Got Satisfaction?

New study finds your top employee talent may be at risk.

By Eric Stites, CFE

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 – is 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 who make franchising happen every day – the employees who work for the brand – commonly referred to as “corporate.”

Last quarter, 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 more than 1,000 employees representing upwards of 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.

Key Findings

While the full findings of the Franchising@WORK study won’t be released until Thursday, March 14 as part of a webinar (see page 54 for details), we want to share a few key highlights from our study:

1. Overall Satisfaction and Engagement Very High

90 percent of corporate franchise employees find their jobs and the work they do rewarding and satisfying. The vast majority of employees have strong connections with their team members, and 85 percent 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 one-third of all employees (29 percent) don’t feel they receive the recognition they deserve, and two in five employees (41 percent) feel 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 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 percent more on average than female managers. The gap shrinks to 8 percent at the director level, and all but disappears at the Vice President level (just 1 percent 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 percent 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 percent) reported that they are paid hourly rather than earning a salary, with average compensation reported at just $14 an hour. While in total job satisfaction was only 12 percent lower among those in customer service, 59 percent 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 percent to 15 percent 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 during 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. Employees under the age of 25 had by far the lowest satisfaction and engagement scores in our survey, scoring 10 percent to 33 percent 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 2017 Employee Job Satisfaction and Engagement 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. Companies have invested millions of dollars to add a “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

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.

Eric Stites, CFE, is CEO and Managing Director of Franchise Business Review. He serves on IFA’s VetFran and Franchise Relations Committees.