McDonald's Human Resource Practice

University Degree Business and Administrative studies

Human Resource Management

2bem0210 Assignment1

McDonald’s Human Resource Practice

Page

SUMMARY 3
INTRODUCTION 3
METHODOLOGY 4
SUMMARY OF THE PAPER 4
INTERPRETATION OF THE DATA

STUDENT’S ‘T’ TEST ANALYSIS
CHI-SQUARE DIFFERENCES

THE LIMITATION OF THE PAPER

SAMLL SAMPLE SIZE

6.2 CORRELATION ANALYSIS

6.3 QUALITATIVE METHODS DETERMINING

7.0 CONCLUSIONS

8.0 BIBLIOGRAPHY

SUMMARY

Tyson argued, “Human resource strategy is intentions of the corporation both explicit and covert, toward the management of its employees, expressed through philosophies, policies and practices.” As a functional strategy, the formulation of Human resource strategy is interactive with the formulation of business strategy. Moreover, in most cases, the Human resource strategy and practice is used to fit with the demands of business strategy, and help companies shape their future business strategies to some extent.

In this report, McDonald’s corporation, which is the largest fast-food chain in the world, is analysed. Its corporate, business strategy and human resource management practice are explored. The author attempts to assess of the degree to which its human resource management practice enables the business’s strategy to be achieved, through analysing the training and reward and recognition program applied in company. Finally, recommendations dealt with its human resource management practice are given.

INTRODUCTION

As was mentioned, McDonald’s is the largest fast-food chain in the world. Since it burst onto the scene in the mid-1950s, it has become a leading institution and symbol of American culture. The generic goal of the company is “to provide the highest quality products and friendly service in clean restaurants at good values.” Based on this goal, the company franchises joint-venture partners, and restaurant managers operate more than 30,000 McDonald's restaurants in 119 countries on five continents. About 1.5 million people work at McDonald's, and generate about $15 billion in revenues annually. However, owing to the affection of the global business recession, the operating income of the McDonald’s has declined since 2000. Some measures, such as slowing up to add new restaurants, closing some stagnant restaurants, were taken to attempt to prevent this tendency.

3.0 METHODOLOGY

The author set about consulting his lecture note from the course and the assessment of the course to outline the structure of this report. Some related books borrowed from library were used to further research. The McDonald’s website and other Internet sources were used to gather related data and further arguments for consideration.

4.0 TYPES OF STRATEGY

Strategy is the purpose of the organisation, and the plans and actions to achieve that purpose. With regard to a large organisation, such as the McDonald’s corporation, its strategies are complex, and with different levels. Consequently, types of strategy are defined and described in this section.

Basically, there are three typically formulations of strategies: corporate strategies, business-level strategies, and functional strategies. Corporate strategies can be defined: “a plan that identifies the portfolio of businesses that comprise a company and how they relate to each other.”(Wang Yong 2003 Handout week 3) The corporate strategies fall into four main categories: (1) growth, (2) stability, (3) defensive, (4) combination. The corporate strategies are adopted and followed by the organisation as a whole. Compare with the corporate strategies, the business-level strategies are adopted and followed by one particular product or service lines. Three basic strategy types are used to classify business-level strategies: (1) cost leadership, (2) product/service differentiation, (3) market segment focus. Functional strategies are “the overall course or courses of action and basic policies that each department is to follow in helping the business accomplish its strategic goals.”(Wang Yong 2003 Handout week 3) The formulation of functional strategies is interactive with the formulation of business strategy. Moreover, in most cases, the formulation specific strategies for each functional area marketing, finance, operations/productions, human resources are carried out to help the company to implement its business strategies.

5.0 McDonald’s Business Strategies

As we mentioned, the operating income of the McDonald’s has declined since 2000. The company adjusted its corporate strategy to attempt to prevent this tendency. Jim Cantalupo,

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5.0 McDonald’s Business Strategies

As we mentioned, the operating income of the McDonald’s has declined since 2000. The company adjusted its corporate strategy to attempt to prevent this tendency. Jim Cantalupo,

Chairman and Chief Executive Officer of the McDonald's Corporation mentioned that: “McDonald's embarked on a new strategic course, reflecting a fundamental change in our approach to growing the business. Previously, we emphasised adding new restaurants. Today, our emphasis is on building sales at existing restaurants.”(http://www. McDonald’s. com). It used to advocate that “ the McDonald’s strategies have focused on the following factors: customer satisfaction, diversification, untapped markets, social responsibility.” (William et al, 1996) Furthermore, customer satisfaction, and untapped markets have been two emphasises at all times. Based on the corporate strategy changed, customer satisfaction would become more important than untapped markets and the others. Jim Cantalupo also mentioned that four key objectives were set up: “attract new customers, encourage existing customers to visit us more often, build brand loyalty and, ultimately, create enduring profitable growth.” (http://www. McDonald’s. com) Not only attracting new customers, but also garnering existing customers, since building brand loyalty needs the high customer satisfaction. Consequently, it was reasonable that this customer satisfaction would be the most important business strategy highlighted.

Ananlysing from the categories of strategy, the present corporate strategy of the McDonald’s company is more likely defensive strategy, which can be defined like this: “ plans to cut back or downsize.”(William et al. 1996) Although new McDonald’s restaurants are set up everyday, it puts emphasis on building sales at existing restaurants. It is reported that 600 McDonald’s restaurants are planed to set up in 2003. Compared with 1050 restaurants and 2000 restaurants set up in 2002, 1996 respectively, the number of the new restaurants has decreased dramatically. As to the business strategies, it is more likely the cost leadership strategy. McDonald’s pay more attention to attracting new customers, keeping existing customers to visit us more often, building brand loyalty, and creating enduring profitable growth. It indicated that McDonald’s attempt to garner a larger share of the market to achieve a higher profit margin. Moreover, it is foreseen that these strategies will be implemented for a long term in the McDonald’s corporation.

6.0 Human Resource Management Practice

As a world’s leading food service organization, the human resource management practices are integrative. McDonald's People Promise is that: “We value you, your growth and your contributions.” (http://www. McDonald’s. com) Based on this promise, McDonald’s human resource management practice can be fall into three main categories: (1) training, (2) careers, (3) benefits.

Training: the training of McDonald’s is provided at different level. First of all, on-the-job training is given to the restaurant crewmembers to coach in skills and procedures essential. Secondly, classroom courses training are provided for the outstanding restaurant employees for advancement. Thirdly, operations and business management training is provided by Hamburger University for the restaurant managers, franchisees, mid-level managers, and corporate executives. Finally, a training system is brought to the crew members and managers to interact their learning experiences.

Careers: Every new employee begins as a trainee on cooking French fries, which is the easiest of jobs in McDonald’s restaurants. Once that employee can master this station, s/he is moved to the next designated station. Moreover, for the initiative employees, McDonald’s offers opportunities for their quick advancement. The whole career path is consecutive “There are four levels of salaried restaurant management career opportunities at McDonald's- Manager Trainee/ Second Assistant Manager level, First Assistant Manager level, Restaurant Manager level, and Consultant level.”

Benefits: “One of the increasing concerns of McDonald’s is its growing, increasingly diverse workforce and matching and effectively communicating the benefits to all segments of that workforce.” (William et al. 1996) The benefits of the employees in McDonald’s are organized into four categories: health and insurance benefits, compensation, reward and recognition programs, savings, investment and financial management programs, work/life benefits. In order to the following analysis, the reward and recognition program is listed only.

“McDonald’s pay and rewards program follows a “pay for performance” philosophy: The better your results, the greater your pay opportunities.” (http://www. McDonald’s. com)The reward and recognition program can be fall into four categories:(1) Base pay – The competitiveness of its base pay are given through an annual review of both external market data and internal peer data. (2) Incentive pay-Incentive pay is provided those employees whose performance meets and exceeds goals. (3) Recognition programs – its recognition programs are designed to reward and recognize strong performers. (4) Company car program - the eligible employees can be provided with a company car for both business and personal use.

7.0 Training, Reward and Recognition Program & Customer Satisfaction

As to the relationships between organisation strategy and human resource strategy, there are five potential relationships: “separation, fit, dialogue, holistic, HR driven” (Derek et al.2002) Based on the status of McDonald’s, it is more likely the fit model namely “ employees are seen as key in the implementation of the declared organizational strategy, and human resource strategy is designed to fit with this.” (Derek et al.2002)

Moreover, fit or contingency model, which was stated by Fombrun et al. in 1984, is designed to ensure a close fit between the human resource strategy and business strategy. With regard to the fit or contingency model, “it based on two critical forms of fit. The first is external fit-that HR strategy fits with the demands of business strategy; the second is internal fit-that all policies and activities fit together so that they make a coherent whole, are mutually reinforcing and one applied consistently.” (Derek et al.2002) Four key functions of human resource management can be involved within the model of Fombrun et al: selection, performance appraisal, continuous development, and reward. Moreover, these four key functions are interacted with each other which can be “mutually geared to produce the required type of employee performance” (Derek et al.2002).

As was mentioned, on one hand, McDonald’s is a world’s leading food service organization, and its human resource management practices are integrative and complex. It is difficult to assess of the degree to which each its policy and activity of its human resource management practice enables the business’s strategy to be achieved. On the other hand, customer satisfaction is the most important strategy of McDonald’s present business strategies. Consequently, only two aspects: training, and reward are analysed the interactive with customer satisfaction through using the fit or contingency model in this section.

Training and reward can be the means of motivation of the employees. In order to achieve the goal of organisation, motivation to the employees is essential.

Training: first of all, on-the-job training is provided with the restaurant crewmembers to coaching in skills and procedures essential. The basic skills and procedures essential coached help to keep and improve the quality of products and service of McDonald’s. As the fast food chain, the products and service of McDonald’s are and should be trump to attract customers. Secondly, the classroom courses training are provided for the outstanding restaurant employees for advancement. Assuredly, this training is attractive to the employees. Career path was designed from new employee to senior consultant. It is sure that this classroom courses are important in the career path of an employee. Moreover, the outstanding restaurant employee was mentioned above. What criterion is an outstanding employee? The criterion can be various and alterable. For example, it might be the work efficiency in the past; it can be the quality of service now. It indicates the flexibility of Human resource strategy. Thirdly, operations and business management training is provided to the restaurant managers, franchisees, mid-level managers, and corporate executives. As the corporation, where 1.5 million people work, mid-level managers are quite important. This operations and business management training are benefit for the understanding, conveying, and implementing of the business strategy of McDonald’s. Finally, a training system brought to the crewmembers and managers can be vehicle of the business strategy or use to learning satisfying customer experiences.

The reward and recognition program: Both base pay and Incentive pay are provided through an annual review of both external market data and internal peer data and depends on the performance meets and exceeds goals, respectively. Therefore, they can fit with the business strategy through alterable criterion. The recognition programs and company car program are designed to reward and recognize strong performers. They represent the customer satisfaction strategy per se.

Overall, some policies and activities, such as on-the-job training, the recognition programs, and company car program, completely fit with customer satisfaction strategy. Some policies and activities, such as activities operations and business, a training system management training were not designed wholly to fit with customer satisfaction strategy. However, they can be used as vehicle of conveying and implementing this business strategy. Finally, such as the classroom courses training, it can fit with this business strategy through the various and alterable criterion.

Recommendations

Ogbonna and Whipp mentioned that “Businesses have to change radically in response to the environment, any degree of human resource fit achieved will be disturbed shortly.”(Wang Yong 2003 Handout Week 4) In this report, McDonald’s changed its corporate strategy from adding new restaurants to building sales at existing restaurants. Simultaneity, customer satisfaction would be the most important business strategy highlighted. However, the change of its human resource management practice is laggard. Therefore, quickening this change is more likely important and urgent. However, change is difficult. Mullins mentioned that “ as to organisational resistance, there are five factors resistance to change: organisation culture, maintaining stability, investment in resources, past contracts or agreements, and threats to power or influence.”(Wang Yong 2003 Handout Week 7)

John Storey argued that “training and development should be regarded as central to anything that can sensibly be termed HRM”(John Storey 2001). The operations and business management training, which provided to the restaurant managers, franchisees, mid-level managers, and corporate executives, it more likely tends to act as a ‘catch-all’ banner. All these kinds of managers enter into this training without selection. It is possible to affect the function of its motivation.

Conclusions

1. The present corporate strategy and business strategy of the McDonald’s company are more likely defensive strategy and cost leadership strategy, respectively. Moreover, it is foreseen that these strategies will be implemented for a long term in the McDonald’s corporation.

2. In the training and reward and recognition program, some policies and activities completely fit with customer satisfaction strategy. Some training were not designed wholly to fit with customer satisfaction strategy. However, they can be used as vehicle of conveying and implementing this business strategy.

3. It is difficult that human resource fit with the business strategy, because of the changeability of environment. Moreover, the human resource of change is difficult and slow.