Overhaul of Strategic Human Resource Management In McDonald’s
Content
- Introduction
to McDonald
- Role
of Strategic HRM in Tourism and Hospitality Industry
- Long Term HR Planning a Necessity than a Luxury
- Appraisal of McDonald's HR Strategy
- Relation between Strategic Human Resource Management(SHRM) and Human
Resource Management
- Impact of
Globalization, High Competition, Change in Technology and Business instability
on devising SHRM Policies(Use of
PESTLE Model)
- Impact of
Equal Opportunity Legislation and Ethical Consideration of Employment of Labor
in the United States
- Advantage
and Disadvantages of Different Management Style
- Impact of
Job Design and Skill Development on Individual and Group Performance
- Role of
Strategic HRM in Developing Organization culture
McDonald is the world’s largest chain of fast food restaurant, spanning over 119 countries and serving around 68 million customers daily. The company had its installation in 1940 as small hamburger stand in California by Richard and Maurice McDonald. Initially operated as barbecue restaurant, it was reorganized in 1948 to offer hamburger as a product. Later on the company witnessed a period of massive growth after Ray Kroc joined the company as a franchise agent in 1955 and purchased the chain from the McDonald brothers. The first filed U.S. trademark for Mc Donald’s was on 1961 which provided the “Drive-In Restaurant Services”. With the global expansion of McDonald, it has been a symbol of globalization and has spread the American way of life across the world.
The primary products of Mc Donald’s are hamburgers, cheeseburgers, chicken items, French fries, breakfast items, soft drinks, milkshakes and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, fish, wraps, smoothies and fruit. It’s headquarter is situated in the United States, operating in more than 34,000 restaurants worldwide where more than 75% are operated by independent owners, creating an opportunity of employment to about 1.7 million people. McDonald is often referred as a benchmark for its standard policies and practices relate to human resources, social responsibility and moral and ethical values.
A McDonald's restaurant is operated by a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27 percent over the three years ending in 2007 to $22.8 billion, and 9 percent growth in operating income to $3.9 billion.
McDonald’s has become emblematic of globalization, sometimes referred to as the “McDonaldization” of society. The Economist uses the “Big Mac Index” as a measurement of purchasing power of countries. Where Big Mac Index is the comparison of Big Mac’s cost in various world currencies which can be used to informally judge the purchasing power parity. The index varies from Norway (highest) to India (lowest).
McDonald’s Corporation earns revenue as an investor in properties, a franchiser of restaurants, and an operator of restaurants. Approximately 15%of McDonald’s restaurants are owned and operated by McDonald’s Corporation directly. The remainder is operated by others through a variety of franchise agreements and joint ventures. McDonald also earns franchise fees and marketing fees on the basis of percentage of sales.
2 Role of Strategic HRM in Tourism and Hospitality Industry
People are the focus of human resource management. The human capital of an organization is vital to determine the present and future of the organization. As such, Human resource management is basically concerned with managing of the people in the organizations. In the word of Gary Dessler, Human resource management refers to the policies and practices involved in carrying out the people or human resource aspects of a management position, including recruiting, screening, training, rewarding and appraising.
Contemporarily, HRM has been a focus of most of the organization. However, there are few organizations that consider HRM for the long period business need. SHRM can be defined as the linking of Human resources with strategic goals and objectives for improving business performance and developing organizational culture with innovation, competitive advantage and flexibility. To identify the need of SHRM means to accept and have the HR function involved as a strategically important partner in the formulation and implementation of the company’s overall strategy.
SHRM is an important factor for attaining a dominant market position. The need of SHRM for Tourism and Hospitality industry is important and prominent in the tourism and hospitality based organizations go for the same. The quality and nature of service product offered depends on the skills and competencies of the human resources that are employed to deliver particular product offerings. SHRM is important for successful operation of the organization in short term as well as in the long term for attaining a dominant market position.
For a multinational company like McDonald, adopting SHRM enables it to focus on:
1) Organizational growth in a global market.
2) Foster competitiveness in the market in which the organization is operating.
3) Adjustment to the rapid change in technological factors.
4) Adherence to the different cross-cultural issues.
5) Changes in the factors in the economic environment.
6) Identifying new issues in the workforce environment and developing of a pro-active approach to adjust to these issues.
3 Long-term HR Planning a Necessity than a Luxury
Long term HR planning is an integral part of Strategic HRM. HR planning is the process of determining an organization’s human resource need.
In today’s business world, competition is an important factor to exist in the business. For an organization like McDonald, operating in 119 countries with 68 million customers served daily by 1.7 million employees, the presence of SHRM is critically important. Long term HR planning generates a bigger picture of the future demand and supply of the organization’s human resource and the ways that organization is supposed to deal with the issue.
We can conclude that strategic HR planning has become a basic necessity for an organization. More importantly, the necessity of long-term HRM in an organization can be emphasized in the following points:
1) Long term HRM helps the organization to reduce uncertainty related to the HR requirements.
2) It makes a strategic focus in the organization’s long term objective.
3) Adoption to the environmental uncertainty can be assured and timely measures can be taken.
4) It also enables and effective acquisition, utilization and development of the human resources.
5) It considers labor relation as an integral part of the Human resource policy of the organization.
4 Appraisal of McDonald’s HR Strategy
HR strategy provides a roadmap for an organization to visualize the future direction and scope with regard to its human resources. It is a long-term strategic plan which facilitates the organization to analyze the opportunity and threats, assess internal strengths and weaknesses, and identify competitive advantage. Developing of HR strategy is a crucial and challenging managerial activity
HR strategy identifies the role of the HR as being transformational and change oriented. HR strategy differs from short term to long term. Unlike traditional HRM where rigidity is stressed, strategic HRM focuses on broad, flexible and team-work form of job design. The most crucial factor in effective HR strategy is the identifying people as important asset of the organization and investment in enhancing of their knowledge
McDonald has been one of the most prominent in the global hospitality for many years. The continuous growth of the company in a global market addressing various issues regarding the Human resources hailing from countries with different culture is really an interesting matter of study. Generally a HR strategy involves the careful development of various components of the HRM. A general discussion of the HR strategy of McDonald has been made as follows:
1) Organizational Structure
2) Job Analysis and Job Evaluation.
3) Recruitment and Selection Process
4) Management development(Training and Development)
5) Motivation Performance management and Appraisal
6) Reward and Employee Benefits
Explanation:
1) Organizational Structure
McDonald has 3 different categories in their structure:
The corporate staff controls the company and manages the franchises worldwide.
The Franchisees are given restaurants to manage them following the standard of practices set by McDonald.
Restaurant workers are the lower-level wage based employees who are paid in hourly basis.
2) Job Analysis and Job Evaluation
Job Analysis method of the McDonald is developed by the human resource department in consultation with various other departments. After job description, job restructuring is performed on the basis of observations of the senior employees.
In Mc Donald’s, Job evaluation involves deciding the wages and salaries of the employees on the basis of job analysis. Job evaluation is also referred as compensation in McDonald. The organization has its predefined standards for the evaluation of its employees based on their skills, knowledge and experiences.
3) Recruitment and Selection Process
McDonald screens the applications submitted by the individual applicants. A well devised recruitment policy is formulated for the selection process. The screening of the applicants is based on the merit, institute of previous employment, experience and so on. Candidates passing through this are further processed for selection.
4) Management Development
Training and development of employees is of vital concern for a globalized company like McDonald. McDonald has a Management Development Program (MDP) designed to develop the potential leaders. For example, each year, McDonald trains about 55,000 employees. It also invests more than $10 million to ongoing employee trainings, providing valuable skills and knowledge to its franchisees all over the globe. It has a designated Hamburger University as a management training center for its valued employees.
5) Performance Appraisal
The performance of the employees is appraised on a regular basis. Absence of appropriate performance appraisal leads to employee dissatisfaction and frustration. McDonald makes use of various performance appraisal methods like Graphical rating scale and 360 degree feedback.
6) Compensation and Employee Benefits
Compensation in McDonald includes:
-Direct financial payments: wages, salaries, bonuses and commission.
-indirect payments: financial benefits like paid insurance
Employee Benefits in McDonald includes perks and benefits like:
-Free life insurance after 3 years of employment,
-Medical and hospital facilities,
-Provident fund, etc.
Identifying employees as a strategic resource is the basis step towards formulation of an effective human resource strategy. McDonald seems to be better at this. It considers the employees as a vital asset for its current position and further growth. It has validated the investment in its human resource development program through its performance and has managed to keep the high morale of employees. Similarly the organization has implemented effective appraisal techniques such as the 360 degree appraisal scheme to reward the employees and promoting them. Well-devised training and development program in Hamburger University has enabled the employees to pick up their job easily. Such programs has held the employee morale high, upgraded their skills and ensured the standard of services to be delivered.
A well devised Human resource strategy can enable any organization to develop its human resources to achieve the overall business strategy. In case of McDonald, its effective human resources strategy has enabled it to achieve a great deal of success till date. However, McDonald should focus on making its human resource strategy more comprehensive and adoptive to the emerging human resources concerns. Specifically, focusing in the following areas shall benefit the company in making its human resources strategy more effective.
1) Communication of its human resource strategy to its employees effectively.
2) Inclusion of the mechanism for identifying the talented and qualified workers, grooming of the workers and providing various kinds of scholarship and facilities.
3) Formulation of effective motivational schemes such as payment of higher wages for the part-time employees.
4) Making the recruitment and selection policy more adoptive to the legislation of the host country along with the recognition of issues related to the workforce diversity.
5 Relation between Strategic Human Resource Management (SHRM) and Human Resource Management
Though Strategic HRM has developed as an emergent and vital concern of the business and management field over the past 25 years, it is often taken synonymously with the traditional HRM. Currently, most business organizations undermine the importance of strategic human resources in the organization. The need of strategic human resource for a multinational company like McDonald holds a great importance for the current business operation and future growth opportunities.
Traditional HRM differs from strategic HRM in great many ways. In the traditional approach of HRM, the responsibility for People Management Programs rests with staff specialists in an organization. However, in strategic HRM, the task of managing people rests with the managers who interact with People-Line Managers. Strategic HRM argues that any individual with responsibility for people is an HRM manager, despite his/her functional area. Conventional HRM focuses on employee relations, motivated and productive employees and the firm’s compliance with the necessary employment laws. In strategic perspective, HRM goes beyond this and focuses on partnership with internal and external constituent groups. HRM and strategic HRM contrasts in other dimensions such as the role of HRM, initiatives, job design and so on.
6 Impact of Globalization, High competition, Changing Technology, and Business Instability on devising SHRM Policies (Use of PESTLE Model)
Strategic Human Resource Management (SHRM) has been, and remains one of the most prominent ideas that have emerged in the arena of management during the past twenty-five years. The central idea of SHRM is to view the ‘people component’ of organization as a resource unlike the traditional value of viewing them as a cost factor. The need to focus SHRM policies is increasing more than ever. At contemporary world of competition, globalization and rapid technological change, achieving a prominent position in the market place is more difficult than before. Thus, the need to think of the strategic HR policy has emerged.
Development of appropriate SHRM Policies
Devising of appropriate Strategic Human Resource Management has been the focal point of most of the globally operating organizations in the recent era. Increased competition, turbulent political forces, socio-cultural changes are some of the factors responsible for this change. For a multinational hospitality company such as McDonalds, the need of SHRM is even more vital due to its confrontation with various critical factors including the management of diverse culture, political instability, and enormous competition.
Impact of various factors on devising of SHRM policies using PESTEL model for McDonalds
PESTEL model is widely used for macro-environmental analysis of a business entity. PESTEL model measures the impact of Political, Social and Cultural, Technological, Environmental and Legal factors on operation of business organization.
With revenues of about $23 billion, human resources of 1.6 million employees and global coverage, McDonald is a leader in convenient foods and beverages industry. The corporation’s increasing success has been the result of its effective marketing strategies, competitiveness, high standard of performance, personal and professional integrity of its employees and standard business processes and practices.
Political factors:
The global operation of McDonald is highly influenced by the political scenario of the particular country in which it operates. Company’s operational policies are highly influence by the political system of the host country. McDonald is confronted to different political consequences in different countries. For example, some pressure groups in the US time and often raise voice demanding state action pertaining to the health implications of consuming fast foods.
Economic Factors:
McDonald is confronted to risk related to foreign currency exchange and the risk of inflation. Franchises of McDonald suffer badly when the economy of the host countries are marked with inflation and change in the currency rates. In addition to this, McDonalds should also adapt itself to the local economic factors. For example, due to low purchasing power of Indian nationals, McDonald offers cheapest product to its target people in India backed by its economies of scale in operation.
Socio-cultural Factors:
Managing human resources coming out of different cultural and social background is a vital task when the organization is multinational. Over the years, McDonalds has been able to manage the workforce diversity it retains under its umbrella. The organization has to address the unique cultural needs of its diversified customers across the globe. For example, keeping in mind the vast majority of Hindus in India, McDonald removed Pork and Mutton products from its menu in India.
Technological Factors:
Though adaptation to the sophisticated technology is a must, a tradeoff between the cost of technological installment and its desired benefit is necessary for a firm. Adapting to the modern technology, McDonald makes use of Facebook and Google advertisements, collaborates with various websites, makes use of hoarding boards, banners, and stars endorsements and so on. In this connection, McDonald has also infused its operation with the new technology-such as technology friendly inventory system and supply chain.
Legal Factors:
Operating in a global environment requires a company to comply with the varied legal system across the globe. McDonald has to comply with various regulatory systems requiring it to be flexible in its operating policies and other labor policies. For e.g.: McDonald provides its customer with appropriate information regarding the ingredients of the products and this has been made mandatory in many countries. Similarly, the company also takes into account of various legal factors like: employment standards, tax obligations, and so on.
Environmental Factors:
In this current time when the issues of global warming, climates changes, carbon emission etc are the emerging global issues, McDonald has also faced various environmental problems regarding its operation. The most notorious allegations to McDonald have been the employment of non-biodegradable substances for their drinks glasses and Styrofoam coffers for the meals. In these connections, McDonald has to control the use of such substances and make its customers aware of these factors. It has to invest in those elements within its domain that promotes the conservation of environment, in any way it can.
Implications of Globalization, High competition, Changing technology and Business instability in formulating of SHRM Policies
Globalization has brought people living in different parts of the world more close to each other. Many companies regardless of their size, operation and business accept globalization of business. As such, devising of SHRM policies in light of globalization is important. Taking into consideration of work-force diversity, cultural differences, languages diversity etc shall be made. Also the global scenario of HR policies should also be considered. Different emerging labor policies across the world should be acknowledged.
Cut-throat competition has flourished the practice of perfect competition. Attracting the talented employees, retaining them satisfactorily, etc has been a prime matter of concern these days. Due to this reason SHRM policies should focus on succession planning of its employees via continuous amendment of Job design and appropriate enforcement of HR training and development programs. Quality at an affordable cost in any dimension of business should be ensured. In this connection, HR plays a vital role.
Changing technology and adaptation to technology should be done wisely keeping in mind the high cost of installment of new technology. Technology used should be employee friendly and should help them in executing their tasks swiftly and in an efficient manner. Use of appropriate technology assists in proper HR coordination and development, while also ensures overall organizational productivity.
Turbulent political changes have been imposing a great threat to the companies spanning across the world. Adjusting to various political systems and adjusting to the changes in them is really a great challenge to the companies. Formulating SHRM policies at this background is also really difficult and hectic. However all these factors should be taken into account while formulating SHR policies of an organization.
7 Impact of Equal Opportunity Legislation and Ethical Consideration of Employment of Labor in US
For a multinational organization which is confronted to the various risks regarding high competition, rapid technological changes, and political instability, the management of workforce diversity is really a challenging task. Management of diversity is an important organizational challenge today. Diversity may be reflected along numerous dimensions, having most managers being focused on age, gender, ethnicity, and physical abilities and disabilities. For instance, the average age of employees in developed countries is gradually increasing resulting to companies like McDonald to hiring many retired workers for temporary jobs. Likewise the composition of workforce is also changing rapidly. For example, American workforce, at present, is marked by increasing number of women. Women at present have moved increasingly to those occupations that were previously dominated by males. As such, in the context of globalization, managing employees coming out of diversified nation, caste, creed, sexual orientation is considered a vital function of HR manager. Hence, such regulatory provisions should be taken in to consideration with due importance or it may cost heavily to the organization.
Equal opportunity legislation aims to the elimination of any kind of discrimination in certain workplaces. Various policies and acts are implemented to ensure fair practices in the workplace. Such legislation prohibits any kind of discriminations based on race, color, national origin, caste, creed, sex and origin. The regulatory body tries to ensure fair and ethical practices in the workplace, implements and monitors the cases regarding the violation of equal opportunity practices. For example, in the context of US, Title VII of the Civil Rights Act of 1964 was the first legislation for the enforcement of equal opportunity legislation. Also a separate regulatory body named U.S Equal Employment Opportunity Commission acts as an agency for the protection of U.S employees from the discrimination.
Equal opportunity policy in US consists of various provisions for discrimination against race, sex, creed, religion, color or national origin. Besides, such legislation also includes discrimination as against age, disabilities, genetic information, and sexual orientation and so on. For e.g.: The Age Discrimination Act has protected those aged 40 and over, but does not protect those under the age of 40.
Ethical Consideration:
The extent to which an organization and its members follow basic ethical standards of behavior is known as ethical compliance. Corporate culture and ethics get developed over a long period of time. Such values and culture get influenced by the major leaders of the company and further is modified, shaped, refined and enhanced by stories, slogans, celebrations, stories etc.
Basically the concerns of workforce diversity coming out of varied cultures keep on influencing the ethical standards of an organization. Organizations provide trainings in ethics and developing of guidelines for enhancing ethical compliance. Many organizations have ethical commitment to ensure that ethical values of organizational behavior are properly followed. Such committees formulate, implement and monitor the compliance of employees towards the acceptance of ethical values by the employees. They also perform the role as review panel to identify alleged misconduct by the employees.
Workforce diversity, changing lifestyles, technological advancements etc has brought various issues in the contemporary labor market. In such a turbulent and challenging context, an organization should take in to consideration of employee related practices and legislation existing in the particular country to arrive a better human resource related policies and practices.
8 Advantages and Disadvantages of different Management Styles
Management styles basically depend on the nature of the organization detailing the way of decision making and relating the sub-ordinates. Management styles are also guided by the overall macro-environmental forces. Some of the major management styles practiced globally is as follows:
1) Autocratic Management Style is categorized by the mangers making unilateral decisions and implementing them. Its main advantage is that, the decision making process is simpler and swift. However, employees may lack morale and the decisions are likely to have shortcomings.
2) Democratic Management Style recognizes the employees, as the manager share work with the employees by delegating the tasks. Feedback of employees is welcomed and valued ensuring healthy and open communication between the employees and management. However, getting too many people in the job may slow down the work activities.
3) Laissez-faire Management Style is recognized by the presence of managers just as a figurehead. The employees are all-in-all and they decide major activities by themselves. In spite of its own advantage, this management style may confront with conflict on the team when some employees try to assume role of a leader rather than an equal member of the team.
4) Management by Walking Around Style of management puts light on the role of the managers as an essential part of the team and as an efficient listeners. Subordinates and superiors communication is effective and frequent, ensuring barrier free communication. Basically leader acts as a mentor and guides the employees as and when needed
9 Impact of Job Design and Skill Development on Individual and Group Performance
Job design specifies the content of the job and the methods of performing the job. Where job analysis provides with job related data as well as the skills and knowledge expected of the incumbent to discharge the job, Job design involves a conscious efforts to organize tasks, duties and responsibilities into a unit of work to achieve a certain objectives. As such job design follows job analysis.
A process of attaining an effective job design involves following steps:
1) What tasks are to be done? : Specification of individual tasks.
2) How are the tasks performed? : Specification of the methods of performing each task, and
3) What is the sequence of performing tasks? : Combination of tasks into specific job to be assigned to individuals.
Job design provides with a pathway for determining the content of the job and how the job shall be performed. The most important factor while designing a job is taking in to consideration of the requirement of the organization and individual needs of the job holder. An effective and successful job design can be attained only via striking a balance between the requirements of the organization and the competencies of job holder.
Skill development of the employees in one of the important ongoing concern in an organization. Human resources need to be developed continuously to achieve organizational goals efficiently and effectively. Skill development activities of an organization are focused on developing competencies of people resources in organization. Organization executes various activities focusing on the development of the varied skills of the employees. Generally an organization makes use of various interventions or behavioral techniques that are designed to teach new skills and knowledge for its employees to perform the designated tasks swiftly.
Benefits of Job design and Skill Development
Job Design and Skill Development of employees are closely related to each other. Where job design focuses on identifying details of the tasks to be done at a particular fashion, skill development has been identified as an integral part of the job design. As job design outlines the methods and skills required to execute a task, an organization should side-by-side focus on the skill development activities also. As most of the organization emphasize in the human resource development, skill development activities are common these days. For e.g.: McDonald has a designated Hamburger University to provide varied skill and trainings to its employees.
Most importantly skill development and training is an important part of Job design. Job design puts down due emphasis on training people so that they will be well aware of what their job demands and method of performing the job. As such, job design when done via integrating appropriate skill development programs of an organization results in attaining of the following benefits that are likely to improve individual and group performance in an organization:
1) Improvement of competencies
Employee’s competencies can be enhanced via improving their knowledge, skills and abilities by proper development of a job design and execution of the training activities accordingly.
2) Enhance the effectiveness of the employees
Well formulated job design ensures productive performance of the employees for achieving goal effectively.
3) Fostering of the team work
When employees become aware of the tasks to be performed by them and each other, conflicts regarding job execution are eliminated. Various skill development activities are designed to enhance the climate of trust, knowledge sharing, effective ;2communication and so on.
4) Increase job satisfaction
Job design developed via matching the need of the organization and the capability of the employees will help to boost-up the morale of the employees and thus better job satisfaction.
5) Improve decision making
When employees are aware of their tasks and are provided with opportunity to enhance their skills and knowledge, they can have a greater control over what they perform. Thus it ensures better decision making.
6) Managing conflicts and changes
Well formulated job design outlines the duties and responsibilities of employees and thus conflicts of overlapping duties and tasks are eliminated.
When a job design is developed appropriately, integrating required skill development training and activities, not only an improvement in the performance of an individual employee will be noticed but also the whole human resources of the organization will perform excellently. Individual conflicts, de-motivation, conflicts and tensions will be reduced and thus a congenial environment will be developed for a harmonious team work via co-operation and collaboration.
11 Role of Strategic HRM in developing Organization Culture
Strategic Human Resource Management (SHRM) encompasses decisions and actions which concern with the management of employees at all levels of the business and is related to the implementation of strategies for sustaining competitive advantage with regard to its competitors. SHRM is the HRM planned at the strategic level. The central idea of SHRM is to gain competitive advantage through human resources management by integrating it with overall business strategy.
Organization culture is the set of values, beliefs, behaviors, customs, and attitudes that helps the members of the organizations understand what it stands for, how it does things, and what it considers important. It is the basic foundation of the internal environment of an organization and highly influential to the behavior of the employees. It is developed over a long period of time. Company’s leadership and its success, symbols, stories and heroes shape-up and enhances organizational culture.
Strategic human resource management is a vital part of the overall business plan of an organization. It shapes the basic standards of values and ethical practices of an organization. Devising of SHRM policies are based in a way that shapes and modifies employees’ behavior in long run to attain the overall business objective. In connection to the Organization culture, SHRM makes following consideration for attaining business strategy:
1) Whether or not an organizational culture is supporting the SHRM?
SHRM and organization culture is inter-related to each other. While formulating a SHRM policy, a HR manager must consider organizational culture. For e.g.: while bringing a change in HR policies regarding implementation of new technology, a youth based organization may accept it wisely because of having a to –do organization culture.
2) Whether or not an organizational culture is supporting the long-term business strategy?
Organization culture being inter-related and inter-dependent to SHRM, in turn also influences and gets influenced by overall business strategy of an organization.
With regard to the organization culture, McDonald has been an outstanding example. Its dedication, care, respects and recognition to the employees and fair treatment has made the corporate values of McDonald strong. The culture of McDonald has holistic approach that covers the society as a whole. The benchmarking culture of McDonald is facilitated by:
· Fair and ethical treatment to employees.
· Quality food at affordable cost.
· High standard of food safety.
· Improvement of the animal welfare
REFERENCES
Websites:
http://www.mcdonalds.com/us/en/our_story/our_history/the_ray_kroc_story.html
Books:
Ricky W. Griffin, Management, biztantra, 2009
K Aswathappa, Human Resource Management, Tata McGraw-Hill, 2008
John M. Ivancevich, Human Resource Management, Tata McGraw-Hill, 2004
