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Analysis of Employee Turnover at McDonalds

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1.1 Introduction

In a perfect world it would be best for any organization to have employees who love their jobs, enjoy working with their co-workers, are happy with the salary, willing to work hard for their managers and never leave the organization. However, in the real world employees do leave either because they want more money, hate the work environment, hate their co-workers, want a change or because their spouse gets a dream job in another state (Sharma, 2008). Many organizations nowadays face ‘high attrition rate' or turnover mainly due to a highly competitive market. Staff attrition or turnover has been cited as one of the primary concerns facing organizations and businesses in any industry. Staff attrition or turnover relates to those who leave an organization due to resignation, termination and retirement. According to the latest CIPD survey (CIPD, 2007), the annual employee turnover rate in the UK was at 18.1 percent. The report also found that the annual turnover levels differed considerably from one industry to the other industry, with the highest average rates being 22.6 percent and these were found in private sector organizations and, within this sector, the hotels, catering and leisure industry reports rates of turnover at 10 percent higher than the average for the sector of 32.6 percent. High turnover rates creates particular pressures for the HR department, which is primarily responsible for replacing those who leave, but also for line managers who face disruption to production and service standards. This is the necessary result of having to induct new employees, who are usually less experienced and productive compared to those whom they replace. It takes some time for the new recruits to perform at their optimum levels. This results in the organization failing to meet its objectives, reduction in productivity and higher costs. It is therefore important for HR managers to measure staff attrition, monitor its impact and take appropriate action to minimize its effects(Banfield&Kay,2008).

Globalization has led to the rapid expansion of multinational fast food companies e.g. McDonalds and KFC. Even at this present time of global economic recession, these fast food companies are growing and generating profits. The customers, who were eating out at a high profile restaurant, are now looking for something reasonable and affordable. McDonalds is offering good hygienic food at a reasonable price to these customers and are benefitting from this global economic downturn. This has lead to a fierce competition between these fast food companies and each of them is trying to give the best quality product and service to its customers. In a company like McDonalds, giving a quick and high quality customer service is essential for its success. However many of the McDonalds restaurants are experiencing high employee turnover which could affect the overall productivity and profitability of the respective McDonalds restaurants. One of the senior executives at McDonalds put the chain's annual employee turnover at nearly 44 percent. According to the chief human resource officer of McDonald's Mr. Floersch the managerial turnover was at 20% globally while that of the crew members averaged between 80 percent and 90 percent. This however, varied from country to country (The Wall Street Journal, 2008). In this research, the researcher would like to investigate the main reasons for experienced employees leaving the organization i.e. McDonald's and what sort of challenges the managers face due to the high turnover. The researcher would also like to find out any retention strategies adopted by the HR department to curb the high turnover rate. For this, the researcher decided to choose few selected restaurants in London.

1.2 The Overall Aim

The researcher's main aim in this study is to find out the main reasons for high employee turnover at McDonalds, the way it affects the managers and the organization, and steps taken to retain employees.

1.3 Research Objectives

The researcher in this research would like to find out the main reasons for having high turnover rate in McDonalds and the challenges that the managers face and also how they can curb the rate of staff turnover.The researcher also intends to study the following:

  1. To find out the main causes of high employee turnover
  2. To find out the various retention strategies adopted by McDonalds in order to retain employees.
  3. To find out the various challenges faced by managers due to employee turnover.


2.0 Background-Company Overview

McDonalds has 31,000 restaurants in 116 countries and is one of the biggest family restaurants in the world. The first restaurant in UK was opened during 1974 in Woolwich High Street and the first franchised restaurant opened in 1986. In UK there are now 1,190 restaurants employing more than 70,000 people, of which 51% is operated by franchisees. McDonald's main vision is to give the family the best experience, something that they will never forget and would want to come back to. They achieve this through its people they employ. McDonalds realizes that its employees can only perform well when they are given the right working environment and for this, they strive to provide various rewards and benefits which would suit each and every individual working in the organization. McDonalds is one of the largest global brands and it offers a culture of flexibility, opportunity, equality and diversity. It has one of the most diverse cultures within the UK (McDonald's, 2009).

2.1 Recruitment at McDonald's

McDonalds policy is to hire those ‘Crew Members' who can bring a smile to the workplace. This brings in positive energy and creates a good friendly atmosphere. The recruitment procedure for a ‘Crew Member' is a two-step process. First the applicant needs to apply online and if successful, the second step will be to invite the candidate to a restaurant for On job evaluation (OJE) and interview. The on job evaluation helps evaluate the candidate's customer service skills and his ability to keep up with the high energy environment. This will last for 15 minutes after which the candidate will be interviewed by the Business Manager for another 15 minutes. Once the crew members are hired, they will attend a welcome meeting which will be conducted at their chosen restaurant or the recruitment centre. The welcome meeting involves viewing a DVD which gives important information about the company and also gives the manager an opportunity to interact with the new recruits. They also attend a compulsory online Health & safety and Food safety test when they start working (McDonald's,2009).

McDonalds also recruit ‘Trainee Business Managers' who need to display some strong leadership skills. In this, McDonalds makes sure that the candidate is right for the job. A candidate applying for this position has to go through four-step selection process. The first stage is the initial screening process, this helps in ensuring that the candidate meets the basic criteria for selection. If successful, the next step is an online personality questionnaire that the candidate will have to complete. This ensures if the candidate has the desired attributes to be working in McDonald's environment. The next step is a restaurant based ‘On Job Evaluation' or OJE. In this the candidate works for the entire day in order to find out what it's really like to work in a McDonald's restaurant. The final step of the process is an interview with the Senior Manager of the restaurant (McDonald's,2009).

2.2 Training in McDonald's

McDonalds success depends on its well trained crew and managers who maintain company standards of providing high quality, good service and cleanliness at each of its restaurants. McDonald's has a company policy to provide career opportunities that will allow employees to grow and meet their full potential. They have included career development programmes for crew and operations management which will allow them to progress to a senior management position. The company believes in promoting people on their merit. The crew members are trained by the Crew Trainers and they learn the skills necessary to run each of the workstations in the restaurant, from the front counter to the grill area. They are also trained on how to take deliveries and store the frozen food into the chiller, this is then further used in cooking and making the necessary burgers. Major part of this training is floor based and this helps the crew members learn faster and are also able to retain the information provided. After the initial training period the crew members are monitored by the use of ‘observation check lists' (OCRs) on an ongoing basis. The observation checklist is a score sheet that marks all aspects of work in the restaurant. The ratings derived from these checklists goes towards their performance appraisal. The restaurants do promote the good performers to management positions where they will have the responsibility to runs shifts within the restaurant. For this, training is given to crew members in areas such as Customer Care, First Aid, Taste of Quality and Food & Restaurant Safety. On successful completion of the management entrance exam, the employees will attend a training course provided by the Training Department before they start working in management position (McDonald's, 2009).

2.3 Retention Strategies of McDonald's

McDonalds provides high levels of training to its employees working in various positions at the restaurants. This helps in reducing staff turnover and lowers the turnover costs. Employees that perform well are given recognition by awarding them with ‘Employee of the month'. It provides medical insurance and offers health care. McDonalds now gives quarterly bonus to its crew and manager's instead of yearly bonus, this was a step taken towards motivating it's employees. The organization gives five weeks holiday per annum and they are going to increase that to six weeks from April 2009. Computerized English language classes are conducted; this can be enjoyed by the crew members between shifts (The Wall Street Journal, 2008). In 2009, McDonald's aims to provide Apprenticeships to up to 6000 of its 72,000 UK workforce and later will be increased to 10,000 from 2010. This will give the staff an opportunity to gain valuable and nationally recognized qualification that is equivalent to five GCSE grade A*-C. McDonald's senses the importance of investing in their staff says the Senior Vice President David Fairhurst of McDonald's UK. This has been done purely to retain the existing staff and also to attract new ones towards working for McDonald's, which, is a global brand name (McDonald's Latest News, 2009).



This section of the study points out the various theories that are relevant to the topic chosen. It starts with the HR and then focuses on employee turnover and the impact it has on the organization. It also speaks about the various ways an organization can adopt to reduce the employee turnover.

3.1Human Resource Management

Human resource management (HRM) is a strategic and coherent approach to the management of an organization's most valued assets. The people working in HRM put individual efforts and also work together collectively in order to achieve its objectives. Their main goal is to help the organization achieve their goals and targets through people. HRM is concerned with choosing human capital that meets the organizations requirements and to develop their capabilities so that the work is done effectively (Armstrong, 2006). Recently there has been a growing importance of HRM; this is due to the fierce competition from overseas economies. In the twenty-first century if an organization wants to have a competitive advantage, it would have to effectively manage the organization's human resource. This would also enable the organization to maintain high performance consistently over a long term. In today's market the managers recognize the growing importance of recruiting, selecting, training and developing, rewarding and compensation the employees. However, individuals that work with human resource matters face a multitude of challenges such as the ever constant changing workforce, the government regulations and technological revolution. Furthermore, globalization has made organizations of all sizes to think about cutting costs and improving productivity (Mondy, 2008). It is therefore, important that the HRM and the other departments within the organization work closely together in order to achieve the organizational goals and objectives and to compete locally and internationally (Sims,2002).

3.2 Human Resource Development (HRD)

Human Resource Development is a title which represents the latest evolutionary stage in the long tradition of training, educating, and developing people for the purpose of contributing towards the achievement of individual, organizational and societal objectives (Wilson,2005).The fundamental aim of strategic HRD is to enhance resource capability in accordance with the belief that the human capital of an organization is a major source of competitive advantage. It is therefore about ensuring that the right quality people are available to meet present and future needs. HRD policies are closely associated with that aspect of HRM that is concerned with investing in people and developing the organization's human capital. Human Resource Development is important for organizations because it is the people whose innovative ideas, their quality at work and their hunger for continuous improvement that is needed in order to compete in today's modern and high competitive business world and these won't come from machines (Swart et al, 2005). The development of human resource will always be an ongoing process and a vital ingredient for the success of an organization.

3.3 Employee Turnover

Employee attrition or turnover can be explained as the number of people who leave employment over a specified period due to retirement, death, redundancy, dismissal, transfer or resignation (Secord, 2003). According to Muller-Camen et al (2008) turnover is the number of people who leave the organization at a given time period. Most organizations would like to reduce their turnover rates, especially when it comes to the good performers who have benefitted from the companies training programs. Some organizations measure their turnover rates on a monthly basis, whereas some do it on a yearly basis. A limited amount turnover is positive for organizations as a poor performer could be replaced by a more productive one. Also, it creates an opportunity for promotion or career development when an experienced staff leaves an organization. However, high turnover could affect the quality of product and service that is offered to the customers (Baum, 2006) e.g. in case of McDonalds if an experienced staff leaves and a new staff is recruited in the kitchen section, the quality of making the burgers will be affected. It is important for any organization to stem the staff attrition rate as finding a replacement could incur heavy costs for the organization. Some of these costs include recruitment, administration and selection costs. The managers will have to recruit new employees which will incur cost to the organization and also to cover up for the loss, the other employees working in the department would be under pressure to meet the company targets. In a highly competitive market this needs to be avoided by the managers. In order to avoid high attrition rate, it is essential for HR managers to try and retain its existing employees.

3.4 Cause of Employee Turnover

There are various employee turnover causes. For example, one of the biggest employee turnover causes is an ill tempered manager. Employees don't like to work with those managers who are always being negative to them, shouting at them and blaming them for something which wasn't their fault. The employees don't want to work for a manager who is not well organized in his work. Employees find it extremely difficult to work with managers who have attitude and are not easily approachable when they face problems, such managers often find it difficult to retain their staff. Sometimes managers in order to maximize profits for the organization try to cut costs by making an employee work more so that they don't have to recruit another staff. Another main cause of employee turnover is less pay to the employees. Many employees leave an organization due to not being paid enough by the management. Employees want that they are respected for their efforts in form of good pay and good benefits. It is therefore important for organizations to treat their employees as human beings and respect their feelings and opinions. When an employee feels that they are not being looked after by their employer, they get affected mentally as frustration creeps in and this forces them to leave the organization. Also, less pay and no benefits results in lack of motivation and job satisfaction. Another reason that causes employee turnover is an employee interaction with other employees. If an employee is not comfortable with their co-workers they often tend to leave the organization. They don't really get along with the workplace and this affects their performance and productivity. Employee turnover also occurs when they are not rewarded for their hard work. If an employee performs really well at work, he/she expects that the employer would recognize the efforts put in. However, this does not happen often to the employee (Employee Turnover Calculator Blog, 2008).

3.5 Types of Employee Turnover

There are two types of turnover: Voluntary and Involuntary. Voluntary turnover is sub-divided into avoidable and unavoidable turnover. Avoidable turnover is that which an organization can prevent from occurring such as increasing the employee pay or by giving him new job assignment. Unavoidable turnover is when an employee quits and the organization could not have prevented, such as people withdrawing through retirement or returning back to school or university. Other examples of unavoidable turnover is when an employee quits in pursuit of a new career, health problems which forces an employee to take up a different type of job or perhapswhenanemployeeleavesthecountry. Involuntary turnover can be split into discharge and downsizing types. Discharge turnover occurs when an individual has been asked to leave the organization. This could be due to job performance problems wherein an employee does not perform well over a period of time even after adequate training is given to the employee or could be for not being discipline at work e.g. coming late at work or misbehaving with colleagues. Downsizing turnover is targeted at a group of employees by an organization, it occurs as a part of organizational restructuring or cost-reduction program to improve organizational effectiveness and increase shareholder value. This reduction could be permanent or temporary due to a plant or site closing or relocation. The reduction in workforce also occurs at the time or mergers and acquisitions (Heneman & Judge, 2006).

3.6 Cost as aresult of Employee Turnover

The most important factor of high employee turnover that affects any organization is the cost. These costs can further be divided into the recruitment costs, training costs, lost productivity costs, new hire costs and lost sales costs (Pilbeam & Corbridge, 2006). Recruitment costs are usually in the form of advertisements. The organization also incurs cost as they have to pay the recruitment agency, and also for posting advertisements on the internet. The training costs include cost of departmental training, cost of the person(s) who conduct the training and cost of various training materials. There are lost productivity costs as the new trained employee would only contribute at 25% productivity level for the first 2-4 weeks and cost of mistakes the new employee makes during his induction period. The new hire costs include putting the person on the payroll, establish computer and security passwords and identification cards, telephone hookups and cost of establishing email accounts. The lost sales costs or lost revenue which is calculated by multiplying the number of weeks the position is vacant by the averageweeklyrevenueperemployee.Despite the costs of high employee turnover being so significant it is overlooked and rarely calculated. Few organizations, 7 per cent of those surveyed, calculate the more extensive costs of turnover (CIPD, 2004a). When these organizations were asked why they don't calculate these costs, over half of them gave the reason that the organization did not require the information, while a third stated that calculating the various costs was just too time consumingforthem.

According to Risher & Stopper (2002) for an organization cost of replacement can sometimes account to around 2.5 times the annual salary of an existing employee. Such costs are rarely identified by the accounting department of an organization. Therefore, in order to avoid such turnover costs, organizations must form a successful retention strategy overtime.

3.7 Customer Satisfaction and Customer Retention

According to Hill (2006) recently many organizations whether it be a small one or a large one, they have increasingly come to understand that it is important for them to maintain customer satisfaction. Nowadays the organizations have realized the fact that retaining existing customers is easier and less costly than finding some new ones. Today's businesses are so competitive that in order to gain or win new customers, organizations have to invest a lot of money. Organizations have started to realize that there is a strong link between customer satisfaction, customer retention and profitability. For many organizations in the hospitality and service industry customer satisfaction will be the topmost priority in order to be successful. Meeting the various needs of the customers and satisfying them has become the key operational goal for many organizations. Customers would only be satisfied when the organizations product or service is good enough to meet their requirements and therefore this needs to be measured by the organization. In the words of Argenti (2002) in order to measure the overall success of any given product or service one needs to find out how often do the customers buy that same product or service. A customer buying the same product repeatedly would mean that he/she is satisfied with that product. If one can put it in simple terms, a company can make regular profits if customers show a long term commitment to their product or service. The reason why organizations can make profits from long-term and loyal customers is because they don't have to invest huge sums in attracting the new customers through the means of advertisements and promotions. Therefore, if a company after acquiring a new customer manages to keep them in the long-run, it's investment on acquiring will pay off. E.g. If McDonald's want to stay competitive in the fast food industry it needs to make sure that their customers are always satisfied with the food and also the customer service. This is essential for retaining customers and would also add value to the company,thereby increasing the company profits.

3.8 Employee Retention

Retention includes all those activities that an employer does to encourage qualified and highly-skilled and productive employees to continue working for the organization (Jackson et al, 2009). Staff retention is about attracting and keeping good-quality employees, while accepting that some of them will leave the organization. However, the managers should ensure that when these employees leave, it won't affect the organization's productivity to a large extent (Bloisi, 2007). Retaining a productive employee is of considerable importance to the company's HR professional. The CIPD (2004) report intro HR trends and indicators reported that 31.7 percent of employers face difficulty with retaining its employees. Large organizations find it even moredifficulttoretaintheirworkers.According to Browell (2003) an organization can benefit a lot from retaining the existing staff, some of them include: reduction in recruitment costs and selection and training of new staff, it keeps skills and knowledge within the organization, helps improve performance, productivity and profitability, it helps in building customer loyalty and satisfaction, and lastly, it could help increase the sales volume of the organization thereby making them competitive in the market.

Organizations should consider the following elements which would help in retaining employees: Job previews - employees should be given a more realistic job preview when they are being recruited. Care should be taken not to give them high expectations that cannot be met. Improve management style - one of the main reasons employees leave the organization is due to dissatisfaction with their managers. Organizations that would like to improve retention should take measures to improve their managers' people management skills. Career development and Progression - organizations should give their employees ample of opportunities to develop their skills. This can be done by introducing mentoring scheme, encouraging multi-skilling, improving career development opportunities and investing in succession planning (CIPD, 2008). Flexibility - organizations should be flexible towards employees working hours and times. If employees are forced to work hours which is not convenient for them, they will look for jobs elsewhere. Treat people equally and fairly - to improve retention organizations should make sure not to discriminate against employees. If they are unfair towards them it will result in voluntary resignations. Every employee that belongs to a team should be treated equally by the managers. Improve pay and benefits - Many employees leave due to less pay and no benefits. A simple pay rise could be a useful strategy for organizations to retain their employees. Organizations should make sure that they match the market rates or better it when it comes to good performingemployees (Muller-Camenetal, 2008).

3.9 Recruitment

In today's global competitive market organizations are under constant pressure to perform well and stay competitive and in order to achieve that, they need to recruit the right people for the right job. Recruitment is a very costly process as a lot of resources go into it. If the organization recruits wrong people it could cost to the organization huge sums and also loss of valuable time. Therefore it is important for the recruitment process to be fair, reliable and valid (Armstrong, 2001). According to Bratton and Gold (2003) an organization should setup such a recruitment process, which will help in generating a pool of talented and skilled workers who are capable for employment in an organization. Recruitment involves searching and hiring qualified people for the organization and consider them when filling job openings. The recruitment process should be consistent, taking into consideration the organization's strategy, vision and values.

There are different sources an organization can use for recruiting: the first being the internal labor market and this could be the company's current employees. A good way for recruiting employees from within is through posting announcements in a company newsletter. According to the CIPD recruitment survey (2004a) 84 percent of UK organizations surveyed looked for applicants from within the organization. They did so by using internal email or intranet (69 percent), notice and bulletin boards (68 percent), team meetings (18 percent), staff newsletter or magazines (14 percent), and by memos, circulars and approaching directly. The second source would be the external labor market and this could be reached via electronic media and also referrals from current employees (Jackson et al, 2009). However, the success rate of these sources is not equal and may vary e.g. employee referrals may yield better quality applicants than through newspaperadvertisements.

It is important for any organization to monitor its recruitment process as this will help reduce the talented and knowledgeable employees from leaving the organization. For any organization the recruitment process is the very first stage of retention. It is therefore important for an organization to monitor the recruitment practice as it will help in finding the right candidate for the job. In the long term this will also help the organization to reduce the turnover levels.

3.10 Training

The primary reason that organizations train their new employees is to increase the level of the knowledge, skills and abilities that they possess. It can be used as one of the ways to retain its existing employees, as training will give them an opportunity to develop new skills and gain knowledge. The amount of training given to the employees has a positive influence on the organizations revenue and overall profitability. Managers should therefore keep a watchful eye on the organizations goals and strategies while conducting training programmes (Snell & Bohlander, 2007). Training is also described as a planned process which enables to change the attitudes of people; it helps a person to gain some knowledge and develop the skills through various activities which helps the person to achieve effective performance. Training an employee at work is important as the employee will be able to meet the requirements of the organization in the present and in the future (Beardwell et al 2004). Training is the systematic process of altering the behavior of employees in a direction that will achieve organizational goals. Training is related to present job skills and abilities. It has a current orientation and helps employee's master specific skills and abilities needed to be successful (Ivancevich,2007). There are two generally accepted methods of training: one of them is called on-the-job training and the other is called off-the-job training. On-the-job training is probably the most widely used method of training and it usually takes place at the workplace. Off-the-job training usually takes place in a location which is outside of the workplace and is normally more expensive than the on-the-job training (Mullins,2005). In on-the-job training an experience worker trains the newly recruited employee. E.g. in McDonald's trainees acquire skills such as running a machine, making of a burger by observing the experienced worker. OJT is also used for top level management, there are ‘assistants' who train and develop the future managers. Some other forms of OJT include apprenticeships and self-directed learning. The advantage of OJT is that it can be customized according to the experiences and abilities of the trainees. Off-the-job training provides group based learning opportunities which is conducted at a site which is away from the workplace. Off-the-job training is conducted in an off-site training classroom close to the workplace or in a corporate or private facility. Off-the-job training is usually expensive as it requires a lot of travelling and maybe used by large organizations. Training classrooms, vestibule training setups and specially constructed training laboratories are some of the sites used for off-the-jobtraining(Jacobs,2003).

In an organization training could also be used to change the culture within the organization. It can be used as an important tool by the organization to improve the overall effectiveness, especially in today's world where the marketis highly competitive. An organization can take up two approaches on training: a systematic training and just-in-time training. In a systematic approach, training must be designed, planned and then implemented appropriately in order to meet the needs of the organization. The training is given by those people who know exactly how to train the employees. Once the training has been provided, it is carefully monitored in order to measure the effectiveness of the training. Just-in-time training is usually delivered at a time when the activity is just about to take place. This training will be based upon the requirements, priorities and plans of the employees. Just-in-time training aims to ensure that whatever is taught to the employees, the same should be implemented at the current work situation (Reynolds, 2004).

3.11 Job Satisfaction

In order to retain talented and highly skilled employees, organizations should make sure that they are satisfied with their jobs. Those employees who are satisfied with their jobs won't leave the organization and would not look for alternative employment. Job satisfaction usually takes place when employees have been appraised for their hard work. Employees who are satisfied are always in a good mood and in a pleasing state of mind (Colquitt et al, 2009). A person's job satisfaction is a set of attitudes toward work. There are many employees who would rate job satisfaction over and above job security or higher pay. An organization that has employees who are satisfied will experience less employee absenteeism as well(Lussier,2008).

The above model shows that in order for an employee to achieve job satisfaction, he needs to have good pay and job security, a good working culture and be comfortable with his co-workers, he needs to be happy with his supervisor, he needs promotion for his hard work and lastly, he needs to be happy with the job. If all these expectations are met, an employee will be satisfied and would be productive in his work. It is important for the management to give autonomy to those talented employees in their job functions and involve them in decision making thereby making them feel that they are an important part of the organization. Employees who are productive always enjoy working for an organization that has a good pleasant working condition and they do not look elsewhere. In addition, updating the employees through training and development helps keep them updated on their current job role and at the same time they learn new skills which could be a good way to improve employee job satisfaction (Sigler,1999).

3.12 Motivation

In the 21st century it is important for any manager to motivate its employees if the organization is to run successfully. As markets become more and more competitive, it is crucial to maximize the performance of the employees or workers in order to grow and maintain market position. There are many motivational theories that explain why people work and the amount of effort they will put in e.g. Abraham Maslow's hierarchy of needs theory. In this theory Maslow pointed out eight important needs, some of them include the need to know and also the need to understand, the aesthetic needs and also the need for transcendence. However, Maslow's hierarchy of needs is normally given in five main levels and this is shown in Fig.2.2

The first need is the Physiological needs which talks about satisfaction of hunger and thirst, sleep, sensory pleasures and arguably, sexual desire. The second need is Safety needs which includes safety and security, freedom from pain or threat of physical attack and having the necessary protection from danger. The third need is the Social needs and this includes being loved, sense of belonging in society and friendships. The fourth need is the Esteem needs which include self-respect and the esteem of others. It involves being recognized in society and having prestige and appreciation. The last one is the Self-actualization needs and is the development and realization of one's full potential (Mullins, 2008). Maslow explains that once the lower needs are met and one is satisfied, it no longer stays as a motivator for the human being. Only those needs that remain unsatisfied, act as a motivation for the person. An organization's top management should identify at what stage each individual employee is and act accordingly to motivate them. Managers who possess this knowledge can construct strategies and apply techniques that will get the best out of the employees. According to Porter, Smith & Fagg (2006) an employee needs to be motivated depending on the particular situations. A need is something that drives a person. An employee would behave differently to various stimuli.

There are also various other motivational theories such as McGregor's Theory X and Theory Y, where in Theory X the employees tend to be passive and disinvested unless controlled by their managers. Theory Y is based on the assumption that employees are not passive but capable and enthusiastic about taking responsibility. Most forward-looking organizations prefer Theory Y (Brody,2004). Other motivational theories include; McClelland's Need for achievement theory, the Herzberg's two factor theory and also the Vroom's expectancytheory.

3.13 Performance Appraisal

Performance appraisal is a central component of performance management in most organizations. The primary goal of many organizations to conduct a performance appraisal, is to improve individual and organizational performance. According to Mondy (2008) performance appraisal is a formal system of review and evaluation of individual or team task performance. In a Performance Appraisal the individual performance is evaluated based on the judgments and opinions of its subordinates, peers and supervisors. Sometimes, even the employees opinion and judgment itself is taken into consideration (Jackson et al,2009).

In today's globally competitive marketplace managers need to do a performance appraisal as it will provide valuable feedback to the employees working in an organization. Organizations should set up performance standards which could be used as the base and then actual performance of the employees can be compared with them. Once these standards are set, they should be communicated to the employees by the management as this would give them a clear understanding of what is expected from them (Naukrihub, 2007). Fig 3.3 shows the process of performance appraisal that an organization shouldfollow.

Performance appraisal also helps managers identify training and development needs and justify termination for poorperformance. Having an effectiveperformanceappraisalhas been and will continue to be in the future, the topmost priority for management.

There are various performance appraisal methods that an organization can use, such as: graphic rating scales, critical incidents, behaviorally anchored rating scales and management by objectives (MBO). The graphic rating scales method is the most frequently used by organizations on key characteristics such as creativity, job knowledge, reliability and adaptability. These characteristics are rated on a scale of 1-10 where 1 represents poor performance and 10 represents outstanding performance. The behavioral anchored rating scale is similar to the graphic rating scale, except that BARS is more specific when it comes to rating. Critical incidents are descriptions made by supervisors and other qualified observers of the way staff behaves and are they effective or ineffective. Later the staff is rated in terms of contribution made towards the organization. The MBO method is used to guide individual staff performance and accountability. The staff and supervisors work together to develop ideas which will enable the staff to achieve the organizations mission and goals (Brody,2004).

3.14 Reward Management

Reward management is concerned with the formulation and implementation of strategies and policies. It mainly deals with designing, implementing and maintaining proper reward systems, with the overall aim to meet the organizations and stakeholders needs. Their purpose is to reward everyone working within an organization fairly, equally and more regularly keeping in mindtheorganizationsvalue(Armstrong,2006). The design and management of reward systems is one of the most difficult HRM tasks for the general manager. According to McKenna & Beech (2008) the main purpose for any organization to have a reward system is to attract new employees and retain existing employees, which in return will enable the organization to achieve its objectives.

The various economic and social factors throw challenges for managing reward systems. Managers today have to improve the productivity and quality of their organization's products and services. At the same time they need to ensure that wage costs are controlled. A social factor such as employee expectations with regards to their pay also needs to be looked upon by the managers. Human resource managers today are pressurized as they have to achieve their organizations goals and at the same time meet the goals oftheiremployees(Bratton&Gold,2003). To retain the services of its employees and to maintain a high performance level, it is essential for an organization to motivate its workers so that they are committed towards their work. This can be achieved through a good management style, providing competitive compensation package and supportive culture (Armstrong & Brown,2006).

3.15 Career Development

Career Development provides a future orientation to HRD activities. Nowadays employees working in the organization need to adapt to various changes if they want to be successful in developing themselves and to gain a competitive advantage over the others. Career development can be explained as a lifelong series of activities which helps in contributing to a person's future career success. For organizations, career development is essential in order to develop and enrich the available human resources. Organizations assist employees in developing their career plans hoping that this would bring them close to the organization. Under such circumstances employees are less likely to quit their jobs. It boosts their morale and productivity, which would result in an increase in the organizations overall performance. The interest shown by the organization towards an employee's career development leaves a positive effect on that employee. An emphasis on career development would make employees view their jobs and their employers with a positive attitude (Sims, 2006). Lack of career development opportunities can result in frustration and the feeling of not being valued within the organization. Career development is usually seen at the centre of the psychological contract and this also binds the employee to the organization. For organizations career development for employees ensures that they develop the necessary skills to sustain a competitive advantage (Harrison, 2002). It ensures that people with good qualifications and experiences are available to the organization when needed. Career development benefits the employee as well as the employer and therefore needs to be considered carefully by both (Mondy, 2008).

3.16 Psychological Contract

Due to the evolving environmental pressures there has been a significant and fundamental change in the ‘psychological contract'. The contract states the various expectations that employees have about their job and what is it that they would get in return from the employer for doing the same. A psychological contract is a legal contract of employment which describes clearly the terms and conditions of employment, the remuneration and various other basic rules that govern the employment relationship. Currently we are witnessing an ongoing change in these psychological contracts (Torrington et al, 2005). In the present business environment employees have become increasingly mobile; they change their jobs for promotion, reward and job satisfaction. To retain the key employees, organizations need to give them developmentopportunities(Harrison,2002).

There are two perspectives to the psychological contract, the employees and the employer's or managers. Guest and Conway's (1997) carried out a research for the CIPD and suggested that from the employee's perspective the psychological contract consists of six parts: to be treated Fairly, to be treated equally and also consistently; Security of employment; Scope to demonstrate competence; Career expectations and the opportunity to develop skills; Involvement and influence; and Trust in the organization to keep its promises (Muller-Camen etal,2008). In today's turbulent climate there is an increased possibility of the psychological contract being violated or misinterpreted. The violation mostly occurs in matters such as training and development and compensation and promotion. Violation of the contract causes disillusionment, dissatisfaction and exit of the employees. The breach in the psychological contract usually happens either in the beginning when employee joins the company or after years of satisfactory service. By violating the contract the morale within the organization may get affected and this might affect the profitability of the organization. If the activities of the organization are perceived as being unjust or immoral, it may affect the reputation and the brand image of the organization(Mathew'sBlog,2008).

3.17 Exit Interviews

In order to reduce employee turnover HR managers must conduct an ‘Exit interview' of those leaving the organization. Employees leaving the organization are likely to be more honest than those who you currently employ. According to Kuretzky & Mackenzie (2003) Exit interviews should be conducted with all employees who leave the company, whether they are leaving voluntarily or involuntarily. The employees should not be forced but ratherbeencouraged as this would provide valuable information to the managers. According to Heneman & Judge (2006) Exit interviews are formally planned and conducted interviews with departing employees. Apart from finding out the reasons of employee's leaving the organization, exit interviews are also used to explain things such as rehiring rights, benefits and confidentiality agreements. It is important that exit interviews are conducted carefully. Departing employees are reluctant to complain about their manager as they will want to avoid burning bridges and don't want to jeopardize future references. In exit interviews employees might say that they are leaving for better pay but in reality they probably would be leaving for poor working conditions or interpersonal conflicts with the supervisors and coworkers. It can be argued that exit interviews, if used at all by an organization, should be conducted as soon as the resignation is confirmed and it should be conducted by an individual who will not have any role in writing future job references (Taylor, 2005).

3.18 Grievance Procedures

Employees want their managers to listen to them and take appropriate actions. This can be done by incorporating a ‘Grievance Procedure'. Many grievances are described as ‘damaged relationships' rather than individual and isolated acts. In most organizations employees leave because of difficulties faced at the working environment. They don't leave their jobs, they actually leave because of their managers or due to stress of working with certain co-workers (Banfield & Kay). Most employees do not raise the issues directly with their managers, as they feel that it could be contentious. Having a proper grievance procedure makes it clear to the employees that there is a course of action that they can take if they have a problem. It also helps the employer and the employee to resolve issues fairly and quickly (Bloisi, 2007). A proper grievance procedure provides a structure within which individuals can reasonably air their grievances and avoid the likelihood of managers dodging the issue when it is difficult. It avoids the risk of inconsistent ad hoc decisions, and the employees know at the outset that the matter will be heard (Torringtonetal,2008).

Chapter 4

4.0 Research Methodology

While conducting a research, a researcher can have two kinds of approach, a phenomenologist or a positivist. Phenomenology for many writers has been quite useful as it covers various styles of conducting a research and it does not rely on measurements, statistics or anything which would be associated with the scientific method. It emphasizes on subjectivity, description, interpretation and agency. It deals with people's attitudes, feelings, emotions and perceptions. A Phenomenology is experienced directly and not through concepts and theories. The world as you see it today is quite complex, nothing is too easy to understand. A phenomenological approach allows a researcher to understand the complexities and get detailed information which would enable him to understand these complexities. Phenomenological research depends on in-depth interviews for data collection and analysis and does not call for any expensive equipment (Denscombe, 2007). Positivism stresses on objectivity rather than subjectivity. A positivist likes to see evidence which can be expressed in quantitative form as this makes it easy to measure and compare (McNeill & Chapman, 2005). A positivist researcher emphasizes on quantitative data which is collected and then analyzed through experiments, surveys and statistics. One of the key activities of a positivist research is counting. The tools that are used in a positivist approach are obtrusive and controlled. The data is gathered through quantitative techniques such as surveys, statistical records and structured observations (McNabb, 2004). In this research, the researcher will take a phenomenological approach while conductingthisresearch as information had to be gathered directly from the employees and managers.

In any type of research there are two styles of reasoning, they are ‘Inductive' and ‘Deductive'. In Inductive research, the research begins by collecting specific data, which is then used to develop a general theory to account for that data. In inductive research, the researcher starts from the bottom of the research circle and then develops a theory at the top (Engel & Schutt, 2005). In an Inductive approach the research lies on the empirical verification of a general conclusion derivable from a finite number of observations. In Deductive research a specific expectation is deduced from a general theoretical premise which is then tested with data which has been collected for this purpose (Engel & Schutt, 2005). Deductive reasoning is based on the establishment of universal laws. These laws are essentially only hypothesis to be tested against the predictions of the laws. The researcher in this research will take the Inductive approach.(Adamsetal, 2007).

In a research there are two types of methodology used to collect information; they are quantitative and qualitative methods. The researcher will use both methods to collect data for this research. Quantitative methods are used to document subject attributes and are generally expressed in quantity, extent or strength. It guarantees objectivity, accuracy, validity and reliability. Their main purpose is to measure the variables which allow in making judgments and comparisons (Sarantakos, 2005). In Qualitative research the researcher describes the characteristics of people and events without making comparisons in terms of measurements or amounts. Qualitative research has a more naturalistic approach to its subject matter which means that a qualitative researcher likes to study things in their natural settings. It attempts to interpret phenomena in terms of the meanings people bring to them (Thomas, 2003). Qualitative methods give you the flexibility in structure and the designs are loose which allows you to capture the reality. It brings you in close contact with the respondents and context sensitivity (Sarantakos, 2005).

A researcher has two common sources to collect and analyze evidence; they are primary sources and secondary sources.The researcher will use both the primary and secondary sources while conducting this research. Primary data is a source of information that is already written by someone at a time when it was being investigated. For the researcher a primary source is an original material which gives the researcher raw evidence (Sapsford & Jupp). The advantages of having primary data are that it is an original data and a data which is collected directly from the population. However it has its own drawbacks as it is time consuming and the data collected is raw and large in volume. In this research Primary data will be collected in the form of structured interviews and through handing out of questionnaires. Few managers working in McDonalds will be interviewed and the employees will be given the questionnaire. Secondary sources on the other hand copy, interpret or judge material to be found in primary sources (Sapsford & Jupp). The advantages of secondary data are that it saves a lot of time as the data has already been collected by someone else and it saves cost as the data is either free or inexpensive. The disadvantages of secondary data are that the data collected maybe out of date and it may not be specific (Kerin et al, 2004). In this study, secondary data will be collected in the form of books, journals, newspapers and articles that are relevant to the research topic.

In this research it was essential to choose a sample size which was about 3-4 McDonalds restaurants in London. A sample is a small representation of the larger population. It is carefully selected in order to gain a reliable picture of the large population (Bouma & Ling, 2004).The researcher also took into consideration the Ethical issues at each and every stage of the research, starting from the design, collection and interpretation of the data. The researcher will be considerate and won't invade the respondent's privacy during interviewing. By participating in the research, the respondents should not fall into any kind of trouble. In order to conduct the interview a special venue was to be chosen and this would have proved expensive. Employee would have had to take out extra time to participate in the interview process. It was therefore decided by the researcher not to interview the employees. Instead, questionnaires will be given to the employees in order to find out the overall picture of recruitment, retention and main causes of employee turnover. According to Sarantakos (2005) questionnaires are diverse; they vary according to the way they are administered as well as according to their nature. Before handing over the questionnaire to the employees, a letter will be handed out to the restaurant explaining the purpose of conducting this research. This would enable the employees to decide whether they would like to participate in the research or not (Singleton & Straits, 2005). The importance of doing this is to get an increased response rate and address ethical concerns.

The researcher chose to interview the managers working in McDonalds. One manager from each store will be interviewed and the same will be conducted in a structured form i.e. the same set of questions will be asked to each of the managers. According to Punch (2005) in structured interviews each respondent is asked questions that are already framed with preset response categories. Each and every respondent is asked questions in the same order with little room for variation. The researcher understands the rigidity of structured interviews and is prepared for the same. While recording the answers derived from the interviews, the researcher will be careful not to manipulate or make judgments of its own while interpreting the data. Other methods of data collection were considered and rejected by the researcher. Qualitative method such as Focus Groups were not considered as it would require 2 people or even more to record whatever the employees had to say. It would have been difficult for one person to ask questions and at the same time record everything the employees had to say. Also, language would have been an issue since the employees working in the restaurants are from different countries and cultures. Hence, not everyone could understand and speak English fluently. Observational technique of collecting data relies heavily on the recall accuracy and the memory of the observer and his ability to record certain information that occurs so quickly it becomes harder to interpret with minimum error (Issel, 2009). Also, McDonald's restaurant gets busy with people and it can sometimes be hard to concentrate and observe each and every employee. This method was therefore not considered by the researcher.

Once the data has been collected through interviews and questionnaires it will then be analyzed. The quantitative data collected from questionnaire will be analyzed using statistics. Data will be analyzed with the help of graphs such as Histogram, pie-charts and frequency curve. The qualitative data through interviews will be analyzed in three main components. The data will first be reduced through editing, segmenting and summarizing. This will help reduce data without significant loss of information. The data will then be organized, compressed and assembled as qualitative data are typically bulky and dispersed. Once the data is reduced and organized, the researcher will draw the conclusions(Punch,2005).

4.1 Research Approach

The researcher handed out the questionnaire to 4 McDonalds restaurants in Central London. These stores were close to the underground stations and therefore were easy to access. None of the stores chosen were drive through, they were located in busy areas of London. Around 25 questionnaires were handed out to each of these stores and one week was given for the employees to fill up the questionnaires. One manager from each store was selected and around 30-45minutes was given to interview them. The researcher spoke to the manager explaining the purpose of this research and only then with their permission the interview was conducted. About two weeks was given for the interview purpose and 2 interviews were undertaken each week. After collecting the information from the interviews and questionnaires, some data which was irrelevant was declared as null or void and only the data that was relevant to the study was used for further analysis.

4.2 Research Constraints

The researcher while conducting this research faced some difficulties in getting the questionnaires filled by the employees. Many McDonald's stores in central London were approached but most of them didn't give the researcher the permission to carry out the survey. The managers of these stores thought that the results from the survey would reveal confidential matters and they didn't want this to be exposed to others. Since most of the stores were located in busy areas of London, the researcher had to wait patiently till the store got quieter, before things could be explained to the managers. Many copies of the questionnaires which were handed out to the stores that agreed to carry out the survey, some of them were either got spoilt or were lost and therefore more copies had to be given in order to get maximum feedback. There were some employees who didn't want to answer certain questions that they think by answering them would jeopardize their job. Some employees who were busy at work filled up the questionnaire quickly, thereby missing out on answering few questions. The response rate from the questionnaire was not so good and this posed difficulty for the researcher. The researcher also had some difficulty in conducting interview session with the managers. Even after taking an appointment date and time from the managers the researcher once at the store had to wait patiently until the managers were available to answer the questions asked. On some occasions during the interview session the managers had to leave in between to attend important calls or resolve certain issues pertaining to the store. This extended the interview time and some questions were half answered due to the disruptions. The researcher had to repeat the questions in order to get a complete response from the managers.

Chapter 5

5.0 Data Analysis

The researcher in this study would be using both quantitative and qualitative methods. Once the data has been collected from the Questionnaire's which were handed over to the employees, the researcher would be using the help of statistics to analyze the quantitative data collected. Pictorial representations such as bar charts, pie charts, histograms and line graphs will be used by the researcher to analyze the data collected from questionnaire. The researcher therefore chose to make use of Microsoft Excel program to analyze them. This program had features such as the use of graphs and charts which will help interpret the data more accurately and without any difficulty to the researcher. Drawing the graphs manually would have been time consuming for the researcher and therefore using the software helped to represent the data quickly. This program was also quite useful in interpreting complex information which made it the best program for thisstudy. While using the Interview methodology, the researcher analyzed the data with the help of ‘coding'. Coding Since the information gathered from the interview was bulky coding helped in data reduction and also analytically categorized the data. The raw data was conceptualized into categories which created themes or concepts. Since the data collected was so descriptive, the researcher assigned labels to units that had meaning (Neuman, 2006). The researcher also recorded the data in the form of notes. These notes were made based on the reflections and thoughts of the researcher about the data collected. Data gathered from the interviews were also analyzed in the form of diagrams and charts as this helped the researcher in organizing ideas and systematically investigate relations in the data. Finally, the software program called MS Word was also used in order to analyze the data collected from the Interviews.

5.1 Findings and Analysis of the Questionnaire given to employees

The researcher gave 25 questionnaires to 4 chosen stores in London and got responses from 74 employees out of the 100 given which was a good response rate. In total they were asked 22 questions and each respondent answered to most of them. 20 questions were closed-ended wherein options were given to the employees to choose from. The remaining 2 questions were Open-ended ones wherein their opinions were asked. The data collected was then analyzed and represented using graphs and pie-charts and few were analyzed in textual form, these are explained below.

Q1. How long have you worked for McDonald's?

The researcher asked the employees since how long have they been working for McDonald's. About 39% of them mentioned less than six months and the remaining 61% of them had worked for more than six months. According to the researcher the significant factor was that only 27 out of the 74 employees have worked over a year which is over 35% of the total strength. This showed that most employees working for McDonalds were either newly recruited or have been working for around 3-9 months. This proved that not many manage to stick around for a longer period of time with the organization and that is why McDonalds faces high turnover. This consists of over 60% of the employees which is quite a significant figure accordingtotheresearcher.

Q2. What age group are you in?

The above graph displays the age group of the crew members in McDonald's. Majority of the employees questioned were between the age group of 18-30 years. This proves that most employees that work for McDonald's are young and are always on the look out for better opportunities. Only 8% of the employees were above 30 years of age. McDonald's targets young people as the job requires quick and accurate customer service. For McDonald's customer satisfaction (refer 3.7) is of utmost importance in order to compete with the others in the industry. They believe that a young staff would be more productive then someone who is old and not agile. They won't even have to pay them more as younger employees are paid less than the older one's in McDonald's.

Q3. Are you a student? If Yes,What are you studying?

The researcher after collecting the data from the questionnaire given to the employees found out that around 76% of them were students. This is purely because

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