Tone Deaf

When I retired in 2014, after being a contributing member of the Public Service Superannuation Plan for 32 years, I began collecting a provincial government pension. The promise of a pension had become very important to me over the last decade or so of my career as eventual retirement loomed and I began wondering what life without a paycheck would be like. Finally I would be free of having to cope with daily life in a bureaucracy and thanks to both the pension and my frugal way of living I would be pretty worry-free. Things don’t always work out like that of course, and early in 2020 us pensioners received word that our pensions would be frozen for the next 5 years. In our new suddenly inflationary environment, that was not good news.

My pension and those of over 30,000 other members who are either paying into one because they are still working or collecting one in retirement is administered by the Nova Scotia Pension Services Corporation (PSC for short). That was an agency created in 2013 from what used to be the Nova Scotia Pension Agency, which was a government operation connected to the Department of Finance. Some history is in order before continuing here.

Back in 2008 after the global financial meltdown, both the Public Service Superannuation Plan, or PSSP (for civil servant pensions) and the Teachers Pension Plan were in rough shape in terms of the asset to future liability calculation, known as the funding ratio. The Teachers plan had been in trouble for a very long time. It is a different animal than the PSSP. Back in the ’90s it adopted a joint trustee structure between the government and the NSTU. In the mid-2000s a number of changes were made to try to bring it back to financial stability and those helped a bit, but the 2008 crash really set it back and it has been trying to recover ever since.   

In contrast, the PSSP always had the Minister of Finance as the trustee, meaning that the government backstopped the pension plan and was on the hook for any underfunding. The Department of Finance managed the investment portfolio of the plan and administered the plan for its members, just as they did for the Teachers Plan. In 2006 that function was spun off into a special operating agency called the Nova Scotia Pension Agency. Incidentally the Acting CEO of that agency for the first couple of years was John Traves, then a provincial Justice Department legal counsel, now HRM’s top lawyer. In 2008 a financier from State Street Bank in Boston, Steven Wolff, was finally recruited to take the job. According to his LinkedIn page, he left that job in 2016 to become President and CEO of TD Mellon in Toronto, and was replaced at PSC by another ex-Dept. of Justice lawyer.

Although (as stock brokerage commercials like to say in the fine print) past performance does not guarantee future results, the PSSP was in far better shape than the Teachers plan. Indeed, in the late ’90s, it had done so well that the Province issued this news release:

Pension Contribution Holiday Confirmed
Finance (to Oct. 2013)
November 25, 1998 – 2:17 PM

Independent actuaries have confirmed that the public service pension fund has a surplus large enough to afford planned pension improvements and contribution holidays.

“The actuarial report shows the public service plan was in surplus as of Oct. 31, 1998, and would still be in surplus if the contribution holidays and pension improvements had been made on that date,” said Finance Minister Don Downe. “Accordingly, I am announcing that the measures will now go forward.”

The Public Service Superannuation Plan moved into surplus two years ago. Last spring, the province reached agreement with the Nova Scotia Government Employees Union to have a contribution holiday for fiscal 1997-98.

In the budget for 1998-99, the government announced it would also be suspending contributions for the current fiscal year and would be making substantial improvements to pension benefits. The most significant measure is to increase survivors’ benefits to 66 and two-thirds per cent from 60 per cent.

The legislation allowing the contribution holidays to proceed was passed by the legislature Nov. 9.
…
Government employees will receive the pension-holiday amount on the second paycheque of January. The contributions for 1997-98 were paid out in June of this year.

https://novascotia.ca/news/release/?id=19981125002

The PSSP had reached a funding level of 108% prior to the pension holiday, so somebody was either very lucky or very good at investing. A couple of years later the dot-com bubble burst, markets went south, and it took a while to recover. Just when things were looking up again, the 2008 crash happened, so when the NDP government arrived in 2009 both pensions were in rough shape.

As Finance Minister, Graham Steele would have received a briefing on top issues from senior staff at Finance shortly after arriving. This is speculation on my part, but I would guess that the state of the pension plans and the provincial liability for them would have been on that list. Combined with all the other financial issues the province was facing at that time, he started taking some pretty big swings at things, like increasing the retail sales tax rate. Soon the PSSP and its liability became something he wanted to get the Province out from under, likely spurred on by dire warnings from the accountants at Finance of what could occur if nothing was done. Given the uncertainty in the financial markets back then, I have little doubt that the economists were feeling quite dismal.

What transpired over the next couple of years was remarkable. Legislation was written to remove the Minister of Finance as sole trustee of the PSSP, meaning that the government no longer backstopped the plan, changing the basic premise of a government pension. It created several new corporations, one of which would act as trustee for the Teachers plan and another for the PSSP. Legislation also converted the Pension Agency into a third corporation, the Nova Scotia Pension Services Corporation, to manage the assets and administer the operation of retiree pensions. Very detailed legislation was also passed that defined how the PSSP would operate going forward in terms of funding ratios and indexing of benefits, and greatly limited what those appointed to the Board or employed by the PSC could do in those areas.

Remarkably, the Pension Services Corporation Act took great pains to distance it from the Province. It explicitly states that it is not an agent of the Crown, it is not a Crown corporation, it is not a government reporting entity, it is not a public body, it is not subject to FOIPOP provisions, and that its employees are not an “officer, servant, or agent of the Crown” despite 50% of it being owned by the Province and the other 50% being owned by former employees of the Province. Of course, their landline telephone numbers remain in the government 424 exchange and unionized employees there are still members of the NSGEU and the PSSP itself, but lets overlook that. To me, the most remarkable provision is found near the end of the legislation:

Regulations

45 (1) The Minister may, with the approval of the Corporation, make regulations

(a) respecting any matter authorized by this Act to be done by regulation;

(b) defining any word or expression used but not defined in this Act;

(c) the Minister considers necessary or advisable to carry out effectively the intent and purpose of this Act.

So, a Minister cannot actually do anything directly in regard to this body that they created unless the PSC approves. It is like a provision saying that my former employer, the NSLC, needs to approve anything that the Minister responsible wants to do. It is rather mind-boggling. The only certain way government could affect anything at PSC is to amend the legislation itself, a much more difficult process. In reality, the Minister could likely direct the Board chair and the 6 government Board members to make such changes, but this remains to be seen since I doubt it has ever been tried.

The Public Service Superannuation Act outlines in excruciating detail how payments and indexing, if any, is to be determined. The emphasis throughout is biased towards maintaining a funding ratio of at least 100% and protecting that going forward with reserve funds. Only if those are both satisfied can indexing be considered, and in any likely scenario, the best one could possibly hope for is 50% of the CPI, with most other scenarios offering less than that. The Act also locks in any resulting scenario for a 5-year term based upon a single point in time at the moment of decision, a very rigid stance. In my case my first 5 years of retirement got me indexing of 0.5% annually, amounting to a lunch out once a month. Yippee!

Something interesting happened at the end of 2019 when that 5-year cycle was coming to an end. The Fall 2019 pension newsletter blithely reported that as of the date it was published, the plan was fully funded at about 104% thanks to very good returns on investment that year. Good news for us pensioners, right? Not so fast. Between the year-end and March 31, 2020 two things happened. One was the COVID crash that drove investment markets down sharply at the end of March. Those recovered totally over the next few months, but that didn’t matter. The other was that the actuarial review of the plan done in early 2020 deemed that the discount rate – which is the percentage by which the calculated future obligations to members can be reduced given future returns on investments – be reduced by half a point. That meant that with the stroke of a pen, the plan was now 98.5% funded. What a coincidence! No indexing for you pensioners for the next 5 years.

The emphasis on requiring 100% funding (or something close to it) for pension plans makes sense if the plan is in the private sector. Companies can go bankrupt or encounter hard times, and you want pensioners and future pensioners to be protected if that happens. But we are dealing with the public sector here. That is unlikely to go away any time soon. Those who are either collecting a pension from the PSSP or expect to do so were hired on by the government and the pension provisions were a promise made at the time, which included some degree of indexing. Now that is no longer quite the case since future pension payments are very much unknown. Back when the province administered the pension themselves, the funding shortfall, if it existed in any given year, was simply recognized as a line item on the provincial books. If the plan was in surplus as it was in 1998 and no doubt other years, a different entry was made on the books of the increased value. No money actually ever changed hands; it was simply an accounting line item that could be positive or negative. The plan itself generated all the cash it needed.

But there is one small group that likely quite enjoys the new way of doing things, and that is the management group at the Pension Services Corporation. If the pension plan itself had enjoyed the kind of increases they’ve been getting all of us would be living very well. It is really quite staggering.

According to their annual report a group of about 20 managers at PSC divvy up a bonus pool of about $750,000 in incentives each year. Government did away with management bonuses about 10 years ago, but of course these folks aren’t government employees any longer, though they used to be in most instances, and apparently the Board didn’t get that memo. Also unlike government, the PSC are not subject to compensation disclosure (or “sunshine list”) requirements, but they do list compensation of their top three executives in their annual report, so I guess we should be grateful. All three are former civil servants.

CEO Salary + Incentive:
2016	2017	2018	2019	2020	2021	2022
150831	231645	438840	438840	457190	491507	529712
Total % Increase: 251%
Chief Investments Officer Salary + Incentive;
2016	2017	2018	2019	2020	2021	2022
234405	238317	242353	269315	297108	321760	290974
Total % Increase: 24% (Note: Retired March 2022)
Chief Pensions Officer Salary + Incentive:
2016	2017	2018	2019	2020	2021	2022
156657	160361	164736	182079	201855	223349	245417
Total % Increase: 57%

I can understand the compensation levels for the Investments person, and the Pensions Officer is more of a COO position so it may not be too out of line either, but the CEO? Wow. Just, wow. Jackpot, baby.

If this was a position still in government there is little possibility something like this could have happened. But since they are explicitly “not government” despite all appearances to the contrary, there is little that can be done without a change in legislation. It is utterly tone deaf, and makes zero indexing of member pensions taste even more sour to those who rely upon them.

Beer Money

When I read the Chronicle-Herald’s op-ed page early in the morning of January 22, 2022, I was interested to see 2 dueling op-ed pieces on the local craft beer industry, one from Debbi MacDonald, the head of the Craft Brewers Association of Nova Scotia, and one from Herald columnist Bill Black, doubling down on his piece from a couple of weeks ago on the treatment of that industry. To say it reminded me of what one’s body demands you to do after consuming a lot of beer would be an understatement.

In the interests of full disclosure, I retired from the NSLC in 2014 after 12 years working there, first as Corporate Secretary to the Board, then in 2012 adding additional responsibilities relating to Communications and Social Responsibility. During that entire time, one of my tasks was policy relating to one of the NSLC’s 4 legislated mandates, Local Industry, which was added in the 2001 amendments to the Liquor Control Act that also made NSLC a Crown corporation, which was intended to give it a degree of autonomy from excessive government involvement.

When I arrived, the local industry here in Nova Scotia was very small, but the problems were large. The pioneers in the local beer and wine sectors felt unloved by the NSLC, and for good reason. The NSLC in the old days was built to deal with large commercial producers, and dealing with the particular requirements of much smaller and less corporate local manufacturers was foreign to them. The NSLC mass-market model simply did not work for small local producers. It was a very intimidating place for them to walk into, and they heard the word “no” quite often.

Fortunately for them, the Board of Directors in those early days took the legislated mandates in the Act quite seriously, and encouraged the organization to address the issues. They saw the positive effect that local wineries were having on Nova Scotia’s rural economy, and listened to those involved in the industry on what could be done to grow that more broadly. The same thing applied to craft breweries, but at that time there were only a handful of them locally and they were somewhat of a niche product.

Since that time, things have changed dramatically. As part of a trend both in North America and elsewhere in the world, craft brewing has exploded in popularity, right along with small distillers and local wineries. This is doubly remarkable when one looks at beer consumption numbers overall. Beer as a category has been largely flat in terms of volume consumed for over a decade. Its not necessarily that people are drinking more beer, at least not beer they buy from the NSLC. But what they are drinking is dramatically different than what it was at the time of the legislative changes here. Starting about 10 years ago, both the number of craft breweries and the volume of product they produce being sold began to trend upward, to the point where we now have over 70 small brewers with over 20% of the Nova Scotia beer market. A real success story by any measure, unless you are a commercial brewer. With the overall market being flat in terms of volume, that 20% came out of their hide.

Of course, nobody can punish success quite like Nova Scotia, so such things could not be allowed to stand, or so it appears. Some of that may be due to inertia, some may be due to ignorance of how the business works, and some it may be due to denial. Having been removed from the industry for some time now, I can only speculate on these things. I do recall that prior to my retirement, meetings with representatives of the craft brewing industry would occasionally touch on the need to update the definitions of what a craft brewery was in the NSLC Regulations. That’s where the 15,000 hectoliter maximum volume was found in the definition of a microbrewery. At the time, a few other provinces had a similar limit, and we suspected Nova Scotia simply copied that. But other jurisdictions were starting to increase that number as they experienced growth in the sector before we did. It made sense to all of us around the table that some sort of graduated step-up framework would be needed since the economics of a small brewer did not magically become those of a large commercial brewer when you passed 15,000HL of annual production. But in 2014 it seemed a long way off because the biggest craft brewer here at the time was around 8,000HL in size.

Tied to that was the NSLC markup charged on sales by craft breweries through the NSLC store network. Around 2000 or 2001, before it became a Crown corporation, the Commission (as it was then known), following what I was later told involved much back-and-forth at one of their meetings, agreed to chop the markup in half, from the 80% they had been charging all brewers, to 40% for craft brewers. This again was in line with what had gone on in other provinces, and recognized a basic principle. If you are making a product in small quantities, it costs much more per unit, because you do not enjoy economies of scale. If the same percentage markup is applied regardless, the much higher retail cost of that craft product makes it largely immune to retail sale. This is not, regardless of what Mr. Black may believe, a “subsidy”. A Rolex is not marked up at the same rate as a Timex. Nor is the $100 bottle of wine on the list at Mr. Black’s favorite restaurant marked up at the same percentage rate as the low-end stuff. It is just Retail 101. In any case, the retailer is not losing money on the sale. What they are making is more than what they would get if the sale did not take place at all, which is the likely result from a one-size-fits-all markup percentage.

Sometime over the last year or two, policies were changed so that every Nova Scotia brewer receives a benefit from NSLC on sales of locally made product, up to a maximum of $750,000 annually. For Labatt and their Agricola St. plant, this was found money, and probably the result of yet another threat to shut the place down. For everyone else, it changed very little since the number was calculated on the markup advantage they were receiving on their NSLC sales, except that it seems the $750,000 figure was not tied to the 15,000HL production limit very well, as it apparently gets maxed out at 11,000HL. Oops. But what it does seem to succeed at is in preventing a growing craft brewer from expanding into the space between 15,000HL annual production and what you might call a “small commercial” brewer, say 50,000HL a year, like the former Sleeman Dartmouth plant was. They couldn’t make a go of it there since they were paying full commercial beer markup, so they shut it down. There is an argument to be made that there needs to be some classification in between craft brewing and commercial brewing that makes that size of an operation viable, but we don’t have that.

I could go on at length on other aspects touched on in the two op-eds, like my puzzlement at the employment and payroll figures cited by Ms.MacDonald, the seeming return to NSLC being directed in terms of policy and operations by the Department of Finance, utterly at odds with the intent of the 2001 LCA, and how the NSLC Board feels about all of this. From a personal standpoint, it makes me sad to see that we seemingly are now not too far away from the same sort of broken relationship between small local producers and the NSLC that we had at the turn of the century. What a shame.

Nova Scotia’s Auditor-General and the NSLC – Part 3

Nearly a full year after releasing their previous and somewhat baffling report on their work at the NSLC, the Auditor-General this week finally released the last of their reports on their work at my former employer. This one covered a look at what used to be called the Merchandising and Marketing functions (now somewhat confusingly called Customer Strategy) which deals with product listings, de-listings, promotional programs, shelf management, and pricing; along with examination of inventory management, and Board governance. Inventory management got a clean bill of health, which was the only thing in the entire report which didn’t surprise me. That group has been very well-managed for years and apparently has stayed that way in the 7 years since I departed.

However the remaining findings leave me absolutely baffled. I really cannot write with any certainty on what has happened there since I departed, but I can tell you what I recall from when I was there. M&M as we called Merchandising and Marketing was the 1000-pound gorilla during my time there, which was really not surprising when you consider they were the group that determined what we sold and how much we sold it for. It really was the core function of what we did and how we performed, and everything else was in support of that. They were the group with whom the vendor community interacted, and their decisions had a great impact on what our customers thought of us. Everyone understood they were Very Important.

When I first got there in the early 2000s the division was not very well thought of by the vendor community. If you were a favored vendor you loved them of course, but there were a number of vendors who were not favored so much and they had a different view. Back then there were lots of reasons for that, and early on in my time there a lot of work went on to fix that. Things were made more transparent, processes were put in place and documented, and results were communicated back to those affected. It took a lot of time to change the perception but from my perspective looking at it from outside the division, it seemed that a lot of things had improved and the vendor community at least understood how and why decisions were made. Not all vendors were happy – something you will never achieve with our monopoly model where NSLC is the only game in town if you are looking to sell your product in any quantity – but things were working.

Part of that was due to a tremendous amount of work that was put in place by the institution of a category management model. Unlike the previous way of doing things where a lot of decisions were made by the seat of the pants and looking at some sales numbers, the CM approach broke everything we sold down into granular categories – so instead of just wine or white wine, you might have a category just for French white wine (along with similar ones for wine from other countries), with sub-categories made up of a number of price brackets, grape varieties, regions, whatever. Determinations would be made as to how many articles were required in the assortment for each of those, and then a call for applications would be issued. This required the vendor to supply all the information needed about the products they represented, from our price to buy it, to package size to case weight to images of the label. It was a very information-heavy process, and some vendors didn’t like having to go to all that effort, though most understood why it was necessary in making decisions. Samples would be requested, it would go through a tasting and scoring process, proposed retail prices would be determined via the pricing formula, and finally winners and losers would be determined. All of this was shared with the vendor community and everything was recorded electronically, usually in spreadsheets. Then orders were placed, products leaving the assortment would be cleared out, and new products would hit the shelves on the appropriate date. This same process happened for every listed product once a year, with various other categories being done in different months. It was a very busy place.  

So, imagine my surprise when I read this in the A-G report:

1.2 For an organization of this size, we would expect to see established and well
documented policies and procedures in all the key product management
business functions at NSLC head office. However, we did not find policies or
procedures in the areas of product management that we audited.

1.3 The scope of our audit included the selection of beverage alcohol products to
sell in stores, as well as pricing, shelf management and promotional program
decisions. Generally, we found processes in place lacked clarity; document
retention was not a priority; and approval and review processes were almost
nonexistent. What the organization expected staff to do in these areas is not
clear.

Unless they threw out everything they used to do, I am stumped by this. Maybe they did, but I don’t know, and I would find it difficult to believe.

Then we read this in the report:

1.7 Currently, to arrive at product selection decisions, management stated that
staff are continuously reviewing product performance. Category managers
indicated they review sales data, identify gaps in the product mix and price
points, and consider other criteria including market, customer, and product
trends. However, the approach to conduct and document this analysis needs
consistency and accountability.

1.8 ‘General list products’ are carried regularly by the NSLC, while ‘one-time
only products’ are items brought in for a specified period. The annual
beverage alcohol selection process applies to both types of listings. However,
one-time only products can also be added and removed outside of the annual
process, making the process less transparent than for general listings.

1.9 Each year, NSLC publishes an expression of interest for alcohol beverage
products, and suppliers and their agents provide a submission which contains
the details of the products they wish to list. Submissions are grouped into
categories; generally, wines, spirits, beer, and ready-to-drink products.

1.10 Staff indicated that they meet with suppliers and agents throughout the
product selection process. These meetings may occur before or after listing
submissions are due and there is no set timeframe in relation to the process.
Management stated that any supplier or registered representative who makes
a meeting request prior to the final listing decisions will be granted a meeting
with staff. However, neither meeting minutes nor a record of discussion is
kept. Record keeping would support consistent consultation with suppliers
on product strategies and assist in relationship management and continuity
if there are staffing changes. This would also support both fairness and
efficiency in the process.

1.11 The rationale to add new general list products is often not clearly documented.
We reviewed the selection process for 26 sub-category reviews within the
wines, spirits, beer, and ready-to-drink categories over a two-year period.
Examples of sub-categories include French wine, Canadian whiskey,
and single serve beer. Management explained that there are no retention
standards for documents associated with product selection. The absence of a
filing system was further complicated by staff turnover in recent years and as
a result, it took time for us to collect the documents from staff.

So it sounds like there is a process after all, just not one that fits in the A-G’s proper type of box. If you are reviewing performance and developments in the category continually, it sounds like you are doing the job you’re supposed to. The behavior of the market and the product development cycle do not occur in handy consistent time cycles over the course of the year. The use of one-time-only or OTO listings is an attempt to respond to those sort of unexpected changes and give the customer the latest and greatest thing. Those often transform into regular listings if the trend proves to have legs. I find myself wondering if the A-G people working on this ever understood the CM process and what it tries to accomplish. I just don’t know.

The report also makes it sound like everything is still paper-based, which aside from meeting notes surely isn’t true. I know that before I left, NSLC was making a big push towards having every electronic document retained using Sharepoint, a Microsoft product. Along with others, I found it very challenging to use, and I wonder if because of that it eventually fizzled out – I do not know. I find it hard to believe that in this day and age those electronic documents are simply purged. Maybe they are in Sharepoint, but nobody could figure out where. Who knows?

The same sort of confusing findings can be seen the the A-G’s reporting on promotional programs. Without repeating everything here, the report describes the process they use and the documentation provided, then criticizes them for having inadequate documentation and processes. I’m not sure what the appropriate solution here is, since they really don’t say. I’m scratching my head.

One of my favorite pieces of the report is the shelf management section. Shelf management involves fitting all of the products you have to sell on the available shelf space in each store. Each store has different amounts of available space, so it would be a very labor-intensive process. Back when I first arrived, the NSLC had just acquired some shelf management software to help with this task. It took a while, but eventually it was tamed and one person was the subject matter expert. She learned how to use the system to generate initial results, tweak it to fit specific quirks or market variances of each store, and then distribute the resulting planograms for implementation at store level. This is something every large retailer does.

The A-G found a shelf management manual dated 1999, back when the process was fully manual. Why they thought this would be in any way applicable to the current automated system is a mystery, but no matter, they apparently do. They also seem to think that this is a hotbed for potential fraud. Because there is a reliance on one person to generate the planograms, and on a store manager to indicate that it was executed as directed, all sorts of shenanigans could allegedly occur. I mean, really. If the Springhill store has 20 facings of various tequilas, and Springhill doesn’t sell much tequila at all, I would hope the manager would take the initiative to reallocate some of the space after observing that and give it to additional facings of something that is popular there. That is what any good retailer would do. But of course, the A-G is assessing this from the point of view of a government auditor, where risk lurks behind every decision that isn’t documented and signed off by multiple people to share the blame if something goes wrong. And that presumes that nobody would notice – the agents, who are in the stores constantly, the regional managers, whomever. The return for those inclined to permit fraud is rather small too. In reality, the risk of fraud is virtually nil. 

Job descriptions were noted as lacking in a number of management roles. When I was there I know from having spent many frustrating hours jousting with HR that it was impossible to get a salary rating for a management position without an approved job description. Without a salary rating the incumbent is likely being underpaid, leading to an unhappy employee. If the employees were not unhappy, that tells me the JD salary rating was not going to change and it was only the words around duties and job title that were lacking. Of course, the JD’s listing of duties is general at best, and often relates very poorly to what the person actually does on a daily basis. But that gets covered off by the annual performance review and objective-setting process, which is what really determines what the person is focused upon, along with the usual periodic updates that occur between the employee and their supervisor on what they’re working on. The fact that one of those positions lacking was or is a direct report to the President tells me that they are probably not missing much from having an outdated JD, and that their performance was not affected one iota. 

Finally we get into the governance section of the report, which is perhaps the most frustrating of all. The A-G begins by misstating the relationship of the NSLC to the Department of Finance and Treasury Board. That relationship does not exist in legislation. The NSLC is assigned to a Minister by Governor-in-Council, i.e., Cabinet. That often changed in the early days of the NSLC as a Crown corporation, and was not assigned to the Minister of Finance by Cabinet until 2009. Since then, however, it has remained there, though it could be changed tomorrow by Cabinet. Like the A-G, I think this is something the government of the day believes is true. It isn’t.

Over time, that relationship has changed how the NSLC Board goes about its business. When you had the Minister of Economic Development or Tourism or Service Nova Scotia as the Minister responsible for the NSLC, the Board chair and Minister maintained a mutually respectful arm’s length relationship. The NSLC Board was largely (though not totally) free to operate the business as they thought best, balancing their mandate under the Act with the wishes of the Minister. Even in my latter days with the Corporation when the Minister of Finance was also responsible for NSLC, by and large, with one or two notable exceptions, they kept their noses out of our operations.

That seems to have changed in recent years, with Finance playing a much more hands-on role in telling the NSLC what and what not to do. I’m not there, and really have no relationship with anyone now in management there, so I can only reach my conclusions based upon what I see from the outside looking in. But it seems clear that the Finance direction is very strong – for a number of years in the not-too distant past there were 3 current or former Deputy Ministers of Finance on the NSLC Board –  and that the Board has become much more of a rubber-stamp for their directives. That’s not always a bad thing, if the public policy goals of government are not being acted upon appropriately. But it becomes a problem when the public policy goals enunciated by Finance to NSLC are at odds with the 4 NSLC legislated objectives. Finance is first and foremost concerned with protecting the revenue position of government, and back in the bad old days of the NSLC as a Commission, delivering that revenue was their one and only objective, customers or local producers be damned. One hopes we are not slowly inching back to that time. The A-G does hint in the report that this degree of influence is not totally healthy, and one hopes that things change in that regard.

The rest of the report on governance issues deals with things like Board member evaluation, skills and competencies, and education for Board members. When I was there I was heavily involved in this area, and we had our challenges. Getting the Board members we needed was sometimes frustrated by having Cabinet make those choices for us, which were not always what the Board chair recommended. Subpar performers on the Board were easy to identify but difficult to rectify, for the same reason. If the Board is intended to actually make its own decisions, these things become important, but are less so (or may in fact be a detriment) if the Board is simply rubber-stamping decisions handed down from above.

So we end up with lots of time and tax dollars spent, lots of supposed flaws identified, but not much clarity on what the impact, if any, of those might be outside of some theoretical what-ifs that might cost a whole lot more to fix than what they are intended to cure. That is not to say the NSLC is perfect; far from it. I am not a fan of the direction they have taken over the last few years and from my point of view I think they have regressed in some areas. But I also think that there are a lot better ways to examine their operations than by sending in the A-G to assess them against some kind of perfect bureaucratic model, if these are the kind of results we get. Odds are that after a brief flurry of activity to check the requisite boxes, these end up as just more reports on a shelf.

One closing note: the media coverage of this part of the A-G’s report was odd. Jean Laroche of CBC noted that it was due to be released by tweeting a link to his story on last year’s report, which dealt with local producers and their relationship with the NSLC, none of which had anything to do with this report. Apparently Francis Campbell of Saltwire read that, because his story for the Herald dealt with the A-G report findings for a few paragraphs, then segued into a long section dealing with a PC Party press release from a week or two back about some communication between the NSLC and small brewers which those brewers believe may place them in jeopardy. Again, there was nothing in this A-G report about that issue either. The Saltwire story included this gem of a quote: ““Taxpayer dollars are going to this organization so they can hold back local producers? That’s not right,” Tim Halman, the MLA for Dartmouth East said.” Mr. Halman seems not to realize that the NSLC generates revenue for the Province and does not suck tax dollars away from other government programs. Like everything else about much of this, how bizarre.

Nova Scotia’s Auditor-General and the NSLC – Part 2

In Part 1 of my commentary on the Auditor-General’s review of the NSLC I laid out my views on their conclusions regarding NSLC’s local industry support and subsequent recommendations. This time, I want to discuss my thoughts on RSMA, the proposed store network rationalization issue raised by the A-G, and governance of the organization, which he says will be in part 2 of his report.

RSMA stands for Retail Sales Markup Allocation. It has been something that has existed for a long time, long before I joined the NSLC, and began when local manufacturers were permitted to sell to the public through their own retail stores. It was always calculated as 5% of the wholesale cost of product sold by them at retail. Back when I was there it was a pretty nominal sum. While one could argue about whether NSLC had any right to impose that, it was seen as one of the terms and conditions of getting a store permit and while no manufacturer probably liked paying it, for most it wasn’t particularly onerous. Occasionally an internal audit would reveal some delays or miscalculations in remittances, but it wasn’t generally a huge issue.

At some point after my departure, things seemed to change. I am not working with any up to date information here other than what the A-G has in his report so I can only speculate. He states that RSMA payable to the NSLC was $1.7 million in the most recent fiscal year, covering all locally-manufactured product categories. Multiply that figure by 20 and you get a wholesale cost of all those sales of $34 million. Retail sales numbers based on that figure would be much bigger, perhaps even twice that. That is a stunningly large number. I see no possible way how that could just be sales through manufacturer’s retail stores, considering that many, especially the larger ones, sell a lot to the NSLC themselves or to other provinces.

I am led to believe (in the absence of any documentation) that the interpretation of RSMA must have changed to include virtually all sales by local manufacturers. Product sold direct to licensees, product sold to liquor boards in other provinces perhaps, who knows. That would help explain the huge jump in RSMA numbers. But by any reasonable definition, those would not be retail sales. To start with, the Liquor Control Act was never interpreted during my tenure as having the NSLC control sales made by manufacturers to places outside Nova Scotia. And a sale made to a party who then resells it, such as to a bar or another retailer, is not a retail sale. They are buying it wholesale at whatever price and claiming an input tax credit because they are reselling it. If so, that would explain why RSMA which used to be a few hundred thousand dollars a year during my time there is now so large, along with the growth of the industry overall.

If this is accurate (and I have no way to confirm it) then the NSLC picked up a fast million or so a year from local manufacturers without doing much else than changing their definition of RSMA. I’m surprised the A-G didn’t seem to look into this. Maybe nobody mentioned it, or maybe they didn’t talk to any local producers. I don’t know if this is true, but it is an area that deserves a much deeper dive.

In part 2 of his report the A-G promises a look into the governance of the NSLC. In my 12 years there as Corporate Secretary to the Board this was one of my main areas of interest, and I worked closely with the Governance and HR Committee of the Board over the years to help construct some governance structures. We started from scratch the day the organization became a Crown corporation with outside directors, and had to create everything we needed on our own.

In concept a Crown corporation makes sense. The government is the sole shareholder, and appoints directors to oversee the organization’s operations. The Chair is accountable to the Minister responsible, and the CEO is accountable to the Chair of the Board. If you want the organization to run on a commercial basis as defined in the Act without politics getting in the way then this has a lot to recommend it. You keep government and politics out of it as much as possible and let the place run like a business.

The reality is often different. Ministers always seemed to have a hard time not telling the Chair or the CEO what to do. This is understandable given the questions they received in the House or at media scrums about what the NSLC was doing. Answering “Don’t talk to me, talk to the Board Chair” never seemed easy for them to say. In my time there, I didn’t see much of the blatant political reach-in that used to be the case – directives to hire this person, buy that piece of property, build a store there – but as time went on the influence of government downtown grew stronger.

Up until 2009 our Minister was always someone other than the Minister of Finance. We had Tourism, Service Nova Scotia, Economic Development and a few others, but not Finance. I think that was felt to be a good thing given the way the organization had been crippled back in the old days, squeezed to deliver every last penny to government when it was a Commission reporting to Finance, with the resultant poor service and facilities that helped produce. For a while, even though our Minister was from one of those other departments, the Deputy Minister appointed to the Board under the Act as a non-voting member was Vicki Harnish of Finance, which worked quite well. Vicki was a fine Board member, who wasn’t afraid to speak her mind and put forward the position of government of any given issue, but who would respect the roles of the other appointed Directors if a majority didn’t agree with her position on something. When the NDP government was elected our assignment was changed to Finance under Graham Steele, but he was a great Minister to deal with and things didn’t change much.

After Graham stepped down and for the rest of my time there, I noticed a change. We would receive directives from the Minister’s office periodically telling us not to do something, to provide them with advance notice of operational moves, to give them weekly updates on public communications and so on. This was not something we had experienced previously where we were trusted to advise downtown only when we had something that might be controversial about to break. It certainly didn’t involve us sending them our weekly product advertising and promotion material in advance as we were now directed to do. I didn’t like it much, because the more information you gave downtown, the more likely they were to reach in and tell you not to do something like they are used to doing with a department of government. By the time I retired, more and more that’s what the place seemed to be turning into.

The Minister Responsible for the NSLC has remained the Minister of Finance in the years following my departure, to the point where I wonder if the Premier and his staff realize that it doesn’t actually need to be, and the connection to Finance became even stronger. At some points there were 3 current or former Finance deputies sitting on the Board. The Board Chair became one of them, George MacLellan. George is a fine fellow and I mean this not to be a reflection on him, but clearly the focus had changed and the degree of Finance influence is large. You see some of the results of that in subsequent developments. The NSLC no longer seems to be the same vibrant organization it was in my first few years there. There has been some regression back to the old days where they were being told by government what to do. From where I’m sitting, the place seems to have more than a whiff of staleness about it these days. Then you have the apparent change to how RSMA is calculated, and what seems to be a feeling by some at Finance that the Emerging Regions Policy as I discussed in Part 1 is a problem despite much evidence to the contrary, and it is a worrying situation. One hopes Finance does not see the NS alcohol industry like they did the NS film industry.

That segues nicely into the A-G’s commentary about a proposal to rationalize the store network back in 2014. He expresses some curiosity as to why that went to Cabinet and why it did not proceed except for one location, Joggins. Ah, the stories I could tell.

Going back to when the NSLC review was underway in 2000, management at the time showed the review committee of which I was part a similar plan they wanted to proceed with, so it has been percolating for a very long time. Back then there were no agency stores in Nova Scotia but other provinces found them successful, so those would have been instituted as part of closing a number of underperforming rural stores that either needed significant investment in their facilities or otherwise were only marginally profitable. Needless to say they were not allowed to proceed with it, but provided it to the committee to demonstrate that they were indeed thinking ahead but were stifled by government reluctance.

When agency stores were approved in Nova Scotia they were initially designed to fill gaps in the retail network rather than to replace corporate outlets. Over the years that concept expanded until virtually all of the gaps were deemed serviced, but the underperforming corporate stores were always considered untouchable by our various Ministers. Despite the business case for replacing them with an agency store and the benefit that offered to the community by making an existing retailer more viable long-term, losing those NSLC jobs in those communities – many of which were considered fairly prestigious – was never palatable. Governments believed that taking on the NSGEU just would not be worth the pain.

This drove our Store Operations group (the people who ran the stores and dealt with store staff) and Store Development people (who built and maintained the stores and managed our real estate) slightly crazy. A lot of the stores in these communities were relics of a former time and would never be built today. Many of them were old and outdated,  oversized for the market, with product on the shelves often just sitting there to fill the space. Store staff would sometimes resort to painting the walls or doing other tasks than dealing with customers when things were slow and there were no customers to serve. The best we could do was to find an existing retailer who wanted us to co-locate with them in their facility and to move there, usually with a downsized store more suited to the market. If you’ve been to the NSLC Bridgetown store, that would be an example of what I’m discussing. But from an efficiency standpoint, replacing these corporate outlets with an agency store would make even more sense if you could find a way to manage the staffing and union issues. You no longer need to manage the real estate and maintain the building, and no longer have over 100 staff members you need to manage.

Regardless, the concept never really went away. I remember working on it at various points over the years whenever we got a hint from downtown that it might be a possibility. That happened again just before I departed in 2014 and one of the last things I did for NSLC was to work on the proposal that I guess made it to Cabinet later that year. From what I gather from the A-G report, the only result of that was finally getting approval to close the Joggins store, which had always been the poster child for a NSLC outlet that needed to go away. Given the likely union pushback it’s a difficult thing for government to ever deal with, but it really makes no sense to keep building and maintaining stores in some of these very small markets when there is very little retail remaining, and where an agency liquor store might make the difference between a grocer staying in the community or closing down. It is something I hope that government and the NSGEU can reach a compromise on eventually.

Before I close I want to comment on a couple of the things the A-G found little to criticize, the present state of store development and facilities, and NSLC procurement. Both of those either are or until recently were under the oversight of my friend Brad Doell, who is the V-P I worked most closely with in my last few years with the organization. The Facilities staff I knew are still there as well, so to Brad, Karen and Theresa, congratulations on getting the A-G stamp of approval!

 

Nova Scotia’s Auditor-General and the NSLC – Part 1

This week the Nova Scotia Auditor-General released his latest opus, a report that covered the NSLC, in particular their treatment of local producers. Needless to say, they found things that did not meet their standard of bureaucratic perfection, and as is almost always the case, the organization on the receiving end of their butt-kicking responded like the plebes in Animal House did during initiation into the fraternity, with a “Thank you sir, may I have another” type of reply indicating that they agreed with the recommendation. Virtually every government department or agency feels required to reply in this manner to A-G recommendations regardless of how absurd they may be. It has always struck me as quite bizarre. It’s unfortunate, because it gives the A-G a level of credibility they don’t always deserve.

A word of clarification on the Auditor-General’s process may be useful as a starting point. Despite the name, these are not traditional financial audits where numbers either support the proper uses and reporting of funds or not. These instead are management audits, where the A-G looks at various programs to determine whether or not they are deemed to be properly managed. The problem is, of course, that the A-G is not expert in most of the things they audit in this way. So they fall back on a general model of looking for strategies, policies, documentation, approvals, oversight, objectives, and measurable results to determine whether or not a particular program gets their stamp of approval. If a program does not check all those boxes, the result is a recommendation to make it so, usually by adding more process, documentation and oversight – i.e. bureaucracy. A standard such as this is sure to result in much grist for the mill since in reality most programs begin with one idea in mind, then evolve and change over time based on feedback and results. Usually it takes time for the bureaucratic and management processes to catch up. That’s just the way things work in the real world. The old saying “Perfection is the enemy of the good” comes to mind here. But it gives the news media and editorial writers something to publish. Bloggers too, I suppose.

I have a bit of a vested interest in this, not just because I used to work at the NSLC, but because for most of my time there, I was the point person for local industry initiatives in my role as Corporate Secretary to the Board. After the rewriting of the Liquor Control Act in 2001 and making the NSLC into a Crown corporation, the organization was given 4 new corporate objectives by legislation:

• promotion of social objectives regarding responsible drinking;
• promotion of industrial or economic objectives regarding the beverage alcohol industry in the Province;
• attainment of suitable financial revenues to government; and
• attainment of acceptable levels of customer service

It may not be immediately obvious, but some of those objectives have a degree of conflict with each other built-in, by design. Responsible drinking initiatives may limit the marketing and merchandising folks from selling product as aggressively as they might do if they were selling boxes of crackers. Providing “acceptable” (whatever that means as it has never been defined) levels of customer service usually means spending more money on store operations, which has an impact on the financial returns to the province.  And so does promotion of economic objectives regarding the local beverage alcohol industry. They all require management to do a bit of pushing and pulling in order to juggle all of those things and reach a reasonable balance. These objectives did not exist prior to the rewrite of the Act in 2001, where the old Commission was seen simply as an arm of the government designed to generate revenue, everything else be damned.

In the early days of the NSLC as a Crown corporation and even prior to that in its last year or so as a Commission, the interests of local producers were not a high priority for management. I have written about how it used to be and how it changed in THIS POST so I won’t rehash that here. I will only add that the image of the entity changed from one of being an obstacle to local producers to one of being their biggest ally, particularly for local wineries. The wineries were the first group of producers to work together, develop their own strategic plan, and engage the NSLC at a senior level. A few small brewers and distillers existed back then, but they only came along in significant numbers later as the market began to focus on local product.

But all that said, the early Board members of the NSLC from 2001 onwards were always keenly interesting in the local industry part of the mandate and wanted the Corporation to do more. They realized it would take time, and the priority early on was getting the organization in order and setting a new direction. Once the winery association developed their strategy, they began working with the NSLC to address the obstacles to growth that existed. From that came the Emerging Regions Policy which allowed NSLC to treat products from small production regions – not just Nova Scotia – differently from those of large, high-production regions in recognition that the wholesale cost would be higher and that less profit would need to be taken when sold at retail, or else you wouldn’t be able to sell them at all since the shelf price would be ridiculously high. That was approved by the Board and over the following year or two the result was that the number of listings of NS wine in NSLC stores took off.

In my role as the contact regarding local producer issues I did whatever I could to assist them. The NSLC staff member in charge of issuing permits for local manufacturers worked for me, and the two of us had a good relationship with most of our local manufacturers. Our objective was to get ourselves and the NSLC out of their way as much as possible in terms of the rules around what was needed to obtain a permit.  We tried to make it as easy as we could for them to understand what needed to be done by them to get approval and for the most part I think we succeeded. But fear not, the A-G still sees a problem. Namely: “One person reviews, approves, and issues permit applications. There is no additional monitoring or review by a second person at any step of the process. This is an inappropriate approach which places too much responsibility and autonomy with one staff member and exposes the organization to unnecessary risk of permits being issued when conditions are not met.” Well, he doesn’t say what that risk might be, so I really wonder what he is talking about. This is not a hugely complex job – essentially the person in charge of permits vets submissions against a checklist, does an in-person inspection if necessary, and if everything is complete and seems kosher, issues the permit. Having two or more people oversee it all would be a waste of resources in my opinion if all you are trying to satisfy is the classic accounting control of separation of duties. There isn’t a huge sum of money at stake here that would lead to under-the-table payments being made, and the NSLC has its own internal audit group that also would be able to catch anything inappropriate.  I also have no idea what the A-G is talking about when he says the records were in someone’s email account. I know that wasn’t the case in my time there. But it shouldn’t be a huge deal to fix. Auditors gonna audit, I guess.

What was, and apparently continues to be a problem at times, is what happens when those manufacturers deal with what used to be called the Marketing and Merchandising business unit (it now has a different name), which is the group that makes the decisions about what products get on the shelves, how they are priced and promoted, and how much the NSLC will buy. These staff are used to dealing with massive producers with deep pockets, companies like Gallo, Constellation, Diageo, Inbev and the like, and those sorts of experiences do not scale down well to tiny local producers a lot of the time. The staff there are charged with enhancing the NSLC’s gross margin too, just like equivalent staff in any retailer would be, and that objective is not always one that fits with the idea of having local listings that do not sell in huge quantities, have lower margins, and thus take up far more shelf space per sales and profit dollar than products from the large-production areas. To their credit the Merchandising folks in my time there did some great things promoting local products, but I know at times some of the local producers found them challenging to deal with. If it was any comfort, the large producers often found them equally challenging. That’s the way it is when you are pretty much the only game in town to deal with as someone trying to sell liquor in Nova Scotia.

The A-G finds fault with the current NSLC for “an overall lack of adequate planning, evaluation,  and  clarity around how NSLC supports the local alcohol manufacturing industry”. He cites “a lack of clear goals and objectives for the local industry, including action plans with measurable targets to determine success”. Well, far be it from me to dismiss the necessity of a strategic plan, but in my experience the realities of the marketplace and the speed at which things change tend to make such plans somewhat less than top-of-mind for managers most of the time. And setting targets for things that you largely have zero control over – show me anyone who predicted the number of local producers would more than double in the last 5 years, and sales dollars nearly triple in that same period – seems rather silly. If they had tried to set targets 5 years ago and then missed them badly as seems likely, I suspect the A-G would have been equally critical. But it ticks a box on his list.

The A-G also notes that they did not set specific targets for sales of NS products. He seems not to understand that projecting targets for sales at such a micro level is virtually impossible, especially in a market as dynamic as that of NS product that is constantly seeing new entrants and new product introductions. It would seem more than a bit pointless. He then goes on to say “While local product sales increased during the first four years of the plan, there is no clear link between the strategy and this growth. As noted later in this chapter, some of the increase in the number of local manufacturers and sales may be attributed to steps taken that were not adequately planned and have not been subsequently reviewed or evaluated, and which may have long-term negative consequences for the industry.” Given that he already faults them for not having a strategy, I have no idea what this section is trying to say. The NSLC doesn’t control how many local manufacturers there are nor what their sales may be. It is all rather baffling.

The section dealing with the agreement on beer between NS and NB, which later expanded to include PEI, is a bit of a muddle, largely because the agreement itself is that way. I was one of the two people (my opposite number in New Brunswick, Rick Smith, being the other) who drafted the thing in 2007. The relationship between NS and NB when it comes to beer is one fraught with peril, and I could not even begin to explain all the ins and out involved here. I recall that it all began with NS craft breweries having difficulty doing business in New Brunswick because of bottle recycling rules, but it expanded well beyond that until we decided that the headaches weren’t worth whatever the benefit might have been, and decided that each province would treat the other’s craft breweries doing business in the non-home province the same as they treated their own. I think (but can’t say for sure) that where it went sideways was when NS decided to apply the infamous RSMA on sales by NS craft brewers regardless of destination. Interestingly, the A-G seems to take the entire RSMA regime at face value, without questioning why it is different in the other provinces. More on that, and other things, later.

The A-G states that “NSLC does not have policies or support for markup structures applied to Nova Scotia manufactured craft beer or cider, including no approvals of the rates by the Board of Directors.  The Nova Scotia craft beer markup has been applied for over a decade with no policy in place.” What I recall on this (excluding cider, because back then the total amount of cider sold could likely have had trouble filling an oil drum) was that it was a decision taken in late 2000 or early 2001 by the former 3-person Nova Scotia Liquor Commission, of which my boss at the time, Michele McKenzie, had been appointed as a member. I remember her coming back to the office after Commission meetings regaling me with stories of why NSLC management said they couldn’t give craft brewers a markup break, despite it being done virtually everywhere else. Finally she pushed back hard enough that her view won the day and it happened. Maybe the old Commission meeting minutes have disappeared in the decades since, who knows. I suppose it is quite possible that nobody remains in the organization who might have some memory of that happening. Clearly, however, the Boards over the years were aware of the markups, having been in receipt of numerous presentations on pricing in the years since.

I’m going to give some special attention to this item in the report, where the A-G states “No internal  risk analysis was completed in advance of implementing the markup rates.  A proper risk analysis would identify potential risks, including unintended consequences, and help demonstrate that NSLC had completed some due diligence that it was operating in compliance with various applicable trade agreements, which is ultimately in the best interest of manufacturers in the long term.  These agreements include, for example, the Canadian Free Trade Agreement and the General Agreement on Trade and Tariffs.  Both agreements have seen recent or ongoing challenges to local pricing structures across Canada.”

Oh, where to begin.

It seems he is focusing mostly on the risk of complaints under trade agreements here. In fact our risk analysis included both that aspect as well as a totally different piece relating to what the markup rates should be and what consequences different ones might have. That was done as part of the economic impact analysis of the NS wine industry we commissioned prior to the Emerging Regions Policy being developed. So risk analysis of different markup rates is out there somewhere if there is a willingness to unearth it. In addition, when the policy was brought before the Board for approval, both myself and Carrie Cussons, now the President and CEO of Events East but at the time the NSLC’s CFO and prior to that interim CEO before the appointment of Bret Mitchell, spoke to the financial implications for the NSLC. The Board deemed them an acceptable trade off. Where the A-G got his information seems a mystery. But his conclusion is utterly incorrect.

But let’s focus instead on the trade agreement piece. I got involved in this way back when, at the time of the Sleeman purchase of the former Maritime Beer Company plant in Dartmouth in 2000 or so. They thought that would mean they would get treated by New Brunswick and PEI just like Olands across the harbor was treated. New Brunswick disagreed, and off I went in my education on trade agreements. As it turned out, the Maritime Beer Accord, as the arrangement was termed, did not exist on paper anywhere. It was an understanding, a nod and a wink between governments, designed to allow the Oland brewery here and the Moosehead brewery in Saint John to continue being treated by the respective provinces just like they had been when they each had breweries in both places. I remember going to the archives and searching out old newspaper stories from 1993 to be able to read at least what was said and reported at the time. It wasn’t documented in any way other than by the ongoing behavior of the respective liquor boards.

As part of learning about this I got to know the NS Trade Representative at the time, Greg Bent, who had lots of experience and who I came to rely upon frequently for advice. What I learned from him was that giving geographic preference to an industry was a very dangerous minefield in the trade world. So when the idea of helping the NS Wine industry came about, I knew that any policy could not say “NS Wine” or it would be a sitting baby duck for the trade people.

When I thought about what we were trying to accomplish, it struck me that the same issue applied to products from any small wine region. A little research revealed there were all kinds of them all over the globe, who were recognized as distinct oenological regions by the wine world, and which did not have the benefit of large production volumes and economies of scale. Without those things, the prices at which they could sell their product to liquor boards like the NSLC were several times higher than your typical bottle of even good-quality California, Australian or Italian wine. The result was that we would never see those products here because it made no sense for the producers to try to sell them to us, or for the NSLC to bring them in.

So the Emerging Regions Policy was written with that in mind, and it seems to have worked, since the NSLC has brought in product under that markup structure from other small wine regions around the world. It will never be a large volume simply because most of those regions aren’t big on exports or experienced in dealing with the bureaucracy of liquor boards. But it does work as intended.

The trade complaint levied by Australia a couple of years ago was mostly directed at B.C., Quebec, and Ontario, but they fluffed it up by adding some other minor irritants from other provinces. In our case it was less about NS wine sales through the NSLC hurting Australia since the two segments overlap very little. It was more about the NSLC’s use of price bands and limiting the number of products in the economy wine category, which hurts Australia to a degree given the ocean of cheap wine produced there. But only to a degree, since the NS market is minuscule in the overall scheme of things. Compared to the Ontario wine stores, once owned by Ontario wine companies, selling direct to the public through their own retail network, or the Quebec laws that allow low-end wine to be sold through dépanneurs as long as it is packaged in Quebec, we are a virtual thimble.

One would think that this would be obvious to anyone who has looked into the complaint, but it almost seems there is a deliberate obfuscation at work here. If there is any one thing of which I’m most proud about that I had anything to do with during my time at NSLC, it is the way in which we helped local producers flourish. But I am not here solely to defend the NSLC because there is a lot that I wish I could have changed about how they operate, and part of the reason I retired when I did was frustration over not being in a position to do anything about it. I’ll expand on that, along with discussion of RSMA, the store network issue raised by the A-G, and governance of the organization, in Part 2.

An Unwelcome Easter Egg

 

This Easter weekend marks the 7th anniversary of something that in retrospect was a great learning experience but which at the time seemed like a classic “What have I gotten myself into?” moment. That was the Great NSLC Price Adjustment debacle of 2013. I was recently reminded of this while discovering some old files from that time on a now-decommissioned hard drive.

First, some background. Just 2 or 3 weeks previous, my boss, Bret Mitchell, asked me to take on responsibility for some areas that were previously in the portfolio of a recently-departed member of the NSLC executive. The main portions were our corporate communications function and our social responsibility mandate. These tended to overlap to some degree and while they were areas that I had some input to previously, now they would be my full responsibility, in addition to everything else I was doing related to government relations, Board governance, and corporate policy. It seemed a logical fit.

While on a social basis I knew the staff who were now working for me, I really had little experience dealing with them day to day. Fortunately they were all quite good at what they did and needed little from me in the immediate term, other than some time to get me up to speed on what they were working on. That was a good thing, because a couple of weeks in, just as I was getting to know them better, all hell suddenly broke loose thanks to a combination of unforeseen circumstances.

In 2013 Easter Sunday fell on March 31st. That meant that the NSLC, both stores and Head Office, were also closed on Good Friday, March 29th. The NSLC at the time did a twice-per-year general pricing update, usually effective the first selling Monday in April and October. In the case of 2013’s April adjustment not everything changed, but about 1050 products had either an increase or decrease in price, out of just over 4,000 total products offered.

Changing that many prices is not a trivial task. The price file was maintained in our SAP system, which then had to update our separate point-of-sale systems in our 100-plus stores. In addition, store staff needed to change what we called “bin tabs”, or price labels found on shelves, before the start of business on that appointed day. Stores had been made aware that would need to happen on Monday morning. Easter Saturday was one of our busiest selling days of the entire year, so you certainly wouldn’t want to have a price change kick in on that day.

This was the first time that these particular circumstances happened – a price change needing to be uploaded to SAP on a Thursday, before Head Office shut down for the long weekend, but not hitting the POS until Monday, with business as usual in-between on Saturday. The IT folks thought they had the scheduling figured out correctly. Turns out they hadn’t quite nailed it. Sometime between the time everybody left on Thursday, and the time stores opened Saturday morning, a portion of the price file somehow got uploaded to the POS in our stores.

Slowly, as stores began making sales on Saturday morning, the issue emerged. A few customers began noticing that the price on the shelf did not match what was charged at cash. Stores were initially baffled, and in most cases did what retail staff do best – made the customer happy, either with refunds or manual overrides. But the majority of customers didn’t notice, or didn’t care. I remember becoming aware of the issue at home around midday Saturday, and was as confused as everyone else. Eventually as the day went on we were told it was a “SAP problem”, and that IT were trying to figure it all out. One thing we did discover early on was that rolling everything back was not possible that day. It would require all stores to shut down for an hour or two, quite possibly even longer if anything failed, which simply wasn’t feasible on such a busy day. Stores were trying to change bin tabs as quickly as they could, but that was hit and miss as well. Yikes.

Easter Monday was supposed to be a holiday for Head Office staff, but those of us in Communications and IT were not so lucky this time. While IT dug into what had happened, Communications was busy preparing briefing materials for our management, for stores, and for our Minister. We didn’t know the gory details of exactly what had gone down yet, but we knew it was a computer issue of some sort. So our early drafts reflected the same language we had been told, that it was a SAP problem and was a completely unforeseen issue.

But the news organizations were hard at work that day, and we began getting reports from store staff that they were being approached or otherwise dealing with members of the media. Some were asking for interviews with staff, while others were just accosting customers either in the store or the parking lot asking their opinions on what had happened. The same kind of interview requests began arriving at our office. By this time we had a pretty good idea of the amount of money we had inadvertently charged – about $29,000 in total. Now the media had come up with another angle on it too, attempting to make a link between this mistake and provincial fee increases for everything from campsites in parks to fees for permits and licenses across all departments of government that had kicked in on April 1 as well. The two things were not in any way connected except for the date they were scheduled to occur, so it made zero sense, but hey, anything to make a good story I suppose.

The next day, April 2, the Legislature was in session and government offices were open. Our Minister got scrummed at the Legislature and handled the questions well. The Premier got quizzed by the Opposition leader during Question Period about “cash grabs” and they parried each other to  no useful effect as typically happens during QP. By the end of our day on Tuesday we had fielded about 20 customer inquiries on the price change, and handled all of them without issue. Some people didn’t bother calling us but instead called the Minister’s office or the Premier’s office. Those all got bounced to us too, as usual, though those meant more work for us in responding since we had to then advise staff in those offices what we had said and how the person reacted to our answers. This is the kind of thing that just doesn’t happen when Superstore or Walmart do a price change. People hold the NSLC to a higher standard though, since they feel a sense of ownership I suppose. Fair enough, and a good lesson.

As it turned out, most people didn’t particularly care about a refund, since unless you had bought a large quantity of product that Saturday, you were generally talking no more than a couple of dollars or even less, just pocket change. But the offer of refunds was always our starting position, and that helped defuse things for most. Meanwhile, some of the nabobs downtown were unhappy with our initial characterization of it as a “SAP problem”, since apparently it was determined that the system did what it was told, so it was the instruction given that was the source. Knowing the complexity of SAP, that potential was almost a given, but it struck me as a bit petty on their part.

Meanwhile, never having seen a small flicker of a flame that couldn’t benefit from being doused with gasoline, Opposition leader Jamie Baillie issued a news release calling for a “full investigation” of the “cash grab” we had so deviously perpetrated. He had an axe to grind already, as a dust-up between him and my predecessor some time earlier had not gone well. This just gave him another opportunity to raise the profile of something that he was touting regarding how the NSLC was run and why the government of the day hadn’t changed the structure of liquor sales in the province – something the government that he had been part of had put in place, mind you, but no matter. He reminded me of my cats, who live by the mantra that any attention is good attention. Naturally, the media was all over it. Thanks so much, Jamie.

By this time though, we were already working on something else. We had been kicking around what to do about the $29,000 the overcharge had generated. We didn’t particularly want to keep it given the circumstances, and our CEO along with our Minister downtown were OK with us finding a home for it. Somebody – I cannot for the life of me remember who, but I know it wasn’t me – came up with the brilliant idea of doing a quick online poll to determine a charity that would be a worthy destination for it. Running the idea past those who needed to weigh in didn’t result in any fatal blows, so Heather, one of the staff members I had recently inherited, went to work on setting it up technology-wise while we came up with some deserving nominees. Even that wasn’t easy, as one of our presumed nominees – a charity we had been long involved with in supporting financially – didn’t want it for reasons that are known only to them, which made me royally P.O.’ed. Fine then, we’ll find someone else, and we did. We ended up with 4 nominees, along with a write-in choice.

The online poll was announced and got good reviews in the press. I don’t recall what Mr. Baillie had to say about it. The votes began rolling in, and some things that we hadn’t anticipated started happening. Some charities took to soliciting votes from those on their mailing lists, which was fine in its own right. Then a bit later into the week, despite saying only one vote per computer, in our rush to get things underway we had neglected to put IP address restrictions in place, and sure enough, someone tried stuffing the ballot box for a particular write-in candidate. They weren’t the least bit subtle about it though, so it became easy to spot and those votes were disqualified. Also, there were a few voices on social media saying it was all a set-up, that we had planned it all along for publicity, which was just so damn stupid that it blew my mind. Now, of course, we have learned never to be surprised by what one finds in such places.

When it was all over, the winner was the Canadian Mental Health Association, Nova Scotia Division, which received a cheque for almost $30,000. For me, the best part of the whole thing was when we invited them in to accept the cheque. It was just a short meeting in one of our boardrooms, not designed for publicity. But the people from CMHA were so genuine, and so grateful for the money, that it convinced me the people who supported them by voting made the right choice. That sum was enough money to make a real difference for them, unlike some of the bigger, high-profile charities. We had coined the tagline “29,000 reasons to do the right thing”, and we, along with the people who voted, did just that. It made me feel good.

The other thing that strikes me in looking back on that 2-week period in my files is that while this is the thing I remember best from that time, there were all kinds of other things going on too. I have no idea how I managed to juggle all those balls back then. Many of them were just grist for the mill, not really of great importance in the big picture view of things, but you need to keep the bureaucratic machine well-fed, and a lot of it was that sort of stuff. It makes me very grateful I’m retired now and don’t have to put up with that madness any longer.

Happy Easter, everyone.

PANS Gets Panned

As if things weren’t already upsetting enough with the world turned upside-down by COVID-19 and the restrictions that are put on our everyday lives, the job losses for many, the huge impact on the economy and investments, the stresses people are experiencing on a daily basis, and most of all the human cost to those afflicted – the Pharmacy Association of Nova Scotia (PANS) decided to pile on and add to the misery with this:

https://www.halifaxtoday.ca/local-news/prescription-refills-limited-to-30-day-supply-2186804

There are two nuggets within this story. The first is what drove this decision:

““The demand for prescriptions and pharmacy services is like it’s never been, and complicating that is obviously the need to ensure safety for staff and safety for patients,” says Allison Bodnar, CEO of the association.

Bodnar tells NEWS 95.7’s The Todd Veinotte Show that this will ensure that prescription drugs and medication don’t go out of stock for those who need it most.

“The last thing we need in our Canadian drug system is to have it become the next toilet paper,” she explains. “We have to protect our supply of medications for those who need medications now.”

Typically, Bodnar says there are lots of people who refill their 90-day supply when they’re only 30 days into it. The Pharmacy Association is advising the public not to hoard medications and to only refill when they have a few days or weeks left.”

Certainly understandable, and the goal is laudable.  However, I’ve had ongoing continuous prescriptions since 1990. Never once in all those years have I been able to refill a prescription 1/3 of the way through it. Even back in the dark ages of that period, you had to plead with the pharmacist to give you more if you were going away for an extended time. These days, it is all managed electronically and in my experience with both Lawtons and Shoppers it won’t let you refill a prescription more than a few weeks out. So I question that, especially since it is totally within the power of pharmacists to just say no to early refills anyway.

Here’s the second point, and one far more important to people like me:

“The pharmacist says she realizes this could cause increased co-pays for some.

“Some health plans have their copay as a fixed copay, so it’s five dollars or six dollars for every prescription, or sometimes it’s the actual dispensing fee,” says Bodnar. “Those people have the potential, in the second or third month, to have copays that they wouldn’t have had if they got 90 days.”

It’s more than just the potential, Ms. Bodnar. It’s a sure thing given the direction that the association has taken. In my case, the impact is significant. Over a normal 90-day refill cycle, my co-pay goes from $30 to $90, or an extra $240 annually. But then there’s this:

“But the Pharmacy Association will be working with benefits providers in the coming days and weeks to figure out a solution.

“We understand that it’s not what everybody wants right now for themselves but it’s best for everyone in the system,” Bodnar says.”

Well, it’s certainly what’s best for the pharmacy’s bottom line, but not so much for the customer, who is now paying triple the amount they would have previously. If I didn’t have the benefit plan that I do, those dispensing fees would cost me about $850 annually, not including the cost of the drugs themselves. Once again, there is something that is totally within the pharmacy’s power that would eliminate this increase. They could treat the 2 extra 30-day supplies the same way they treat situations where they are short of supply and owe the customer some number of pills. When those come into stock, they provide the balance with no additional charge or co-pay since you paid that the first time. If the objective here is to manage supplies better, why wasn’t this the default?

It’s not like dispensing fees are set in stone anyway. According to this chart done by Halifax Retales back in 2018, they’re all over the map. I use Shoppers because they are convenient and I like the staff, but they are far from the least expensive:

I fully understand the desire to ensure consistent supplies. But neither the rationale nor the solution chosen seems to make much sense to me. Imagine if grocery stores had tripled prices on necessities when the current crisis hit. The outrage and shaming would be massive. Indeed, when it was clear that hoarding of supplies was happening, those businesses put limits on the amounts someone could purchase, in order to solve the problem. If early refills were truly what was driving the situation here, then pharmacies could simply stop that, without resorting to this. A suspicious person could well conclude that this is profiteering in times of crisis. It seems completely at odds with other actions we have seen governments and businesses take in these extraordinary times. And to see this come from pharmacies and pharmacists is doubly shocking. If nothing else, it is a very, very bad look for pharmacies. Their statement says they consulted with government on this. If so, then government made a mistake is letting this go ahead.

I’m no lawyer, but I spent a lot of my working career dealing with legislation and regulations, so I wonder if this move is in violation of the Pharmacy Practice Regulations, specifically section 11 (2):

11 (2)    A pharmacist may adjust the quantity of drugs dispensed from that prescribed where

<list of reasons, none of which are the situation here>

but a pharmacist shall not alter the quantity of drugs from that prescribed unless the alteration is for the benefit of the patient and is fully explained to the patient, including any extra cost that may be incurred by the patient.

“For the benefit of the patient” is arguable at best, and the signage I saw in my pharmacy made no mention of the extra co-pay cost. Nor is there any indication of how long this may last. One can only hope that it is truly a temporary measure, as PANS claims, but they gave no indication of how long “temporary” actually means, at least from what I have seen.

All I know about pharmacies is that many if not most, even those within large chains like Shoppers and elsewhere, are independent businesses owned and run by a local pharmacist. I know in my experience the pharmacies I have used long-term have always been like that. So this is being done by those folks. That’s why it is so troubling. Who knew that pharmacists could be so tone-deaf? They have about 4 weeks to set things right, until the first round of 30-day refills kicks in. Otherwise, it strikes me that this is something that the Province needs to lean on PANS about and get them to fix it.

A Taxing Problem

 

On November 9th The Chronicle-Herald ran a piece by Brett Bundale entitled ” Property tax cap favours Nova Scotia’s wealthy”. It is an interesting discussion of a complex issue that unfortunately does not touch on all potential questions surrounding the assessment cap. I’d like to highlight some of those that weren’t mentioned (Note to readers: I submitted this to the Herald and as of today it hasn’t run, so I presume it won’t ever be seen – hence my posting it here).

 

The article is accurate in noting that the genesis of the cap came from skyrocketing assessments of seaside or waterfront properties, particularly in certain regions. The threat for some homeowners in these areas of losing their properties because of excessive taxation was very real, and many were forced to consider (or actually proceeded with) selling their properties and relocating to keep property taxes from taking such a large bite out of their disposable income. Those conditions could return should the cap be removed.

 

The problem isn’t necessarily that the assessment is increasing dramatically. It is that the tax bill which is derived from that assessed value is increasing dramatically. The Province chose to cap assessed values because that is the part of the equation they could control most readily. But they could just as easily have passed legislation limiting the amount of increase to a municipal tax bill for a given property, or designating only properties in certain areas from increasing assessed values beyond some percentage. They chose to do none of those things and instead did a blanket cap, presumably for expediency at the time. That has proven to be a problem.

 

When one discusses the inequities that the cap creates, it is important to note that the municipal property tax system both here and in most other North American jurisdictions is based upon what I have long believed is an inequitable premise. That is the premise that the assessed value of a property determines one’s “ability to pay”. That is like charging you income tax on the value of your RRSP or the accrued value of your pension plan. Just like a residence, those are not realized until you liquidate them. But under our property tax system, people pay vastly different rates for identical municipal services based solely on what the estimated income from their residence would be if they sold it.

 

For example, garbage collection costs a certain fixed percentage of a municipal budget and, by extension, of a given tax bill, but the actual amount paid for that service varies greatly depending upon the assessed value of the property. I may pay $150 annually for garbage collection, while my neighbor up the street pays twice that and my widowed aunt living in the same house she has been in for 50 years which is now in the high-rent district may pay 4 or 5 times as much. That applies to most municipal services and is quite inequitable itself, making the argument somewhat tenuous. Imagine if things like water and power were billed the same way. The most equitable way to pay for municipal services would be by some other method depending upon the service – street frontage, number of residents, number of bedrooms or baths, square footage – but that would be rather complex. It seems unlikely that the present inequitable model will change much since municipalities do not like changing how they operate, although some taxes, like the much-maligned HRM “ditch tax”, already follow this model, so it is possible.

 

So the degree of inequity depends upon where you stand. I do have some sympathies for first-time homebuyers, or people who move here for work reasons. But once those folks get past the first year, their taxes become relatively predictable, and in any event they would have known what their annual tax bill would be before they made the purchase. If we want to discuss inequities that impact those citizens, no discussion of the subject would be complete without mention of the Deed Transfer Tax. In HRM, this is a tax calculated at 1.5% of the sale price of the property. On a $350,000 home, that is a “Welcome to HRM” greeting card containing a bill for $5,250.00, just for HRM changing the owner name on their tax account file. In the current fiscal year it is budgeted to bring $39,000,000 to the HRM coffers. As tax grabs go, this one is a doozy, but one which all municipalities in the province enjoy.

 

Once the homeowner recovers from that, the issue then becomes one of trusting that your assessment and resultant annual property tax bill will not take unexpected jumps. Can one trust that to be the case? It is not something the homeowner can control all aspects of. If they improve their property to the extent that the assessment takes a large jump, they should expect that their tax bill will increase by a similar percentage. But it is the unexpected bumps in an unchanged property’s value that are most vexing. Those are generally due to changes in the market, and are out of a homeowner’s control. It is the same issue as waterfront property owners faced which led to the cap, just on a different scale. Most of those would be a complete surprise until the tax bill is received. Too bad, so sad, according to the municipality; you are now richer and thus deserve to be charged more. That doesn’t strike me as very equitable either.

 

In theory, if the cap goes away and capped properties get adjusted over some period of years to market levels, once the transition period ends the assessed value of most properties is likely to be considerably higher than what it currently is. But some homeowners will be impacted more than others depending upon how much the market has grown in their area. Where the market has not increased values much, homeowners will have to trust that the municipality will reduce tax rates to an extent that reflects the greater value of the overall assessment roll in order to get a break. That would supposedly be paid for by homeowners in areas where the market increase was large, who will be paying considerably more in taxes despite the lower tax rate. The result will be a lot of unhappy homeowners, and voters, in those areas. That is likely to make politicians very nervous. Could it lead them to want everybody to pay more in taxes just to show that the pain is being spread broadly?

 

One can only speculate, but it is surely possible. Based upon the numbers in the article, HRM alone is looking at a potential annual $37 million carrot should the cap go away based on merely holding the line on current tax rates. Will that prove too attractive for them to resist, and will they really reduce the tax rates accordingly? HRM has shown a tremendous appetite for spending so it is easy to suspect they will want to keep some of that for themselves. If the cap does go away it might be a good idea to limit the ability of municipalities to take advantage of that potential windfall.

 

The mitigation measures mentioned in the piece are unlikely to do much. While transitioning out of the cap over a decade or more will be helpful in reducing the immediate pain, it will still be rather like a long-term headache for homeowners so affected. The low-income programs noted in the article seem unlikely to be of much benefit given the absurdly low cutoff income threshold of $34,000. If that is the level at which any new programs for property tax relief are structured to take effect, those too will be of little benefit to most, and does little to reduce suspicions that HRM might want to keep a chunk of the windfall. Even if you somehow own your property, an income of $35,000 does not make you rich but would disqualify you from relief.

 

Given that the cap program has been in place for nearly 2 decades already, one wonders what percentage of properties remain fully capped. Whatever perceived inequities it may create change every time a property gets sold. Then those new homeowners begin to enjoy the effects of their own new cap, while the sellers face having to relocate to a new residence which is assessed at an uncapped value once they purchase it. So the problem, such as it is, is self-correcting to an extent. Over time, most of those who are beneficiaries of the original cap eventually give it up, while others begin to benefit. Would provincial efforts not be better directed toward creating a more targeted cap mechanism rather than one applying to all properties, providing some reasonable protections on the size of increases in municipal tax bills, or even on overall spending by each municipal unit, by some measure?

 

All of the points in the article fail to mention that once any changes to eliminate the cap are fully in effect, we would be right back where we started. Without any alternative measures being put in place, those with homes in high-demand areas leading to rapidly increasing assessments would once again be faced with inordinately high tax bills all over again. Let’s not overlook that fact in the discussion of the impacts on those homeowners not in that situation. That is a problem that needs be addressed first and foremost. Taxes, not assessed values, are what citizens are most concerned with. It is important to ensure that any changes do not impose an excessive burden on homeowners, especially those whose issues led to the cap originally being imposed, and do not fuel unsustainable long-term spending by municipalities.

Cloudy Thinking

Smoking is bad. Does that even need to be stated? Over the last couple of decades the degree to which the collective mindset of the public towards smoking has changed is remarkable, in a way perhaps unprecedented in modern times. That has been in large part due to a concerted campaign by governments not only discouraging smoking and making it uncool, but also through very tough regulation, taxation measures, and shaping the minds of the public generally and particularly young people from the early grades in their school curriculum. Given the toll it takes on the health of smokers over the long term this is not a bad thing.

 

Back when smoking was (at least somewhat) cool, its devotees liked the badass attitude it projected, the sensation from the nicotine, and for some at least, how it looked, tasted, and felt to smoke. But even back then it still had many detractors who really disliked it, for good reason. It was dirty. It made the smoker and their environment stink. It was hazardous. It made your physical conditioning worse. It was a risk factor for a bunch of diseases. And even before the taxation levels we have today, it was expensive. Do it enough for long enough, and it had a pretty good chance of doing you in. But beyond all that, it was addictive, and it was very hard to quit. I never bought the “more difficult to quit than heroin” argument, but never having been addicted to either I am hardly the best person to comment.

 

Some people were able to quit with relatively little difficulty. But the majority needed some help. Hypnotism, acupuncture, drugs, and nicotine replacement therapy that used gum or patches were some of the ways and had varying degrees of success. About a decade ago, the e-cigarette began to appear. Early versions looked like a cigarette, and delivered a vaporized liquid that contained nicotine. It was nicotine replacement therapy that mimicked the actions and rituals of smoking. It wasn’t smoking because nothing was being burned, but it sort of looked like it. There wasn’t much smell, and none of the nasty by-products of burning tobacco. Suddenly, many smokers found these things helped them quit cigarettes better than anything else they tried.

 

Still, there was no unanimity among public health officials about the devices. In the U.K. they have become accepted as a smoking cessation tool. A CNN article offers the following from a government official with Public Health England. “…if you smoke there is no situation where it would be better for your health to continue smoking rather than switching completely to vaping. PHE’s advice remains that e-cigarettes are a fraction of the risk of smoking, and using one makes it much more likely you’ll quit successfully than relying on willpower alone.” The article also notes that Public Health England found that vaping is 95% less harmful than smoking conventional cigarettes and was helping 20,000 people quit a year. The agency was concerned that more than half of smokers “falsely believed that vaping is as harmful as smoking. There is much the public misunderstand about nicotine… less than 10% of adults understand that most of the harms to health from smoking are not caused by nicotine.” Over there you can apparently even buy vaping products at some hospital gift shops. Just imagine.

 

North American officials have been far less enthusiastic. Despite the success stories offered by smokers, they didn’t like how these things mimicked the act of smoking. Like many in the Public Health community, they seem to have had a prohibition mindset towards anything that was related to smoking, even if this wasn’t smoking. So they pooh-poohed the stories of using these things as quitting aids and instead threw up a bunch of arguments about how they hadn’t been proven to be safe. Of course a lot of things we put into our bodies hadn’t been proven totally safe either, but whatever.

 

One big difference between the U.K. experience and that here was among youth. Early vape devices were deemed cool things by some, but with the introduction of the Juul product here, a very compact device resembling a USB stick that was deemed cool by young people, use in that age group took off. The anti-smoking forces here throw around percentage increase numbers but those are fairly meaningless if you are starting from a number near zero as was the case here. Still, it was understandable that people generally were not happy with this development, because they were addicting young people to nicotine if not to smoking.

 

The U.K. experience was different. There, little evidence existed regarding e-cigarette use as a gateway to smoking among young people in the UK, where regular vaping among youth who never smoked was reported as less than 1%. The differences between the UK and North America were attributed to the much stricter advertising regulations and possibly the lower nicotine levels of liquids in the U.K. as compared to levels here. But at its core was the cool factor of Juul vaping devices and similar-looking clones among youth here, fueled by availability of the devices, social media posts by influencers, and the nature of young people wanting to be trendy.

 

So two different cultures with very different outcomes. The “youth vaping epidemic” (more on that later) here was predictably met with alarm by those in the anti-smoking business and the usual rhetoric about Big Tobacco and the kid-friendly flavors (the same arguments used with certain types of alcohol, which ignore the fact that adults like flavors too) quickly followed. But suddenly it took a different turn when reports began surfacing about people in the US becoming afflicted with serious, sometimes fatal lung conditions. Things rapidly spun out of control as a wave of hysteria, predictably fanned by media reports amid dire pronouncements by Public Health officials, quickly ensued.

 

Reports emerged fairly quickly that those suffering from serious lung damage were users of illegal black market THC vape pods, usually homebrewed outside of any regulatory regime and bought on the street. The culprit wasn’t the THC but one of the substances used in the liquid cocktail, vitamin E acetate. That isn’t used in any of the nicotine-containing vaping liquids. There were no cases found outside the US, despite breathless reports from some news media in Canada that quickly fell off the radar when they turned out to be false. But that information was largely left unmentioned by many of those in authority, as they were too busy using the publicity to begin waging war on teen vaping of nicotine-containing products despite the two things being unconnected. The result was bans either proposed or enacted on flavored vape liquids and pods and a variety of other restrictions. Now Nova Scotia is considering the same. This would be a mistake for a number of reasons.

 

Let’s start with the obvious. There is a body of proof now that vaping of nicotine is a useful tool, perhaps the most effective and accessible tool, to help smokers get off cigarettes. If someone is smoking cigarettes, you should want them to try vaping instead. But those people want flavors that are palatable to allow them to use them long enough to break the addiction. If your 60-something Grandma wants bubblegum or mango-flavored juice to help her quit cigarettes, don’t force her to use something that tastes awful. If that same flavor tempts her granddaughter, there are other ways to help stem that. By the same token, taxing the stuff to similar levels as cigarettes makes no sense. The harms associated with vaping have not only been unproven, they haven’t even been noticed to any extent worthy of attention. I’m sure that eventually some risks will be proven, but there is risk associated with every human behavior. It is the degree to which harmful risk occurs that is important when making policy, and to this point we have not seen any evidence of those related to vaping.

 

But what of those vaping deaths, you may ask? The tragic THC cases in the US are not what is being discussed here, as that had nothing to do with nicotine vaping. In fact they make a very good argument against bans of any sort. You are far better off from a Public Health perspective regulating something with the potential for harm than banning it, because with bans you force people who want to use it anyway to turn to the black market where there is no oversight whatsoever. Even a ban on certain flavored vaping liquids could have the unintended consequence of people brewing up their own without any understanding of what they are introducing to the mixture and doing themselves harm as a result, as was the case with the THC deaths. Ironically, those voices calling for bans of certain nicotine vaping products now set themselves up to be called stooges of Big Tobacco themselves, because they may well cause smokers to return to cigarettes. How delicious.

 

Sensible regulation is another issue, the key word here being sensible. The U.K. model seems to be a reasonable one to follow. But no regulation will keep young people from wanting to do things they collectively deem to be cool, even if by the standards of others they would be considered foolish or dumb. It is just the nature of things. It was that way with smoking and drinking underage when I was growing up, and with weed a generation later. On a more silly note, it was even that way with Tide Pods a couple of years ago. You can’t totally regulate such behavior, just discourage it. My experience with Public Health officials during my time in the liquor business taught me that many of them are very badly out of touch with that kind of reality and take the most extreme sort of prohibition-level positions without regard to real life. We don’t need that here.

 

But what of that “youth vaping epidemic” we are seeing? A few points. First of all, despite what the Public Health folks might contend, I don’t believe it is really a gateway to cigarettes for most of those kids. Sure, they might be curious and try a few. But does anyone seriously think that very many 15 year-olds are going to become pack a day smokers like many did back in my generation? My observation tells me that many of those who vape themselves still think smoking cigarettes is gross, based upon the reality of the activity itself and their indoctrination about it while growing up. And even for those who don’t feel that way, with cigarettes at $15 or so a pack, how likely will they be to be able to establish a habit, much less sustain one, for any period of time? Sorry, I just don’t buy that argument. Young people who use Juuls are doing it for the cool factor, and then making themselves become dependent on nicotine. But I don’t think they will suddenly become smokers. Why would they? They way they are getting it now would be far more appealing to them.

 

Should we just look the other way and let them continue vaping? That is a more difficult question. The costs of waging a scorched-earth war on it like was done with tobacco smoking means that option doesn’t really make much sense. The harms we know of associated with vaping just haven’t shown themselves, at least not yet, and may never show themselves. We just don’t know. The one thing that is known is that it does make one become dependent to some extent on nicotine, which isn’t a great thing. But again, it isn’t the nicotine that kills you when you smoke to get it, it is all the other stuff. Vaping doesn’t have that. It may have other things in it that are bad, but we don’t know what they are and probably won’t for a long time. On its own nicotine has some effects on the body that are somewhat akin to caffeine, but of course it is a lot more addictive. All I can say on this is that if I had a granddaughter, I would be upset if I discovered she was smoking, but wouldn’t particularly be concerned if she revealed she was vaping. Most of those I know who vaped did it for a while and then were able to wean themselves off it completely. It doesn’t strike me as something with a particularly long lifespan.

 

Also, as a side note: I understand many people dislike vapers as much as they dislike smokers. Part of that is due to social conditioning related to smoking, but I think part of it is due to what are variously called “cloud chasers” or for males, “vape bros” – the plaid-shirted, tattoo-covered, often-bearded hardcore vapers who expel massive dense clouds from the windows of their cars or wherever and stand out. I get it. I think that behavior is dumb, and probably isn’t good for the individual, just like doing anything to excess isn’t good. They are today’s equivalent to yesteryear’s 4-pack-a-day chainsmoker, or to a totally baked-out pothead. But they are fringe cases and not what government needs to worry about when it comes to figuring out what needs to be done. Focus on the majority of those doing it, not the extremes.

 

So let’s not give in to hysteria, rush into ill-considered solutions to complex and nebulous problems, or accept everything the activists say as gospel. We have learned that often those voices are distorted and only tell the worst side of a multifaceted story. First, let us do no harm, and take time to fully understand the implications of any action. And let’s not be hypocritical either. I can walk into a NSLC store and buy pre-rolled joints along with a whole assortment of devices to help me smoke weed and even get advice on how to do it. Government hates the health effects of tobacco, but still makes a bundle on it. Both of those things are harmful to the lungs. Arguably vaping is less harmful, maybe a lot less harmful, than either of those activities, based upon what we currently know. Maybe this is one dance the government should just sit out.

NSHA: Facilities, Signs, and Client Service

When I was at the NSLC one of our Board directors for many years was Paula Minnikin. Paula was almost always the director who would speak out, ask the best questions, and generally do her job as a director in the role of questioning management. As someone who had one foot in the management camp it wasn’t always the most comfortable relationship, but I greatly respected her and I hope she felt the same about me. Paula recently wrote a piece on Nova Scotia health care that touched a nerve with me, as it described something that has bothered me for a long time:

 

https://www.novascotiahealthcarecrisis.ca/the-nsha-is-toxic/

 

I had been outlining this entry for a while and Paula motivated me to finish it.

One of the biggest challenges and one of the most impressive accomplishments I got to witness during my work career was the transformation of the workplace culture at the NSLC, both within the Head Office operation but most notably in the retail store network. It strikes home with me every time I have an encounter with our health care system how badly that same sort of thing needs to happen there. They are two very different types of operations, but there are some common threads and, I believe, similar lessons to be learned.

When the NSLC became a Crown Corporation in 2001 it was a shock to the organization’s system. As a Commission until that point, it was run much like every other government bureaucracy. It was slow-moving, not very efficient, with a range of employee types that ran from very good to those just putting in time. At the retail level, there was very little attention paid to customer service in most stores, the Port of Wines and a small number of stores with a fine wine and spirits assortment excepted. The product was there (hopefully), the customer could buy it or not, and it made no difference to the store staff whether a customer left happy or annoyed. Their job was to show up, do what they were told, and that was about it.

So when the new management adopted as one of their core principles the aspiration to be an exceptional retailer, that obviously needed to change. It went well beyond the staff level, and included such things as the store facilities themselves, the signage both inside and out, the store atmosphere and decor, all sorts of things. But clearly the staff needed to play the biggest role. This was an organization that debated whether or not store staff could even recommend a product to a customer asking for something meeting certain criteria – the argument being that we had to treat all suppliers equally and that recommending one over the other would violate that principle. Even staff who wanted to help customers were given little in the way of tools or training to let them do that.

Clearly it was a large mountain to climb, and it didn’t happen overnight. Lots of things needed to be done first, from making sure products that were supposed to be on the shelves were actually there, to improving the assortments themselves, building stores that customers felt were welcoming and cheerful, and convincing staff that their job was to serve the customers as best as they could, not just to serve the internal workings of the NSLC. Things needed to be put into place over time in order to do that, from basic customer service techniques to product knowledge training to reward mechanisms when things were done properly. A transformation of this magnitude wasn’t easy, and took years.

But they got there, and we learned some things ourselves along the way. We discovered that a lot of store staff were frustrated by the old ways of doing things – they really did want to help the customers and make them happy, but were poorly equipped with few tools to let them do that. The store environment they worked in made a huge difference too. We found when a store moved from their old, cramped, dingy space to a new, bright, modern, well-designed store that not only were the customers happier but the staff responded almost instantly in the same manner and with much better service. It was a remarkable difference. When recognition programs were implemented to award both entire stores along with individual staff members for exceptional performance on a known set of service metrics, it drove those results even higher. It wasn’t universally loved, and some of the old-timers either didn’t accept it at all or did so grudgingly, but many of the hardest cases surprised us by how well they changed their attitudes. When you spend 8 hours or more a day at work, it’s hard to be miserable and grumpy all the time, so if you are given some tools to let you change that, many people were willing to give it a try. If you work in the service industry, it’s more enjoyable to make people happy than to leave them dissatisfied.

When I have encounters with our health care system – and I have had far too many of them over the last few years – it is obvious to me that this sort of mindset is virtually non-existent. Now, the parallels are not totally the same, given that the NSLC makes money, whereas the health care system is seen as a cost to be managed. Those costs are hugely challenging, with an aging population, higher expectations, more sophisticated and expensive diagnostic and treatment methods, and the resultant exploding costs. It seems clear that budgets within the health care system are chronically too small for the demands placed on it, and things from basic maintenance to signage, fixtures and facilities all suffer. But ultimately the public is passing judgment on both, either at the cash register or in the voting booth. At some point people are going to say that it is no longer acceptable. A focus on the client would go a long ways towards making people feel better about their interactions with the health care system.  And, based on my NSLC experience, I suspect a better working environment with fewer lost, confused or upset clients or run-down facilities would help workplace morale and staff performance too.

Some examples immediately come to mind. I worked at the Victoria General complex early in my career and was slightly involved when the Dickson Center for outpatient clinics was being built and finally opened in 1984 (I think that’s the right date). When I have gone there recently, I am struck by how little things have changed. The paint on the walls in much of the space looks original, as does the furniture. The same old bulletin boards are still on the walls, maybe even with the same signs, who knows. But of course that is still better than the public spaces in other older parts of the VG complex. Spaces that look decrepit do not provide much confidence that your care will be much better.

Newer facilities have their own foibles. We learned that wayfinding signage within a store was important to keep customers happy. They wanted to know where to find what. Nobody likes feeling lost. At some point somebody was responsible for this within at least a part of the health care system, as evidenced by the colored lines on the floors of parts of the QEII complex which help clients get to where they are supposed to go. But those seem to have never been maintained or changed when renovations get done. Most health care facilities leave me feeling lost when I walk in the door. And being a newer facility doesn’t mean that the QEII is immune to looking like a college dorm room in places. This is a cardiac surgery exam room:

 

I wish I had kept the picture of the certification of a surely long-departed staff member dated 1986 that was affixed to the wall above, or the linoleum in the elevator that is worn though right to the subfloor. It’s as if people who work there are blind to how bad this sort of thing looks to a client.

My pet peeve is signage. One of the things I always notice when I visit any clinic is the abundance of “homemade” signs, usually on 8.5″x11″ paper thumb-tacked to a wall or the ever-present bulletin boards, what Paula calls “visual pollution” in her piece. She gets that exactly right. I’ve got nothing against bulletin boards in an office or other non-public areas, but seeing them in public spaces makes me bonkers.  A sea of different homemade signs clustered together is not going to be read by anybody, but I defy anyone to find any health care facility in this province that isn’t overrun with the things. The same holds true for homemade notices taped to reception windows or stuck on support pillars. If a client reads them, it is only by dumb luck. Get them out of there and replace them with properly-designed official signs that people will recognize, read and follow.

More recently I’ve had numerous appointments at Dartmouth General, which has been under construction for what seems like years. I’m hopeful that when it’s all done it will be better, because it badly needed improvement. But enduring all that, from a parking lot that was a torn-up maze for what seemed an eternity, to a newly-renovated lobby that gives you virtually no idea where to travel next, to a radiology check-in that is in two places depending upon the time of day you have an appointment, is painful. But established facilities aren’t much better. Whoever designed the registration and check-in system at Cobequid needs to spend some time in a client’s shoes before being sent back to their drawing board to try a do-over. I have been there 3 times in the last couple of years and never know if I’ve done it right or where I am supposed to wait. It is terrible. I now prefer to take a road trip to Twin Oaks in Musquodoboit Harbour if I have a choice for routine tests just because it is small, easy to navigate, and painless to deal with.

You might say “But to do all that is just extra overhead and cost to a system that can’t afford it”. Well, so were roofs that didn’t leak, pipes that didn’t burst, backup generators that didn’t fail to switch on, or HVAC systems that kept things cool or warm, apparently. The system needs infrastructure to serve the client base, but it has always been largely ignored until there is a crisis. Deferring infrastructure and maintenance is always the first thing to be cut when budgets are tight, but eventually it jumps up and bites you. Doing so habitually is a sign of poor management. You need to strike the right balance, and depending on 8.5″x11″ paper signs isn’t doing that. Not having clients feel good about where they are going to get what may be life-threatening conditions treated is not going to give them much confidence in that treatment itself. Obviously clinical needs should get the lion’s share of the health care budget. But surely a bit of investment in client and staff satisfaction cannot hurt, and might do more good than one or two of those 6-figure NSHA directors. It’s one thing to not want to have facilities look like the HQ of some mega-billion dollar hedge fund, but another to have Soviet-style facilities. We are dangerously close to the latter in some instances.