Tyson argued, “Human resource strategy is intentions of the corporation both explicit and covert, toward the management of its employees, expressed through philosophies, policies and practices.” As a functional strategy, the formulation of Human resource strategy is interactive with the formulation of business strategy. Moreover, in most cases, the Human resource strategy and practice is used to fit with the demands of business strategy, and help companies shape their future business strategies to some extent.
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In this report, McDonald’s corporation, which is the largest fast-food chain in the world, is analysed. Its corporate, business strategy and human resource management practice are explored. The author attempts to assess of the degree to which its human resource management practice enables the business’s strategy to be achieved, through analysing the training and reward and recognition program applied in company. Finally, recommendations dealt with its human resource management practice are given.
As was mentioned, McDonald’s is the largest fast-food chain in the world. Since it burst onto the scene in the mid-1950s, it has become a leading institution and symbol of American culture. The generic goal of the company is “to provide the highest quality products and friendly service in clean restaurants at good values.” Based on this goal, the company franchises joint-venture partners, and restaurant managers operate more than 30,000 McDonald’s restaurants in 119 countries on five continents. About 1.5 million people work at McDonald’s, and generate about $15 billion in revenues annually. However, owing to the affection of the global business recession, the operating income of the McDonald’s has declined since 2000. Some measures, such as slowing up to add new restaurants, closing some stagnant restaurants, were taken to attempt to prevent this tendency.
The author set about consulting his lecture note from the course and the assessment of the course to outline the structure of this report. Some related books borrowed from library were used to further research. The McDonald’s website and other Internet sources were used to gather related data and further arguments for consideration. Strategy is the purpose of the organisation, and the plans and actions to achieve that purpose. With regard to a large organisation, such as the McDonald’s corporation, its strategies are complex, and with different levels. Consequently, types of strategy are defined and described in this section.
Basically, there are three typically formulations of strategies: corporate strategies, business-level strategies, and functional strategies. Corporate strategies can be defined: “a plan that identifies the portfolio of businesses that comprise a company and how they relate to each other.”(Wang Yong 2003 Handout week 3) The corporate strategies fall into four main categories: (1) growth, (2) stability, (3) defensive, (4) combination. The corporate strategies are adopted and followed by the organisation as a whole. Compare with the corporate strategies, the business-level strategies are adopted and followed by one particular product or service lines.
Three basic strategy types are used to classify business-level strategies: (1) cost leadership, (2) product/service differentiation, (3) market segment focus. Functional strategies are “the overall course or courses of action and basic policies that each department is to follow in helping the business accomplish its strategic goals.”(Wang Yong 2003 Handout week 3) The formulation of functional strategies is interactive with the formulation of business strategy. Moreover, in most cases, the formulation specific strategies for each functional area marketing, finance, operations/productions, human resources are carried out to help the company to implement its business strategies.
5.0 McDonald’s Business Strategies As we mentioned, the operating income of the McDonald’s has declined since 2000. The company adjusted its corporate strategy to attempt to prevent this tendency. Jim Cantalupo, Chairman and Chief Executive Officer of the McDonald’s Corporation mentioned that: “McDonald’s embarked on a new strategic course, reflecting a fundamental change in our approach to growing the business. Previously, we emphasised adding new restaurants. Today, our emphasis is on building sales at existing restaurants.”(http://www. McDonald’s. com). It used to advocate that ” the McDonald’s strategies have focused on the following factors: customer satisfaction, diversification, untapped markets, social responsibility.” (William et al, 1996)
Furthermore, customer satisfaction, and untapped markets have been two emphasises at all times. Based on the corporate strategy changed, customer satisfaction would become more important than untapped markets and the others. Jim Cantalupo also mentioned that four key objectives were set up: “attract new customers, encourage existing customers to visit us more often, build brand loyalty and, ultimately, create enduring profitable growth.” (http://www. McDonald’s. com) Not only attracting new customers, but also garnering existing customers, since building brand loyalty needs the high customer satisfaction. Consequently, it was reasonable that this customer satisfaction would be the most important business strategy highlighted.
Ananlysing from the categories of strategy, the present corporate strategy of the McDonald’s company is more likely defensive strategy, which can be defined like this: ” plans to cut back or downsize.”(William et al. 1996) Although new McDonald’s restaurants are set up everyday, it puts emphasis on building sales at existing restaurants. It is reported that 600 McDonald’s restaurants are planed to set up in 2003. Compared with 1050 restaurants and 2000 restaurants set up in 2002, 1996 respectively, the number of the new restaurants has decreased dramatically.
As to the business strategies, it is more likely the cost leadership strategy. McDonald’s pay more attention to attracting new customers, keeping existing customers to visit us more often, building brand loyalty, and creating enduring profitable growth. It indicated that McDonald’s attempt to garner a larger share of the market to achieve a higher profit margin. Moreover, it is foreseen that these strategies will be implemented for a long term in the McDonald’s corporation.
Human Resource Management Practice As a world’s leading food service organization, the human resource management practices are integrative. McDonald’s People Promise is that: “We value you, your growth and your contributions.” (http://www. McDonald’s. com) Based on this promise, McDonald’s human resource management practice can be fall into three main categories: (1) training, (2) careers, (3) benefits.
Training: the training of McDonald’s is provided at different level. First of all, on-the-job training is given to the restaurant crewmembers to coach in skills and procedures essential. Secondly, classroom courses training are provided for the outstanding restaurant employees for advancement. Thirdly, operations and business management training is provided by Hamburger University for the restaurant managers, franchisees, mid-level managers, and corporate executives. Finally, a training system is brought to the crew members and managers to interact their learning experiences.
Careers: Every new employee begins as a trainee on cooking French fries, which is the easiest of jobs in McDonald’s restaurants. Once that employee can master this station, s/he is moved to the next designated station. Moreover, for the initiative employees, McDonald’s offers opportunities for their quick advancement. The whole career path is consecutive “There are four levels of salaried restaurant management career opportunities at McDonald’s- Manager Trainee/ Second Assistant Manager level, First Assistant Manager level, Restaurant Manager level, and Consultant level.”
Benefits: “One of the increasing concerns of McDonald’s is its growing, increasingly diverse workforce and matching and effectively communicating the benefits to all segments of that workforce.” (William et al. 1996) The benefits of the employees in McDonald’s are organized into four categories: health and insurance benefits, compensation, reward and recognition programs, savings, investment and financial management programs, work/life benefits. In order to the following analysis, the reward and recognition program is listed only.
“McDonald’s pay and rewards program follows a “pay for performance” philosophy: The better your results, the greater your pay opportunities.” (http://www. McDonald’s. com)The reward and recognition program can be fall into four categories:(1) Base pay – The competitiveness of its base pay are given through an annual review of both external market data and internal peer data. (2) Incentive pay-Incentive pay is provided those employees whose performance meets and exceeds goals. (3) Recognition programs – its recognition programs are designed to reward and recognize strong performers. (4) Company car program – the eligible employees can be provided with a company car for both business and personal use.