Analysis of McDonald’s Corporation

Analysisof McDonald’s Corporation

Analysisof McDonald’s Corporation

Thehuman resources practices adopted by organizations determine theircompetitiveness in the market as well as their capacity to attractand retain experienced employees. Human resources management is oneof the key functions that are designed with the objective ofmaximizing employee performance (Collings&amp Wood, 2009). Thesuitability of the human resource management practices is determinedby the policies and systems put in place by the management to guidethe organization in the management of employees at all levels.However, the difficulty of establishing policies and systems of humanresource management varies with the size of the organization withmultinational corporations facing the biggest challenge. This paperwill analyze the human resource practices at McDonald’sCorporation. The paper will provide the background information aboutMcDonald’s Corporation, examine the present human resourcemanagement challenges, evaluate how operating internal havecontributed towards the human resource management challenges, andrecommend a suitable challenge to improve the competitiveness of thecorporation.

Backgroundinformation

Currently,McDonald’s is the world largest chain of fast food restaurants. Itis estimated that the chain of restaurants serves approximately 68million customers on a daily basis (Randy, 2009). The company wasstarted and operated by Maurice McDonald and Richard in 1948 as abarbecue restaurant. Over the years, the company has experiencedgrowth through product diversification and entry into theinternational market. McDonald’s range of products includescheeseburgers, hamburgers, French fries, chicken, soft drinks,desserts, and milkshakes. McDonald’s is one of the companies thatare highly responsive to the market conditions. This has been provenby the frequent expansion of the menu to include other types of foods(such as fish, smoothies, salads, wraps, and fruits) as a response tochanges in customer tastes.

Currently,McDonald’s Corporation operates globally, with about 35,000 outletsthat are located in approximately 119 countries (Randy, 2009). It isestimated that the company is served by a total of about 1.8 millionemployees who come from different countries and cultural backgrounds.Although the company has managed to increase its global presence byestablishing its own restaurants, franchising has also played a partin increasing its international operations. Franchising isaccomplished through developmental licenses, conventional franchises,and foreign affiliations through license agreements. In most cases,the company buys the land and the buildings in which it operates itsrestaurants or enters into long-term lease agreements. AlthoughMcDonald’s Corporation serves customers across all age groups andsocial classes, its main targets include children, youths, and youngfamilies living in the urban places.

Commonhuman resource management challenges

Themanagement of human resources form the basis of all activitiesrelated to organizational management. There are several challengesthat arise, especially when an organization manages a large number ofemployees. In the case of McDonald’s Corporation, there are threemajor human resource management challenges that are likely to affectits competitiveness in both short-run and in the long-run. First,McDonald’s ranks among the international corporations thatdesperately seek to employ the largest number of unskilled workers(Stewart, 2013). The tendency of McDonald’s to employ a largenumber of unskilled workers is based on the notion that restaurantworkers are expected to operate equipment that does not require ahigh level of training and skills. The larger proportion of unskilledemployees is desperate immigrants and students who work on a parttime basis.

Secondly,a high rate of employee turnover is a major challenge that hascontributed towards a significant decline in the quality of servicesoffered by McDonald’s. Although employee turnover is a challenge innearly all fast food restaurants, McDonald’s Corporation is amongthe leading companies in terms of employee turnover. According toJargon (2013) McDonald’s records an annual employee turnover rateof about 60%, which is the highest rate in the fast food industry.The major cause of this high rate of employee turnover is lack ofemployee satisfaction as well as poor treatment of employees by thecompany, which is a suggestion of inappropriate management of humanresources.

Third,McDonald’s Corporation has been criticized severally because offorcing employees to work for long hours and paying them low wages.Most of the McDonald’s employees earn either a wage that isslightly below or above the minimum wage rate. For example, a cashierworking with McDonald’s Corporation earns about $ 7.72 per hour,which is slightly above the minimum wage rate of $ 7.25 per hour(Irwin, 2012). The company has experienced several workers’strikes, especially in its restaurants located in the United Stateswho have been complaining about the increasing in working hours andlow wages. The issue of poor compensation is prevalent in all regionsthat McDonald’s operated, including Australia and China.

Theinfluence of the international status on the human resourcechallenges

McDonald’soperates in many countries that have different business and economicenvironments. Differences in the minimum wage rates in thesecountries in one of the key factors that have increased the number ofchallenges in the human resources practices. For example, the averageminimum wage rate China is $ 12.6 per hour and $ 7.25 per hour in theUnited States (Irwin, 2012). Differences in the minimum wage ratesand regulates on employees’ compensation is a major challenge thathas reduced the capacity of the McDonald Corporation to give equalwages across its branches. In addition, varying economic conditionsin different regions determine employees’ satisfaction with thecurrent rate of compensation, with employees in developed economies(such as the United States and Australia) recording the highestnumber of strikes compared to their counterparts in the developingeconomies (such as China).

Differentcountries have varying labor regulations and seriousness with whichthese regulations are enforced. For example, labor regulations in theUnited States are clearer than in China. This is the major reasonemployees in the United States to take industrial actions and legalactions against the company compared to other countries (Irwin,2012). From the company’s perspective, operating in countries withliberal workforce, especially in the United States is morechallenging because the company is forced to increase hourly wages.

Thegeographical diversity of the company has also subjected it tochallenges caused by differences in cultural background of employees,which in turn determines employees’ attitudes and behaviors. Thisimplies that employees in different geographical regions are likelyto have varying levels of satisfaction with the compensation awardedby the company. Moreover, different employee attitudes and jobsatisfaction also determine the rate of turnover. It is challengingfor the McDonald Corporation to establish human resources policiesthat can address human resource challenges in all geographicalregions.

RecommendedHR strategy

Theemployee compensation strategy is the most promising approach ofaddressing the key challenges (including a high rate of employeeturnover and low wages) affecting McDonald’s performance.McDonald’s should develop a comprehensive strategy that will ensurethat all employees are compensated on the basis of their performanceinstead of focusing on geographical differences. Employeecompensation is positively associated with the staff motivation, jobsatisfaction, retention, and improved performance (Ramlall, 2003).Apart from giving wages that are commensurate with performance,McDonald’s should observe three factors. First, the compensationstrategy should be linked to the overall corporate strategy to ensurethat compensation rates in all countries are consistent with thecorporate business strategy. Secondly, McDonald’s should focus onestablishing a corporate culture and reinforce that culture with asustainable compensation policy. Third, McDonald’s should rewardbehaviors and employees’ conducts that drive results (Irwin, 2012).Giving employees’ compensation rate that is competitive in the fastfood industry will reduce the rate of turnover, attract experiencedand well trained employees, and motivate the existing labor force,thus increase McDonald’s competitiveness.

Predictingthe degree of effectiveness of the compensation strategy

Givingemployees a compensation rate that is competitive in the fast foodindustry will reduce the rate of turnover, attract experienced andwell trained employees, and motivate the existing labor force, thusincrease McDonald’s competitiveness. The compensation strategy hasbeen shown to be among the most effective ways of motivating membersof staff. According to Ramlall (2003) an increase in employees’compensation increases their motivation by 64.1 %. This means thatmany employees are willing to remain in the current job as long astheir wages meet their expectations. Another study has established apositive association between employee compensation and the decline inturnover (Sajjad, Ghazanfar &amp Ramzan, 2013). This is because awell compensated employee feels satisfied with the current job andfinds no reason to quit. The compensation strategy has also beenassociated with an improvement in quality of serviced and innovation,which in turn increases the firm’s competitiveness (Muczyk, 2002).In the present business environment where investors are competing formarket share and profits, company’s workforce is an importantresource that can help McDonald’s in moving ahead of itscompetitors. However, with the current poor compensation,competitiveness cannot be achieved. Therefore, McDonald’s will beable to enhance its competitiveness in the industry in both theshort-run and in the long-run by formulating a competitive employeecompensation strategy, which should focus on individuals’ or teams’performance.

Conclusion

Thehuman resource management strategies adopted by organizations isamong the key determinants of their success in the contemporarybusiness environment. McDonald’s Corporation is a multinationalcorporation that has faced several challenges related to poormanagement of human resources. Although some of these challenges(include the low wages and high rate of employee turnover) areassociated with the international status, the company’s managementhas failed to establish viable compensation policies that willaddress the compensation challenges across different market segments.To this end, the compensation strategy stands out to be the mostviable recommendation for the management of McDonald’s to implementin order to enhance the company’s competitiveness in the market.The compensation strategy should ensure that employees in allrestaurants are compensated on the basis of their performance and nottheir geographical location. This will improve employee motivation,job satisfaction, ad reduce the rate of employee turnover.

References

Collings,D. &amp Wood, G. (2009). Humanresource management: A critical approach.London: Rutledge.

Irwin,T. (2012). UnitedKingdom: Six steps to a sound compensation strategy.London: Mondaq Ltd.

Jargon,J. (2013). McDonald’s tackle repair of broken services. TheWall street Journal.Retrieved July 25, 2014, fromhttp://online.wsj.com/news/articles/SB10001424127887324010704578414901710175648

Muczyk,P. (2002). The strategic role of compensation. HumanResource Planning,11 (3), 225-239.

Ramlall,S. (2003). Managing employee retention as a strategy for increasingorganizational competitiveness. AppliedHuman Resource Management Research,8 (2), 63-72.

Randy,J. (2009). McDonald’sabroad.New York: Time Incorporation.

Sajjad,A., Ghazanfar, H. &amp Ramzan, M. (2013). Impact of motivation onemployee turnover in telecom sector of Pakistan. Journalof Business Studies Quarterly,5 (1), 76-92.

Stewart,A. (2013). Desperateneed for unskilled workers.Christchurch: The Press.