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Starting December 1, 2016, our industry faces potential impacts from new labor laws, one of which includes creating additional retention challenges to our already stressed talent pool in the franchise industry. The Fair Labor Standards Act (FLSA) of the U.S. Department of Labor (DOL) is making significant changes to overtime pay for employees. As outlined in the article, “New Overtime Rule Compels Problems for Franchisees,” the change means that it is going to force employers to shift the pay status of their employees from salaried to hourly.
In May of this year, the administration announced the DOL’s final rule that will automatically extend overtime pay protection to more than 4 million workers in the United States. Key provisions from the final rule include updating the salary and compensation levels needed for Executive, Administrative, and Professional worker to be exempt from overtime pay. Given that the franchise industry is one of the largest with pools of primarily part-time employees it could mean you may find yourself having to comply with minimum wage requirements and increased overtime expenses.
In the Multi-Unit Franchisee Report article, “The Emotional Toll of the DOL Ruling”, Dan Schneider wrote that, “..franchise owners are convinced that the impact will be complete demotivation of those who have been “demoted” by the DOL.” He went on to write, “Long-term, it probably won’t have a negative impact on your franchise business because your high-value employees will be promoted back into an exempt higher-salary position.” This change brings to the forefront an emphasis on “people costs.” How much do you invest in the development of people in your business – from hourly to C-level; and what are the kinds of risks you may be facing when hiring just any candidate.
In working with multi-unit franchisee owners, they often overlook people costs when they are building strategies to grow their organization. They know there are costs to recruit, and because of the type of work they may only be there for a season. And, because the industry is built on this foundation, we rarely look at the impact of turnover costs.
Another people cost widely overlooked, especially in hourly pay positions, are those related to workers’ compensation claims generated as a result of poor employee morale. In the franchise industry, specifically, there is tremendous revenue impact due to work related injury claims and a large part of this is due to the type of hiring practices that have become the status quo for our industry. However, the best defense to protect your businesses in these critical areas is hiring right and investing in your employees from the ground up.
A couple of months ago one of my partners was sitting next to a CFO of a burger chain who shared with him how insulting he found the term ‘burger flipper.’ His reasoning was he began working as a part-time employee during high school, stayed with them through college, graduated, was offered a position in the home office, worked his way up from a junior accountant, passed the CPA exam, received a series of promotions over the next 35 years, and is now the CFO of the organization. Because of how the organization positioned opportunity for him from the ground up, it motivated him to invest back, creating a sense of loyalty and ownership mentality towards the success of the business.
Turnover or poor employee moral could be a result of the type of pay structure, but it is probably more likely they see no growth opportunities enticing them to stay long-term. If you would like to recruit and build talent from the ground up, here are some things to consider in recruiting and retaining employees with strong values and providing opportunity for C-level growth:
Being intentional about recruiting and willing to invest in the right people who are looking for long-term employment and growth opportunity is a sure fire way to set yourself up for success. As a multi-unit franchisee, it is important that you develop and shape programs to properly recruit on the front end and build in programs to motivate your employees to retain them on the back end.
When you build programs that attract and retain people that are looking to grow with your company, you save tremendous cost in turnover. You also do something else that is just as tangible, you find that the employees have more drive to do well, that they are passionate about being in their job, and this correlates to having less accidents in the workplace and fewer small claims opportunities. Investing in your people provides you with enormous opportunity to develop leaders and create a growth environment.
Kendall Rawls knows and understands the challenges that impact the success of an entrepreneurial owned business. Her unique perspective comes not only from her educational background; but, more importantly, from her experience as a second-generation family member employee of The Rawls Group - Business Succession Planners. For more information, visit www.rawlsgroup.com or email info@rawlsgroup.com.