Finance

Human Capital: Biggest Expense, Most Important Asset

December 01, 2008

December 2008 Franchising World

Successful human-capital investors constantly measure their people for efficiency and performance.

By Vaughn Baker 

Recognizing that your employees are an active investment–they are your “human capital,” and not just doers, is the critical ingredient in any business and is often the difference between success and failure. Successful human-capital investors constantly measure their people for efficiency and performance. Unsuccessful investors let their people become the fastest drain on cash and cause for lackluster economic performance and often failure.

Consider your favorite professional athletes and sports teams. When these athletes go out to perform, they know exactly what they have to accomplish. Everyone can see the scoreboard and review the personal performance and statistics of each athlete. Their goals are very clear and their progress is open to scrutiny. They know exactly what is expected of them, how to win the starting position, and what it takes to get to the championship game.

Surprisingly, companies often fail to create an environment of success for their employees. Frequently, employees have no idea if they are doing a good job, or if they are failing, until they sit down with their supervisor. Unfortunately, many companies evaluate employees only on a quarterly or annual basis. Your most important asset and your biggest cost could just be floating along day after day, totally out of touch with your overall mission. An environment of success is one where the employees know what is expected of them, have the tools to perform effectively, and are successfully measured on their results.

Define Workflow Process
Every job in an organization has specific functions, inputs, and outputs that tie into the larger company business workflow. Many franchisors refer to their franchise operations manual as the “Operations Bible.” And yet, even with this precise view into a specific franchise unit, many neglect to consider the operational processes beyond. The additional workflow processes surrounding the sale of new franchises, and the support of their entire franchise network are additional key components to success. Corporate staff jobs, such as franchisee management and technology support, need their own key performance indicators and goals.

Develop Realistic Goals and KPIs 
Good managers establish realistic goals for each employee based on the organization’s corporate goals. These goals should be tied as closely as possible to the company’s KPIs and that part of the ‘workflow process’ for which an employee has specific responsibility and accountability. There should be significant thought and discussion in goal setting, and goals cannot be a substitute for leadership or strictly established to push sales results. Good leadership and proper goal setting enables an employee to achieve more than they think they can or dare try. But manager beware, misuse of goals and constantly setting goals higher than anyone can ever possibly achieve only establish an atmosphere of failure. Measure Actual Results

As the manager of your employees and one who helps your franchisees manage their employees, having easy access to each employee’s work results (their “wins and losses” record) is critically important to creating a stable and scalable franchise. With today’s Webbased technology you can create your own instant scoreboard. Goals for the week, month or year can be discussed and reviewed, and then actual business KPIs can be posted real time for every franchisee, or even every employee within each franchisee unit. Management and the franchisee can both compare where they actually stand versus what is expected. When they are ahead of plan, reward and celebrate the wins. When these folks are behind, evaluate, retrain and make changes when needed.

No doubt, the cost of retraining is a lot less than the costs associated with dismissal: the hiring process for replacement employees and the down-time associated with a new employee getting up to speed. Once again measurement results are beneficial because they reveal exactly how much training, and specifically what type of retraining is necessary.

Hiring for Job Placement 
The recruiting process within a company is sometimes a bit over the top in terms of selling a potential employee on the company, and frequently understated in terms of communicating the daily job that needs to be done. But agreeing to job expectations and goals should be an important part of recruiting. If you have established standards and objectives, someone squeamish about the specific goals and KPIs is possibly not going to measure up, while someone better suited for that position would instinctively understand and be appreciative of the challenge. 

Tools 
You may be thinking that the largest hurdle with the goal-setting and measurement process is not defining goals, but gaining access to good and reliable results data. But today, thanks to technology, there is a live scoreboard for all the players on your team. Web based technology can sniff out problems and tell you today, not next month, which employees or franchisees need assistance, then allow you to drill down in several clicks to see what is happening with any franchisee. For example, you can immediately “see” how effectively they are processing their leads, or how many estimates they have in their pipeline, how many appointments they have booked, how far behind they are in scheduling new business or whatever the custom established KPIs you are monitoring. You can even have a window into determining whether your franchisees are collectively better financially this year than last year. Web-based technology can also be integrated with accounting so you automatically receive your royalty reports, and the franchisor-franchisee tension that usually results from manually-produced royalty reports is mitigated by effective transparent automatic reports produced in real time.

Vaughn Baker is the vice president of business development for SageFire. He can be reached at 303-381-4613 or vaughn@sagefire.com .