Tag: change

What Would Pop Do?

Posted on by Paul Segreto

I frequently think about a particular interview when I was asked my opinion about why some Private Equity firms fail in their efforts at operating what was originally considered a successful franchise system, while others take the system to even higher levels of success…

As you’ll see by my response below, I actually started at the end and worked backwards. But in the end, there is a common theme and it’s built around relationships, or lack thereof. Certainly, systems play a big part in the success equation but losing sight of “people” is a sure way to create a disconnect, even within the most perfect systems. My response and theory may be too simple for many to agree, but I do feel it lends towards the foundation of any successful business in one way, shape, fashion or form.

All too often you hear about founders buying out the Private Equity firm. I personally, know of two that have done so recently, and for different reasons. And even though only one was a franchise company, there was a common denominator in the circumstances that had developed within the organizations that led to the founders deciding to buyout the PEs… the “parent” company lost sight of its relationship with its “employees & franchisees” and the end-users, “clients & customers”.

My opinion is that “true” mom & pop operations are typically built upon the foundation of relationships, and it’s the strength of those relationships that build the foundation of a strong organization complete with common beliefs, values and mission. It definitely becomes an interdependent relationship. I have rarely seen that occur when PEs get involved where it’s more numbers, numbers, numbers. Don’t get me wrong, numbers are important. But it’s the lack of balance between driving towards making the numbers and building relationships that is often missing. Ultimately causing rifts in the organization with the customer or client feeling the lingering effect of diminishing service levels.

Let’s look at a similar situation that occurs all too often in a very typical mom and pop setting even without the inclusion of a PE in the equation. Mom and Pop have run a very successful business for 25 years. They have done quite well over the years, building the business very methodically, never taking on too much debt at any one time – but still progressive in growing to meet customer demands. Sure, their product or service stands out as excellent. But it’s the relationships they have fostered over the years that have truly made the business successful.

Looking ahead, Mom and Pop have structured a very strong succession plan. Junior has gotten his MBA and is primed to take over the business. In fact, Pop has insisted that Junior also work five or so years out in the corporate world so he can gain some hands-on experience, and mature. Mom and Pop have met with their attorney and CPA and have everything in place for Junior to take over the family business. What’s next is a situation that occurs all too often when Mom and Pop are no longer in the picture.

Junior, complete with new ideas, a wealth of education, and some successful business experience, begins operating the business. He introduces new technology, replacing the antiquated systems that had been in place since day one. Junior streamlined operations, improved inventory control, and basically tweaked here and there to the point that the business appeared to be transformed to a business that appeared bigger than it was – almost like it was a part of a national chain.

Initially, customers loved the transformation and the buzz within town was full of praise and admiration for the family. But what transpires over the next few years as things begin to change as the business becomes less personal and more structured is actually the beginning of the end.

Strict policies have been put in place for both customers and employees. Product and service lines have become more defined, but at the expense of some customer favorites being eliminated. Customer service, having become more automated has reduced the necessity of a large staff. In-store signage has taken over where courteous employees once stood. Well, the list goes on… to the point of the business losing sight of people and relationships. Employee turnover continues to increase. Customers’ faces are no longer familiar. And, when a true national chain opens on the edge of town, foot-traffic starts to diminish.

You see, with all the great succession planning that Mom and Pop painstakingly put into place, they missed a key component to the success of the business. And when Junior transformed the business, he also lost sight of that key component. It basically comes down to WWPD… “What Would Pop Do?”

WWPD is basically the relationship part of the business. To put it simply, Pop knew when to put his arm around an employee. Pop knew when to come out from behind the counter. Pop knew how to make a customer feel special. Pop knew to carry certain items that some of his “regulars” loved. And, again, the list goes on… Pop knew, but Junior didn’t. It’s the classic example of the disconnect between WWPD and MBA, and it’s a similar disconnect between a founder-run business and a PE-operated business.

Now, I’m not saying that it can’t be done, or shouldn’t be done… meaning the sale of a successful business to a PE. Absolutely, it’s the American Way! Instead, along with the financial and legal succession plan needs to be a visionary succession plan that basically outlines and teaches, “What Would Pop Do?”

So, in addressing the original question, let’s just insert Mom and Pop for the franchise, the employees and customers for the franchisees, and Junior for the PE… and the scenario fittingly plays out.

Developing and Cultivating the Right Culture

Posted on by Paul Segreto

Recently, in a discussion about organizational culture, the exchange was quite robust and included the following statement from a CEO participant who stated, “The challenge becomes determining where and when things might be out of alignment. So, developing the methodology about how to realign must be developed and committed to early on.”

To the CEO’s point, the development and management of organizational culture is much like that of developing and cultivating a brand…

It must be planned.

It must be nurtured.

It must be allowed to grow.

It must be invested in.

It must be protected.

It must be promoted.

It must be cherished.

It must be the center of the universe.

I believe it’s relatively easy to determine when and where things are out of alignment in a franchise organization – disgruntled franchisees, refusal of franchisees to develop additional locations and instead are investing in other brands, frequent franchisor employee turnover… just to name a few that would be very apparent. Obviously, these are the results of, but not the root of the problem that may have caused things to move out of alignment. Mostly the problems occur (and fester) due to poor communications and lack of transparency between franchisor and franchisees. Inconsistent messaging adds fuel to the fire. Basically, similar problems to a marriage or other types of relationships that fail.

As for methodology to realign, that takes full commitment and focus from all parties to the relationship. However, in a franchise relationship it takes the franchisor to take the bull by the horns and lead the charge. The franchisor must spearhead the initiative to create open, honest, transparent communications, and especially through difficult scenarios. Franchisees have made a significant investment in the brand, and they must be kept aware of the good, bad AND ugly. Two precarious points include: How much is too much? Do franchisees need to know everything? Getting back to square one, a benchmark of sorts is critical as emotions running high will dictate more rather than less. Actions must speak louder than words!

At workshops and seminars, as well as within coaching and consulting projects, I talk a great deal about creating and delivering positively memorable experiences at all times. I believe it applies to the franchise relationship as much as it applies to customers & clients. I won’t get too deep here as this past week I shared my thoughts on the topic in this newsletter and in the past in the IFA’s Franchising World magazine. Instead, I will share my thoughts on a guideline that will help monitor the experience factor in any transaction or relationship. This guideline is what I refer to as, “The Emotion Circle”.

The Emotion Circle

There are seven key steps within the circle. Think in terms of a clock with the top being the starting point. This is where the relationship begins. Once something occurs that doesn’t meet expectations the first reaction is surprise. From there, emotions may escalate to the next steps of disappointment and doubt. Or it may not escalate but another “incident” will definitely move the needle along. Sometimes, even an unaddressed issue will move it.

Of course, it is inevitable things happen, and expectations aren’t met or even understood. This is why proactive, open, transparent communications are paramount. If the issues are discussed openly and frankly in a respectful way, the needle can be moved back to the 12 o’clock position with minimal or no chance of fueling a fire. We must keep the emotions within the blue section of the circle. This is key!

However, if issues are not addressed in a timely and respectful manner the fire burns rapidly and on occasion to the point where it flares up and / or quickly burns out of control. And, just like wildfires in the forest, these fires can and will jump across roads from house to house and community to community with devastating results.

If not brought under control in a swift manner, the next emotions are often expressed in rapid order through the pink sections and into the red circle. These include frustration, anger, hostility and yes, remorse (think “buyer’s remorse). Ultimately, the end result is broken trust and as we know, trust is the backbone of ANY relationship. Moving back from the pink section is extremely difficult, but not impossible. However, once emotions escalate into the red section, the possibility of salvaging the relationship is almost impossible. Trust will need to be earned back without any assumption on the part of the offending party that it will.

In order for realignment to occur throughout the emotion circle, issues must be addressed expeditiously. It’s paramount that trust be rebuilt before further escalation of emotions. It’s certainly not easy – but it can and must be done. However, it does take huge, ongoing commitment to be established, to remain in place, and to be built upon.

An important question to ask yourself or of an organization’s leadership – Are we truly committed to our relationships? If the answer is not a resounding yes, rest assured trouble is on the horizon. As such, it’s essential to find out the reason(s) and immediately take action to correct. The foundation of developing and curating the right culture depends on it.