Labor Relations in Fast-Food MNCs - Case Study Example

Labor Relations in Fast-food MNCs Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx July 28th, 2012. Introduction Over the past years, the fast food industry has immensely grown hence becoming a major industry in the world. Their services have changed from simple hot dogs to a variety of other delicacies. With this in mind, the fast food restaurants have spread to other regions hence becoming a global industry (Allan, Bamber & Timo 2002, pp.35). Among the restaurants that have spread their wings to other countries apart from the United States is the McDonald’s. This is an example that has brought about employment in many countries hence expanding the global market on human resource management. Employees have largely benefited from the introduction of these chain stores in various countries courtesy of McDonald’s (Royle &Towers 2002, pp.76). Employees are to a greater extent related to the human resource hence with such a large organization like this one, there is the need to incorporate collective agreements and policies that will be guided by the trade unions in various countries. In this discussion we are going to place major emphasis on comparing and contrasting how United States, Germany and Australia apply the policies that have been kept in ensuring the well being of employees in the fast food industries in these countries. In the three countries, we will take an in-depth look at how McDonald is taking measures to ensure that there are different yet acceptable practices that are adhered towards the management of human resource in different nationalities. Our main aim is to consider the role of human resource in the employment process laying focus on the environmental factors some of which may include political, cultural, economical and even technological factors. Discussion Human resource management involves a set of activities which are mostly personal that link strategically to the objectives of the organization. Among the activities involved with the human resource are how to manage on the performance of employees, planning on the human resource, training and development of employees, paying of employees, recruiting more people to work in an organization and finally industrial relations. McDonald’s is an international organization hence its human resource department should focus on a global environment that applies both internal and external processes in the management of its resources (Royle &Towers 2002, pp.74).Involving international human resource management is effective because there are more activities involved, there is a broader view of the goals to be attained and there is more involvement on the employee’s personal live which also affects their cultural background and there is a great need for involving local and expatriates in doing the work. Among the external factors that the human resource faces is the cultural environment where members of a particular group share a certain belief over a period of time. This differences affect the way people relate in the work environment hence there should be cultural awareness in the workplace. With quality being the aim of service delivery, McDonald has invested heavily on expatriates who are citizens from other countries that are posted in other countries to work there (Armstrong 2000, pp.63). This has been made possible by the geographical spread and the continuous growth in the fast food sector that presses the need for improved coordination and increased control in the business units. With all these there is definitely the need for a corporate human resource to coordinate and manage the employees in all branches. To ensure that there is good delivery process, McDonald is maintained at a high quality level, they have found the need to acquisition where its name remains to be the dominant one and it has the largest responsibility of control. McDonald being an international organisation with various chain fast food restaurants all over the world; it uses geocentric approach which recognises each country to offer a unique competence in the market. In this kind of approach less emphasis is placed on the nationality one belongs to hence the process of hiring and placing people in their effective positions becomes easy (Armstrong 2000, pp.71). Some advantages of international recruitment which McDonald restaurant uses is that there is a wider choice of selection of personnel, People being interviewed know the job expectations so it is expected they have the required skills. Some of the drawbacks encountered in international recruitment are that it is expensive to carry out the recruitment as it is based on different people who have diverse cultural backgrounds not familiar to the cultural market and legal system in the countries they are going to work in. Also in the recruiting of employees McDonald takes much emphasis in the effects of family in the transfer process of expatriates (Leidner 2002, pp.56). In this they look at individual and situational factors that may affect the decision on employment. In individual factors, they look at the ability that is possessed by the employee, how suitable is the employee in terms of relating to different cultures and the expectations of the family once there is employment. In the situational factor, McDonald considers the familiarity of language to be used, cultural requirements of the country they are intending to post someone and the multinational requirements expected. With this in mind, McDonald takes into consideration that there is equal opportunity for all in employment (Leidner 2002, pp.70).This is enhanced by taking note of the differences that exist among various laws made in different countries and upholding human rights that are fundamental in all countries. Among the three countries Australia is thought have the most stringent rules when it comes to employee relations. These laws are seen to be favourable to the operations of Fast-food MNE’s as the labor laws are friendly to business and they have to contend with moderate safety laws in Australia that are not found in the American market. Recently, Australia has witnessed the entry of several American fast food MNEs including Starbucks, McDonalds and Burger King through franchisee Hungry Jack. The current Australia political order prefers a centralized approach to labor matters instead of the decentralized enterprise bargaining pursued by trade unions. In the last two decades Australian legislation has worked to the advantage of employers discouraging unionization and sometimes making laws that are hostile to collective bargaining (McCallum, R 2011, pp. 189).. However the introduction of the Fair Work Act 2009 changed the workplace relations in Australia. The FWA encourages employees to bargain for their rights collectively. For lowly paid worker like those in employed by fast food MNEs are also covered by the FWA which provides for low-paid authorization where a trade union can negotiate on behalf of the fast-food MNC employees (McCallum, R 2011, pp. 193). These include workers in the fast-food industry as mostly employed on a temporary basis. Additionally, the FWA limits the award of compensation workers can claim for any wrongdoing by the employer. Despite this strikes by non-unionized workers in most categories are also illegal and thus MNCs do not have to worry about constant disruption of their operations by striking employees. Furthermore, the Australian employment law does not set any age limit for it workforce and thus fast-food MNCs which favour teenage staff have a free hand in their recruitment policy. The labor laws in Australia mean that McDonalds is forced to pay wages that are above those that may attract a low-cost authorization. Trade unions have been one of the barriers preventing MNEs from adopting the same HRM policies they have at home. In Australia the labor laws are pro-employee and thus encourage the use of non-standardized HRM practices for MNCs. However, the fast-food industry in Australia is still able to employ temporary employees who are not members of any trade unions and who fit into the requirement for the industry to rapidly deliver services. Most employees of Fast-food chains in Australia are fresh high school graduates and university students. Unlike Australia, Germany’s labor laws and regulations are more worker friendly than those of Australia or the United States. The German industrial relations system relies on cooperation of employees rather than statutory regulations that limit workers and hand the advantage to employers while bargaining. Germany’s policy towards industrial relations favors workers and gives them an edge while negotiating terms with their employees. The German law is very clear about the rights of employees and the obligations of the employer in their relationship with employees. Changes in German law in 2001, gave workers more bargaining rights making standardized human resource operations harder for fast-food MNCs (Royle 2002, pp. 59). The role of trade unions in modern employee relations with their firms have grown less significant as the global business environment becomes more competitive. The German system is on the decline as it needs to adapt to the flexibility requirements of the modern employers especially foreign MNCs used to different practices in their home country (Royle 2002, pp. 59). Recently, the number of open clauses in collective bargaining agreements has increased as employers try to deal with the inflexible law. Trade unions in Germany are large and powerful as they are organized on an industry basis. In most cases these trade unions wield so much power that employers also have their own organizations to negotiate with them. Most importantly workers in the service sector have a labor alliance called the NGG (Nahrung Genuss Gaststatten) which refused to merge with another trade union over concerns that the larger union will not cater for the interests of its workers (Royle 2002b, pp. 78). Legal precedents and procedural rules also remain a hindrance to standardization of fast-food MNC operations in the German market. In German unlike the US and Australian collective bargaining agreements take precedent over any other workplace agreements (Royle 2002b, pp. 78). Secondly employers cannot overlook trade unions when negotiating terms with workers as trade unions have to ratify agreements for them to be acceptable. Australian fast food MNCs is characterized by political barriers as well as low wages to employees. As compared to USA fast food MNCs, Australian fast food MNCs has a global strategy that is based on cost reduction (Leidner 2002, pp. 89). In the case of USA, most of its fast foods are owned by franchise which has enabled the industries to grow even with ‘saturation’ in the market. For example Burger King and McDonald’s are the main suppliers and they have their own laid down rules and procedures. By being ‘franchise’ oriented, their running of business is not only different from that of Australia but also to that of other countries. McDonald USA is known for its multinational expansion and is been adopted by most of its competitors. Nevertheless, this strategy has enabled it to gain the capital by involving other franchisees in order to share the risks and the cost of expansion. Again, it provides the local multinationals with a bank of knowledge on how to run their business in global market/economy. In addition, franchise provides the chance of cutting down the cost of labuor. Unlike in Australia, the USA restaurant are focused more on the speed of delivery and fulfilling their promises of “smile” that puts first the cultural aspect of friendliness as opposed to propriety (Leidner, 2002. Since they are franchise oriented, USA fast food industries are more focused on the employers than the employees. Hence, the employees do not have unions and they are lowly paid. It is important to note that workers in these restaurants are not employed by the giants of the fast food but by the franchisees. The lack of unions among the employees in the fast food industries in USA is because of structural and cultural forces impacting not only the state but also national government, business people, USA workforce and corporations (Leidner 2002, pp.77). This has been propagated by the American rule of law and cultural accords which have given the franchisees the chance to employ and discipline their workers. Moreover, it has enabled the USA fast food industry employers to relatively un-regulated market. As mentioned above, USA fast food industries are managed with the promise of low cost to customers. So, profitability is only gained by reducing the cost of production, wages, and other costs of operation (Leidner 200, pp.25). Hence, restaurants are bound with minimal benefits, low wages to employees, tight employment and efforts to increase productivity among the workers. Triggered by these factors and lack of unions, workers do not have a voice in the management of the restaurants and are exposed to hard/difficult working conditions. Due to decentralization of employment, employees are not only paid poorly but also do not have benefits associated with employment like in other employment relations. Because of these inhumane working condition and low income, the fast food industries are employing young workers who have no experience and knowledge of unions. It is largely noted that most of the workers in the fast-food restaurants have other sources of income such as pension, family members and government programmes. Hence, the employees have no need for unions since that is not their permanent occupation or source of income. By employing “young task”, the management makes sure that the workers are paid cheaply hence reducing the cost of labuor since there is no need to employ skilled workers. In Australian though some of the fast food restaurants are owned by the franchisees, most them are owned by private developers. Politically, labuor relations in Australian fast food industries are well catered for by the government through establishment of unions unlike in USA. In this respect, the employees’ wages, benefits and working conditions are determined by the unions. Conclusion The major difference between USA and Australia labuor market is that, while USA allowed for expansion of fast-food industries to other countries, Australia focused on specialization of its local industries (Royle 2002, pp.67). Therefore, in Australia fast food industries do not expand their business outside its territories. Again, Australia does not allow emigrates from taking the job in such industries hence limiting the labuor market. The employees employed in such industries are originally Australian and because of established unions, they are not exploited (Royle 2002, pp.81). Apart from restaurants owned by franchise, most of the other fast food restaurants enroll their workers to unions which cater for better pay and working condition among other benefits. To illustrate this, most of restaurant throughout Australia pay their workers overtime allowances if they attend to work during week-ends (Royle 2002, pp.90). Though fast food industries in both Australia and USA are based on low cost of labor and low wages to employees, Australia has better terms and conditions for the employees. Because of this, they employ relatively qualified workers with better skills as compared to USA. Though there are similarities in establishment, policies and organizational objective in the fast food industries between the two countries, the differences outweigh the similarities. Like stated earlier, in United States different policies and laws are bent to favour the employers rather than the employees (Leidner 2002, pp.54). This and other factors have made the employees of say McDonald’s who are enrolled in the worker’s unions to subside. Due to franchise, fast food restaurants are owned and run by different people and corporations hence devolved management in relation to human resource management. Finally and as a result, USA workers find it hard to create workers union because their protocols and barriers to face in the process (Leidner 2002, pp.83). References Abdullah, F. S 2009, McDonald's case study, Retrieved August 7, 2012, from: http://www.scribd.com/doc/16050821/McDonalds-Case-Study. Allan, C., Bamber, G. & Timo, N.2002, ‘Employment relations in the Australian fast-food industry’, Labour relations in the global fast food industry, Routledge, London. Armstrong, M. 2000, Strategic human resource management: A guide to action, Kogan Page Publishers. Labor Relations in the Global Fast-Food Industry, Retrieved August 7, 2012, from: http://www.nyt-om-arbejdsliv.dk/2omtale.aspx?itemID=43. Leidner, R 2002. ‘Fast food works in the United States’, Labor relations in the global fast food industry, Routledge, London. Leidner, R 2002, ‘Fast food work in the United States’, in Royle, T & Towers, B (eds)  Labor relations in the global fast food industry, Routledge, London, pp. 8-23. 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