HRM Issues in McDonalds - Essay Example

?HRM Issues in McDonalds: Literature Review Introduction Human resource management (HRM) practices are of great significance in the modern corporate world as HRM is one of the central contributing factors for organisational success. The key elements of HRM may include HRD systems, manpower planning, career planning and succession planning, recruitment and selection, training and development, performance appraisal, merit rating, and compensations systems. If then, in today’s business environment, manpower is an inevitable component in maintaining and improving the firm’s market competitiveness (Geet et al 2009, p.3.10). This paper tends to examine the HRM practices in McDonalds giving specific focus to its high staff turnover issues based on a good volume of literature evidences and research. McDonald’s recruitment and selection policy with reference to training and development, and rewards and benefits seems strategic. In contrast, increasing rate of staff turnover is the major HR issue the firm has been experiencing for several years. Company Overview McDonalds Corporation is the largest network of fast food restaurants headquartered in the United States. The company was founded in 1940 by brothers Richard and Maurice McDonald. Currently the organisation has it active presence in 119 countries across the world with franchisees, affiliates, or the corporation’s own restaurants. The firm’s main sources of revenues include rent, royalties, and fees from franchisees, and sales revenues from company’s directly-operated restaurants. As stated in its website, the corporation’s product lines include hamburgers, chicken, cheeseburgers, french fries, soft drinks, and desserts (McDonalds.com). The strategic position of McDonald with regard to the recruitment and selection, training and development, staff turnover, and reward and benefit has been a topic for academic discussion for decades. Staff turnover: The major issue High staff turnover has been criticized as the indication of low staff morale in McDonald, however, a BBC report (28 January 2008), says that McDonalds specifically focuses on the issue of staff turnover as a strategic gap to be bridged (BBC News, 2008). The challenges involve the following; first, recruitment and training of new employees is an expensive task. Hence employee turnover contributes to the firm’s operating expenses. Secondly, due to this issue the organisation has been losing experienced and skilled employees and thereby it causes productivity declines. Most of the Multinational Corporations confront the issues of rising labour costs, staff turnover, and staff shortage. As Smith (2006, p. 175) points out, in order for keeping the labour costs low, McDonalds and other fast food chains have lobbied government and legislative bodies against worker benefits many times. And the result was high turnover which in McDonalds alone reached 300 percent per year in some of its outlets (Ibid). A recent report in Wall Street Journal dated April 10 says that McDonalds is striving to address the mounting complaints against its rude and unprofessional employees (Jargon 2013). The problems with low employee morale also have to be counted as the indication of high staff turnover that can be attributed to some HR failures. Evidences suggest that employee turnover has been pertinent in the industry for several years. For instance, a Chicago Tribune report (May 15, 2007) by Schmeltzer also describes what McDonalds did for retaining its employees in Chicago outlets. It launched a career campaign highlighting the employment in McDonalds as McCareer instead of McJob. According to the Fast Food Nation statistics (as cited by Lubin & Badkar Dec 7, 2012), McDonalds hires more than 1 million workers in the US every year with 700,000 domestic workforce and with 150% turnover rate. Msn Money report by Berr (Apr 11, 2013) also reveals that McDonalds has been recently facing numerous issues associated with staff shortage. Another report of the sort by Chittum (April 12, 2013) appeared on Columbia Journalism Review also point of the issues caused by staff shortage and subsequent customer service failures. To illustrate, when the organisation employs less employees than what actually needed, it would face difficulties in performing its supply chain functions efficiently. Referring to the view of Wiersema (2006, p. 21.28), the organisation may incur additional expenses in salaries when it is overstaffed and the situation in turn would reduce the firm’s net profitability. Undoubtedly, monetary and non-monetary compensations would assist an organisation to increase the level of employee morale and overall organisational productivity (Henderson 2009, p.5). Therefore, it is recommendable for the HR department to frame some potential compensation systems for the employees of the supply chain department. However, it seems that McDonald’s management has clear view regarding how to address this issue. For instance, according to the management, ‘choose wisely, and treat well’ is one of the most effective ways to curb the issue of staff turnover (The Times 100, n.d). Recruitment and selection The organisation uses effective and extensive recruitment and training approaches to attract, identify, develop, and retain potential staff that would best suit McDonald’s long term business interests (McDonald’s Corporation 2009). As per records, in 2004, the company employed 43,491 people in its restaurants, 40,699 hourly paid workers, 2,292 managerial personnel, and 500 office staff. McDonald’s US franchisees employed further 25,000 people in 2004 (The Times 100, n.d). Most of the McDonald’s employees are paid based on an hour-rate system and those employees are referred to as crew members. Training and development After the completion of the recruitment and selection process, the company inducts its newly recruited employees into the business through a specially designed Welcome Meeting; and it is the first stage of training at McDonalds (McDonald’s Corporation, 2008). As Aswathappa (2013, p. 221) describes, the company conducts detailed researches on each and every new destination before it commences its operations so as to adjust its HR strategies. In order to collect information regarding the ‘laws, political factors, and cultural issues’, the company contacts the professionals of other US firms already working in the proposed destinations (Ibid). The company claims that it “provides the business manager candidate with a package of professional rewards that includes a starting salary of up to ?1,500 including London weighting (?3,000 in inner London and ?1,500 in our South East region)” (Recruitment & Training at McDonald’s, n.d.). Reward and benefit The company uses ‘Observation Checklists’ to evaluate employee performance and manage ‘appraisal grading’ continuously (Hendon & Svenson 2005). This appraisal grading system is used for employees’ promotion to hourly-paid management positions. In addition, management level entrance exams are also conducted for employee promotion. The employees are provided with relaxed worksite environment, fun time, and flexible work schedules (Allan et al 2002, p. 170). In addition, McDonald provides its staff with scholarships and grants, discount cards, and other financial incentives. All these efforts include McDonalds’s efforts to reduce its staff turnover rate. Global strategy The success story of McDonald is well described by D'Annunzio-Green et al (2004, p. 179) giving specific focus to the firm’s cultural integration and work related strategies in foreign destinations. According to this study, ‘management of risk at work’ is the major challenge it confronts in foreign destinations especially in Australia due to the firm’s “multi-state operations, combination of franchise-operated and company owned (McOpCo) stores, and work force characteristics”. However, the firm has taken the issue for granted and strives to address the issue well by implementing risk management principles and cultural change throughout the organization (Ibid). Cooke (2003, p. 364) points out the operation of McDonalds in some of the EU countries as an example for an international firm’s HR success. According to the study, the firm to a great extent has been able to diffuse its own HR strategies in the foreign destinations independently of regulatory systems; and the success could be attributed to the firm’s corporate culture in which it achieves standardized management behaviour (Ibid). Conclusion Although McDonalds HR strategies are sound enough to lead some of the domestic and international markets, they would fail in a global context of very intense competition and staff turnover. In the current business scenario, it would be very difficult for McDonalds to continue its market dominance unless the firm’s HR department becomes more strategic so as to improve its employ retention. A close analysis indicates that McDonalds has been maintaining a sound strategic position in all areas except the issues related to high staff turnover. Among the possible strategic steps, offering a very competitive labour cost should be given prime focus to ensure employee satisfaction. References Allan, C, Bamber, G. J and Timo, N., 2002. “Employment relations in the Australian fast-food industry”, In: T. Royle and B. Towers (Eds), Labour Relations in the Global Fast Food Industry. New York: Routledge. Aswathappa, K 2013. International HRM. New Delhi: Tata McGraw-Hill Education. Berr, J. Apr 11, 2013. “McDonald's to workers: Customers aren't the enemy”. Msn Money. [online] available at [accessed 30 Oct 2013]. BBC News., 28 January 2008. “Everything I needed to know I learned in McDonald's'”, [Online] Available at: [Accessed 20 August 2012]. Chittum, R April 12, 2013. “McDonald’s through management’s eyes, in the WSJ”. Columbia Journalism Review. [Online] Available at [Accessed 20 August 2012]. Cooke, W. N 2003. Multinational Companies and Global Human Resource Strategies. US: Greenwood Publishing Group. 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