Managing People - McDonald’s Restaurants Limited
1. Introduction
This write-up aims is to identify a main external factor which impact on an organisation and understanding its implications on employment and the employees of that organisation. In addition the report will analyse and evaluate the business response and during the course of this process, the author will identify the areas where future improvements could be made to the Human Resource Management within the organisation.
The author is presently appointed as a floor manager in one of McDonald’s Restaurants Limited outlet, located at St Ann Square Street in Manchester and has opted for the same Company for his research. St Ann Square Branch is only six years old and is one of the busiest in the region.Janet Moran is the Business Manager.Weekly sales of the branch is around £30,000. The restaurant has approximately 13,000 people come through it a week and the company itself has 60 employees and 10 shift managers. Seventy percent of workers are only part timers. The Manager herself considers every body as a big team and there is no different class between management and crew members.Being aware of a high employment turnover,management makes sure that there personnel are tranined properly in order to furnish best customer services.
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McDonald’s Restaurants Limited
McDonald's is the world's leading food service retailer with more than 30,000 local McDonald's restaurants serving 46 million customers each day in more than 100 countries (Rowley, 2004).McDonald’s brand is recognized as a positive benchmark for standards and performance. Like other fast food outlets, McDonald’s offer a simple and confined menu. To develop fast food operations in the UK, US companies have played a vital role and McDonald’s now is considered to be the market leader in this sector it was KFC, who were leading in this field. Companies like Pizza Hut, Burger King and Wendy’s moved along with McDonald’s into the international market, but none were initially able to keep pace with its rapid expansion.
1.2 History
History of McDonald’s Restaurants Limited divulges the most successful chain of franchises in the world over. The business opened by two brothers, Dick and Mac McDonald in Los Angeles area of California actually started off in 1940. In the Year 1961, Raymond Albert Kroc, a salesman after considering great opportunity in this business recommended Dick and Mac to expand their operation and open new restaurants. In early1960s, the Company also sponsored a kids' TV show called Bozo the Clown so as to flourish the business. But after the cancellation of the show in 1963, Willard Scott (actor of Bozo) was appointed as a new talisman of McDonald’s restaurants to appear in three adverts as Ronald McDonald. (BBC News, 2005).
The Corporation business was spread to the countries outside USA by the Year1967.This unyielding expansion led to open McDonald’s restaurants in 110 countries in 1994, producing $ 3.4 bn in annual revenues. McDonald's serves about 1% of the world's population on any given day through its 23,000 restaurants internationally. McDonald’s restaurant history should also be known as the history of fast food, since this is the practice that basically invented the whole system of fast food service.
1.3 UK Overview
In October 1974, first McDonald’s restaurant was established in Woolwich with its Head Office in Hampstead, North London. Primarily all of the restaurants were owned and managed by the company. In the Year 1986, UK’s first franchise restaurant was established. At the end of 2004, in the chain of McDonald’s there were over 1330 outlets operating in the UK. In September 2004, the business -owned outlets employed 43,491 people: 40,699 hourly-paid restaurant employees, 2,292 restaurant management, and 500 office personnel. (The Times 100)
2. What is Human Resource?
The idea of human resource is different than the other natural resources. Unlike metals, coal, water or machinery, technology and products etc, this resource possesses a mind and a heart. Human resource is in fact, people with skills, knowledge, capacity or at least potential with appropriate behavior which can make difference or can offer competitive advantage.
Human Resource definition given by John Storey (1995. P.5)
“Human resource management is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of culture, structural and personnel techniques”
Mutuality idea given by Walton quoted by Armstrong (2006. P.10)
“The new HRM model is composed of policies that promote mutuality –mutual goals, mutual influence, mutual respect, mutual rewards, and mutual responsibility. The theory is that policies of mutuality will elicit commitment which in turn will yield both better economic performance and greater human development.”
2.1 Theory behind Human Resource Management
Over the past thirty years the corporate world has become increasingly aware of the added value that effective management of human resources brings to the business in terms of helping the achievement of its objectives (Beardwell and Clayton 2007, p.30). Thus the importance of the worker as part of corporate strategy has increased significantly (Salaman et al, 2005, p.33). In fact, most HR experts are of the opinion that it is the most vital task within the remit of business managers (Price 2004 p.3). For example, Michael Armstrong (2006, p.9) in his study, suggests that “Human capital can be regarded as the prime asset of an organization and businesses need to invest in that asset to ensure their survival and growth”.
However, to be effective the strategic management of human resources has to take cognisance of external as well as internal forces that have an impact upon the business employees (Armstrong 2006, p.24). For example, the Michigan Business School “Matching” Human Resource model (figure 1 below) clearly shows that HR, corporate strategic mission and culture are intrinsically linked and therefore HR management has a implicit need to react to changes that occur within the external as well as the internal environment (Beardwell and Clayton 2007, p.7).
Figure 1 Michigan matching model
Source: Beardwell & Clayton 2007, p.8
Thus, when an external issue threatens the current business HR strategy, the business has to react to analyse and address the implications of that threat.
3. Pestle Analysis
It is indispensible for McDonald’s management team to contemplate the implications of the pestle analysis, comprising following issues:
- Political
- Economical
- Social
- Technological
- Legislative
- Environmental
The issue on which the author will focus is Social. Other issues are briefly discussed in appendix- A.
3.1 Social
External environment includes all legal aspects, government regulations, quota systems domestic and international competition, demographic changes economic trend, and political changes etc. (Schuler. 1995. p.12). A company like McDonald’s which is operating in several countries across the world, should be conscious about the social and cultural environment of each country it operates in.
The individual culture is fairly driven by different social structures. Now Customer demands food that is readily available but not unhygienic, which is beneficial for the fast food Company like McDonalds. The Company needs to focus the aspects which influence customer satisfaction and repurchase behavior in order to improve customer satisfaction.
Service approach and restaurant cleanliness are also vital element of customer satisfaction and of whether or not the consumers will revisit the restaurant. These issues also have an effect on the productivity of the operations.
4. Main External Factor which Impact on McDonalds Company
In its most recent eleventh edition Oxford Dictionary has comprehended a new word within its pages. This word is McJob and the definition that they place on this is that it represents an “unstimulating job with few prospects” (Redford 2007). The online Wikipedia dictionary has taken this definition a step further by describing the term as being “slang for a low-paying, low-prestige job that requires few skills and offers very little chance of intra-company advancement.” This is not a positive publicity for the fast food giant. The Chief Executive Officer of McDonald's Jim Cantalupo dispelled the term as “an inaccurate description of restaurant employment” and called it “a slap in the face to the 12 million” industry’s staff. (BBC News, 2003)
Douglas Coupland, a Canadian novelist was the person who devised the word McJob in his novel (Generation X) in the year 1991.This word was used to depict a “low-prestige, low-dignity, low-benefit, no-future job in the service sector" and due to its increased usage in everyday language, lead to the word being entered as a dictionary definition in 2003.Ever since it’s registration in the dictionary, McDonald's has shown grief about the use of the term as it is maltreating the Company’s trade mark and now they have launched a petition on behalf of McDonald’s 67,000 British employees and their colleagues in the UK service sector to get the definition changed (BBC News, 2007).
5. Implications of Derogatory Job Description
The external derogatory job definition given to the title of a “McJob” suggests that to work at McDonald’s an employee needed no educational standards and could only expect the position to pay minimal wages in return for fulfilling a task that had no future prospects in terms of career advancement. The description further infers that the working environment is not conducive to those who are in search of satisfaction from their work and that it is temporary in nature. In order to be able to develop an appropriate response to these perceptions McDonald’s needed to first analyse their implications for the business, or more directly the impact that they could have upon current and future employees. This analysis result showed that there were three main areas of human resource management that could be affected.
5.1. Employee Needs and Motivation
In order to contribute fully to their work and to the success of their employer, employee’s needs motivation. One of the basic functions of Human Resource Management is to understand the needs of the employee and how the fulfilment of these can lead to increased motivation within the workplace. In his research into motivational theory, Abraham Maslow, recognized that the individual progressed through five distinct stages of need that could equally be applied to their work environment (Armstrong 2006, p.254), and which had to be fulfilled in a predetermined sequence. These were:
5.1.1. Basic needs
The most essential reason for people to work is to enable them to provide for the necessities of life, being food water, clothing and a home.
5.1.2. Security
When an employment position is found that provides for the basic, there next concern is the security of that position. For example, is the job long term or temporary?
5.1.3. Belonging and affection
Individuals need to feel a sense of belonging to the environment they are in and this applies as much to the work environment as elsewhere. Therefore, it is important for them to feel that they are an integral part of the business they work for.
5.1.4. Esteem and respect
An employee will respond positively to those who respect and value them as individuals and their contribution to organisation. Therefore, they would expect to receive respect from their employer and those they serve such as customers, and to have their efforts recognised.
5.1.5. Individual achievement
Once the previous levels in Maslow’s “Hierarchy of needs theory” have been fulfilled, the individual will begin to look for self-fulfilment, and this aspect of need becomes their motivational force. In the workplace this can be identified as a need to see a clear career development path within the organisation that employs them. The Oxford dictionary definition of a “McJob” implies that few of these motivational needs for the employee can be fulfilled when employed by the fast food organisation. Whilst the basic need is addressed, albeit with low wages, the security of the position is placed in doubt and certainly there is the implication that the sense of belonging, respect and potential for career advancement and development is not met by becoming a McDonald’s employee.
5.2. Recruitment and Retention
Another major implication of the “McJob” perception is the impact that it could have upon the recruitment and retention of staff within the catering industry and McDonald’s in particular. Recruiting the right level and quality of staff, irrespective of their educational standards is essential to any business and is one of the basis tasks for the Human Resource department (Armstrong 2006, p.66). However, a successful recruitment campaign in this respect is dependent upon the appropriate projection of the business as an attractive working environment for the potential employee.
Any person applying for a new position will have certain perceptions about the potential employer and the work environment, which due to the impact of external factors such as the one under discussion, may not equate with the reality of the situation. An essential element of the recruitment process for any business is to ensure that its recruitment process outlines the expectations and opportunities of the role are clearly established (Goudge 2006, p.143). Clearly the external job definition and perception of the working conditions and expectations that a position with the McDonald’s organisation would present could act as a deterrent for a number of applicants, which in itself can affect the quality of employee that the business is able to attract.
In addition, the above mentioned situation also has an influence upon the retention of employees, particularly those with the quality that the business requires to improve conditions for success. Michael Armstrong (2006, p.396) advocates that one of the most “powerful method of retention is simply to ensure that people feel they are valued," a view that is held by others such as Salaman et al (2005, p.105).
Another aspect of retention relates to the need for “self-fulfilment” referred to earlier. A large proportion of employees will only remain with an organisation if they can see that there is a clear path that enables them to further their career by improving their position within the company as time progresses. Thus there is a tendency for these employees to take a position with a firm that values the individual and offers them a training and development programme that will increase their motivation and commitment to the business for the longer term. An appropriate retention policy also has benefits for the business in that it reduces the cost of recruitment and lowers the cost of the employee to the business generally (Armstrong 2006, p.381).
The implication of the external “McJob” definition is to suggest that McDonald’s does not have any of the appropriate Human Resource recruitment and retention policies in place within their organisation, which as stated previously gives the impression that it is not a suitable career choice for many people, despite the fact that they might have the qualities and skills that the company requires. Furthermore, it also poses a threat to the firm’s ability to retain its existing employees. As outlined within Maslow’s “Hierarchy of needs” theory (Armstrong 2006), employees need to feel valued and respected and this is an integral part of what motivates them within the workplace. This value not only needs to be extended to them by the employer (Leat 2007, p.8), but also by the society within which they live. Being labelled as a person with a “McJob” position, with all of the derogatory insinuations and implications that the Oxford Dictionary definition implies has the opposite effect; that being to devalue rather than increase the value and esteem with which their community holds them. Thus it increases the risk of the McDonald’s employee seeking alternative employment in order to avoid the associated stigma. This situation would add to the corporation’s recruitment and retention problems, making the task of the Human Resource department even more difficult.
5.3. Customer Service
The final implication of the Human Resource issues raised as a result of the perceived “McJob” definition relates to the reaction that it may cause both from an internal and external viewpoint in relation to customer care and service, which is one of the core foundations of the McDonald’s corporate strategy. One of the key success determinants of a retailing business is the level of customer service that is extended by the staff and it a key purpose or human resources to add “customer value” at the consumer end of the supply chain (Salaman et al 2005, p.62). This is showed in the way that the employee reacts to the customer, the manner in which they deal with their requests and the amount of help and assistance that is extended to them. Conversely, it also affects the customer perception of the employee. If a customer perceives, through their understanding of the job description, that the quality of the business employee is deficient to their expectations, whether this perception is valid or not they will be more inclined to seek an alternative or substitute product from a different retailer. McDonald’s as a company relies intensely upon customer’s satisfaction.
6. McDonald’s Restaurants Limited Response
Having evaluated the implications of the derogatory “McJob” description placed upon its employees and employment opportunities within the organisation, McDonald’s response has been twofold. The first of these was a direct marketing and Public Relations response and the second was to conduct a review and reorganisation of its internal Human Resource procedures and strategy.
6.1. Direct Response
The direct response by the company took two distinct forms. The first was to launch a campaign to have the definition erased from the respect Oxford journal (Redford 2007). This included instigating a petition (gained widespread support from MPs and business figures) which has been signed by some prominent members of the business and government advisors, such as “Sir Digby Jones and the British Retail Consortium Director-General Kevin Hawkins. This high profile approach also led to a motion being tabled by an MP in the House of Commons. MPs are supporting an attempt in eliminating the word McJob from the dictionaries. McDonalds is petitioning against the tag backed by sixteen MPs. Labor’s Clive Betts, who has tabled a parliamentary motion, branded Mcjob "derogatory" and condemned it as prejudice against service industry staff (Prince, 2007).
The other aspect of McDonald’s direct response was to involve the marketing department in promoting the benefits of employment within the organisation. This promotion of the “brand” was directed at the existing and potential employees (Salaman et al 2005, p.121). A central theme of this “high problem solving change to recruitment” (Leat 2007, p.315), using examples of the career paths that existing employees had achieved within the organisation, is intended to have a dual effect. In order to deal with the external derogatory job definition and safeguard its reputation, McDonald’s has taken its campaign to one of the Uk’s most famous advertising spaces- the electronic hoardings above the Piccadilly Circus which publicises the benefits and opportunities of working at McDonald’s and uses the strap line,” Not bad for a McJob” (Sweney, 2006). Furthermore, by displaying factual evidence that the company employed people standard, together with outlining the advancement of many within the management structure, it sought to dispel the perception that had been built around the company employees and employment conditions. The use of the slogan “not bad for a McJob” also served to reinforce the inaccuracy of the Oxford Dictionary definition and address and reverse and damage that this was potentially causing the to the business recruitment and retention policies.
Secondly, this campaigning was also aimed at reinforcing the value that the business management placed upon its human resources. It was seen as a unique method for the business management to be able to communicate the extent to which they valued and appreciated the efforts that the employees put into their work and their contribution they made to the business success (Goudge 2006, p.67). From a strategic point of view this can be seen to be a good HR move, one which was enhanced by the fact that the lead in these promotional campaigns was taken by the business HR executives rather than its marketers.
6.2. Internal Response
The internal response of the business was to review its HR policies and also the ways in which these were committed to both the existing staff and the external community. To assist with this the company developed a high involvement work practice (HIWP) model (Price 2004, p.45-46), which includes the following elements (McDonald’s 2007): -
6.2.1. Resources and recognition
This deals with the way that employees are treated and the recognition and rewards that can be gained for their efforts on the firm’s behalf, which include the quality of their customer service.
6.2.2. Values and leadership behaviours
In particular this aspect of the strategy concentrates upon the values of learning, knowledge transfer, accountability and the need for effective communication throughout all levels of the business supply chain, which includes all of the employees and customers of the business.
6.2.3. Competitive pay and benefits
The company has made a commitment to connect pay and benefits directly to the value of the employee, which includes ensuring that it is commensurate with local rates.
6.2.4. Learning, development and personal growth
This aspect relates to the training and skills that employees receive in order to enable them to develop their careers. McDonald's has launched free courses in basic reading, writing and numeracy for its employees in an attempt to provide the skills many school leavers lack. The restaurant chain is offering the tuition to its 67,000 staff as part of its drive to become a "progressive'' employer and rid itself of the unwanted "McJob'' label. The courses are delivered online using interactive modules and tutors who answer queries by e-mail at any time of the day. McDonald's predicts that at least 1,000 staff could be studying within the year, with many completing their courses at one of the 200 restaurants now designed "exam centres''. David Fairhurst, McDonald's UK head of human resources, said the fast food giant saw the pounds 500,000 cost of setting up the scheme as an investment in its future. "Looking at the Leitch report, if nothing is done by 2020 by employers or Government, then we will have 12 million adults in the UK that do not have the numeracy of an 11-year-old,'' he said(Tyler,2006).
Adrian Furnham a professor of psychology conducted an academic study with the name Brighter Futures at University College London. Around 475 people together with young McDonald’s employees, their working friends, parents/partners, managers and teachers participated. The Brighter Futures report intimates that having such a job often has a positive impact on the life of young people. The study also showed that 90% of young McDonald’s employees showed high levels of satisfactions and commitments in their job and this level of satisfaction was substantially higher than the other workplaces where comparable studies have been undertaken (Thomas,2006).
6.2.5. Resource to get the job done
A business commitment ensuring that sufficient resources are available to execute the tasks demanded of the employee. Also to make available sufficient staff in the restaurants, so as to provide better customer services as well as to supply schedule flexibility, time for training and work-life equilibrium.
The results of the changes that McDonald’s has made to its Human Resource strategies and policies is already producing improvements and becoming apparent to the external stakeholders. This is evident from the fact that the company won the “2007 Best place to work in Hospitality award” (Dempsey 2007), resulting from the £14 million staff development programme, within which it included the teaching of basic skills. As the company itself says, this is “not bad for a McJob” employer.
7. Lesson for the Future
From the above experience, lesson that McDonald’s Restaurants Limited can learn for the future is determined in two areas.
7.1. Lesson 1
The first of these is to understand the importance of “human capital” management as part of the corporations core strategy, by which it needs to ensure that a format is developed that creates a more open and motivational approach to its interaction with the people it employs (Fombrum 1985, 453). The Harvard Human Resource Model suggests that the impact upon the employee of any strategy decision should be taken into account in the same ways as they would any other business resource (Armstrong 2006 p.8 and p.12). Most observers believe that one of the best ways to achieve this is by implementing a high level “employee involvement” strategy, which has been shown in other corporations to have a beneficial impact upon productivity and performance (Beardwell and Clayton 2007, p.21).
7.2. Lesson 2
The second lesson is that of communication. Had the business had in place lines of communication with its internal stakeholders, namely the employees, and the external stakeholders (Leat 2007, p.83), which include potential employees, the marketers and the general community, it might have seen the perception of its employees being defined a lot earlier than when it was presented as a “fait accompli” in the Oxford Dictionary, which is seen to be the layman’s bible of definition. In that case it could have addressed the issue at a much earlier stage, which might have limited any damage that may have been caused to it and those that work for the business.
Conclusion
The external definition placed upon employment with the McDonald’s organisation had severe implications for the firm, particularly in respect of its Human Resource management strategies. In this respect it would have increased the problems that existed within the internal recruitment and retention of human resources, as well as potentially affecting customer perception of the quality of service available from the business.
The development of this event and issue depicts that the management of McDonald’s had not been sufficiently focused on their HR management strategies; a situation which although they have addressed, they also need to learn from for the future. As Lucas et al (2007, p.191) explains the reaction of management to HR policies and strategies makes a positive “contribution to enhancing individual and organisational performance in a highly competitive business environment. McDonald’s needs to keep this thought at the top of their agenda to ensure that there is no repetition of the incidence that has occurred with the Oxford Dictionary definition or a similar external event.
References
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Appendix-A
Pestle Analysis
Political
McDonald’s is extremely responsive to the political conditions of different countries. Asian markets mainly, are facing weak economic circumstances and some are susceptible to political unrest. McDonald’s should make contingency plans so as to conquer any difficulty. According to the government’s policies for monopoly controls and reduction of buyers power can limit entry to this sector with such controls as license requirements and limits on access to raw materials.
Economical
The restaurant sector has slowed in recent years, mainly due to decrease in consumer spending in the weakened economic environment. The McDonald's top seven markets (US, Japan, Canada, UK, Germany, France and Australia) have traditionally helped to offset weaker regions in periods of economic decline. However, with softening demand in some of its leading markets, there is little protection at present. Foreign currency fluctuation can often cause problems with global companies such as McDonalds, often adversely affected results.
Technological
“Provides a base for the economic environment. Technical skills and equipment affect the way companies convert an economy’s resources into output” (Perreault & McCarthy 2000, p.85). McDonald’s Restaurants Limited needs to keep up with the fast pace of change. The Company has recently fixed EFTPOS (electronic funds transfer point of sale) machines in its stores. This added service provided by Company has benefited both customers and the company.
McDonald’s is already offering high speed free wireless internet access in 8,000 of its 13,000 outlets in the US and is to introduce free Wi-Fi internet access at most of its 1200 restaurants in the UK . Customers will be able to connect online via their laptops, compatible mobile phones and games consoles for hours. Some coffee shops and cafes also provide this service but charge users a fee.
(http://www.guardian.co.uk/technology/2007/oct/06/internet)
Environmental
McDonald’s is much concerned about the advertisement committed to company’s environmental responsibilities. Rising apprehension about the environment pollution with manufacturing companies causing much waste and donating to global warming, prompt companies to be more accountable in their operations and production cycle. McDonald's will convert its British delivery fleet to run on biodiesel produced mainly from its own recycled cooking oil. The biodiesel will primarily be made up of 85 percent used cooking oil gathered from around 900 McDonald's outlets and 15 percent from pure rapeseed oil. (www.puregreencars.com/Green-Cars-News/Business/McDonald-to-Recycle-Oil-to-Biodiesel.html).
Legislative
In each country it operates, McDonalds has to regard the legal environment. Such as, in China there were legal bars in the operation of franchisee based business model but after accession into WTO, the prospects for a clearer franchising regulatory environment have gradually amplified and now McDonalds has started its franchiser based business in China (www.franchisetochina.com/f1.htm).
Labour parties nowadays seek to forbid junk food advertisements from daytime TV in order to stop the fast food giants targeting children and showing adverts for burgers and chicken nuggets, backed up with offers of free toys (Morrow, 2004).
Public perception of fast foods is often associated with messages of nutritional negativity. The Food Standards Agency (FSA) specifies that take away foods are high in fat but if eaten rarely should not be a problem. The Food Standards Agency also highlights that if take away foods are eaten regularly; it is possible to choose healthy options.
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