Exploding the Benchmarking Myth

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Explosion

Franchisors keep telling me stories of people trying to sell profiles by doing a “benchmark” and thereby “customizing” the profile for the franchisor.

Their method? Easy. Take 5 or 10 of your top franchisees and profile them. This will supposedly give you a “benchmark” unique to your business.

Sounds reasonable doesn’t it? What a load of hog-wash! There is no way that you can arrive at an accurate assessment of a profile by profiling only 5 or 10 people.

A Flawed Method

Here’s the first bone of contention I have with the proposed method of profiling 5 or 10 people to arrive at an “ideal” franchisee score. If you don’t include your worst performers, what have you learned? Very little. You know that the people you profiled are good performers. And you know what their profiles look like. So what? How do you know what a poor performer’s profile will look like?

In fact, you could develop a benchmark just as accurately without going through the bother of profiling anyone. Just place upper and lower limits on the profile dimensions being used. You will still have “A standard by which something can be measured or judged”. Much simpler, much less hassle for you and your franchisees and, possibly, much cheaper. Plus, it is likely just as accurate. Because you already have a good handle on what it takes to be a successful franchisee.

Profiling only your good performers doesn’t give you a statistically accurate analysis of the characteristics of the group. It doesn’t give you a meaningful basis to describe your culture statistically. It doesn’t identify attributes and characteristics of peopleĀ at different performance levels. For that matter, it gives you none of the information a valid study should, and would, give you.

Finding The Difference Between Good And Below Average Performers

Without knowing what a below average performer’s profile looks like, how can you make a reasonable assessment of who will perform at high levels? Maybe the difference between good and poor performers isn’t even assessed in the profile being used. Maybe the profiles of good performers and bad performers are very slight and are limited to only one dimension. You’ll never know if you don’t include both the good and the bad.

A more accurate way to predict performance

If you want an accurate and meaningful study, people from different performance groups absolutely must be included. When we do studies, I recommend that about 50% of the franchisees included are performing at average levels, 25% at below average, and 25% at above average levels.

It’s the same with the offers made to do “one free profile”. If you’re considering whether the profile can help you decide whether a candidate would make a good franchisee, what good does one profile make? Unless you profile a good performer and a poor performer, how can you in good conscience say that the profile can accurately differentiate between performance levels? The truth is, you can’t. Simple as that.

And that’s the whole point of choosing to use a profiling system, isn’t it? To be able to tell which franchise candidate will perform at a high level.

Second, let’s say you profile 10 people. Big deal. Ask any person with a knowledge of statistics what kind of results you’ll get from that. Their response? Not much… if anything. A sample size of 10 people is far too small to be meaningful in any way, shape, or form. Even if you include below average performers in the group.

Larger sample size equals better accuracy

In any statistical analysis, the larger the sample size, the more accurate the results. Because our sole purpose is predicting performance of franchisees, I always recommend the largest sample size possible. Preferably over 100. While studies with a minimum sample size of fifty are possible, the results are far less statistically accurate.

The more people included in the study, the more performance categories can be used. For instance, if you only include 50 people in the study, don’t expect significant results from more than three, and possibly as few as two, performance ratings.

With groups over 100, knock yourself out. Define as many different performance categories as you like. Running an analysis on ten groups is almost as easy as running it on three.

But what if you don’t have more than 50 franchisees operational? Then you make sure that the profile you are considering has been shown to be consistently reliable and accurate in predicting performance of franchisees specifically. If the profile has demonstrated reliability and accuracy, there is no need to even consider trying a benchmark with such a small sample size.

Instead, do your own a benchmark by placing upper and lower limits on the profile dimensions being used. You’ll be in the ballpark. You wouldn’t have survived this long without knowing already, would you? And, it will be just as accurate as profiling only a few of your best franchisees.

Take the guesswork out

So you see, developing a real benchmark is much more than simply profiling a few of your top performers. If you want to make a decision “by guess and by golly”, then go ahead. Just be prepared for the fallout. Because the fall-out will happen. I promise.

If you are willing to make your decision “by guess and by golly”, then why would you be looking at adding profiling into your selection process?

By somehow believing you can get a good idea of what to look for in a franchise candidate by using such a small sample size and not including performance data, you are wasting your time, money and the candidate’s money and time. One thing we all need to keep in mind…. our decisions have huge impacts on the lives of the franchise candidate and their family.

It’s no wonder that people get disillusioned with profiling tools. You’ve heard the expression GIGO (Garbage In, Garbage Out). Here’s a perfect case for it in action. Too small a sample size and no one to compare good performers to gives you garbage.

The costs are too high

It’s incumbent on everyone involved in franchisee selection to make sure that we do all we can to help everyone be successful. Basing a decision on flawed assumptions only costs everyone. Usually big-time. There are no small costs associated with franchisee failures.

Properly used, profiles can play a critical role in selection. But basing any hiring decision or approval for a franchise on a flawed “benchmark” simply gives profiles of all kinds a bad name.

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