Reward Management-Performance Management System - McDonalds - Case Study Example

Student’s Name: Professor’s Name: Subject: Reward Management-Performance Management System-case study: McDonald Date: A situational analysis of the Macdonald Company McDonald is the largest global foodservice retailer, represented by over 31,000 local restaurants catering for more than 58 million people within 118 countries in a day. A number of McDonald’s restaurants across the globe are owned and managed by independent local men and women. The company aims to become customers’ favorite place as well as way to eat and drink by offering core favorites which include, McDonald’s World Famous Fries, Big Mac, Chicken McNuggets and Quarter Pounder. The strengths of the company include; McDonald ranks highly on the Fortune Magazine’s food service companies that are mostly admired, the company operates globally-all over the world, the ability to strictly adhere to the food safety guidelines, the biggest part of McDonald restaurants are franchised out, McDonald owns the best brand recognition across the globe such as the golden arches and Ronald McDonald. However, McDonald has weaknesses such as, poor test of pizza market which limits the company’s capability to compete with other providers of fast food pizza, inability to offer organic foods and vary the provision of seasonal products, franchised operations raise quality concerns and failure to consider healthier options or alternative food for their customers than simply focusing on burgers and grease fried food. Besides has great opportunities such as establishing more joint ventures with different other retailers worldwide, chances of continuing to venture into existing and new enticing beverage choices and offering optional allergen free food products, such as gluten free and peanut free. Some of the threats to McDonald include, the company’s marketing strategies that largely entice people with different age ranging from small children to involve adult as well as the criticism they are subjected to because of it. In addition, McDonald faces lawsuits for continuing to offer unhealthy foods that are considered to be addictive additives and a number of consumers are now paying more attention on the importance of healthier dieting (McDonald Company Profile 2015). Analysis and evaluation of Macdonald Performance Management System (PMS) As its strategic direction, McDonald makes strong alignment, the company’s franchisees and suppliers entirely known as the “System” has contributed largely to the success of McDonald. The company leverages their system which enables them to identify, implement and scale different ideas that assist the management of McDonald to meet the dynamic needs and preferences of their customers. The business model of the company provides an ideal approach towards ensuring consistent delivery of locally-relevant restaurant experiences that meet their customers’ needs besides emerging as an integral part of the communities they serve. Over and above, McDonald has a customer focused approach or plan to performance management referred to as Plan to Win which provides the company with a common framework on which they aligns their global business to allow for local adaptation. In the framework of their plan, McDonald focuses on three global growth priorities which include optimizing their menu, broadening accessibility as well as modernizing their customer experience. Furthermore, the company’s initiatives support such priority areas implemented focusing mainly on the Plan’s five major aspects-People, Products, Place, Price and Promotion. In so doing, McDonald is well positioned to improve their customer’s experience and create more shareholder value in the long-term operation. However, it is crucial for such priorities to align with the company’s customers’ changing needs. This requires the management of McDonald to combine their competitive advantages of not only convenience, but also menu variety, undertake geographical diversification as well as system alignment to achieve long-term sustainable growth (McDonald Company Profile 2015). By considering the influence of both intrinsic and extrinsic rewards on the performance of employees, specifically in the banking sector, Khan et al (2013, p.283) examines that different factors which determine intrinsic and extrinsic rewards have great impact on employees’ job satisfaction and job performance. The researchers also found that intrinsic and extrinsic rewards enhance the overall job satisfaction as well as the performance of employees. The intrinsic rewards, such as ability, authority, security, variety, moral values and social service are significantly and positively are associated with the self-reported performance of employees. However, the extrinsic rewards, such as advancement, recognition and supervision-human relations are significantly and positively related to employees’ performance. Therefore, it is crucial for organization ensure equal implementation of their human resources policies particularly those related to rewarding employees so as to enhance the satisfaction level of their employees at work (Khan et al 2013). The fit between Macdonald Performance Management System and its strategy Studies indicate that developing appropriate performance management strategy enables organizations to manage their partition’s performance in a more proactive manner than merely reacting to changes that have already occurred. It is important to note that performance management strategy of company largely depends on how much time it can afford to spend on managing performance. For instance, working with small companies means that different aspects of the business are easily managed, and thus fewer hours are spent to managing performance. For many large companies, however, they employ performance specialists to ensure that their performance management systems remain tuned and running effectively. Therefore, different business needs call for different performance management strategies. This implies that specialists in performance management need to be aware that determining the key performance management strategy as well as identifying appropriate performance application to use, requires them to classify their companies in small business, mid-sized business and large business categories. Over and above, the businesses resources for each size often vary, implying that a company’s management strategy will also vary accordingly (Bedoya et.al 2009, p.15). With over 400,000 managers and senior staff members in 118 countries across the world, it is important to note that the leadership at McDonald is well-informed about the significance of developing a consistent global compensation. Being one of the big companies worldwide, it has become vital for McDonald to establish the perfect balance between its global consistence strategy and cultural adaptability to avoid indulging in decentralized and inconsistent situation or compensation programs. Therefore, the company adopted a revitalization program known as “Plan to Win” which focuses on people development. It is notable that McDonald’s consistent global compensation strategy enables the company to attract and retain the right people. Through a collaborative approach, the company has managed to inform its international managers about the importance of having a consistent global compensation program. In line with this, human resources managers in different countries are required to provide their business cases and targets to enable the company determine each country’s annual incentive pool at the end of the year. This is assessed based on the region’s capability to meet its target and on the operating income of a business unit. On the one hand, each and every employee’s annual bonuses are offered in relation to that mix and on the other hand, employees’ annual incentives are given on the basis of individual performance (Marquez 2006). Lawler (2003, p.396) examines that virtually each organization is supposed to have a performance reward system that can attract, retain and motivate employees to ensure that an organization achieves its goals. On the other hand, performance appraisal systems work more effective in organizations that have well-built connection between their performance management system and their reward systems. Lawler argues that involving rewards in this case, implies that a performance management system is going to be very helpful to both the appraiser and the appraisee. With rewards being involved, therefore, it means that there is assurance that the whole appraisal process will impact greatly the individual’s relationship with the organization as well as his or her compensation. As a result, an individual is motivated to feel that everything goes on well as it is the case with appraiser, who is expected to do a fair allocation of the little amount of the financial rewards (Lawler 2003). Initially, McDonald relied on its performance rating system but today, the company uses global guidelines that require only 20 percent of its employees to be rewarded with the highest ratings. The company believes that through provision of guidelines rather than forced rankings, it is an added advantage to encourage differentiation of performance as well as flexibility particularly for local nuances. By guiding and giving local managers the power to customize their compensation programs as a way of responding to their market demands, McDonald Company is successfully reducing its turnover rate. The global chain has shown a 5 percent increase of employees who accepted they are paid fairly and understand well their compensation as well as how it contributes towards achieving the goals of the company (Marquez 2006, p.26). A number of variables affect the performance of employees at workplaces, for instance, manager’s attitude, job content, financial rewards, personal problems and organizational culture. However, all these variables create positive impact particularly on employee’s performance except one variable-personal problems of an employee that negatively affect the performance of employees in an organization (Saeed et.al 2013, p.120). The nature of business at McDonald is encouraging because its fast-food giant restaurants have employee motivation built into their operations. It should be noted that each restaurant affiliated to McDonald Company operates a separate profit, and thus employees have realized the significance of engaging with the idea of teamwork as well as collaborating to ensure sustainable operation of their restaurants. As a result, McDonald gives incentives to encourage such desired behaviors among their employees in form of two bonus schemes for all its 400 company-owned restaurants. All employees ranked the top 10% of restaurants on the basis of mystery shopper scores are entitled to a month end bonus. Similarly, restaurant managers are given a quarterly bonus determined from the three equally weighted measures in particular, sales growth, profitability and the mystery shopper scores. Therefore, the entire management team is appropriately aligned as single team waiting to be motivated to as well as rewarded for achieving such great business metrics. However, the same entire team is also challenged to ensure that the best customer service is delivered since it is not easy to tell exactly when the mystery shoppers will visit their restaurants. Job and reward satisfaction can influence membership behavior directly, for instance, employees who become more satisfied with their rewards and job conditions tend to engage in less absenteeism. Such employees also show greater desire or interest to work for long with the organization. It is notable that satisfied employees often turn up to work because believe that the extrinsic and/or intrinsic rewards offered for accomplishing a task meet a substantial number of their emotional or material needs. However, unsatisfied employees develop low affective commitment and membership behavior, and thus increased rate of employee turnover and absenteeism (Shields 2007, p.46). Generally, McDonald’s motivation and recognition schemes comprise of service awards that recognize the company’s employees’ service at intervals of five years, there are two major restaurant bonus schemes-for all employees and for managers given to them based on the restaurant performance. In addition, McDonald Company offers restaurant of the quarter and of the year as well as president’s Award given as global scheme for support staff. It is relevant to point out that such initiatives are considered as part of McDonald’s wide portfolio of motivation and incentive scheme, operating throughout the company’s not only in the UK but also its global business. McDonald strongly believes that ensuring that fresh and exciting recognition schemes are put in place, maximizes staff motivation. Therefore, the company reinvents existing schemes to maintain their appealing reputation to employees (Lovewell-Tuck 2013). Recommendations on how the Macdonald PMS could be improved Incentives or rewarding aspects of performance is considered as one of the powerful ways for organizations to enhance the salience aspects that performance employees are expected to perform (Glen 2006). Since climate refers the perception of employees of the existing or enacted policies and practices of employing organization, management of McDonald Company should invest more in rewarding their employees because rewards is a strong indicator of the climate and underlying culture of an organization (Aguinis 2007). Therefore, McDonald can give monetary bonuses as a way of rewarding their employees who particularly contribute towards ensuring that their organizations successfully implement strategies as well as support their culture. It is also vital for the management of McDonald to understand that paying employees a bonus for improving the production or service process creates very different climate compared to rewards given to employees for decreasing costs. Monetary incentives in particular, motivate the discovery and adoption of tactics necessary for employees to perform a task in the sense that performance and the subsequent incentives are often obtained. This implies that depending on their culture desired most, McDonald should consider which types incentives they need to offer employees (Schneider & Barbera 2014). It is important for MacDonald to understand how their employees would prefer to be rewarded. Although increased pay would be supported by many employees, it is surprising that incentives for higher performance are still a contentious subject for quite a number of employees. In the UK, for instance, performance-related pay (PRP) or merit has become the main form of reward, though, generally receive a poor press. Therefore, management of McDonald should adopt other sophisticated approaches in rewarding their employees. Such approaches may include skill-based pay and flexible benefits to be used alongside PRP to help compensate for its associated limits. It is considered that when an organization strongly believes in the power of financial ‘carrot’, it means that bonuses must be substantial in response for outstanding performance (Holbeche 2012, p.260). List of references Aguinis, K., 2007, Performance Management: Performance Management and Reward Systems in Context, Pearson Prentice Hall. Bedoya, H., Roy, M., Neerukonda, N & Nuutinen, P., 2009, End to End Performance Management on IBM, IBM Redbooks. Glen, C., 2006, ‘Key skills retention and motivation: The war for talent still rages and retention is the high ground’, Industrial and Commercial Training, Vol.38, No.1, pp.37-46. Holbeche, L., 2012, The High Performance Organization, Routledge. Lawler, E.E., 2003, ‘Reward, Practices and Performance Management System, Effectiveness’, Organizational Dynamics, Vol.32, Iss.No.4, pp.396-403. Khan, I., Shahid, M., Nawab, S & Sikander Wali, S., 2013, ‘The influence of Intrinsic and Extrinsic Rewards on the performance of employees: The banking sector of Pakistan’, Academic Research International, Vol.4, Iss.No.1, p.282. Lovewell-Tuck, D., 2013, “McDonald's Restaurants built on motivation”, Retrieved April 29, 2015 from, Marquez, J., 2006, “McDonald's Rewards Program Leaves Room for Some Local Flavor, Workforce Management”, Retrieved April 29, 2015 from, McDonald Company Profile, 2015, “McDonald’s is Global and in your Hometown”, Retrieved April 29, 2015 from, Saeed, R., Mussawar, S. Nawaz, L.R, Iqbal, A., Hafsa, N., H., Yaseen, S., 2013, ‘Factors Affecting the Performance of Employees at Work Place in the Banking Sector of Pakistan’, Middle East Journal of Scientific Research, Vol.17, Iss.No.9, p.120. Shields, J., 2007, Managing Employee Performance and Reward: Concepts, Practices, Strategies, Cambridge University Press. Schneider, B & Barbera, K.M., 2014, The Oxford Handbook of Organizational Climate and Culture, Oxford library of psychology, Oxford University Press. Read More