Compensation Practices at McDonald's
McDonald's
McDonald's is an American multinational fast food chain. It was established in 1940 by Richard and Maurice McDonald as a small BBQ restaurant. The current McDonald's started growing globally when a business man Ray Kroc purchased this entire fast food chain from the owners and began franchising it to private investors in the local and international markets. McDonald's is headquartered in Oak Brook, United States and currently operates in 119 countries worldwide. Globally, McDonald's has more than 34,000 fast food restaurants, outlets, and stores (McDonald's, 2013).
The major product lines and brands of McDonald's include Big Mac (hamburger), chicken sandwiches, Chicken McNuggets, desserts, Quarter Pounder, French fries, milkshakes, salads, coffee, soft drinks, soups, and a wide range of breakfast items (McDonald's, 2013). The huge scale of operations and extremely large supply chain and distribution network enables McDonald's to serve more than 69 million customers every day. McDonald's has a sound financial strength, a well-developed brand image, and a high level of brand appreciation by its stakeholders (ADVFN, 2013). It has always focused on expanding business operations on continuous basis either through self-ownership or franchising to private investors (About McDonald's, 2011).
Compensation Practices at McDonald's
McDonald's has an approximate workforce of 400,000 employees worldwide. Its human resource management policies and strategies are formulated at the Headquarters while implemented in all 34,000 locations around the globe (McDonald's, 2013). The HRM policies and practices of the company reflect its emphasis on equal employment opportunities, respect for cultural diversity, strong organizational culture, and diverse working environment in different markets of the world (D'Annunzio-Green, Maxwell, & Watson, 2004).
The compensation practices are an important part of McDonald's human resource management strategies. This section describes the major compensation practices which McDonald's has employed in its headquarters, regional offices, restaurants, and outlets in all the corners of the world:
Major Components of the Compensation Package
a. Basic Salary:
Basic salary is the most important component of McDonald's compensation package. It is an essential component which is paid to all types of employees irrespective of their position or experience in the organization (D'Annunzio-Green, Maxwell, & Watson, 2004). McDonald's pays competitive basic salaries to its employees. However, it varies with respect to their educational qualification, professional experience, and tenure of employment with the company (McDonald's, 2013).
b. Short-Term Incentives:
Short-term incentives are paid on the basis of employees' efficiency and performance during a specific period of time. These incentives are generally paid in the form of cash or direct promotion to a higher or more challenging job position within the same department. McDonald's pays these incentives as a part of its performance appraisal program which is primarily aimed at keeping the employees motivated and satisfied with their job (Dowling & Welch, 2008).
c. Long-Term Incentives:
LTI stocks are one of the most common long-term incentives in the compensation package offered by McDonald's. These stocks allow the organizational members to become shareholders of McDonald's for a specific period of time. They can not only earn attractive return on these stocks, but also enter into a long-term relationship with the company. This component of the compensation package is also an effective technique for enhancing employee motivation (McDonald's, 2013).
d. Company Car Program:
McDonald's also offers company maintained cars to its middle and top level managers. A specific quantity of fuel is also offered to the top level managers. For the Corporate Directors, McDonald's also provides full time drivers. All these benefits are a part of the company's financial perquisites for its higher management officials (McDonald's, 2013).
e. Monetary and Non-Monetary Benefits:
In addition to the aforementioned components, McDonald's also provides transportation allowance, medical allowance, life and health insurance for the employees and their family members, children education plan, paid holidays and vacations, long-term benefit plans, dental treatments, and Sabbatical programs.
Compensation Challenges for McDonald's
McDonald's manages a large workforce of more than 400,000 employees worldwide. These employees consist of multicultural people from all the regions of the world. Designing compensation strategies for these employees becomes a big challenge for McDonald's. Therefore, its international compensation packages include some extra benefits which are not offered to its local employees.
International compensation packages are specifically designed for the expatriates (parent country nationals) who join the company's new offices and outlets in foreign markets worldwide (Sims, 2002). These expatriates serve the company in new markets for specific projects or business assignments, or on the basis of permanent transfer to those markets (Dowling & Welch, 2008). For these Parent Country Nationals, the company offers free visits to home country on quarterly or semi-annual basis, cost of living allowance, hardship allowance, life and medical insurance, accidental insurance, and other benefits...
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