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A business overview of McDonalds Restaurant Ltd

McDonalds began in the USA in 1955 with one restaurant. McDonalds is now the largest and fastest growing Quick Service restaurant in the world. (Employee Handbook, 2008) Now McDonald’s sales are over $30 billion, operating 21,000 stores in more than 101 countries. In the coming years they have plan to open 3200 new stores. In 1974 McDonald opened its first store in UK in Woolwich and now they have over 1000 restaurants in the UK (www.mcdonalds.co.uk).

McDonald's is the biggest food selling company in the globe and also the largest employers in the USA. McDonald’s slogan is: every time a good time.

“Human Resource Management is the process of acquiring, training, appraising, and compensating employees, and attending to their labour relations, health and safety, and family concerns “says Gary Dessler, professor of management and international business. Human Resource Management refers to the policies, practices, and systems that influence employees’ behaviour, attitudes, and performance.

HR strategy of McDonalds:

McDonalds operates in the food industry that has a lot to do with quality, service, customer satisfaction, and hygiene. McDonalds has identified its workforce as the key resource to deliver its philosophy, maintain its brand and achieve growth in terms of profitability. They feel that it’s impossible to achieve goals without motivation and commitment of the employees and also without keeping them satisfied. So, their HR strategy seems to be:

Increasing motivation and commitment of the employees, emphasising on learning and improvement of the employees by providing them training and satisfy them by various promotional programmes.

McDonalds continues to enhance its strategic position by further evaluating additional factors critical, such as an employee’s perception of the organization. Also, they encourage employees to add a little bit of their own personality. (Dana Moore,I-O Psychologist, McDonalds).

HR activities:

Theoretically, HRM activities include organisation design and development, job and role design, recruitment and selection, performance management, HR development, reward management, employee relations, welfare services, etc.(Armstrong M,2003)

For McDonalds, training is continuous throughout the company and in the restaurants this includes day-to-day coaching and technology assisted learning programmes. Aspiring managers attend a two week advanced operations management class at company’s Management Training Centre. Once a year, they hold what they call Founders Day, when all office employees leave their desks, put on a new uniform and work in a restaurant for the day so that they remember what business they are in. (Gilmore F, 1999)

Employees are being moved around from one function to another to gain experience in all areas of the business. Other HR activities include promotions in terms of position and pay(appraisals),scholarship programmes, service recognition awards, life assurance plan, private medical care, providing opportunity to employees to invest in shares of the company, etc. (Employee Handbook,2003)

Literature has identified two versions of HRM:

Hard HRM and Soft HRM

Hard HRM emphasizes the quantitative, calculative and business strategic aspects of managing people. It regards people as human capital from which a return can be obtained by investing in their development. The worker is regarded as a commodity. (Guest, 1999)

Soft HRM emphasizes communication, motivation and leadership and the need to gain the commitment it views employees as means rather than objects. (Guest, 1999)

Its focus is on mutuality that is interest of management and employees should coincide.

McDonalds has identified its People as part of the global corporate strategy for success. They use their workforce extensively to achieve their goals. Workforce has to follow clearly defined procedures and path. On the other hand, it is very clear from their HR activities that they stress on human side by motivating the workforce, developing commitment, collaboration and communication, skills development and appraisals. So, it is difficult to draw clear line between hard and soft HRM for McDonalds rather it can be said that they follow both the approaches which includes more of soft HRM and less of hard HRM.

3. BEST PRACTICE AND BEST-FIT (CONTINGENCY) HRM THINKING

Comparison with Best Practice and Best-fit (Contingency) HRM thinking

Best Practice assumption:

The most common assumption is the “best practice” literature is that best practices are those that enhance shareholder value. The notion of best- practice or “high-commitment” HRM was identified initially in the early US models of HRM, many of which mooted the idea that the adoption of certain “best” human resource practices would result in enhanced organisational performance, manifested in improved employee attitudes and behaviours, lower level of absenteeism and turnover, higher levels of skills and therefore higher productivity, enhanced quality and efficiency.

Best Practice Model:

Best Practice HRM is the idea that a particular bundle of HR practices has the potential to contribute to improved attitudes and behaviours, lower levels of absenteeism and labour turnover, and higher level of productivity, quality and customer service, ultimately generating higher organisational performance and profitability. (Marchington & Wilkinson, 2002)

The main components of best practice are selective recruitment, internal promotion and employee job security, training and development of employee, reward over the organisation performance and employee voice etc (Marchington & Wilkinson, 2002; Hughes & Julia M, 2002 International Journal of Contemporary Hospitality Management Vol.14 No.5)

Employment security:

The entire McDonald employee after spending three months probationary period, there job status becomes permanent. It is very difficult to remove employee from his job without valid reason. McDonald offering great employment security and committed to reduce the staff turnover. McDonald assures to employee that they will keep their jobs regardless of changes to the environment and the organisation. McDonald following best practice model in this context.

Reduction of status differences

There is a reduction in hierarchy level at McDonald and staffs feel free to discuss with the store management any issue relating to employment, employees are very committed to their given task and can speak openly.

But in my view senior staff takes the undue advantage from new member of staff, senior member enjoy and put pressure on the new employee.

Internal promotion:

The 40% of senior managers at McDonalds have been promoted internally and not hired from outside directly. They started their career by working at the lowest level of the hierarchy that is as crewmembers in the kitchen of the restaurant. (www.bized.ac.uk) they conduct training, learning and development programmes regularly and extensively which is reflected in their HR activities. They also provide high level of employment security. By implementing various HR activities, they have been successful in developing committed and competent workforce who delivers quality and customer satisfaction and this can be observed easily by the current market position of McDonalds.

On the contrary, the best practice model assumes that employers can take a long-term view of strategy. Practically, by personal experience, it is observed that the lowest level employees (who work in the kitchen and believed the hub of the business) generally don’t have the perception of the organisations strategy. Also, employee voice has not much to do with the organisation and its strategy. (The lowest level employee of ASDA, Wal-Mart Inc., can make suggestion for the organisation, which is considered and discussed at senior management level.) Further, reward system is totally appraisal based and not performance based.

On the basis of above arguments, it can be said that McDonalds has been practising many components of the best practice model but they have not implemented the full best practice model.

Extensive training:

McDonald offers extensive training opportunity to its employee; there are lot of programs such as CDP (crew development program) to enhance the employee progress and to make him more efficient. There are lot of other program for the development of crew member to take him to the management position. There is enormous room for growth. But in fact McDonald employees are not giving any extensive training, during the work they learn. There is no separate program for crew-member development, McDonald don’t spend much money on training so they are fitting to the environment.

Selective hiring:

All the recruitment for McDonald is done through internet application form and advertising on the store. This process is very quick, time saving and also money saving. After receiving the application form only selective candidates are invited for interview. From this we can say McDonald is practising best practice model.

Reward System:

McDonald is paying minimum wages to their employees. It is noted by personal experience that the low level of employee (crew-member which are very important to the organisation) are unhappy with their wages and reward systems. McDonald should increase motivation and commitment among the low level staff by increasing their appraisal scheme. In this context McDonald is following best-fit policy.

Best-Fit (Contingency) Models:

The best-fit school of SHRM explores the close link between strategic management and HRM, by assessing the extent to which there is vertical integration between an organisation business strategy and its HRM policies and practices.

Best fit approach based on the belief that firms may under-perform and may fail if they do not adapt to their environment; (Boxall & Purcell, 2006). This is the main view of best fit approach. It issues the universality assumption of the best-practice perspective. The best fit approach emphasises the fit between Human Resource activities and company`s stage of development (external-fit). This approach highlights the importance that HR policies are appropriate to the circumstances of the organisation. This approach is based on the principle that there is no single universal recommendation for HRM best practices. It`s all depend on the situation, traditions, and business strategy of the organisation.

(1)- Business Life Cycle

Strategy relates to the stages of organisational development, business life cycle stages relates to human resource functions such as recruitment and selection, compensation and rewards, training and development of employee etc.

If we look at the McDonald, at least they have restaurant everywhere in the world and they recruit people throughout the year. Best-fit model says that during growth, organisation recruit adequate numbers and practises effective management and organisational development. (Marchington & Wilkinson, 2002). McDonald is also controlling labour cost and improving productivity.

(2)- Cost control

McDonald is very cost effective and controlling labour cost by improving productivity. According to one manager of McDonald;

“McDonald policy is to keep the labour cost less than 15% of their drive-through sale”.

By cost controlling strategy it is obvious that McDonald is following Best-fit model.

Resource based view

The resource-based view of the firm (RBV) represents a paradigm shift in SHRM thinking by focussing on the internal resources of the organisation, rather than analysing performance in terms of the external context (Holden L et al 4th edn,2004).

The resource-based view therefore recognises the HR function as a key “strategic” player in developing sustainable competitive advantage and organisation human resources as key assets in developing and maintaining sustainable competitive advantage.

McDonald has competitive advantage of resource based view over the other companies. McDonald has Hamburger University which is recognise one of the best corporate training centres in US. This university provides extensive training to its internal customer to create a competitive advantage. It provides operations and accredited business management training for restaurant managers, mid-level managers, owner/operators, and corporate executives.

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