They simply log on and text in whatever challenge they're having.
If they're having issues with transportation and need help getting to work that day, they simply can text, “I need help getting to work today,” or “I need help with transportation.” They will very quickly get a response. Our coaches will ask a few qualifying questions just to get a better understanding of what's actually going on and make sure it's a valid need. And that could look something like, “Very sorry to hear that. can you tell me a little bit more about what's going on with your transportation today?”
As long as they give us a valid reason, we generate a way for them to get to work very quickly. Whether that is a ride share voucher or, in more rural communities, we contract with local taxi services so that we can still make sure folks can get there. It's really just about making sure that, within about a minute or two, they have a solution that will allow them to show up to work that day and show up on time.
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‘The argument that gets the contract signed . . . is the one that says we save you money.’
Nick: The thing that can come up a lot in corporate boardrooms when talking about workers like these is the idea that “we’re not running a charity.” How do you make the business case to employers that this is worth their money to address?
Sean: What you’re saying is one of the reasons we left the nonprofit space. You can't rely on companies to do good for the sake of doing good. They're driven by profit. They have fiduciary responsibility to their shareholders.
So that's the exact argument we make. With the McDonald's [franchisees] we work with, their internal metric is it costs them $350 every time someone miss a shift. That’s because they're paying someone else overtime [or] it's slower sales or, as one of the owner-operators we work with says, if you [the customer] drive up and there's a long drive-thru line, you just don't get in the line.
When you can tell them you can fix that $350 missed shift with a $15 Uber, it starts making sense. This isn't about doing good. It's about impacting their bottom line.
Now, I will say a lot of the employers we work with do know that their employees struggle and want to help. But in the end, the argument that gets the contract signed with Escalate is the one that says we save you money.
Nick: The case for a lot of workforce development is this abstract idea that you're saving money over time that you won’t have to spend on turnover and things like that. I've noticed some employers really struggle with that idea because the money doesn't feel real to them.
When employers haven’t done the same work as those McDonalds to calculate the cost of a callout, how have you engaged those employers, and what are you hearing from them?
Sienna: When you talk about overtime and when you talk about their managers and the amount of time and resources that managers are putting into frontline operations when they really should be doing their jobs, that's usually when they start to say, "Oh, OK. Like, maybe I don't know the exact number for how much it costs us every time someone calls out, but absolutely I'm spending money on overtime every day. Absolutely, my managers are not doing the work that I need them to do. And absolutely our customers are getting out of line when the line is too long or it's not moving fast enough.”
They're very familiar with at least those three things that they know are costing them on a daily basis even if they don't have the exact figure.
Sean: When you talk to small business owners—which I think are often overlooked in workforce conversations because we all want scale—they're already doing this. When someone calls out, the owner-operators are saying, “Hey, I call them on my cell phone and sometimes I drive and pick them up. Sometimes I send an Uber and, you know, it's not scalable and it drives me crazy.”
In the workforce space, if we were able to engage small businesses in a different way, you wouldn't eliminate the problems. They never go away, but they would shift. I think small business owners really get this.
At an enterprise level, it really goes to a question of how are we showing [return on investment] quickly?
To be honest, when we started Escalate, we started by talking about retention. That was too abstract. Thinking of what it cost them [per] year, they knew it. They had numbers. Someone in their finance [department] had even given them numbers, but it's not something that shows up on their [profit-and-loss statement].
So what does it cost per shift? What does it cost in a manufacturing plant when everyone has the skilled machine that they're on [and] one person doesn't show up? And if we can get [employers] there, how does that change things for you? That's where we're making inroads with the enterprise companies.
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‘Where they want to be.’
Nick: I still think that this issue is elusive with policymakers who might not see why it’s important to invest in supportive services and other supports that get people to and through training. What should they be paying attention to here?
Sean: People want to work. They do. And especially when you think of low-wage workers, they’re the people who can least afford to miss a shift.
They're not lazy. Most of them have two or three jobs. And the thing is, we don't make it easy for them to go to work. We work in Prince George's County [in Maryland], where their buses just don't run on the weekend. Like, they just don't. So how do you get to work if you're working at a McDonald's?
If you wake up in the morning and you open your fridge and there is no food, and you realize that when you get home from your shift, you are not going to be able to feed your kids, you don't go to work—even though what you really need is your paycheck.
You go into panic mode and you start thinking, “Who can I call to get food for my kids?” We see [that when] you give out a $25 grocery card when someone messages our app and says, "I'm panicking because I don't have food,” they take the $25 grocery card and they go to work and then they stop at the grocery store on their way home and they can feed their kids.
So, from a policy perspective, we have to make it easier for people to get to work because that's really where they want to be.
Nick: Have you had any conversations with employers about pay? In my consulting practice, the thing I ask employers is, “Why do you pay people?” My answer is, “So they show up.”
Have you seen any sort of re-evaluation from employers on that aspect? I acknowledge you have a business interest in them taking advantage of your product, but I do wonder if that’s fed into employers’ thinking about the pay and the other things around the job they’re providing.
Sean: What's interesting for us is this is not an issue only in minimum wage jobs. We work with some big manufacturing companies that pay in the mid-$20s per hour and folks still have these issues.
How we define a working wage or a livable wage is interesting. Even if you're making a livable wage by definition, you still lack a safety net, especially if this is your first job after a prolonged period of unemployment or if you've been bouncing from job to job. It would be easy to knock a McDonald's and say, “You should pay more than minimum wage and then your folks wouldn't have these issues.” But that's not actually what we see as true.
For a lot of the workers that we work with and we talk to—and we follow the coaching conversations—the job that they can have and hold is a good job regardless of the wage. It's where they need to be at this stage of their life for whatever reason.
We know from working with owner-operators and small businesses that margins are tight. So yeah, I don't think I don't think wages are the silver bullet that I thought they were earlier in my career.
Sienna: Unless you are going to triple or quadruple their pay, you're still not setting [workers up] in a space where they can be successful and not need a safety net. Increasing [pay by] $5 [or] $10 an hour even doesn't solve it.
Even those who this is their first job, they're typically coming from a family where poverty and lack of resources has been an ongoing thing.
Sean: If you can get someone past their first 90 days, they are much more likely to make it to the year.
We’re coming from our workforce development background where our whole career was trying to get people up the ladder. But how do you move people up the ladder if they're like barely holding on to the bottom rung?
So what we have to do is focus on getting them solidly on the first step. That's the key.
Card subject to change.
Thanks to Sienna and Sean for a conversation I’ll be thinking about for quite a while.
On Thursday, I’ll be back with THE MONEY. We have some new federal grant announcements with an interesting twist, and some new data from The Fed is a good conversation starter on where we need to go next on spending public workforce cash. I’ll see you then.