Performance Management - McDonalds - Case Study Example

Performance Management - McDonalds Name Class Unit Executive summary The report analyses performance management system used at McDonalds. McDonalds is one of the largest fast food outlets globally with presence in more than 120 countries. The organisation has been able to successfully implement performance management in two ways which are application of motivational theories and use of an effective performance appraisal. The motivational theories used are Hertzberg and equity theory. Through these theories, the management have created an environment where employees are appreciated and recognized. The employee individually is also recognized since it is very vital for motivation. McDonalds have created an environment where the employees are appreciated and appreciate each other. The performance appraisal used by the company is based on the performance development system. The system was designed with an aim of ensuring that the employee performance is driven to the best level possible. To achieve this, the process ensures that the company goals are aligned with the employees’ goals. The system is also designed to ensure that the rewards given are best suited for the employee performance. The employee is given the responsibility of ensuring that they are able to meet their objectives. The reward system includes both financial and non financial rewards. These include holidays, company cars, free meal and house furniture paid by the company among others. To improve on their performance management system, the company can work on the job enrichment, enhancing wages and including 360 degrees feedback in their performance appraisal. Contents Executive summary 2 Contents 3 Introduction 4 Performance management at McDonalds 4 The application of any motivational theories in the organization 5 Implementation of effective performance appraisal at McDonalds 7 Type of grading system at McDonalds (PDS Form) 7 Review the reward system of this organisation 11 Designing the incentives and rewards 11 Awarding 11 Recommendations for the Performance Management and Reward System improvements 13 Conclusion 14 References 15 Introduction McDonalds is the largest fast food chain in the world with more than 35000 outlets in 120 countries. The food service company was started in 1948 by brothers McDonald and Dick. The company was bought out in 1961 by Ray Kroc who helped the company to spread its activities outside America. The fast food chain is known for their quality food and excellent service to the customers. McDonald’s success has enabled the company to make billion yearly in their operations globally. At the moment, McDonalds derives more than 65% of their income from global operations. In their global operations, McDonalds has been able to make a strong brand to their customers. Having a strong brand has enabled McDonalds to have a personality to the customers. The golden arches logo is well known in its markets worldwide. In their operations, McDonalds faces competition from other fast food chain such as Burger King. There are also factors such as economic, legal and change in technology that affects their operations. McDonald’s vision is to offer the best quick service restaurant worldwide. To achieve this vision, the fast food chain have been embarking on getting profitable growth through brand expansion and ensuring they leverage on their strengths by the use of innovation and technology. There have been also a lot of efforts to ensure that their employees are well motivated in order to gain a committed workforce. The fast food chain has been able to gain reputation among the best place to work (McDonalds.co.uk, 2014). Performance management at McDonalds Calculating the firm performance management is essential in order to know how the firm is faring. The employee is able to identify the level of output needed for them so that they can know whether they are meeting the demands (Tyson & York, 2002). The two major performance systems to be analyzed include the application of any motivational theories in the organization and the implementation of an effective performance appraisal. The application of any motivational theories in the organization True motivators at McDonalds are based on the job and reward system. The motivators enable the employees at McDonalds to increase their performance. McDonalds uses the Herzberg’s theory in motivating their employees. This involves recognizing that when employees are satisfied with their jobs, they are able to perform better which leads to an increase in their productivity. Another theory utilized is the equity theory. This theory involves a scenario where the employee compares their output and input to the output and input of others. If they are able to gain an equal ratio, they become satisfied with their jobs and may increase their inputs for better performance (Brewster et al. 2007). The employee increases their input expecting to get better outcomes which are higher salary, job security among other positive benefits from the company. McDonalds have designed a lot of non financial incentives that enables them to meet the employees’ needs. In line with Hertzberg theory, McDonalds has been working hard to ensure that the employees are satisfied with their jobs (McDonalds.co.uk, 2014). This is done through several means of motivation towards the employees. The efforts by McDonald’s management to motivate the employee and increase their drive to work are very vital. The motivation efforts are directed towards improving the firm performance through engaging staff. A good motivating factor should be able to make the employees combine their own aims with those of the company. The employees should be motivated to exert more efforts towards the company goals. It has been proved that staff performance is directly related to their level of motivation in the firm (Nolan & O‘Donnell, 2003). Lack of employee motivation reduces the firm output. McDonald’s management is able to note signs when employees are not motivated. The signs are absenteeism, lateness, and reduced output and quality in products. When the staffs are motivated, they tend to be more loyal. The performance of staff at McDonalds has been excellent. The staffs in the company are motivated and inspired. Appreciating and recognizing the employees individually is very vital for motivation at McDonalds. McDonalds have created an environment where the employees are appreciated and appreciate each other. The employees’ management relationship is boosted through social activities. McDonalds makes an activity plan where there is a social activity in every month. There are also nomination categories for the employees. This includes the employee of the year or the best customer service. These are recognitions that make the employee to be more engaged in their work and feel appreciated. The main aim of all these activities is to make the employee happy with their job. The management realizes that it is vital for the employees to feel important and wanted in their teams. This is due to the fact that each employee has a part to play and have to depend on each other to accomplish a task. Bonding of the teams through motivation helps them to be able to comfort each other and assist (Nolan & O‘Donnell, 2003). The teams also engage in competition where they can win prize money. For example, when the company introduces a new burger, they may compete which restaurant sells the most of it. There may also be competition on who is able to put the right amount of salad in a burger. Giving recognitions to the employees helps them to feel appreciated. Through these forms of motivation, McDonalds is able to make employees to behave the way they want (McDonalds.co.uk, 2014). Implementation of effective performance appraisal at McDonalds Appraisal is a system that is designed with an aim of monitoring employees’ performance in a given period of time. Having an appraisal system is one of the best methods that a company can utilise in order to get regular feedback from the employees. The management and employees at McDonalds discusses the procedure formally at the company. During this time, the information, monitoring and the measurement of the performance is discussed and written down. McDonalds has been able to give the employees some training and advise them on areas where they are supposed to improve on (McDonalds.co.uk, 2014). The company makes short presentations to the employees in a regular basis in a bid to help them improve. At these instances, the employee is given a chance to discuss the obstacles faced in the job which may lead to poor performance (Nohria, Groysberg & Lee, 2008). All matters regarding the job are discussed and recorded during these meetings. During the appraisal, the manager and the employee have a chance to look at all the problems associated with the job and address them. The resultant is a good working relationship between the employee and the manager which act as a motivating factor, according to the Herzberg theory (McDonalds.co.uk, 2014). For example, during the meeting, managers can ask for suggestions from the employees on the way in which they can improve their working conditions such as hygiene (McDonalds.co.uk, 2014). Performance development system (PDS) is the performance appraisal system used at McDonalds and it is discussed below. Type of grading system at McDonalds (PDS Form) This system is used at McDonalds and it was designed with an aim of ensuring that the employee performance is driven to the best level possible. To achieve this, the process ensures that the company goals are aligned with the employees’ goals. The system is also designed to ensure that the rewards given are best suited for the employee performance. The employee is given the responsibility of ensuring that they are able to meet their objectives. The employee job specifications and competency are looked at by the system together with employee career aspirations. The employee and, manager are supposed to meet twice a year to review the performance and revise the set goals. The goals are reviewed based on the changing business priorities. The employee is supposed to meet the managers face to face and submit their accomplishment. The employee action is weighted at 75%, while the method used to accomplish is weighed at 25%. If the employee scores 10% in the distribution, they are required to improve since the results are unacceptable. Based on the performance, the employee is assessed as ready for advancement, ready for future advancement and a new position if they have stayed for less than 12 months. If the employee is assessed as current level, they are not capable for promotion in a period of less than 2 years (McDonalds.co.uk, 2014). McDonalds has been able to seize the opportunity presented by the performance appraisal and build a collaborative environment where the company solves its issues. McDonalds have been able to address the hygiene and motivators issues that are addressed in the Hertzberg theory. For the employees, they are able to raise their complaints which can be compared to the hygiene factors addressed in the Hertzberg model (Nohria, Groysberg & Lee, 2008). McDonalds utilises the new performance appraisal model. The employees are directed and supported with an aim that they will be able to work according to the organisation requirements. Through the model, McDonalds has an aim to improve their results and attain the company goals. An agreement is drawn between the employee and the company which aligns the employee objective with the company objectives. Through this, McDonalds is able to diagnose the needs for development and give the required feedback to the employees. McDonalds is also well known for their coaching programs which are carried out to improve the employees’ performance. To enable smooth implementation of McDonald’s objectives, the company has clearly stated and communicated them to the employees. The output from all employees is set to help the organisation in achieving its goals (Stredwick, 2000). Through the use of the appraisal system in place at McDonalds, the employees are assessed fairly and they can even access themselves. According to the McDonalds management, the process of performance appraisal is conducted semi-annually. The company comes up with the structured standards which are set to compare the employees’ performance. Using the set standards, the employees’ performance is compared to the real level standards of the company. Through the performance appraisal, the management is able to make commitments about the employee performance and feedback on how to improve is given. The employee performance at McDonalds is compared against four levels which are; outstanding, excellent, good and need development. Through the feedback on the achieved level, the employee is advised on the weakness and strengths and how to work on their weakness (Nohria, Groysberg & Lee, 2008). It has been proved through the expectancy theory that using a valid and reliable performance assessment system can motivate both the employees and the accesors which is vital for the organisation success. The employees are able to improve on their behaviour if they are able to perceive the measurement as valid (Brewster et al. 2007). This implies the success of the performance appraisal tool at McDonald can be attributed to the perceived fairness by the employees. The efficacy of the performance appraisal tool that is used by McDonalds is thus fortified. The system in place is able to rate both the personality and performance factors of the employees. McDonalds recognises the need for having the right kind of personality in the fast food industry. There is also standardisation of the performance factors and the scale used for rating. The overall result is a performance appraisal system that has high credibility among the employees and management (Gibb, 2008). The main goal of the employee appraisal system used at McDonalds is to enhance the company performance management. The managers are able to explore the problems that the employees are facing and identify their causes. There are collective efforts in coming up with action plans that are capable of enabling the employees to come up with the solutions (Stredwick, 2000). Improving and helping the employees is taken as an initiative by all concerned employees. The non performing employees are able to gain help which is good for all involved. Assessment helps the manager at McDonalds understand the employee and know where the employee needs help (McDonalds.co.uk, 2014). At McDonalds, the performance appraisal system is very important as it helps the company to maintain their human resources at the required standards. The management understands that use of ineffective performance appraisal tools can lead to a reduction on the employee productivity and morale. A faulty performance evaluation tool leads to more problems than solutions to the organisation (Nohria, Groysberg & Lee, 2008). Review the reward system of this organisation Designing the incentives and rewards To promote and encourage performance, McDonalds has designed an incentive system. The incentive system is designed to reward the individuals who have contributed to the company performance. At the managerial level, McDonalds has designed the incentive based on the payment. McDonalds have realised that despite being a means of payment, incentives helps in directing work in an organisation (Nohria, Groysberg & Lee, 2008). McDonalds rewards include reward by both cash and non cash. Rewards by cash involve; attendance, annual, medical and hard soft furnishing. Hard soft furnishings are a reward scheme where the employees are rewarded through house furniture and carpets by McDonalds. In some countries, McDonalds has been providing paid holiday for the employees for a set number of days. Through non cash means, the organisation issues staff of the year, staff of the month, gift certificates, free food and branch of the month. Employees are also entitled to benefits once they become employees for the company. The benefits include; benefit sharing, holiday, job leave and social activities. During the job leave, employees who are students are able to undertake their school activities (McDonalds.co.uk, 2014). Awarding McDonalds has a comprehensive rewarding system which is made of both financial and non financial incentives. The employees are able to get team rewards as well as individual rewards. The reward system helps in motivating the employees in their tasks (Nelson, 2000). When employees are given a reward, they are able to work hard for the organisation. One of the areas where the company rewards their employees is through the base pay (Brewster et al. 2007). The employees pay is reviewed annually. The company has a broad compensation system. When the employees are able to perform according to the set goals or exceed them, they are able to benefit from the incentives. McDonalds uses the Target Incentive Plan where the employee performance is linked with the company goals. The employee base salary is added with the gratuity from the incentive system. McDonalds also engages in long term incentives. This is a system where the employees who have shown commitment to the company long term value creation are rewarded. The employee may be given prize money and are retained in the organisation (McDonalds.co.uk, 2014). The long term incentives are able to help the organisation to retain the employees who add value to their operations and enhance an environment where the employees feel valued (Nelson, 2000). The physically powerful performers are rewarded through the recognition programs. The appraisal system is able to makes the employees to engage in positive competition where the employees are able to encourage each other. McDonalds engages the employees in the company car program. The employees at the company are allowed to use the company car for both business and personal use. This is based as a reward for the entitled employees only where the entitled employee is supposed to decide. The reward helps create a competitive environment as they strive for it. The reward system at McDonalds has helped to create a positive working environment where there is an appreciation for the hard work (McDonalds.co.uk, 2014). Recommendations for the Performance Management and Reward System improvements Despite being one of the largest fast food chains, McDonalds has several areas to improve on their performance management. It has been found that though the pay package for the company is reviewed annually, there are still complaints. The employees are not satisfied with the company wages which may affect their performance. The company can be able to tackle this issue through increasing their pay for the overtimes. The company also needs to re-evaluate the relationship between the management and employees. Adopting Taylor’s scientific principle may affect the company’s employee retention. The managers seem to have close supervision where they make the employee work hard with an aim of gaining maximum output. This may lead to the employees not being interested to work at the company for a long time. This in turn has an effect on the employee retention and commitment (Richard & Johnson, 2004). The employee appraisal plans should be re-evaluated and a lot should be done to ensure that there is no subjectivity. Though McDonalds has non-monetary incentives, there is need to work and enhance them. There is a need to include symbolic incentives to a higher degree. The managers are supposed to look for the causes of performance systems and come up with viable solutions. The company should work to enhance job enlargement and enrichment. This will help in retaining the employees. The performance appraisal should be conducted more regularly to ensure that employees are able to be corrected and commended timely. The company management should be more aware of the unexpected benefits that may arise from the performance management system. This should help them to be fast in acting and taking advantage of them (Brewster et al. 2007). The top management is also required to be more supportive. This is due to fact that organisations are able to commit to the system, if the top bottom approach is used. There is also need for McDonalds to educate the employees on the way in which they will benefit from the system. This can be done by ensuring that employees are involved in the process from the beginning and their input is valued. Though the management have been engaging the employees through getting their feedback, there is a need for more efforts (Richard & Johnson, 2004). The 360 degree feedback process should be adopted by McDonalds. This tool is well developed to help gain the all round job evaluations from the employees. The 360 degrees feedback has been cited as the best method of getting feedback as it gives honest feedback. The managers are also able to easily identify areas of weakness and work to give methods to improve them commitment (Richard & Johnson, 2004). The method can help McDonalds to see all areas that need improvement in an employee assessment (McDonalds.co.uk, 2014). Conclusion McDonalds is one of the most successful fast food outlets globally. The fast food retailer has grown from a single outlet to become a multinational organisation. The organisation has been able to realise that employees are the most important asset in an organisation. Performance management is an important tool in any organisation in ensuring the employees are able to align their goals with business goals. With performance appraisal, an employee is able to identify their weakness and strengths and work in enhancing their strengths and improving their weakness. The tool is capable of helping the employee in their development process. Motivation is another important aspect in an organisation. McDonalds has been able to utilise employee motivation and performance appraisal as tools for employee engagement (Armstrong & Ward, 2006). Performance appraisal has been used by the company to reward the employee and also identify those eligible for promotion. The employees who have been able to show excellent results have also been rewarded though other means such as holiday and provision of a company car. The current system is able to achieve the set objectives. Despite this, McDonalds can work to improve the organisation performance management system. This can be done through including 360 degrees feedback and incorporating other methods of motivation. There is also need to expand the range of non monetary rewards. Job enrichment and enlargement should be carried out. All these will enable McDonalds to improve their reward system. References Armstrong, K. & Ward, A. (2006). What makes for effective performance management? The Work Foundation in the Corporate Partners Research Programme. Brewster, C., Higgs, M., Holley, N. & McBain, R. (2007). Employee engagement–report from HR Centre of Excellence Research and members meeting, Henley. Gibb, S. (2008). Human Resource Development: Process, Practice and Perspectives,Palgrave Macmillan, Hampshire. McDonalds.co.uk (2014). “Management Opportunities – Your Reward”, Retrieved 2nd Sept. 2014 from http://www.mcdonalds.co.uk/company/asp/ci_HR_reward.asp Nelson, B. (2000). Are performance Appraisals Obsolete? Compensation and Benefits Review, 32(3), 39-42. Nolan, P. & O‘Donnell, K. (2003). ‘Industrial relations, HRM and performance’, in P. Edwards (ed.) Industrial Relations: Theory and Practice. Oxford: Blackwell. Nohria, N, Groysberg, B.& Lee, L. (2008). Employee Motivation, Harvard BusinessReview, 86(7/8), 78-84. Richard, O. & Johnson, N. (2004). High Performance Work Practices and HRM Effectiveness, Journal of Business Strategies, 21(2), 133-148. Stredwick, J. (2000). An Introduction to Human Resource Management: Clear, Concise and Comprehensive, Butterworth Heinemann, Oxford. Tyson, S. & York, A. (2002). Essential of Human Resource Management. Butterworth Heinemann: Oxford. Read More