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PE-Backed Companies - Employees are Feeling the Pressure

Updated: Nov 29, 2020

Last week I received a text message from the personal trainer I have been working with for a while. I hadn’t seen him for the last few months, during the business closures forced by COVID-19, but I have been looking forward to returning to the club.

“I am reaching out to let you know I am leaving [XYZ fitness club]. The member experience will most likely return to what we all remember in the next 3-12 months, but unfortunately the employee experience has drastically changed and won’t be anything like what it used to be anytime soon. I’ll be running my own LLC two minutes down the street in a private studio for training, at a significant discount compared to [XYZ club] rates.”

For the last couple of years, I had been hearing a number of the trainers and other employees at this club talk about the changes being introduced to the company since it was purchased by a large private equity firm. It was the unfortunate story I’ve heard shared by the teams at so many other PE-backed companies. While this can certainly happen in any company regardless of the ownership structure, the experience that is shared with me over and over is of PE-backed companies squeezing the life out of businesses they purchase after a few years, if not sooner. With the primary focus on ROI and on being able to show a “zero fail” track record, employees at these companies are pushed harder and harder to sell, with little regard for what brought the employee to the company in the first place. In the case of this trainer, he takes tremendous pride in and much of his identity is tied into helping people become healthier and reaching whatever their personal health and fitness goals are. While he of course wants to earn a sufficient living to support himself, he did not seek a career in sales and does not have training in a sales role. In the past, this club would offer some of the fitness “boot camps” that are so popular in similar environments and runs under a variety of names. Members pay an additional fee to participate in the offering, which often includes group or personalized nutrition and fitness training, a sense of community from sharing the experience with other participating members, and possibly other perks. As the company transitioned under the ownership of the PE company, the clubs started pushing these programs more frequently, and started applying more pressure to the staff to sell the offerings. A program that might have run twice a year became a quarterly offering, and then other programs were added almost monthly, until essentially there were paid programs being pushed throughout the year.

In addition, pressure has been put on the trainers to sell larger packages of personal training sessions vs. allowing the members to pay as they use individual sessions. Compensation for trainers at many clubs is structured as a commission and incentives, and are tied to the size and quantity of training blocks and program registrations, plus retail and other offerings the employee sells. This may vary at different clubs, but this is a common compensation setup.

During this stressful and uncertain time, the disconnect between the sales goals of the company and the needs of the staff, will cause companies to suffer quickly. There is inadequate focus on critical metrics and feedback about employee satisfaction, engagement, and retention.

The disconnect is that for the employee who shows up to work every day to do the work he or she loves, which could apply to any industry and job, this becomes overwhelming and “cold” feeling, and for the employee who is fulfilled by creating relationships with clients, this is a constant distractor and wedge in those relationships. It is exhausting and disheartening for them, and failure is almost guaranteed.

With companies returning to work after the COVID-19 closures, the pressure on employees to sell, will be greater than ever. This comes at a time when these same employees have likely also been impacted financially and personally, they have been dealing with the stresses of this crisis, and they are eager to fill the void that being separated from their clients has created for them. If weary and concerned employees return to work and are faced with the demands to hit the ground selling, they will simply find a path out of the pressure. The cost and client-facing impact of losing staff, especially those who have the attention and respect of other team members who may follow their lead, can be catastrophic.

Now is the time for companies to demonstrate that they have the agility to make the necessary changes in their programs, staffing, and approach, and that they are committed to providing the mentoring and support team members need to meet the goals of the company, while also feeling appreciated and fulfilled in their role. Companies who do not have the skills and experience to do this internally, or who realize they may just not be objective enough to step back and get honest about the issues that need to be addressed, may need to add the right advisory support to the team for a period of time. The right advisor will be able bring the fresh ideas and perspective needed to solve these problems, add the extra hands needed to roll out the communications and changes, and assist with measuring and managing the results.

If companies do not address this issue head-on, the financial impact will be inevitable, and investors will start pushing for answers, as ROI drops, and companies who hesitate to act, risk failing.

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