Analysis of McDonalds Succession Plan - Case Study Example

Insert name: Human Resource Management Analysis of McDonald’s Succession Plan Institution Date Table of Contents Table of Contents 2 Human Resource Management 3 Analysis of McDonald’s Succession Plan 3 Introduction 3 The HR Strategy and Human Resources Issues 4 The External Environment 5 Succession Planning 7 Performance Management and Compensation 9 Employee Development 10 Career Development 12 It can happen to you 13 Succession Planning Defined 14 Leader-Staff Relationships 15 Ethical Practices 17 Conclusion 18 Reference List 19 Goh A. L S, 2011, An Assessment Methodology for Evaluating Supply Chain Management (SCM). International Journal of Applied Management Vol. 2 (1), pp 1742-2590. 19 Dilcock, M. G, 1998, Sustainable Development: Ideology Considered. International Journal of Applied Sustainable Development. Vol. 1 (1), pp 1742-2620 21 Human Resource Management Analysis of McDonald’s Succession Plan Introduction Succession planning refers to the official activities in a planned event or unplanned vacancies of leadership. Most of the time, it is applied on the CEO’s but it can as well address other levels of leadership. The chairperson and the chief executive of McDonald’s restaurant company James Cantalupo died unexpectedly from a heat attack in 19 April 2004 (Hamre, 2006). It was after his death that the restaurant underwent a succession process that took quite along time due to many issues that were involved. The transition of leadership was done through succession planning. Most of the host nation’s business pundits thought that Charlie Bell who was the president and chief operating officer was the heir of Cantalupo’s. However, in the final analysis, it was it was not easy to tell who the heir was fortunately; the transition successful. The ultimate aim of this paper is to examine the HR and other strategies that were employed, analyze the succession planning, looking at the Performance Management of the new management, the employee development, career development and staffing. It also analyzes the compensation process and the ethical issues involved in whole process. The study winds up by outlining other theories and techniques employed in the succession plan (Hamre, 2006). The HR Strategy and Human Resources Issues The McDonald’s restaurant is the largest restaurant corporation in the globe and second largest United States employer after Walmart (Wilcox, Eichbaum and Tonello, 2009). It serves around 90, 000 branches around the world with 500,000 employees. This means that it requires leadership with more knowledge and human resource management skills than any other corporation. The HR managers have lately been valued greatly because of their skills that have stretched extensively above the normal administrative abilities like the designing benefits packages and managing union work force. The chief executives are putting great premium on their top HF managers’ ability to develop succession plan and retain talent (Pallettierre, 2007). All these are done due to the rebounding of the job market and the re-evaluation of employees’ options. Therefore, the implication is that for a company to be competitive enough in the business market, it must acquire the HR people who have full-range talents and experience as well as recruitment and retention skills (Hamre, 2006). Each corporation requires three core elements in order to succeed. These elements are the mission, vision, and value. These are the foundations of any stable and goal oriented organization. In order for a large corporation as McDonald’s to come up with these pillars, it takes more culture and diversity that must be considered and respected. The mission of the McDonald’s restaurants is the promotion of inclusion and diversity among the operators or owners, employees and suppliers (Hamre, 2006). This has attracted diverse populations around the globe. The vision of the organization is that the system advantages talents that are unique, assets and strengths of diversity around the globe in order to be the favorites to the customers and way to eat. The value is “Q.S.C. and V”- which stands for Quality, Service, Cleanliness, and Value. These are the main strategies that the McDonald’s restaurants that are used all over the world. This has been successful since the company is still doing great despite the death of James Cantalupo who was the former CEO. The progress was greatly influenced by the successful, non-disrupted replacement process of the CEO. The External Environment The corporation is one of the most successful ones in the world since it has branches over hundred countries and serves millions of people around the globe with 500 employees. Nevertheless, there are some criticism and attacks that are attracted by its success especially from Hollywood that reflect the results of eating the fast food served by them to the ‘McJobs’ entitlement in dictionary. The American society has greatly felt the low-paying and labor intensive from the McDonald’s jobs entitled McJobs. Note that the McDonald employees are said to be the lowest class employees in the society. Such criticism comes from both the general public as well as professionals (Steingraber, Magjuka and Snively, 2011). The McJobs is referred to as the “low-paying and dead-end work” as per the Merricam-webster dictionary. Douglas Coupland gave out another definition of McJobs in the book Generation X: tales for and Accelerated culture as low paying, low benefit, low prestige and no future job in the service sector. Besides a comment by justice Rodger Bell made during the McDonald’s and ex-employee trials in 1997 suggested that the inadequate and unreliable shifts, late closes and long extended shifts, autocratic management instances, lack of grievances third-party case representation and occasional early going staff request without pay. This means that the corporation pays minimal wages to the employees as well as depressing wages to other workers in the industry (Wilcox, Eichbaum and Tonello, 2009). The National University based academic HR Tony Royle from Ireland criticized the corporation by saying that what goes on in the McDonalds restaurants is not much known to the HR department. However, the young managers and their assistants are under high pressure to cut down the costs while the staff records, how they work and the hours they work in a day are not open to them thus they find it hard to argue. The leaders of the McDonald’s are working hard to change the impression that people have on the corporation and re-image it. They are working to achieve their strategies they laid down in order to make sure there is a good impression of the corporation. The vice president of the UK’s McDonald’s restaurant David Fairhurst suggested that the company has been plagued with the McJob’ reputation from the society for years, the big issue however is the gap between what the society believed and the reality. A number of initiatives based to re-image the reputation of the corporation followed this statement (Pallettierre, 2007). Peter Beresford who also came up with direct email called ‘Ask Peter’ where the employees can discuss their concerns and ask questions with him supported Fairhurst. The ‘Tom Hall’ then answers these questions, which is a monthly live online event where the corporation leaders answer questions from the staff. Moreover, there is a monthly magazine known as the MDUK that gives the details of the corporation, news and events. All these are strategies laid down to fight the bad reputation of the corporation by the society. They are very effective since all the complains and issues concerning the employees are dealt with including their wages that are being looked into (Goh, 2011). Succession Planning The succession planning as mentioned earlier is the official plan of behavior in the planned or unplanned events of leadership vacancies. This is mostly applied to the CEO though it should be applied to all levels of leadership (Hamre, 2006). It is as well referred to as the channel of recognizing critical management positions starting at the project manager level through to the supervisory positions to the highest positions in the organization. It also gives the best description of management positions to issue the utmost flexibility on imaginative management moves and to give the surety that the individuals achieve the highest seniority. This broadens their management skills where they become more generalized in connection to the total organizational strategies and goals other than the purely departmental goals (Bhatnagar, 2004). James Cantalupo the McDonald’s chairperson had come out of retirement to turn around the company but unfortunately, he died of heart attack before fully achieving his goals. He died in Orlando, Fla. where he had been attending McDonald’s convention. Cantalupo had earlier on enacted a succession plan that he laid out where he named Charles H. Bell, who was the McDonald’s chief operating officer and president as the chief executive. The nonexecutive chairperson was issued to Andrew McKenna who initially was the chief executive of the Schwarz Paper Company and the presiding officer of the board. Mr. Bell who is the youngest chief executive who had been at the McDonald’s for 28 years and an Australian native becomes the first company’s leader from other areas other than America. He was appointed while he was only 43 years and he shares the same focus on customer experience with the late Mr. Cantalupo. However, unlike Cantalupo who began his career at the McDonald’s as a controller, Mr. Bell joined the corporation at the age of 15 and became the Australian youngest manager at the age of 19 and the vice president of the company at 27 and the director at 29 (Steingraber, Magjuka and Snively, 2011). The McDonald’s shares dropped on the announcement of Cantalupo death but again hiked a little at the declaration about Mr. Bell. The corporation rejuvenated the eating behaviors of millions of consumers and became the identical with the American popular culture in the whole world had been going through had times of massive losses when Cantalupo took the leadership from Jack Greenberg as the chief executive in early 2003. Mr. Greenberg had beaten Cantalupo for the position in 1998 resigned under the shareholders pressure before the company announced its first quarterly loss as a public trade company (Hamre, 2006). The achievements of Cantalupo were significant right from the beginning where he begum by cutting franchise openings rate, doing away with the expensive technological initiatives, selling underperforming subsidiaries and restarting sales in the United States chairing over the popular new items introduction. These items included the McGriddle sandwich and plying to new concerns over obesity with salads summated with chicken McNuggets made of white meat, Paul Newman dressing as well as the happy meals of adults with salads, pedometers and bottle water instead of a plastic toy (Nat Stoddard with Claire Wyckoff, 2009). His 16-month period as the chief executive was very remarkable and there were many McDonald’s members who appreciated it including the big guy, Ray Kroc. These were the words of the Pipper Jaffray analyst, Peter Oakes. His remarkable works led to a turnaround in their domestic dramatic improvement and also laid the foundation for their improvements all over the world, it was said to be mind blogging (Goh, 2011). Moreover, there were more remarkable and controversial changes in early 2004 just before he died this were elimination of supersizing. He had also set down the strategy of phasing out the practice concerning obesity issues by the end of 2004 and this had been highly lauded by the health groups and consumers. Despite all the achievement, Cantalupo also left the corporation with some significant challenges. Note that most of the company’s growth in the previous year was contributed by favorable currency exchanges. Some franchisees were as well upset with the invigorating sales of the company, which often came to their profit margins cost (Hamre, 2006). Performance Management and Compensation Each company needs to have an independent board whose function should be to approve the annual goals and objectives of the CEO and the consistent company’s goals and objectives to check whether the two are relevant to each other. The compensation committee also confirms if the goals and objectives are in accordance with its charter. In order to ensure that the CEOs performance is well evaluated, the compensation committee chairperson need to be a member of the governance committee whereby the chairs of both the governance committee and the compensation committee must consult with the independent directors to evaluate the performance of the CEO (Pallettierre, 2007). It should be clear that the CEO is the backbone of all the developments and achievements of the organization. His or her strategies and goals are what determine the future of the organization. Therefore, it is very important to evaluate their performance and make sure they are okay and they lead the organization or the corporation somewhere, to some great achievements. The evaluation process by the independent directors together with the chairs of compensation committee and the governance committee should be done annually. They later issue the CEO with the performance review that he may use for the preceding year. After looking at that, it is upon the compensation committee to establish the salary of the CEO, bonus and other equity and incentive for the year (Wilcox, Eichbaum and Tonello, 2009). The other function of the compensation committee is to approve the annual compensation structure for the officers of the company as well as approving their bonus, salary incentive and equity compensation. Note that the bonuses, salary and other equity and incentive compensations for the company’s officers is above the level of vice president. Therefore, it is clear that the performance of the any organization depends on the CEOs strategies and goals that are evaluated by the chairs of compensation and governance committee together with the independent directors. This makes the organization to have real strategies that make it competitive enough in the business field. It is good to also note that the compensation and the performance of an organization work together to achieve a common goal. Employee Development The McDonald Company did something that is hardly seen in other corporations, this is due to the continuation of the company’s chain even after the shock of loosing such an important person. It straight away named a new executive team hours after the death of Cantalupo. It named Charlie Bell as the new CEO of the Company a move that greatly shocked a number of the jittery investors and employees. Note that some people thought it was not a desirable decision (Pallettierre, 2007). This is because Cantalupo immediately after being announced the CEO of the corporation, he also requested Bell be named the COO so that he could later on make him his successor though most of the people did not like the idea. Cantalupo worked hard to achieve his goal by making great changes and leaving a legacy behind. These achievements were to be used to measure how he prepared his successor as well as the smoothness of the power transition. Not all leaders concurred with the task of grooming successor, they mostly wrestle and rebel the successor’s decisions. It is clear that history spreads widely with succession planning as it goes by (Bhatnagar, 2004). ­­­­the hazards of having no succession plans were told by Michael Eilsner’s Disney travails. The tales showed that Cantalupo claimed to have had the emergency envelop that was inside his desk that had the name of his handpicked replacement. In reality, Eisner came up with several of his would-be successors out of the corporation when outstood as chairperson. However, the board of Disney is still working on coming up with a real succession plan. This is just a planning part disease. When the most talented HR managers and executives graduate to the high leadership roles they normally leave the other positions that require to be filled by almost similar gifted people. This brings about the succession planning which has become the staple of corporate as a result of diligence. The succession planning programs by the Korn/Ferry international executive study search were found to be on the rise: in 2001, there was a report from the American boards of directors that showed only 33 percent of them had the CEO succession plan in place in 2001 and this had hiked to 77 percent in 2003. Mark Polansky said that they are seeing more emphasis being put on business continuity planning and such things (Steingraber, Magjuka and Snively, 2011). Polansky was one of the members and managing director of the advanced technology practice at the New York Korn/Ferry’s office. He added on that it was not only about the physical security, cyber security and losing of electrical power, but they were taught 9/11 that was also about losing people which refers to the succession planning. This act was becoming a more practiced and prominent art. Career Development Just try to think of your own CFO or even another senior executive to walk up in one day and announce plans to move to another place like hospital, to retire or to change career. Another case is when the same person suddenly dies or becomes disabled. The question is, does your corporation have plan at hand to fill the vacancy in an orderly manner? A good and well organized succession planning process wraps all of these unforeseen events. The best example is the McDonald’s which had his CEO die abruptly and unexpectedly and there was an orderly manner in his replacement which was took over by CEO Charlie Bell who was as well replaced by the board in and orderly after a few weeks due to being diagnosed with cancer (Bhatnagar, 2004). It should be clear that the healthcare organizations normally carry out the succession planning very well if they get the opportunity to do it. It is as enjoyable as a bad breath discussion topic. The succession process normally starts with a conversation between the CEO and the board chair during the CEOs evaluation. Some CEOs and boards usually ignore the succession planning process because they are confident with their young leaders whom they think can take on the leadership without problems. Sometimes the succession process is done as ritual secret done under the inner ‘power group’. Due to the changing times, the succession planning is as well becoming a high and crucial strategic main concern for various healthcare organizations. Major companies and top organizations like McDonald’s normally take the succession planning as part of the daily and ongoing process which is as well part of the daily business (Bhatnagar, 2004). The risks or hazards are very high at this stage. As more CEO and board members reach the retirement age, there is a notable shortage in talents of executive emerging. The shortages show that the unplanned available jobs can lead to slow transitions; this is not affordable thing in today’s high competitive market (Bhatnagar, 2004). The impetus could come down on important initiatives. The new announced executives and new initiatives could face challenges in short term. The strategic planning actions could come to a sudden stop. Eventually the leadership job opportunity could have negative effects on the hospital rating bonds. It can happen to you The incomes of executive causes are numerous and change over time. Note that the CFOs or the CEOs may get out of their positions due to getting older and retiring or through re-evaluation of career due to some life events reasons. The re-evaluation of career may be due to highly recruitment to the national attention issued to them due to their outstanding achievement. They may as well die or become disabled. At such a point, the organization requires a more different type of executive. Sometimes the organizations get involved in conversions of succession planning to give an incumbent chance to make a grateful move-out. Moreover, there may be a favorable candidate whom the board or the CEO selects (Nat Stoddard with Claire Wyckoff, 2009). The National studies put it clear that the CEO turn up rate is about 16 percent. Other earnings of the executives go down just short of this figure. The CFO turnover over the past two years or less has seen a quarter of CFO respondents at their jobs as indicated by the 2003 HFMA survey. Succession Planning Defined The succession planning as mentioned earlier is the formal plan of activities in planned event or unplanned leadership opportunities. There is no standard plan in the succession planning meaning that where there are 10 of the succession plans then they are all different. The differences in the succession planning are due to the different goals and needs of the different organizations since it is not easy to find different organizations with same goals and objectives as well as needs. Nevertheless, the succession planning normally has common elements. All the effective succession plans contain three basic content elements: an emergency plan is the plan that is used in case an executive abruptly dies or becomes instantly harmed. The publicly traded companies mostly employ this type of plan (Pallettierre, 2007). The standard plan on the other hand is the planning process employed when an executive moves out for another job. However, there is no any specific leaving whereby the succession plan comes up with steps to be followed in case such a thing occurs. The anticipatory planning is the plan that occurs when an executive announces a retirement or comes up with a precise departure date. It should be clear that several healthcare CFOs and CEOs have a general retirement age of 61 or 62 but not 65 (Bhatnagar, 2004). Note that all the effective succession plans should as well focus on other leaders other than the CEO; the senior leaders are also crucial board members. They should be developmental meaning that they should focus on concepts such as experimental activities, development and exposure for the main staffs who could acquire leadership positions. Leader-Staff Relationships The stuffing issue is very crucial and it requires a lot of attention. The leaders who take hold of the staffs in an organization should be very brave and keen when handling this people because they are the performers of the organization and they determine the outcomes of the corporation. They also contribute greatly toward achieving the corporation’s goals and objectives. The leaders of such groups of employees should posses the following characteristics. To begin with, they need to have the ability to lead and motivate the team (Nat Stoddard with Claire Wyckoff, 2009). The leadership qualities really matter at this point since it is at the same juncture that production or the performances take place. The leader needs to motivate his or her staff members to work towards achieving organization’s goals. They also need to have excellent communication skills which they should use to win the hearts of the staffs in order to maintain good relationship that may lead to the success of the organization (Leadership Transitions, 2010). The staffing leader should as well have the decision making ability that is mostly applied during the making of critical decision concerning the staff (s). The leader may find him or herself in a dilemma where there is a confusing case that requires intelligence and wisdom. Such a case may be solved through caring out a one-on-one interview with the involved parties separately. Note that most of these characteristics were highly employed by the managing board of the McDonald’s corporation headed by James Cantalupo and all went well where he was able to achieve a lot. The leaders also need to sound business senses in that they should think big to ensure the staffs come up with the best quality goods like fast foods when talking about the McDonald’s restaurants. The business field is highly competitive today and it requires highly skilled entrepreneurs to be fit well in those markets (Nat Stoddard with Claire Wyckoff, 2009). Therefore, the leaders need to sound business senses. The leaders need to understand the retail laws that govern the staff. These laws include security provision, health caring and safety to all the staff members. This means that as a leader you should make sure that the rights of the staff are met and not violated. The leaders and the staff need to have strong commitment towards the customer service. The customers need to get the best service ever be it I a restaurant like in McDonald’s or any other service to customer (Dye, 2005). They are the first priority and should be treated well in order to maintain them in the competitive market fields. The leaders also need to have the knowledge to understand different ‘Tom Hall’, which was an online system of answering the basic questions from the staff once a month. This great understand brought about good relationship between the leader and the employees who then embarked in working hard where they were able to achieve a lot in the period of 16 months under Cantalupo. The staff as well as their leaders should have the ability to work under pressure and handle challenging situations. Pressure mostly amounts when the company fails to reach its goals or fail to meet the customer demands. This pressure is usually very wondering and need to be handled with great care in order to solve everything correctly without difficulties. The leaders should as well have the ability to conduct interviews with their staff members as well as the visitors who visit the organization. Interviews are very useful since the media may also have interest to know more about the company or organization and they may do it through interviewing the leader (s). Thus, the ability to handle interviews should be high (Wilcox, Eichbaum and Tonello, 2009). Ethical Practices The ethics refers to the principles and moral values that are seen in the succession planning. It also involves the basic practices and good practices shown by the leaders and even the staff in the organization. The following gives the best ethical practices from the leaders; the first practice is involving the board early in all actions of the company or corporation. The main issue of the process of talent-piping is for the directors to freely access the internal talent both formally and informally on normal circumstances. The 2010 webinar shows that the chairperson of the McDonald’s Andrew J. McKenna suggested that most often the main danger that faces the board of any organization is that they do not pick the right CEO or less the CEO does not come up with the line up behind him (Steingraber, Magjuka and Snively, 2011). This is now what is referred to as the talent-development practice that leads to succession planning in various globe companies. He used the example of the McDonald Corporation where he said its board has six regular scheduled meetings of the board and the ultimate aim of those meetings being the discussion of the succession planning and the development of talent at C level and throughout the entire corporation. Besides the meeting, a section of the executive board session devotes to discuss about the succession planning. Therefore, there are a number of potential individuals who have been identified in the corporation having the C-level leader qualities. This explains why the McDonald’s has had three successive transitions (Ogden and Wood, 2008). The other practices that can be put under this category include finding the proper fit where it suggests that many successions normally fail due to improper selection of CEO who do not fit into the into the cultures and powerful subcultures of the organization and therefore end up failing. They fail due to doing things that are not accepted by people they lead. Lastly, there is the establishment of a nominating committee (Dye, 2005). The boards that accept the succession management responsibility should as well establish an effective committee made up of independent directors. Despite the fact that the board may involve the participation of the CEO or leading parts of the effort, it should not renounce the responsibility for delivering quality results and selection process. Conclusion The succession of a CEO is normally viewed as an event other than a process. Most experiences and survey research shows that companies have enough confidence to promote the internal leadership succession which achieves great long-term results. The effective management succession is significantly fundamental to the sustainability of a company. Significant disruption, high risk and burgeoning costs lie ahead of boards that are partially engaged in the whole process. The better results and high proceeds lie ahead of those boards. Reference List Goh A. L S, 2011, An Assessment Methodology for Evaluating Supply Chain Management (SCM). International Journal of Applied Management Vol. 2 (1), pp 1742-2590. Bhatnagar, P. 2004. Sad day at McDonald's Fast-food chain names Bell as CEO after Cantalupo dies of an apparent heart attack. New York. Retrieved from Boards of Directors and Entrepreneurial Posture in Medium-size Companies: Putting the Board Demography Approach to a Test International Small Business Journal October 1, 2007 25: 511-537 Dye, F. 2005. Is anyone next in line? Succession Plans are Critical to ensuring a smooth transition when an organization faces an unexpected or an expected leadership vacancy. Healthcare Financial Management. New York. Executive Pay Tracker Equities Inc.; Cari Tuna, The Wall Street Journal, "Hiring a CEO from the Outside is More Expensive," 28 July 2008. Fred G. et al. 2011. Home-Grown CEO: one key to superior long term financial performance is managing leadership succession. A.T. Kearney, Inc. New York. Knowledge Accumulation in Family Firms: Evidence from Four Case Studies International Small Business Journal August 1, 2008 26: 433-462 Leadership Transitions, (2010). Sample Succession Planning. Retrieved from http://docs.google.com/viewer?a=v&q=cache:B9hj0Azy5xoJ:www.arts.state.tx.us/toolkit/leadershiptransitions/templates/samplesuccessionplan.pdf+succession+plan&hl=en&gl=ke&pid=bl&srcid=ADGEEShbbBkaKx9lTtdPw0HXwCQZAUkQxHGPouFoKpqE8bzlyrwBAzrYnjVwbtRkUBGUi00eB8jfRkg29OdO_s4FNtkGP71yB2s7Rqpi_xFydfaA7SAuZH3OtQqp8CaNb6EtxUAgg7uE&sig=AHIEtbQLVGomB7nYsTpE40-fEBS0smmFSg&pli=1 Hamre, J. 2006. Center for Strategic and International Studies, Washington D.C., Chicago Council on Global Affairs, Board Retreat, 2006. Nat Stoddard with Claire Wyckoff, 2009. "Pick a CEO Who Truly Fits the Company," Forbes.com. McDonald’s dot.com, (2010). Leadership Development. RMHC retrieved from Ogden, D. & Wood, J. 2008, "Succession Planning: A Board Imperative," Business Week, 27 March 2008; and NACD In the News. Pallettierre, A. 2007. Succession Planning: Can it improve the Odds for family owned companies. Leadership Strategies, the university press. Dilcock, M. G, 1998, Sustainable Development: Ideology Considered. International Journal of Applied Sustainable Development. Vol. 1 (1), pp 1742-2620 Succession Planning in Family-owned Businesses: Evidence from Turkey International Small Business Journal April 1, 2008 26: 155-180 retrieved from . Wilcox,J. et al. 2009. "The Role of the Board Turbulent Times: CEO Succession Planning," The Conference Board Executive Action Series, August 2009. Read More