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FAIR PLAY AND FRANCHISING

by Greg Nathan,
last updated 26/04/2018

Greg Nathan of the Franchise Relationships Institute (FRI) discusses the importance of shared values, culture and leadership for franchisors and franchisees

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Greg Nathan: what can we learn from Australian cricket's ball-tampering scandal?

Greg Nathan: what can we learn from Australian cricket's ball-tampering scandal?

The recent ball-tampering incident by members of the Australian cricket team has upset a lot of people. Our distress was not about the little red ball; it was about people in leadership roles disregarding the deeply held value of fair play that defines the Australian national identity. It’s a powerful reminder of how outrage can be triggered if you disrespect the values of a group.

Here’s another example, perhaps closer to home, when a newly appointed franchisor CEO incited a virtual revolution in a franchise network which almost cost him his job. He decided, without consulting his franchisees, to remove a long-standing and valued supplier from the group’s authorised supply chain. To him it was a simple business decision, because the supplier wasn’t bowing to his demands. To the franchisees it was an offensive display of arrogance, a show of disloyalty for a valued relationship, and a blatant disregard for their autonomy to choose who they could buy from. One franchisee was so upset he told me he wouldn’t rest until he had the CEO’s head on a plate!

What makes you proud to be part of the franchising sector?

The forthcoming Parliamentary Inquiry into the Australian franchising sector is also going to put some noses out of joint. Examples of bad behaviour and issues that have deeply upset people will be aired. Given this, I reckon now is a good time to revisit what we stand for as a business community. I put this to an audience of franchisors and advisers a few years ago when addressing the FCA’s National Convention. My question was, ‘What makes you proud to be part of the franchising sector?’ There was several minutes of free-flowing discussion, after which the following four themes emerged. The people in the auditorium said:

•             We are proud that our entrepreneurial spirit drives innovation and economic growth.

•             We are proud that we create opportunities for families to become financially independent.

•             We are proud of how our businesses create jobs and contribute to their local communities.

•             We are proud of our unique culture of collaboration and sharing ideas.

What I didn’t ask was, ‘What would make you ashamed to be part of the franchising sector?’ No doubt disreputable or unfair behaviour and a disregard for franchisee profitability would have emerged — accusations being levelled at particular franchisors which have prompted the Inquiry.

The fact is, we are not perfect. We are human. Even the religious institutions, who are meant to be the guardians of social justice, have been found wanting. I have indeed seen some franchisors implementing dubious practices from time to time, usually out of ignorance. However, FRI’s data on franchisee satisfaction, gathered by asking thousands of franchisees to share their honest views about their franchisors, shows that the vast majority of franchisees believe their franchisors are ethical and well-intentioned.

By the way, franchisees are also not immune to opportunistic or unethical conduct. I have seen many good franchisor teams subjected to disgraceful bullying and Machiavellian power games from franchisees looking to destabilise a franchise network for their own commercial or personal reasons. And most franchisees will at some stage fall out of love with their franchisor for a time, a psychological phenomenon I have dubbed The Franchise E-Factor.

Culture is the shadow of the leader

Let’s now address the role of values, leadership and culture in the franchising sector. By culture, I mean the way things are habitually done when groups of people come together, especially what they regard as important and what makes them anxious. These values quickly morph into expectations that people buy into, and these definitely guide their behaviour. Consultant Steve Simpson calls them ‘unwritten ground rules’, and they are particularly shaped by those who are in charge or looked up to — the leaders. Leadership and culture always go together, thus the saying, ‘Culture is the shadow of the leader.’

In newer groups, the culture will be tentative and malleable as it shapes itself around the values of the people with the most influence. In well-established groups with a long history, it may be self-righteous and rigid, perhaps with the tell-tale smell of something that is past its use-by date. The question is not whether a culture exists in the places you frequent – it’s always there. The important question is whether or not it’s healthy.

Is there such a thing as ‘universal values’ that we should all aspire toward? I personally think there is, and my view is supported by a considerable and growing base of scientific evidence that suggests the practice of certain positive values is conducive to good mental health and a happy, productive life.

These healthy values include honesty, respect for others, and trying to be helpful in what you do and say. Unhealthy values include deception, exploiting or manipulating others, and being self-serving. Social scientists have consistently found that we despise leaders who are self-serving, manipulative and dishonest. In one of our own studies, we discovered the second most mentioned reason that some franchisees were feeling pessimistic about the future was having to work with a franchisor leadership team they felt were self-serving (the first was anxiety about declining profitability).

Putting our values under the spotlight

Because a group’s culture comes from the values of its leader, we cannot, and should not, avoid putting our values as leaders under the spotlight. Let’s ask ourselves a few hard questions. Are we clear on what we stand for? Do we have a philosophy of life guided by clear values? Are we making decisions for the long-term health of our organisations, or are these being driven by desperation for short-term wins? And, most importantly, are we turning a blind eye to things we know are a bit on the nose?

I have never seen a bad culture exist under a good leader. But I have seen well-intentioned leaders stray off track and turn a blind eye to things they wouldn’t normally tolerate, if they took the time out to reflect on what’s important.

I once interviewed the founder of one of Australia’s leading franchise networks, a person I know to be of high integrity. When I asked him if he finds it hard to practice his ethical principles in the hurly burly of business, his response surprised me. He said life is about compromise and that he is constantly having to make compromises.

I have often thought about this response. It’s a reminder that, as we rise in the leadership ranks, the challenges we often face are complex and the answers are seldom black and white. It’s why Advisory Boards, mentors and, possibly the most important of all — a husband, wife or partner who knows you better than you know yourself — are so important.

Greg Nathan will be one of the speakers at the National Franchise Conference being held at the Wairakei Resort, Taupo, on 9-10 August 2018. Read more about the Conference here – early bird rates available until 1st May.

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