Franchisee Focus on Workplace Culture Helps Drive Employee Retention

The past 2 years have seen the highest number of employee resignations since people started tracking this data in 2000, and franchised business units were not immune. Employees are tired of working at companies that make them feel undervalued, underdeveloped, and ultimately uncared for by their managers.

Covid-19 and the disruption of work patterns it created allowed people to reevaluate their working conditions and make changes based on what wasn’t working for them. While this is a good thing for employees, better aligning their values and principles with a new company, it has been tremendously disruptive for small businesses across North America. What was good enough for your employees yesterday is simply not cutting it in today’s competitive labor market, especially as industries like hospitality, tourism, and bricks-and-mortar retail continue their strong recovery in the post-Covid world.

Previously, employees who valued job security were less likely to change companies. However, the new reality is that massive demand in the labor market has changed the game. Now, more than ever, employees have been tempted by headlines about the stiff competition to hire workers, specifically in the retail and hospitality sectors, and are checking out other opportunities. How you retained your employees in the pre-Covid era isn’t going to retain your existing workforce, let alone attract new employees to your vacant roles.

Today, on average, only 30% of companies can fill their vacant roles within 30 days. With an increase in the time required to hire or replace an employee, working shorthanded is negatively affecting the rest of your business. Consider the impact of turnover on the employees who have to cover the workload for vacant positions, or how your customer experience may suffer while someone is working double duty—not a good result in a world of high inflation where delivering value to your customers has never been so important. Ultimately, operating your business shorthanded has a spiral-down effect on your remaining employees, often causing more turnover. However, now isn’t the time for panic.

Illuminating the problem

For many years managers relied on principles of a bygone era to lead and engage their employees, predominantly using tactics from a “command and control” or “authoritarian” leadership style. But as the Boomers and their “military-centric” leadership style retire from the workforce, many from Generation X are taking the helm. The challenge is that the Gen X leaders of today are inheriting outdated management systems and workplace cultures that rely on the notion that the paycheck is reward enough to keep employees engaged. The demand for entry-level workers today has exasperated these systemic issues. Employees want and expect more from their employers, and if they don’t get it, they can and will go elsewhere.

Small-business owners today must take a hard look at what types of incentives they offer and what their working culture is like, as this is likely having an impact, good or bad, on your employee retention numbers. Talk to your employees and ask them what they love about working for your company so you can do more of those things while trying to minimize what they tell you they dislike about working for your company. You can’t fix a problem you don’t know you have, so start that dialogue today.

What has to change?

Employee engagement isn’t what many people assume it is. While salary and benefits are important, in today’s competitive labor market they are considered table stakes, the bare minimum required for someone to consider working for your company. Employees today expect that they are going to be paid a fair starting wage, in line with what is happening in their regional labor market. But total compensation isn’t usually the problem.

It’s the other things that matter immensely to people, specifically Millennials and Gen Z, that are missing. I’m talking about appreciation, recognition, and a culture built around coaching and career progression. A recent survey of both Millennials and Gen Z conducted by Deloitte found that one of the most important criteria for them when considering where they choose to work is an environment where these cohorts can 1) learn and develop their skills, and 2) have an opportunity to advance their career and earn more money.

Other recent workplace studies have shown that more than 60% of employees would stay in their jobs for 3 years longer if they felt their company was invested in their professional development. Similarly, most exit interviews and studies about why people leave their jobs in the first place find that a lack of career progression often tops the list.

The reality is simple. People want to learn and be developed, knowing they’ll have an opportunity to advance in their careers, earn more money, and do more challenging work. Finding a way to invest in your employees’ coaching and career progression in the long term could help avoid costly turnover and disruption to your customer experience, both of which could lead to a less profitable outcome in your unit economics.

An undue focus on salary as the main driver for employee satisfaction and how people prioritize what matters most in finding their next job is an old paradigm. Millennials and Gen Z are far more likely to cite coaching, development, and mentorship as ideal working environments than any other generation.

I’m not suggesting that salary and benefits are unimportant. If you find yourself with total compensation below what your competitors are offering, you will struggle to compete for talent. However, things like recognition, coaching, and career development can no longer be ignored or labeled as a “nice to do.”

With the significant headwinds small businesses are facing to attract and retain their employees, taking a hard look at how your business shows appreciation and recognition to your employees and how you support their desires for career advancement is a great place to start.

Laura Darrell brings over 25 years of leadership experience from some of the most iconic brands of our time, with 20 of those years spent in the franchised environment working for both multi-unit franchisees and in senior leadership roles with some of Canada’s most respected restaurant franchisors. She also brings technical insights in organizational leadership focused on how enhanced collaboration between franchisees and franchisors can lead to better business results. Contact her at ldarrell@oldgrowthdevelopments.com.