Addressing Leadership Turnover in the Franchise World

Retention efforts and turnover concerns have been making headlines throughout the franchising world (and the entire business world) for the past several months. One potentially overlooked aspect, however, is how rapid turnover is affecting even the highest levels of leadership. To remain stable in changing times, your organization needs strong, committed leadership, but that may be easier said than done.

 

The Executive Churn

Research from Altrata found that, in 2022, turnover increased significantly among C-suite roles like CEO, COO, CFO, and others. The fastest change was seen among CEOs, with turnover rising

by three percentage points to 13.2%; among CFOs, turnover rose to 15.9%, and to 27.2% among COOs. COOs and CMOs have the highest turnover rates in the C-suite, while CEOs have the lowest. The sharp rise can be attributed to a number of factors, from planned retirements having been delayed due to the pandemic, to hasty hires during stressful years, to competitive markets luring even top executives to new jobs.

 

Other recent studies have noted the significant turnover in some or all areas of C-suite leadership, across industries and sectors. The average tenure of CEOs among companies that make up the S&P 500 Industrial Index has shrunk down to under five years, driven by significant retail turnover in particular. Meanwhile, chief diversity officers (CDOs)—a popular addition to leadership teams in the last few years in particular—are seeing even more turnover. According to the Wall Street Journal, the average tenure of a CDO is just three years.

 

Franchising and Leadership Turnover

In the world of franchising, executive leadership turnover can trickle down to have an effect at every level. For instance, the COO—the role with the highest turnover of all C-suite roles—is typically the executive most involved with day-to-day strategy and overall operations; in other words, they are the leaders who typically have the “direct line” to franchisees and their teams across the country. A lack of clear, stable direction from top leadership can lead to unnecessary stress and uncertainty for individual franchise locations.

 

Today’s customers expect a consistent, positive, and convenient experience, no matter which location they frequent. 30% of customers are willing to pay more to get excellent service, and individual franchises and their employees will be on the “front lines” of customer satisfaction or dissatisfaction. However, developing those services (especially popular conveniences like mobile apps or AI chatbots) requires buy-in and approval from the top. Especially for franchisees, which have an “independent” feeling despite being part of a larger corporate “family,” C-suite comings and goings can seem very distant, but they will have an effect down the line, sooner or later.

 

Recruiting Leaders for the Long Term

 With such high turnover in top roles and all the attendant stressors that come with it, companies are looking not just for new, transformative leaders, but for leaders who are more likely to stick around and steer the organization with a steady hand. According to one survey from Lattice, retention is the top priority for companies in 2023. Retention efforts don’t stop at the C-suite—they just might look a little different than they do for employees at other levels.

 

Franchise organizations should be considering the factors that lead C-suite executives to leave their posts. For instance, Altrata’s research found that C-suite exits are higher for older (age 60 and up) executives and among women. The latter dovetails with research from McKinsey showing that women at all levels are leaving their companies at higher rates than have been seen in years and that women remain woefully underrepresented in the C-suite: just one in four C-level executives are women, and only one in 20 are women of color. While some factors are inevitable (older executives are typically nearing retirement), others, like gender gaps, can be addressed to reduce turnover risks.

 

When you partner with an executive search firm like Blue Rock to fill a C-suite role, you’ll get dedicated, proven expertise to locate candidates who are interested in a lasting professional relationship with your company. Our Franchise Executive Search practice has over 10,000 contacts in the franchise industry, plus a tried-and-true approach to position you to win in the competitive talent marketplace. If your organization needs a transformative leader to drive franchise growth and confidence, talk to our team today to learn more.

 

About the Author

Nancy Estep-Critchett is a founding Partner of Blue Rock Search, with oversight of the Franchise Practice. She has 30 years of successful working experience as a business advisor and executive recruiter in the franchising space. Nancy has built solid relationships which have spanned decades with industry professionals and internationally recognized brands.

 

Blue Rock Search is an MBE Certified, minority/female-owned executive search firm, an SRA Network member, a Hunt Scanlon Top 10 global recruiting firm, and a member of the Hunt Scanlon HR/Diversity Recruiting Power 65.  We specialize in the targeted identification, assessment, and placement of executives across four distinct practice areas: Human Resources, Franchise, Higher Education, and Customer Experience.