Human resource systems and organizational implementation

McDonald's Corporation Analysis

Existing Conditions in McDonald's Corporation

Issues identified and discussed

Time line for Change and Financial cost

The organization selected for analysis for this report is McDonald's Corporation. McDonald's can be considered a true international organization. It has operations in more than 119 countries and employs individuals from a wide range of cultures, age groups, opinions, race and religion. The laws and regulations of the local country have to be understood. And effective checks and balances have to be built into the system in order to ensure that the company restaurants and the franchises are all operating within the laws of the region. With approximately 400,000 employees worldwide, McDonald's has a difficult task of balancing the needs of the worker and the need to generate profits for the organization.

This report will identify the current labor issues facing the company and offer theoretical recommendations to improve the situation at the various locations around the world.

Introduction

McDonald's is one of the most recognizable of U.S. organization worldwide. The twin golden arches are the most recognized everywhere. It is a publicly traded company that has been consistently in the past been able to show profits and stakeholders of the company have constant anticipation of growth of the company. The company operates approximately 30,000 restaurants worldwide in 119 different countries by using a network of offices all over the world. (Barboza, 2001) Approximately, 418,000 employees work at the various locations around the world. Consistency has been the benchmark of McDonald's in the corporate world. (McDonald's, 2004b) It operates restaurants using a combination of organization run restaurants and franchise operated restaurants. Teamwork, honesty, dedication and cheerfulness are very important in a service organization.

Existing Conditions in McDonald Corporation

McDonald has a high turn over rate in its employees but the company is not very concerned as the training and orientation required for new workers is not very high. It is estimated that the cost of turnover at McDonald is approximately $2,000. (Murray, 2003)

Human resource management is becoming a strategic planning medium for many organizations. At McDonalds, "the corporate ethos and management system are rigidly imposed, detailed operating manuals followed to the letter and an extensive field organization checks on each store to enforce standards. Every foreign operator attends hamburger universities and international sessions with other members of "McDonald's Family." (TICL, 1987) The HR department at McDonald's, especially at the corporate level, is becoming a strategic partner for the organization, as it is a purveyor of the most important asset a company controls -- the human asset. The human element cost is the most variable for the McDonald Corporation worldwide and there are always serious analysis being conducted to ensure that this element is aggressively monitored.

Shareholders and management are constantly looking for ways and means to improve the bottom line of the organization. Technology, the Internet and globalization of the market have drastically changed the way most organizations operate. McDonald's, in recent times, has also been shuffling their HR personnel and hiring new faces to manage the human resource at different locations around the world. (McDonald's-Press, 2003) With this change McDonald hopes, the HR department can undertake more innovative and involved methods of handling the changes that the organization faces.

McDonald's believes that the company's "employees are the best advertisement" they "have for the tremendous potential" they "offer." (McDonald's, 2004d) McDonald HR managers are of the opinion that many American and European teenagers get their first job at McDonald's. The company experiencing high level of turnovers has the task of new employee induction down to a science. New employees at the restaurant service level are "trained" to follow fixed number of "steps" to achieve their goals and serve customers in a timely and fast manner. At a more corporate level however, McDonald jobs can provide the challenge and opportunity that any other corporate level job can provide.

While McDonald prides itself on being an equal opportunity employer and company history and records indicate that this is very true, McDonald is more likely to hire younger workers (16-22 years) or older retired workers (above 65) at its various restaurants. (IDS, 2001) In addition most of the line employees generally start out at minimum wage mandated by the local and state governments of the various locations where McDonald operates. For example, in the UK in 2000, the basic rate for most employees was between £3.75 and £5.55. While McDonald allowed workers to move up the pay scale fast; the number of employees staying with the organization over the minimum periods needed to be eligible for the pay raises.

At its essence, the McDonald Corporation is not managed in a "command and control" fashion but rather as a "form of market." Under McDonald's franchising agreement policy the personnel management is broken up into discrete and independent operations that are governed by the initial contracts signed by the franchisee. (Phillips, 2001)

The workplace is changing. But change has not affected the low-tier of McDonald Corporation. More than physical and other resources, changing the mindset and the human factor will ultimately come to represent the new competitive edge for McDonald. Communicating the goals and mission of the company effectively to all employees is considered important at McDonalds. At the same time, reviewing employees' grievances and complaints is also essential. McDonald's has to ensure that it is doing its best to address this issue. Motivating low-tier employees is not top priority for the management; however, managers and decision makers are nurtured and treated with high degree of respect by the McDonald Corporation. The more knowledge and information that the HR department along with the respective departments in the organization can provide the manager and supervisor it is believed, the better and more efficient will be the manner in which the worker performs his responsibilities and become an asset for the organization.

McDonald epitomizes the concept that America is the land of dreams. It is a place where a common person can strike it rich if he (or she) works hard enough, be smart at his work, and perform the requisite tasks for longer hours. In recent times however, there has been a feeling of resentment by the low-tier workers who feel trapped within low wage and no prospect structure of McDonald. The new worker was often taught a single skill that was used repetitively in mass production, "the hamburger assembly-line setup." (Curry, 2003)

Issues identified and discussed

Every organization strive to create an environment of mutual respect, encouragement and teamwork -- an environment that rewards commitment and performance. Such an environment is responsive to the needs of the employees and their families. Mutual respect, dignity of the individual, and respect by the individual are a few of the methods employed. The HR department realizing that a happy and satisfied employee is also a productive employee helps in identifying the factors that affect the workers in the organization.

Evaluating the output of the worker with respect to time is also one of the key tasks of the HR department. Finding fair and unbiased methods of evaluation keeping in mind the sensitivities of the culture and laws of the region is also an important task of the HR manager. The employees should be made aware that employee-loyalty is more critical to the welfare of the company that any new technology -- "people are more important than machines." This is however, not the case and point-of-view when the HR department deals with the line and rank employees at McDonald.

Individuals work in order to earn money -- every worker expects to be compensated. A satisfying compensation will reduce turnovers in the company. (HRGUIDE.com, 2003) In a good economy, workers may be able to obtain higher compensation due to an abundance of jobs; in a slow economy, workers may not always be afforded that luxury. Many companies take compensations to the next level by offering employees' bonuses, commissions, stock, profit sharing and gain sharing in addition to a basic salary. McDonald does offer educational incentives and programs for its young workers. In addition, McDonald also offers competitive benefits packages when compared to other food retailers in similar industries all around the world. HR also provides decision support through regular review and analysis of data, i.e. salary, staffing trends, absenteeism to evaluate the true costs of the employees in the organization both for the U.S. And worldwide.

Some of the key HRM issues identified for the McDonald Corporation are:

Low motivation among the employees. Many of the employees especially the long-term employees in the low-tier of the workforce do not see any hope or advancement in their work life. As such the motivation is very low and the desire to work to their full potential is almost non-existent. For example, many single mothers who work at McDonald's at the service level live below the poverty line and in spite of working 40 hrs a week might be unable to satisfy their basic needs with the salary and wages that they earn.

High turnover rate within the lower-tier of the workforce. McDonald has a policy of hiring young workers between the ages of 16-22 for their service operations. Many workers in this age group use a McDonald job as a means to earn extra spending money and often do not care about the long-term impact of the low wages provided. They are also move on due to school demands, the satisfaction of the financial need or simply because they no longer need to work for the money.

Balancing the needs of worker compensation and restaurant profit by the site manager. Every McDonald restaurant is actively managed by "numbers." Simply put, if a location does not consistently generate revenue, the local management of the restaurant will be changed or a franchise transferred. As a consequence, every supervisors and managers at location are constantly looking for ways and means to control cost. Labor cost is one of the only variables that is completely within their control and they often resort to manipulation of this variable to obtain their profit margins.

Training of the lower-tier workforce at site and managers and supervisors at the HQ. Every worker at McDonald is trained -- in McDonald's way of doing things. However, the training differs drastically from low tier worker to the managers and supervisors of McDonald Corporation. While many managers often rise through the ranks and are selected because of their abilities and skills, the low-level worker is often treated as "just a means to an end." This attitude has affected the morale of the worker and consequently the productivity.

Benefits and perks provided to the employee. McDonald used to provide benefits and perks for all employees in the past. Recently however, the need to generate revenue and the slowing down of the growth and profits of the corporation has forced management to reduce many of the incentives provided to the workers.

A random search on the Internet revealed that there are too many dedicated websites citing injustices that McDonald workers face in the line of duty. Some range from overworking of the employees to serious injuries while using store equipment. As a result, it is fair to assume that worker morale and performance is at an all time low.

Recommendations

When management knows and understands both their strengths and their weakness their effectiveness as managers is greater with the workforce. Common courtesies, like being polite, decent and having good manners with the workforce are important especially at the service level where the manager and the employee are both in contact with the public. It is important that the corporation set an example in good humane behavior for its employees. (McDonald's, 2004c)

Managers are under tremendous stress to show profits and revenues for the company constantly. While this strategy has help McDonald become the leader in the fast food industry, it should also provide sufficient incentive for managers who are able to reduce turnovers and improve morale and performance of existing workers. It is critical to note that the idea stated earlier is a cyclic process. In order to improve motivation, compensation, bonuses or perks might be desired. As compensation increases within the restaurant, the profitability of the operation correspondingly decreases. The trick however, would be to reduce turnover and thereby reduce the hidden cost of new worker training and the learning curve that might be experienced by a new worker.