FRANCHISE LABOR

Many businesses are becoming ever more dependent on one key factor of production—the super-skilled or “franchise” employee. Exceptional managers have always been recognized as central to a company's success, but the new franchise cadre may reach far beyond the traditional managerial levels. Its ranks are certainly broader than the usual suspects—the sports star, the dynamic lawyer, the corporate deal maker, the software guru, the (currently) renowned media hero, and so on. The role of key individuals has been greatly enhanced by the growth of large enterprises—often highly knowledge based—that service global markets through extensive use of modern distribution and communication channels. In this environment, an incremental level of skill can be efficiently levered so as to have a major economic impact on a company's profitability.

We view franchise labor as comprising all employees who can effectively make an exceptional claim regarding their impact on the profitability of the business activities in which they are involved.7 In any company, the franchise employee is always a scarce resource. The challenge is to accurately assess true current and future franchise labor. When a firm is doing well, franchise labor may be overestimated because of the firm's difficulty in discerning precisely which employees really are the key drivers of earnings. There is a certain temptation to assign franchise value to an overly large cohort of employees involved in an area that is ...

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