New Study Finds Your Top Employee Talent May Be at Risk
Originally published in Franchising World Magazine, March 2019.
As the saying goes, “be careful what you wish for.” Just a few years ago, franchisors were yearning for less regulation and a stronger economy. Now, with the economy humming along and unemployment rates at historic lows, some franchisors are struggling to grow.
The problem? Top talent – both franchisee candidates and employees – are getting harder to find, and even harder to retain. Many franchise organizations have openings in key positions that they can’t fill. More and more people in the franchise sector are now wishing for “a little recession” to help get strong franchise growth moving again.
The Pulse of Franchising
With the unique combination of a strong economy yet growth challenges, we thought it was an ideal time to formally check-in with the people that make franchising happen every day – the people that work for the brand – commonly referred to as “corporate.”
So in late 2018, Franchise Business Review conducted a first-of-its-kind study of corporate employees across the franchise sector. In partnership with the International Franchise Association, we launched the Franchising@WORK Employee Engagement and Compensation Benchmark Study and invited all corporate franchise employees to take part.
The response was incredible, with over 1,350 employees representing more than 250 franchise brands sharing their opinions and feedback. Participants were asked 24 core benchmark questions related to job satisfaction, engagement, management, brand leadership, and culture, as well as detailed personal questions about their position, compensation, benefits, and demographics.
1. Overall Satisfaction and Engagement Very High 90% of corporate franchise employees find their jobs and the work that they do rewarding and satisfying. The vast majority of employees have strong connections with their team members, and 85% feel that their ideas and feedback are valued by their managers.
2. Recognition and Compensation Keys to Retention While satisfaction and engagement are high overall, nearly a third of all employees (29%) don’t feel that they receive the recognition they deserve, and two in five employees (41%) feel that they are under compensated. Given the current ‘Employees’ Market’ and the fact that compensation is the number one factor employees change jobs, a significant part of your team is at risk – particularly your top performers.
3. Gender Pay Gap Is Real and a Threat From the board room to the front desk, women in franchising earn less than their male counterparts with similar experience. The gap is widest within mid-level management, where male managers earn a full 34% more on average than female managers. The gap shrinks to 8% at the director level, and all but disappears at the VP level (just 1% lower for women, which is within the margin of error of the survey). Discrepancies widen again in the C-suite, with female C-level executives reporting salaries 15% lower on average compared to men.
4. Customer-Facing Employees Are Least Satisfied Across the various roles within a franchise organization, those in customer service and support are the least satisfied, and the most likely to leave. Three in four customer service employees (75%) reported that they are paid hourly vs. earning a salary, with average compensation reported at just $14 an hour. While job satisfaction as a whole was only 12% lower among those in customer service, 59% indicated that they did not see a long-term opportunity with their current company. That said, the majority stated that a small raise of just 10% to 15% would be enough to make them satisfied.
5. Clearer Communication and Transparency Is an Opportunity Of the 24 benchmark questions asked of employees, one of the lowest scoring questions was “Our senior management team communicates clearly and openly.” While many questions received overall ratings in the low to mid 80s, this question received an overall index score of just 74. Communication and transparency are common challenges within many organizations, but also important issues that can be easily addressed with your team’s input.
6. Younger Employees Aren’t Buying into Your Mission There has been much talk about the Millennial workforce over the past decade, but it is their younger counterparts – Generation Z – where much work needs to be done. Gen Z’s are individuals born in the late 90s or after. According to the Lovell Corporation’s 2017 Change Generation Report, Gen-Z employees are mostly interested in passion in the work, and growth opportunities[i]. Employees under the age of 25 had by far the lowest satisfaction and engagement scores in our survey, scoring 10% to 33% below benchmark. Clearly, Gen-Zers haven’t found their passions in the franchise sector yet. That said, the brands that adapt their training and career opportunities for these independent, free-thinkers, and help them connect-the-dots between your brand’s mission and meaningful work, will create a significant recruitment advantage.
7. Culture is More Important than Ever Money is overwhelmingly the number one reason people will leave an organization, but creating a flexible, transparent, meaningful culture may be your greatest asset to help your best people stay. Based on research from the Society for Human Resource Management, flexibility to balance work and life issues, job security, and meaningful work are three of the top reasons employees stay at their companies[ii]. Companies have invested millions of dollars to add “cool factor” to their culture, creating a marketplace of “keeping-up-with-the-Joneses” benefits packages. But before you go invest in ping-pong tables, a beer fridge, and napping pods, try a few good, old programs targeted at better communication, more transparency, and a fun, yet flexible work environment. You might like the results.
Next Steps for Employee Satisfaction & Engagement
High employee satisfaction and engagement will clearly have a significant and positive impact on your franchise organization. The evidence is clear – engaged employees will lead to engaged franchisees, and ultimately to more loyal, satisfied customers. While the costs associated with improving satisfaction, engagement, and culture are nominal, only the very best organizations dedicate the time and consistency that is required to really move the needle.
[i] 2017 Change Generation Report available at www.LovellCorporation.com
[ii] 2017 Employee Job Satisfaction and Engagement (SHRM, 2017)
FBR’s CEO and Managing Director Eric Stites details the findings of the groundbreaking Franchising@WORK Employee Engagement and Compensation Study. Download now to get the report and access a 30-minute webinar explaining the results.
Eric leads FBR’s research and consultants with clients in the area of franchise performance. He is an active member of the International Franchise Association (IFA), serves on the IFA’s VetFran and Franchise Relations Committees, and speaks frequently on topics related to franchise relations and best practices in franchising. Eric lives on the coast of Maine with his wife and two daughters, and enjoys spending as much time as possible on the ocean.
Franchise Business Review is the leading market research firm in the franchise sector specializing in franchisee satisfaction and employee engagement. Since 2005, we have helped more than 1,100 franchise brands drive better results. Let us put our insights to work for you.