Generation Y & McDonalds: The Challenge of Remaining an Attractive Global Employer - Case Study Example

Generation Y & McDonald’s: The Challenge of Remaining an Attractive Global Employer Introduction This report examines the international HRM platform of McDonald’s Corporation, one of the world’s largest companies and most iconic brands. While McDonald’s has been extraordinarily successful in its 60+ years of growth, its traditional approaches to standardised globalisation may require a considerable paradigm shift in order for the company to maintain its position and relevance as a global employer. A brief summary of the company’s history is presented to establish the background for the analysis of McDonald’s organisational strategy and HRM approach. How McDonald’s maintains a high degree of convergence and a strong corporate culture is examined in detail, and the most significant challenge to the continued success of the McDonald’s approach – the coming-of-age of the globally-connected and socially-active Generation Y – is identified. Finally, a number of recommendations to help McDonald’s remain a socially-relevant and attractive employer are offered. Company Background McDonald’s, one of the world’s most-recognisable brands, began as self-service drive-in restaurant in San Bernardino, California in 1948. In 1954, Ray Kroc, at the time a kitchen appliance salesman, called on the McDonald’s restaurant and was impressed with the concept; upon learning from the restaurant’s owners Dick and Mac McDonald that they were looking for a nationwide franchising agent, Kroc took action and within a year had purchased the rights to the McDonald’s name and opened a new restaurant in Des Plaines, Illinois. (McDonald’s, 2011a) By 1958 McDonald’s had sold its 100 millionth hamburger; by 1959, the chain had grown to 100 restaurants. The company went public on its 10th anniversary in 1965, with an initial stock price of $22.50 (the equivalent of approximately $158 today). McDonald’s international presence was established in 1967 with the opening of restaurants in Puerto Rico and Canada, and it seems altogether fitting for such an internationally-recognised brand that the milestone of its 5,000th restaurant, was reached with the opening of a restaurant in Kanagawa, Japan. By 1983, the chain had grown to nearly 7,800 restaurants in 32 countries, and today there are more than 32,000 McDonald’s in 117 countries, more than 80% of which franchised rather than corporate-owned, and employing 1.7 million people. (McDonald’s, 2011b) Organisational Goals & Strategy Franchising is at the core of McDonald’s business model, and is justified by the company as being less capital-intensive than extensive corporate ownership of the restaurants. (McDonald’s, 2011b) The franchising model is also a key clue to McDonald’s international success because, “By franchising to local people, the delivery and interpretation of what might be seen as US brand culture are automatically translated by the local people in terms of both product and service.” (Vignali, 2001, p. 97) In terms of specific strategies, McDonald’s divides the world into three major areas – the Americas, Europe, and Asia-Pacific-Middle East-Africa – and has slightly different objectives for each one. In the Americas, the focus will be on promoting new menu items and increasing the number of restaurants with extended hours. In Europe, McDonald’s seeks to improve local relevance by introducing more culturally-specific menu items, and to improve business transparency by highlighting its responsible sourcing and environmental sustainability. Elsewhere, the company will focus on expansion – primarily in China, where McDonald’s hopes to have 2,000 restaurants by the end of 2013 – and offering greater availability by increasing delivery services and extended restaurant hours. (McDonald’s, 2011b) Establishing the Brand through ‘McDonaldization’ The original vision of Ray Kroc was to provide a strictly standardised, consistent experience and product in every McDonald’s, so that a customer in California would have exactly the same experience as a customer in Canada, or anywhere else. (McDonald’s, 2011a) The model was so effective – and imitated by others – that it lent its name to the concept of intense service standardisation: “McDonaldization.” The fundamental orientation of the concept and the way in which it relates to human resource management is that it concentrates on standardising service processes, to the point of automating them in some instances, so that the focus of employees can be directed to service quality. (Taylor & Lyon, 1995, pp. 64-65) There are other well-known examples of the model as well, such as Starbucks, 7-11, and other fast-food chains. In terms of cultural theory, McDonaldization describes a form of globalisation, one which creates a kind of cultural erosion by altering local cultures according to some global standards. (Dulupçu & Demírel, 2005) The McDonald’s model quite literally changed the way people around the world eat and regard their mealtimes. But by the mid-1990s, McDonald’s started to see their market strength slip; the standardisation model’s focus on efficiency meant that in order to relate service outcomes to the model’s effectiveness, service had to be measured in some empirical way, such as the time it took to fill the average customer’s meal order. Efficiency, however, did not necessarily translate into good customer perceptions or positive feelings about ‘service.’ (Taylor & Lyon, 1995) Moderating ‘McDonaldization’ with ‘Glocalisation’ Thus, McDonald’s began to adopt a ‘glocalisation’ model, finding ways to modify global service processes and standards to local markets (Dulupçu & Demírel, 2005), and this orientation is reflected in the company’s current strategy and objectives. Another way in which this approach is described is “mass customisation,” wherein McDonald’s service philosophy and processes are made sufficiently generalised to be flexible to local conditions and preferences. (Taylor & Lyon, 1995, p. 65) Doing that with McDonald’s products is relatively straightforward, in that new products appealing to customers in particular areas and cultures can be easily added. Doing that with McDonald’s global workforce, however, is more challenging and some HR issues that are raised by “glocalisation” or “mass customisation” are addressed below. HRM Successes and Challenges to McDonald’s International Objectives The overall challenge for McDonald’s in international markets with respect to human resources management is finding a proper balance between the level of consistency that is required to meet the company’s vision, mission, and objectives and the customisation of HRM practises that are required by particular changes in global society, or cultural and political conditions in different countries. This is recognised as a key effect of globalisation on management practises. Another way to describe it is as a conflict between the opposing forces of convergence, internal factors that make consistency in policy and practises necessary or desirable, and divergence, external effects such as political and cultural conditions that are incompatible with the internal objectives. (Scroggins & Benson, 2010, p. 411) Standardisation Orientation in McDonald’s HRM Practises As a US-based organisation, McDonald’s HRM practises are fundamentally based on its home country’s culture and practises. This convergence manifests itself in three main ways: 1. Tight control of franchise operators: Beyond standardisation of restaurant facilities and menus, McDonald’s control of HRM in franchises is exercised through highly-detailed planning and organisation that dictates the exact number of job positions and employees, and centralises training for management and executive positions. (Royle, 1999, p. 540) 2. Avoiding, at least as much as possible, the involvement of trade unions: Union representation is almost completely absent among McDonald’s workforce in the US, and that is a pattern the company apparently prefers worldwide. This has not always reflected well on McDonald’s, and has made the company the target of some public criticism, such as what occurred in the aftermath of a frustrated attempt by employees to form a union in a McDonald’s food-processing plant in Russia. Several employees who were hounded out of jobs for their union activities filed court cases against McDonald’s, and won a ruling which declared that the company’s actions were illegal, and furthermore, contributed to depressing wages in an entire employment sector. (‘McDonald’s Resists the Union Bite’, 2006, p. 17) 3. Minimal employee participation in management decisions: This is a consequence of McDonald’s highly-structured and hierarchical organisation. McDonald’s does value employee input, and proudly points out that many of its famous menu items such as the Big Mac and the Egg McMuffin were inventions of regular franchise employees. (McDonald’s, 2011a) But the mode of tapping employee talent is focused on promoting promising employees into higher positions, rather than increasing the capabilities of lower positions. (Royle, 1999, p. 543) Maintaining Convergence through Training The way in which McDonald’s maintains its standardisation and consistency throughout its more than 30,000 restaurants is through its extensive training programs. Restaurant and HR managers in new countries or regions are trained abroad in established McDonald’s restaurants, and can receive advanced operations and management training at the company’s own “Hamburger University” located at the corporate headquarters in Illinois. (Solomon, 1996) The outcome of this is that McDonald’s employees and managers have detailed job knowledge that can be applied almost anywhere in the world. In Europe, for example, where 225,000 McDonald’s employees work in 25 countries, the transferability of skills has even been formalised with the introduction of the “McPassport”, a certification record of training and skills that employees from European country can use to find work in a McDonald’s outlet in another country. (‘McDonald's Europe launches private training-certification scheme’, 2007) Employee Satisfaction & Talent Retention Are Key Objectives of Training Besides maintaining the standardisation of processes and services, a major objective of these kinds of training and career-development programs is to retain McDonald’s HR talent. For the past several years, McDonald’s has endeavoured to shift the focus of its managerial-training programs from an arrangement of a sequence of short-term, year-to-year training objectives to more long-term career development; this shift in perspective was forced on the company by a significant exodus of middle managers that first raised alarm among McDonald’s top-level executives back in 2004. (‘McDonald’s and nPower Train to Retain’, 2008, p. 32) Among lower-echelon workers, where greater employee turnover is to be expected, the focus of training is directed at improved customer care, with employee retention a secondary consideration. The obvious rationale for this is that these workers are customer-facing employees, and so from the company perspective service is a far more critical priority. Nonetheless, a two-stage customer care training program, one that requires a bit of individual study and initiative on the part of the employee in its second phase and rewards those who successfully complete it with an additional certification and a distinctive uniform, had the effect of improving both customer and employee satisfaction ratings after the program was first deployed in the UK in 2004. (Pollitt, 2007, p. 24) The combined results of the shift in managers’ training and the customer-care training have been a marked improvement – cases like the union-related tension in Russia described above notwithstanding – in employee retention at all levels. (Pollitt, 2010, pp. 36-37) How Employee Satisfaction Theoretically Relates to Customer Satisfaction Objectives Even among employees who do not directly interact with customers – such as the grill workers at a McDonald’s restaurant, or warehouse employees – employee satisfaction has a positive correlation to customer satisfaction, and there are two theoretical ideas that explain this. The first is balance theory, which states that individuals in a group who have different attitudes will experience tension and cognitive dissonance, and engage in activities to seek to relieve that tension by balancing attitudes. A related idea is emotional contagion, which describes how strong attitudes “rub off” on others with weaker attitudes. (von Wagenheim, Evanschitzky, & Wunderlich, 2007, pp. 691-692) Thus, if enough employees have a strong sense of satisfaction, the feeling will spread among the rest of the workforce, at least among those who are indifferent or only weakly dissatisfied. When this attitude reaches customer-facing employees, the same sort of interactions described by balance theory and emotional contagion take place, albeit on a much smaller scale; in other words, customer satisfaction increases as the customers perceive that the employees are satisfied. Is McDonald’s Corporate Culture Keeping Up with the World’s Societal Culture? McDonald’s very success is the source of much of the criticism directed at the company; McDonald’s critics describe it as a monolith of Western – American – corporatism, and in many ways that characterisation is inescapable. After all, McDonald’s is not just the largest restaurant chain in the world, it is practically a one-of-a-kind phenomenon, and as described in the preceding paragraphs, works very hard to maintain a distinct consistency and level of standardisation. (‘It’s all McChange at McDonald’s’, 2007, p. 5) While McDonald’s does make some effort to diversify and cater to local customs and tastes, much of this initiative is superficial, entailing moves such as adding locally-appealing menu items. The focus on a franchised business model does allow McDonald’s to claim that 100%, or nearly so, of its outlets and people are ‘local’, but that is really only true in the physical sense; the convergence of McDonald’s processes, training, and products – without which McDonald’s would likely not be “McDonald’s” – is handed down from its US-based leadership. (Royle, 1995, p. 56) The obvious success of McDonald’s is evidence enough that so far at least, its corporate culture is able to supersede societal culture wherever the restaurants have opened their doors. What Generation Y Means to McDonald’s The global culture, however, is changing as well, and because of McDonald’s unique position as an employer of large numbers of younger workers, it may find itself challenged in ways it has not anticipated. The majority of McDonald’s workforce worldwide are under 25 years of age, belonging to the group of people born between 1982 and 2000 known as “Generation Y,” “Millenials”, or “Generation D” (D for ‘digital’). This generation has a number of unique attributes. First, they are highly technology-oriented. Second, technology has enabled them to socially interact in a completely different way and on a much wider scale than any previous generation. In general, they value family and friends more than work, and have a greater cognisance of community and the environment than their forebears. They view work as a means to an end and not an end in itself, and are likely to change jobs often throughout their lives. They have high self-esteem and are better able to apportion criticism or blame than they are to accept it, yet are nevertheless – again, thanks to technology – accustomed to being part of a group and working collaboratively. (Shaw & Fairhurst, 2008, p. 366) It is these latter characteristics which place them in the majority of the people around the world right now who are “Occupying” various places in protest against inequality and corporate greed. This leaves McDonald’s in a rather precarious position: It is a corporation of the very class that is the target of considerable anger from the very generation it relies on for most of its staffing. In addition, it is a generation which is less likely to find appeal in “career development,” is more likely to demand a demonstration of clear short-term personal benefit to be gained in exchange for labour, and is more likely – and thanks to technology, vastly capable – to share any criticism or dissatisfaction with others on a wide scale. Thus the challenge to McDonald’s can be expressed simply: How does McDonald’s present itself as an attractive employer to Generation Y globally? A few possible solutions are presented below. Recommendation: Position “Working at McDonald’s” as “Being a Part of the Global Community” This should be the overall theme of McDonald’s recruitment, training, and retention efforts, but obviously will require a number of supporting initiatives; Generation Y will not be charmed by clever rhetoric without substance: Highlight CSR and Environmental Sustainability efforts, primarily through social media: Generation Y has a strong ethical sense, and will not be encouraged to work for any organisation they perceive as “being part of the problem,” because by doing so, they themselves become part of the problem. CSR and sustainability are not HRM issues per se, but they can have a significant impact. Of course, the other side of this coin is that ethical problems that arise from unfair or unsustainable practises will need to be dealt with swiftly and transparently to preserve the company’s ethical credibility. Give all employees a better opportunity to share their views and suggestions about processes and operations: Again, this would be best achieved through the use of social media, a digital “suggestion box,” as it were, on a global scale. Good ideas, or conversely, problems that need to be solved can be shared and discussed among the people who are affected most by them; it is a form of employee empowerment, and from a corporate perspective, a virtually effortless way to crowdsource solutions and innovations. Decentralise training: A large part of the appeal of being part of a “community” is having a feeling of ownership in it. Decentralising training by making each level of the company hierarchy responsible for the training of the level below it will indeed reduce some of McDonald’s monolithic standardisation, but will at the same time make the restaurants more locally-relevant and attuned to their customers. And from an employee perspective, it will allow the connection to McDonald’s to become more “personal” and unique. The potentially greater emotional investment will therefore help to foster a more committed workforce according to the principle of emotional contagion. Conclusion Beginning as a single, albeit revolutionary, example of a new kind of restaurant in post-World War II California, McDonald’s has grown to become one of the world’s largest employers and best-known corporate brands. Throughout its history, it has maintained its impressive growth through careful attention to customer tastes and well-planned and rigorously-maintained standardised training and operations programs. While its reliance on a franchise business model allows McDonald’s to make the claim, not without some justification, of being one of the ‘most local’ global brands, the fundamental secret of its success has been the strict adherence to centrally-developed uniformity. While this model has quite obviously served McDonald’s well, it now faces an unprecedented challenge in Generation Y – a global generation of young people who are quite unlike any generation before them, tech-savvy, socially-conscious, and by turns extremely independent and extremely collaborative. As McDonald’s relies on the 25-and-under age group for most of its workforce, it must reconsider its “top-down”, convergent approach in order to attract and retain the talents of this new and engaged generation of workers. By positioning McDonald’s as a responsible, appealing part of the global community, the company can, if it is sincere in its efforts, win the hearts and minds – and the considerable energy and talent – of Generation Y, and remain as one of the world’s most respected companies for decades to come. References Dulupçu, M.A., and Demírel, O. 2005, ‘Globalization and Internationalization’, European Commission Education and Culture Programme, 2005. viewed 3 November 2011, http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=11&ved=0CCoQFjAAOAo&url=http%3A%2F%2Fwww.phil.muni.cz%2Fped%2FECOLAB%2Feng%2Fmodules%2Fdocs%2Finternationalization-and-globalization-theory.doc&ei=-4e9TrCoDuidmQXgwsSlBA&usg=AFQjCNERgNJy9Rs0rz2kT_cbyoFHIHJAmg&sig2=B2WAK6OUDSkU6GcdCigSZw. ‘It’s all McChange at McDonald’s’ 2007, Strategic Direction, Vol. 23, No. 11, pp. 5-8. McDonald’s 2011a, McDonald’s History, viewed 2 November 2011, http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html. 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