Eight Top Mistakes of Franchise Industry Performance Management

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An effective performance management system not only can help employees succeed, but can also benefit the performance of the business.

By Michael Pires

Like every small-business owner, franchisors and franchisees have to balance the demands of the day-to-day operations while also planning ahead for growth. Many of these demands are human resource and compliance related — time-consuming tasks that can easily distract owners from focusing on clients and business goals. No matter how time consuming, small-business owners have to get them right because there are consequences if they don’t. Consider, for example, that an employment law changes every 3.2 seconds, based on the Manpower’s 2011 Quarterly Employment Law Thermometer, and 40 percent of small businesses pay an IRS penalty every year, according to the 2010 “Journal of Accountancy.” Whether completing routine tasks, such as hiring and managing employee performance reviews or more complex regulatory requirements such as complying with the Fair Standard Labor Act, managing a business is tougher than ever before, especially without a dedicated HR representative or partner. Often short on resources, many business owners, including franchises, make the mistake of cutting corners, or worse, skipping essential HR and compliance tasks altogether. With every short cut comes risk, especially when it comes to managing employee performance. An effective performance management system can help a company maintain a productive and motivated workforce, meet goals and make better informed decisions regarding promotions, training needs, pay increases and disciplinary actions. The performance management process requires setting clear goals, regular and ongoing employee feedback and firm supervisor commitment. Here are eight common performance management mistakes franchisors, franchisees and other business owners can make, along with tips to avoid them:

1. Failure to set clear performance goals. When an employer establishes clear goals, employees can focus on specific tasks and prioritize their work. To help set clear goals, remember the acronym SMART— specific, measureable, attainable, relevant and time-framed. A SMART goal is detailed enough so that employees understand the desired outcome and can measure their progress accordingly. SMART goals can be realistically accomplished with the proper resources and time availability, are relevant to the employee’s role and the business’ overall objectives and have a target date for completion.

2. Failure to align an employee’s goals with business objectives. One way to help ensure that employee goals are relevant is toalign them with the business objectives of the franchise. Every employee, from top executives to entry-level workers, affects the success of a franchise. Therefore, every employee should be held somewhat responsible for business results and have SMART goals that will help the business meet its overall objectives.

3. Infrequent feedback. Employers should not wait until a formal annual review to provide feedback and clear direction to employees. When employees are performing well, employers should give positive feedback. Offering praise and recognition when goals are met and projects are completed successfully can motivate employees to continue to perform well. If an employee’s performance needs improvement, employer feedback should be constructive, rather than negative, with the ultimate aim of helping the employee succeed in the role. That way, when formal reviews come around, there aren’t any big surprises to the employee or supervisor and both parties will have a pulse on where goal completion stands.

4. Failure to hold supervisors accountable. Sometimes, supervisors fail to take ownership of the performance management process. They may not take responsibility of this important task due to lack of direction or lack of a process to follow what is outlined by the franchisor or franchisee. This can undermine an employer’s efforts to maintain an effective performance management program. To help supervisors manage the process, clearly communicate the importance performance management has for the business, set guidelines and provide supervisors the training to deliver effective performance feedback and provide supervisors with cascading goals and timelines for delivering performance reviews. Employers should also consider evaluating supervisors on their performance management efforts.

5. Failure to provide adequate supervisor training. Whether a supervisor is new or tenured, all supervisors should receive adequate training on effectively managing employee performance on a regular basis. Supervisor training should address the company’s performance review process and expectations, as well as guidelines for giving objective and constructive feedback in between and during formal reviews, avoiding bias, setting appropriate goals, and coaching employees to perform the best that they can.

6. Overlooking training and development. It costs approximately $3,665 for a small business to recruit just one candidate, according to the “Talent Acquisition Factbook, 2011.” That means employee turnover is something to avoid as much as possible. An important aspect to employee retention is offering employee training and performance development opportunities. Employers should provide employees with training programs to build on the employee’s skills and knowledge. Training can improve an employee’s current performance and develop skills for growth into a future role. Both are important to the company and employee. Employers should talk with employees about ideas and opportunities for career development and create a plan that meets the employee’s aspirations and company objectives.

7. Failure to document performance. It is a best practice for employers to complete a formal written performance appraisal at least annually for each employee. Every performance appraisal should be signed by a supervisor and the employee and should be kept in the employee’s personnel file. Employers should also maintain records of training, promotions, transfers, recognition forms, disciplinary notices and other performance-related records in the employee’s personnel file. By keeping detailed records, franchisors and franchisees will mitigate unnecessary risk.

8. Failure to provide timely formal performance reviews. To help demonstrate the importance of performance management, it is important to complete performance reviews within the time frame promised, barring extenuating circumstances.To do so,schedule performance reviews for a time of year that makes sense for the business, start the review process early and check in regularly with supervisors on the progress of completing reviews on time. An effective performance management system not only can help employees succeed, but also benefit the performance of the business. To help ensure the process is effective, conduct regular performance reviews, provide constructive and ongoing feedback and training, and monitor the performance management program closely. At the end of the day, small businesses, including franchises, incur 42 percent more regulatory costs compared to large companies, according to the 2011 “The Impact of Regulatory Costs on Small Firms” report from the SBA Office of Advocacy. Managing your employees well, including a robust and effective performance review system, can only help mitigate that compliance risk.

Michael Pires is the division vice president for business development and innovation at ADP and created HR411, a human resource platform designed for small businesses.  Find him at fransocial.franchise.org.    

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