The benefits of having employees who are better trained, more engaged, and who stay longer are clear. You might even call it the Holy Grail of HR. What's not so clear is exactly how to achieve that cherished goal. Some multi-unit operators rely on their franchisor-provided training, but that primarily teaches new hires about the brand and how to perform their job. Others supplement this with their own programs, adding training and education in customer service skills, teamwork, coaching, and their organization's values and culture. But not everyone has the resources--or the know-how--to do that.
One basic choice in how to hire, train, and retain top-performing employees is whether to do it in-house, or to outsource parts (or all) of their employee and management training. Outsourcing all, most, or some of your HR functions can be done through a professional employer organization (PEO), which hires a company's employees and becomes their employer of record for insurance and tax purposes--along with managing HR functions such as payroll, benefits, workers' comp, risk management, and regulatory compliance.
According to the National Association of Professional Employer Organizations (NAPEO), an estimated 700 PEOs operate in the U.S., serving up to 3 million employees, and the average PEO client has about 20 employees. According to a 2012 NAPEO study, 9 out of 10 PEOs provide services such as customized employee handbooks, recruitment, pre-employment screening, wage and compensation planning, and assistance with job descriptions.
The goal of working with these third-party firms is to allow business owners to focus on their core competencies and on building their organization. But even if an operator can afford the additional expense, how do they gauge the cost and measure ROI to see if the service is worth the investment? NAPEO says it is, citing a 2013 study showing that since 2010 employment growth among PEO clients has been 9 percent higher than at other small businesses, and 4 percent higher than in the U.S. economy overall. Other benefits cited by the association include improved employee benefits (thanks to the PEO's expertise and buying power), a safer workplace, and increased long-term retention of employees.
We asked a large (230 units) multi-brand restaurant franchisee, a 21-unit multi-unit retail franchisee, and three HR company executives for their thoughts on the subject.
What's in it for you
The reason to outsource HR-related activities is not necessarily the "nice to have" aspects (payroll service, workers' comp, etc.), nor is it necessarily the tactical advantages, says Danny Mormino, division vice president at Infiniti HR, a PEO firm with a focus on franchising. "The reason for a PEO is so you don't focus your time and resources on non-revenue-generating work," says Mormino, who became a CFE earlier this year. Even if you hire an HR or payroll person full-time, he says, it still takes resources away from revenue-generating activities.
Then there's the paperwork--the unprecedented federal, state, and local regulatory environment that businesses must navigate today. "It's not a good strategy to manage that directly," he says. "If you're accurate, congratulations. If you're not, you're in trouble."
Also, he says, many small businesses operate on thin margins and don't have the resources to hire the best people for these functions, so outsourcing is a viable alternative. And hiring someone in-house who wears 10 different HR hats can lead to unexpected--and unwanted--problems, he says. "No matter how great that person is, if you, the franchisee, are not compliant, you're responsible. Even if you have the resources, is it even in your best interest to have that liability in house?" Instead, he says, outsource those HR-related liabilities to a company that does nothing but deal with those regulatory and compliance issues, from checking immigration status to identifying and processing tax breaks for new hires.
If you do have a great HR person in-house, outsourcing the mundane but necessary tasks will allow them to move beyond paper-pushing and compliance issues and focus on higher-level HR functions such as recruitment, retention, career path training, and other personnel support services, says Nate DaPore, president and CEO at PeopleMatter, a workforce management platform provider.
The platform consists of four core products, or modules: hiring, training, scheduling, and Peoplelytics, an analysis tool. DaPore says more than 41,000 units are using the company's system, including dozens of well-known franchised brands in the food, service, retail, and hospitality sectors.
In May, Subway's Independent Purchasing Cooperative, owned and operated by Subway franchisees, signed on with PeopleMatter to use their online platform in its more than 29,000 U.S. and Canadian locations. The employee onboarding module, "You're Hired," is already being used by early adopters at Subway restaurants. A national rollout is planned to U.S. franchisees by late summer, and by the fourth quarter to Canadian franchisees. The new system aims to help franchisees move their paper-based employee onboarding to the cloud, and to allow new employees to complete tasks from any computer or smartphone.
The platform, integrated with My Subway Career, IPC's online applicant tracking system, allows managers and new hires to complete onboarding tasks electronically, including I-9s, E-Verify, W-4s, state and provincial tax documents, franchisee-specific documents, and employee handbook review. It's also configurable to meet the needs of each franchisee. Managers can use it to track activities and manage workflows across all their locations, ensuring compliance and successful document completion, saving time for managers and new hires alike.
"They want to have one place to go to help their franchisees to hire better," says DaPore--and to avoid inadvertently getting into trouble when hiring documents are not completed or are done incorrectly.
DaPore says there's a lot of change ahead in the HR field, and the ability of franchisees to adopt new technologies will be a significant factor in their ability to run their business and compete effectively. "Those not investing in these technologies will lag behind--and get laggard type employees," he says. "The tidal wave of adoption on talent management will be very big." Adapting to the popularity of mobile devices--especially with younger, front-line staff--also will be critical in engaging these employees, he says, calling mobile devices the "laptops" of that generation.
Says DaPore, who spent 15 years in the employee benefits field before starting PeopleMatter, "We really believe we are building a platform that is making the employee's and franchisee's life better."
Never too early to start
About 10 years ago, Mike Kulp, whose KBP Foods operates 230 restaurants in 10 states and employs 5,300, began working with an outside firm to help improve employee hiring, training, development, and retention. "We started with 5 units, grew to 12, 34, 46, and all of a sudden we were faced with that fact that we couldn't be involved in every hire we were making. Our growth was beginning to outpace our ability to grow from within. We needed a different skill set."
So he began looking for a third-party to improve his odds of hiring talented people from outside the company, beginning with coaches, vice presidents, and other above-store positions. He found an off-the-shelf product from an industrial psychology firm that matched his needs. "It gave us a feel for IQ, EQ, and competencies," he says. It also is used to assess people for both near- and long-term positions, based on how they stack up against those in similar roles.
Before that, he says, the company "made tons of mistakes in hiring--that's why we spend money on the process." A huge mistake, says Kulp, was starting the recruiting process before he fully understood the expectations and fit for a given position. One disconcerting fact he learned quickly: "Our instincts were off."
The tool was hugely beneficial after only a couple of months. "I can't imagine making a hire without it today," he says.
Another benefit is that the system makes his company's hiring process more efficient. "If you have 20 applicants for a job, the process could narrow it down to 6 before you meet them. It gives us the confidence that everyone who sits in front of us is qualified," he says. "Our managers don't even see applications from people who don't score a certain level."
KBP's extensive hiring and training process, along with its Team Talent Selection Guide, not only helps attract better candidates, it also gives its top performers confidence in the company. "We use it as a recruiting tool. We get a lot of credit for how robust our hiring process is," he says.
The process provides KBP with a highly specific skill set to measure candidates against. And it evaluates their strengths and weaknesses, allowing the company to provide new hires with relevant coaching before they come on board. "Once we've made a decision to hire, this process allows us to put together a Developmental Workbook that shows strengths and developmental needs," he says. Each workbook contains developmental modules and a personal action plan to guide each employee in achieving their personal and professional goals, with a focus on leveraging their strengths.
Kulp says his team also looks into the cultures of companies applicants have previously worked for, to see if they will fit in with KBP's. For example, if someone had been promoted every 2 years for the past 8 years, what's most important to Kulp is why were they promoted. "We've found there's often a huge misalignment in what's important from one organization to another. It could be very different for your organization," he says. "All that good stuff they did before might be the fifth most important thing for us. I think a lot of organizations skip this step."
Kulp is still working with the original company he hired, continually refining and improving the system. He doesn't know if the technology he uses existed when he started, but if he could do it over again, Kulp says he would have adopted it sooner--and driven it down to front-line applicants earlier. Even for smaller companies, he says, it's not only a good idea, but also can be affordable. "You can pay on a per-assessment basis, it's linear," he says.
In hindsight, says Kulp, "If I could start over I'd have this system at five restaurants. Hiring decisions are more critical when you're small. If you have five locations and hire someone to manage them, if you make a mistake it will kill you."
The following is an excerpt from "The Passionate Entrepreneur: Essential Building Blocks for Entrepreneurial Success" by Steve Adams, CEO of U.S. Retail, which operates 21 Pet Supplies Plus stores in 4 states.
- Hiring. Before we hire anyone, they have to go through a work-style test that is a profiling tool to help us gauge fit. We use this heavily and combine it with the application and interview to make the final decision. There has to be a strong overriding reason for someone to be hired who is not on profile. The payoff for our business is that we are assured everyone in the organization is a relatively good-to-excellent fit with the type of work involved. As a result, the buy-in to our vision is high because people who would fit in poorly do not become part of the picture.
- Onboarding. In addition, we have an excellent software system for the onboarding of new hires. It makes the new employee's introduction to our company go smoothly. In the first 60 days, the employee's experience is highly scripted. That communicates clearly that we are on top of our game and know what we are doing. It gives the new hire a good impression of our company and makes them feel valued.
- Training. The training is pretty much set for the first year. Each employee is required to work through a 9-module online education in pet care. As the employee completes a certain amount of training, a pay raise is given. Typically, employees can increase their pay 20 percent or more with these modules, which are to be completed within the first year. Their progress is a good indicator of motivation and fit. If we find that someone is not doing well in this area, it suggests clearly to us that they are not very motivated and not interested in the material. We start making alternative plans for that individual.
Store managers each have a private coach who works with them on the overall building and growing of their stores. This training includes outside marketing consulting, training in consultative sales, and general entrepreneurial training. The goal is to teach the store managers to view their role as that of a small-business owner.
Another piece of our training system--and it is a major one--is our 30-day action plan. Under this plan, each store manager meets with every employee in their store once a month to do an informal evaluation. They discuss strengths and weaknesses and gaps in training. They pick one or two things that the employee will focus on for the next 30 days. At the end of the month, they discuss how the employee performed and talk about the next month. When I go to the stores, I can review the files the manager keeps for the action plans.
There are no surprises. The employees know exactly where they stand. The manager doesn't build up unexpressed frustrations with the employees. The 30-day action plans eliminate the dynamics that cause problems in employer-employee relationships.
Profiling for Success
Today, a growing number of multi-unit franchisees are profiling candidates to assess potential fit with their organization, their brands, and their growth plans. Many are using third-party companies, customizing their "off the shelf" profiling systems, and others have developed their own profile of a successful hire.
One time-tested indicator, used for more than 50 years, is the Myers-Briggs Type Indicator (or one of its many variations). The model, which identifies 16 personality types, has its critics and detractors. But as Paul Tieger, founder and CEO of SpeedReading People, points out below, 9 out of 10 Fortune 100 companies use it to help them recruit, train, manage, and retain employees. Here's what Tieger--who worked with the IFA's VetFran program to develop the Veterans Franchisee Success Profile--has to say about how multi-unit franchisees can use a short test to "type" potential employees, and why they should bother.
With dozens of locations and hundreds, or even thousands, of employees to hire, train, manage and retain, multi-unit franchisees need tools that are effective, economical, and simple to use. Eighty-nine percent of Fortune 100 companies make use of the Jung/Myers Model of personality type to help them successfully address these challenges.
Personality type is the most popular model in the world for understanding people. It enables recruiters, managers, and coaches to understand what makes each individual tick, and provides them with keen insights and simple, practical, proven strategies for achieving their various goals. In conjunction with MSA Worldwide, our company has developed the following suite of tools designed to meet the unique needs of multi-unit franchisees.
- Hiring. Using our Profitability Potential Selection tool, employees complete a "Franchisee Success Assessment," a validated personality type assessment that takes about 5 minutes. They instantly download their "Franchisee Success Profile," a report that identifies their potential strengths, blind spots, and success strategies. A "Profitability Potential Profile" for each employee allows the franchisee to rank each person as a 1, 2, or 3 (based on their profitability). This can assist them in selecting new hires with the greatest profit potential, identifying which employees can be coached to greater profitability and which proven strategies will be most effective for each type.
- Training. Our one-day SpeedReading People training teaches two critical skills: how to quickly understand others, and how to get on their wavelength and "speak their language." This training is customized to meet the specific needs of each client, and has been delivered to dozens of leading companies worldwide. It includes a suite of easy-to-use online tools, available 24/7.
- Managing, engaging, and retaining. Our TeamWorks tool helps managers understand how to motivate, engage, and retain each individual employee and helps team members (even virtual ones) understand each others' strengths, blind spots, preferred communication style, and how to collaborate most successfully with all of their teammates. It's quick and easy to set up for each team. Virtual training is included, with onsite leader-led facilitation available.
- Turning managers into coaches. Our Online Coaching tool provides managers with a succinct report customized for each employee, describing their strengths and potential blind spots, how to engage and give feedback, how to inspire and motivate, what to avoid, and key success strategies. Using data from the Profitability Potential Selection tool, managers are able to identify which employees need coaching, and to know which specific strategies will help each individual maximize their performance.