International Human Resources Issues at McDonald's - Case Study Example

International HR Issues at McDonald Overview of McDonalds The organization is the most successful fast food franchise in the world, with over 35,000 outlets under its name and a presence in over 100 countries. McDonalds has been commercially successful over the past few years, and has reported increases in revenue or operating income consecutively in 2012, 2013 and now portions of 2014. Its last annual report indicated that the company made $ 28.106 in revenue; further, 1.8 million employees and 68 million consumers prove that the organization must be effectively managed (McDonalds, 2014). McDonalds began humbly in 1940 when the owners with similar names started their own fast food restaurant at San Bernardino California; they differentiated themselves through fast and efficient service. The two brothers grew the organization and later sold it to Ray Kroc whose managerial ingenuity catapulted the organization into the international brand that many now recognize. It became known as one of the most recognizable global brands as it entered into various markets in Asia, Europe, Latin America and the Middle East (McDonalds, 2014). Some even equate McDonalds to the phenomenon of globalization as the products it sells are uniquely American, and this symptomatic of this lifestyle. Ownership structures in McDonalds depend on the method of acquisition; the largest percentage of the restaurant’s owners is franchisees. They account for 57% of the ownership while 24% own the chains through developmental as well as foreign affiliates. Finally, the rest of the company’s control lies within the company’s grasp; in other words, 19% of the restaurants are actually owned by McDonalds itself. The organization thus makes money through royalties paid by the franchisees and the rent that they charge for working under their brand. Additionally, those restaurants operated by the company itself also generate income for the organization through their own sales. This firm largely targets consumers who enjoy great-tasting fried foods, common in the country with its most predominant product being its hamburgers. It also sells cheeseburgers, fried chicken, soda and other healthier options, which were introduced when the company’s profits were dwindling in subsequent times. However, what attracts most people to the company’s premises is its fast food; this has been shown by numerous researches which link obesity to McDonalds restaurant proximity. The company is also one of the most prominent employers in the US since as much as an eighth of the population has ever worked in the establishment. Common HR challenges that the organization faces One of the greatest challenges that McDonalds faces in its human resource endeavors is high employee turnover; unlike other rivals like Starbucks, the organization struggles to keep employees in place. Some claim that the wage bills are partly to blame for this as the company pays less than the industry norm ($7); it has been stated in the news that some members of the organization plan on staging protests in order to increase wages to $15 per hour (Lewitinn, 2013). However, if the company pays higher wages than its current figure, it may not be able to offer its burgers and fries at the same low cost. Therefore, more often than not, it is forced to automate or still maintain the low wages and deal with high employee attrition. Studies have indicated that companies with high attrition levels tend to report relatively lower service quality than those with steady numbers. Furthermore, they have to spend additional revenue on training of new employees, who tend to be much slower than their older counterparts. A number of employees have also accused McDonalds of having a paternalistic approach to management of workers who often feel manipulated by their superiors. Many claim that the excess bureaucracy in the organization makes work conditions quite difficult; supervision is quite extreme. Most of the workers also frown upon the lack of opportunities for promotion or career development within the industry. Some experts have accused McDonalds of hiring young teenagers as these individuals are susceptible to manipulation; most of them are not confident and mature enough to complain against unfair treatment. Additionally, several McDonalds outlets tend to hire foreign workers who are an equally vulnerable group; many of them may have experience from their home areas but this becomes irrelevant when they join the institution. Overall, the short-termism inherent in most workers tends to cause them to have a low sense of loyalty to the company, and this hampers their effectiveness. Work schedules in the company have been called punitive and unfair by some as employees are expected to work for long hours. The company ostensibly claims that it pays workers for the extra hours contributed but several individuals have complained that these man hours are rarely included in work outcomes. Some workers are not fond of the communication style employed by organization which is seen by many as being adversarial and controlling in nature. Perhaps the major challenge for the employees is the routinization of their service jobs; this makes them easily replaceable and also undermines their sense of loyalty towards the organization (Mujtaba & Patel, 2007). Reward systems in the company are also highly wanting and fail to give workers the incentive to become better at what they do. Motivation is negative because the company tends to dwell on punishing employees for their misnomers by either suspending them or firing them altogether. Some individuals can lose jobs for minor infractions like forgetting to wear their gloves or talking on the phone without knowledge of the policy. Payment systems mostly consist of wages although individuals may be entitled to life insurance when they have served the company for over 3 years, which is rare. Despite the above conditions, the company also struggles with recruitment especially in newly opened restaurants outside the US; this is true because of the dwindling number of teenagers available to work for the company (Sterrett, 2011). There have also been some service slowdowns during recruitments as new workers tend to fumble with equipment and thus slow down delivery of the service. It costs the company a lot of money to prepare its workers for the current work environment ($10 million) so it does not make sense for the organization to lose its employees at such a fast pace. Recruitment processes tend to take a lot of time and money because the organization has to ensure that employees are able to handle the high pressure associated with working for a fast-food franchise. How the internationalization of the business influences common HR challenges. Internationalization tends to introduce more factors in the human resource management process especially in terms of recruitment, training and compensation. If a company operated within its host country, it would only have one set of laws concerning employee wages, rewards and conditions. However, when it operates in multiple geographies, it would have to familiarize itself with a range of standards and regulations that may not always be favorable to business. Even expectations concerning the rewards and incentives to be paid to workers may depend on the nature of environment under consideration, so this could be problematic (Mujtaba & Patel, 2007). Challenges assocoateed with hiring employees quickly and in an effective manner may also be compounded in the international platform. The organization always has the difficulty of determining whether it needs to hire internally from its headquarters and then transfer the individual to the new foreign position or whether it should source talent locally in order to meet the needs of the consumer base. Human resource management has the capability of streamlining the learning of a new culture in the concerned market. The business model in the US for this organization centers on keeping labor costs down but this may not work in some countries like Germany where fair wages are compulsory. Processes often demand a lot of resources and time, but this can quickly spiral out of control in the international dimension with dire consequences. McDonalds often takes its workers through a 60-hour training session, but the persons responsible for this will depend on the nature of the branch being opened. If an international organization is under consideration, then it is likely that the persons responsible for training will be an expatriate, so certain costs associated with moving the expatriate to the intended location need to be considered. In the McDonalds branches at Russia, it was necessary for the company to send its new employees to the Hamburger University in Illinois USA. Cultural challenges may also come in the way of effective human resource management as language barriers may arise between managers and their subordinates. McDonalds must make a point of either hiring someone who is willing to learn the foreign language and also get locals who already have good command of English owing to its association with the headquarters. The company already decided that the reporting language between all its franchises would be English (Mujtaba & Patel, 2007). Other issues such as talent shortages also compound the international hiring process as some policies in the US may not apply in the concerned country. For instance, the problem of hiring young workers may be complicated in foreign climates because of movement into other areas of life like tertiary education. Lacking a talent pool from which to hire one’s workers is a real problem in the company but it tends to increase as the country enters into foreign markets. Recommendations on the strategy that could be implemented in order t overcome the above challenges The recommendation is a global rewards plan that will ensure challenges associated with labor management are dealt with in advance and all the respective hurdles are prevented from occurring. It may be true that one should not try to replicate the success in one country in another, it is also essential to have certain values that apply across the entire organization irrespective of whether the franchise or branch is located. Total compensation schemes play a critical role in implementing globalization efforts because this area of human resource management is quite different from other. The demographic patterns, different economic situations as well as divergent talent management issues can come in the way of effectively controlling one’s compensation processes. McDonalds needs to have a method that ensures effective compensation through adherence to certain qualities; flexibility, competitiveness, mobility and adjustable (Chaudhary, 2012). The company needs to align its business objectives with its human resource strategy and costs at every new location; this implies complying with local requirements. Besides this aspect, employees ought to receive more or less similar rewards despite belonging to a different home nation. All McDonalds branches need to have flexible compensation plans that are able to accommodate new international developments as well as the local needs in that new location. The scheme needs to be scalable and highly competitive otherwise people are unlikely to apply for jobs if they can get lucrative offers elsewhere. Bonuses must be given to the employees, so they need to be a combination of three things: customer satisfaction, the performance of the organization as well as the performance of the individual under consideration. This collective system should apply to every employee regardless of where they are located in the world. Prediction on the degree of effectiveness It is likely that this strategy will lead to some impressive results in the organization because a war for talent exists within the global talent pool. When this matter is amalgamated by the high attrition rates that are symptomatic of many fast food restaurants, it should come as no surprise that companies that win are the ones with a systematic and well-developed compensation plan. No single solution exists for the management of human resources within the global environment, so any mechanism must be sensitive to the various variables within its environment. McDonalds has not had an effective compensation strategy and this has undermined its talent pool as well as its ability to retain talent. Therefore, one must consider other ways of bringing a common approach to the issue and this plan attempts to bring some semblance of order for the company. References Chaudhary, S. (2012). Globalization of compensation. Retrieved from http://www.aon.com/apac/human-resources/thought-leadership/asia-connect/2011-sep/globalization-of-compensation.jsp Lewitinn, L. (2013). “McDonalds has bigger problems than $15/hr wages”. yahoo.com. Retrieved from http://finance.yahoo.com/blogs/talking-numbers/mcdonald-bigger-problems-15-hour-wages-202130093.html McDonalds (2014). Company profile: McDonalds is global and in your hometown. Aboutmcdonalds. Retrieved from http://www.aboutmcdonalds.com/mcd/investors/company_profile.html Mujtaba, B. & Patel, B. (2007). McDonalds success strategy and global expansion through customer and brand loyalty. Journal of Business Case Studies, 3(3), 55-67. Sterrett, D. (2011). McDonald’s faces teen labor shortage. Workforce. Retrieved from http://www.workforce.com/articles/mcdonald-s-faces-teen-labor-shortage Read More