The Human Resources Approach and Human Relations Approach in McDonalds - Case Study Example

Communication, organisations and McDonald’s Introduction From the management view, developing a successful and productive organisation begins with the foundation of quality leadership and using different management models to plan strategy, organise workers, and control certain issues involving employees and the workplace environment. Some of the most successful organisations use a blend of management controls along with giving employees certain flexibility in relation to areas of job responsibilities and their personal schedules. As a manager, there are many different options or models available to lead the organisation toward meeting strategic goals, including the human relations and human resources approaches. Both of these management strategies focus on the needs or motivations of employees, but each has their own benefits and potential disadvantages. The human relations approach Human relations often deal with the specific environmental (physical) conditions of the organisation that tend to boost productivity levels. The Illumination Studies, studies that involved the correct level of illumination in the workplace, tended to show that productivity remained the same regardless of how lighting was increased or decreased in the organisation (Miller, 2008). Further studies showed that in the presence of other factors related to the worker, such as pay incentives, specific work hours assigned to each employee and even the social environment boosted productivity when paired with environmental issues such as lighting (Miller). In order to best describe the human relations approach to managing people, it involves understanding that people want to be included as a part of a team environment and also given the physical conditions that make the job rewarding and worthwhile. The human relations approach also deals with motivational issues in the workplace, such as providing better bonuses for meeting corporate goals or providing additional compensation through the performance appraisal so that employees realise they are respected and valued contributors to the organisation. Motivating employee loyalty and giving them personalised incentives for meeting more than just job role responsibilities are factors that are modelled into the human relations approach. “The accountability to which organisations increasingly have to respond can be adequately met only by making an appeal to the responsibility of individual employees. The organisation depends on their loyalty” (Vandekerckhove and Commers, 2004, p.226). What this means for management is that in order for the business to be successful to all different stakeholders, it must depend on the personal actions and loyalties of employees to reach the goal of productivity sustainability or growth. Getting the employees to become more loyal and productive, however, relies on managers’ abilities to provide a motivational and rewarding environment. This is the nature and strength of human relations. One of the most common theories of motivation was offered by Abraham Maslow, a psychologist who developed what is known as the Hierarchy of Needs, a pyramid structure model showing the different needs that most employees desire in order to become full contributors to organisational success. Maslow’s model shows that, first, basic physiological needs require attention in order for them to progress as valuable and worthwhile employees. These needs include issues of environment, such as lighting, food, or having access to a work station that is ergonomic or without constant interruption from other employees (Miller). This hierarchy then suggests that basic security needs require addressing, such as promising employees that they might have a chance to be promoted if they reach corporate goals or guaranteeing that their job positions will not be replaced with modern technologies. After security needs are met, the employee must feel as if they belong within the organisation, which is their next basic need. Belonging can be established by creating functional teams or giving ongoing feedback. These managerial efforts let the employee know that they are valued and trusted. “Individuals with a wide range of useful and influential friends in a range of positions can find this network very helpful. They are valuable, difficult and time-consuming to build, and difficult to replace” (Chow, 2009, p.45). Because of this, managers must have an ongoing focus to strengthen employee relationships between their peers and managers so that this network gives employees support in their job roles. It is only after the described needs have been fulfilled that the employee can begin to develop their own self-esteem, which is the fourth tier on Maslow’s hierarchy. Self-esteem can be developed by managers by giving employees more job tasks to let them expand their knowledge or by simply giving them power, control or prestige (Gambrel & Cianci, 2003). In order for the employee to become self-actualized, the final stage of the hierarchy, confidence in their job roles and their place within the organisation as a trusted contributor must be satisfied. Self-esteem development is mostly achievable through social conditions such as team-working, as part of the human relations focus for managers (Miller). Maslow’s model, by itself, is a strength because it recognizes the needs of employees and helps incorporate new human relations practices into the business model. There are some difficulties to this approach, due to the nature of management roles in the business. Complicated schedules and other real-life situations often make their job roles difficult to manage as they try to plan new strategies or set up control mechanisms to make sure that employees always remain focused on their individual or team-based job roles. Strategy development involves areas of marketing or generating reports about productivity or for shareholders, which can take up a manager’s time on a weekly basis. This often gives them no room for being able to help employees develop their sense of belonging or self-esteem. There is another approach to managing people through human relations models, identified by McGregor known as the Theory X versus Theory Y approach. Theory X describes the employee as being typically lazy and in need of constant management supervision. It suggests that employees will abandon their work in favour of ongoing socialisation if they do not have constant direction and manager presence (Miller). Classical organisations often used the Theory X approach, especially in manufacturing environments, in order to keep productivity high. Theory X represents “authoritarian values with a repressive style. It has tight controls with no room for employee development and produces a depressed culture” (Chapman, 2002, p.1). Managers using Theory X for human relations could definitely improve productivity by giving employees tight controls, however it could cause budget issues when employees leave the business looking for a more autonomous work environment. It could also damage relationships with employees and managers if they are not given opportunities to expand their knowledge or skill variety when they are being micro-managed from many different management levels. Some companies try out different motivational schemes such as decentralizing the environment through delegation, job enlargement, or ongoing performance appraisals (Kopelman, Prottas and Davis, 2008). However, when built using a Theory X approach, most of these programmes fail to achieve positive loyalty or motivational outcomes in employee groups. The Theory Y approach is more modern and offers that employees will be motivated to succeed if they are given opportunity. It describes workers as being internally motivated to succeed and will actively seek out new opportunities at the business if they are presented. “Theory Y is liberating and developmental. Controls occur naturally as part of continuous improvement and empowering employees through responsibility” (Chapman, 2002, p.1). Managers with a Theory Y approach tend to look for ways to give employees a better knowledge management environment where they can look forward to socialising, to group involvement, and better decision-making. These are its strengths in application. There are some disadvantages to the Theory Y approach, which could include employees receiving too many job responsibilities and being unable to manage them successfully. Even though the Theory Y approach suggests improving autonomy in job responsibilities, without some sort of management control system employees might take advantage of these liberties and fail to meet organisational goals. The McDonald’s Corporation has a very strong Theory Y approach to human relations and pushes for diversity in the job role. Offers the organisation, “We accomplish diversity in a number of ways, such as the integration of diversity initiatives into our daily business practices” (aboutmcdonalds.com, 2010, p.1). Diversity, at this organisation, is much more than just ethnic diversity, it is about giving employees opportunities to expand their career through promotion and establishing different employee business networks to help with areas of education or career growth with the company (aboutmcdonalds.com). This human relations approach at McDonald’s uses the Maslow and Theory Y models to boost incentives for having a rewarding job experience by appealing to their sense of belonging, job security and even self-esteem development. Karen King, President of the East Division at the company, offers, “If you have the will and the drive to grow in this organisation, there is no ceiling for what you can achieve” (King, 2010, p.1). This means that McDonald’s, at the time of first being hired, promises that employees can move through the ranks of management and even achieve an executive level career position if they are willing to commit to meeting goals and performing according to expectations. Right from the start, employees are promised opportunities as part of diversity focus and are even given the coaching and career-building tools to make this a reality. This is probably why McDonald’s is world-renowned for their successes in providing excellent customer service through employee involvement. If McDonald’s took more of a Theory X approach, limiting opportunities for advancement and knowledge-gaining while adding many management controls, they would likely lose valuable and competent employees who would leave in favour of a more autonomous environment. McDonald’s also recognizes the importance of meeting the basic physiological needs of employees, those described in Maslow’s model, by having the job environment remain a priority. “We will continue upgrading our restaurants’ ambiance through reimaging, including adding another 200 McCafes” (mcdonalds.com, 2008, p.23). The company attempts to make the job environment more inviting to potential job candidates, and sustain it for those who already work there, by making the environment look less like a fast food company and more like an upscale café. There has been the cultural idea of the McJob, that is often a derogatory term used to describe a low-paying, low-level job at McDonald’s as one that people in society should not seek. However, paying attention to the ambiance of the organisation gives employees more incentive to stay, be proud of their job position and find meaning as an employee. McDonald’s even invested considerable funds into a national advertising campaign designed to end the social idea of the McJob by promoting its flexible benefits and opportunities for career growth (aboutmcdonalds.com, 2010). This Theory Y approach to management makes the environment stand out from other competing firms, giving them a better pool of job candidates to choose from. The human resources approach The human resources approach was built on the back of the concept of human relations, but takes the idea one step further by recognising the absolute importance of building qualified talent that can assist in meeting organisational performance and productivity goals. Human resources managers should first understand the social learning theory. This theory “suggests that individuals are influenced by observing role models and learning about appropriate behaviour vicariously through witnessing what is rewarded and what is punished” (Neubert, Carlson, Kacmar, Roberts and Chonko, 2009, p.158). They will model managerial actions. More than just motivational theory or acting as role models, HR is about investing time and funds into helping employees develop their knowledge through different mentoring programmes. Human resources is offering employees the tools necessary to expand their core competencies by structuring the organisation in a way that provides value in a variety of different outcomes. It is about building an environment where knowledge management is the focus and creating talent (where none might have existed) that can help the company experience better competitive advantage. Human resources is classified through models such as teamwork, sharing information between employees and managers, reducing status differences, decentralizing decision-making, and giving employees opportunities for self-management (Miller). Some companies use bonus schemes as incentives to build a better human resources focus. The CIPD Annual Reward Management Survey identified that 52 percent of organisations have some sort of bonus scheme and one in seven of the surveyed organisations actually met their performance goals and employees received their bonus (Brown, 2005). This means that bonus incentives are a common scheme to build morale and improve employee dedication. The disadvantage to this approach is that managers have to set attainable bonus goals and also monitor individual employee performance accurately to make sure they are eligible for the bonus reward. This counts on managers taking the time away from their basic planning or control activities to be more active in monitoring employee involvement. In a real-world environment with many managerial responsibilities, employees might achieve these targets and be passed over for bonus rewards and then become less loyal to the organisation. This is a major disadvantage to the bonus scheme: Active measurement and time investment. McDonald’s is one example of a company that promotes its bonus opportunities to new employees by adding them as incentives on its recruitment website. The goal is to make the business look more attractive for long-term career-seekers and show its dedication to human resources practices. McDonald’s offers in its annual report, “We continue to strengthen our hiring, orientation and training practices…to attract and retain quality employees” (mcdonalds.com, 2008, p.12). This means that the company invests much labour investment and the financial funds necessary to build a world-class recruitment and retention programme, which is part of the human resources focus. Some companies even use their human resources focus to change the actual organisational structure so that decision-making moves horizontally between employees rather than always coming from the highest levels. This is known as decentralization, which usually results in an outcome of perceptions of employee empowerment (Carpenter, Bauer and Erdogan, 2010). Decentralization efforts, when conducted by human resources managers, usually means removing layers of management so that employees (and even managers) are not forced to have multiple people to report to. Motivation is a major strength in decentralizing. In a company that practices this as a means to boost morale and loyalty, it tends to not only help retain current employees but also make the business more attractive to job-hunters (Carpenter et al). The centralized organisation is a disadvantage because it tends to put more strain on managers to make the majority of business decisions and can lead to poor performance from employees who are not given an opportunity to express their own innovations or suggestions on how to improve their own work environments. Business that use the Likert System have different approaches, each of which involves how to manage employees according to organisational culture norms or management preferences. The Managerial Grid shows the level of concern for employees along with their concern for productivity, indicating whether the managers’ focus remains on satisfying business objectives first or the needs of employee populations. The Likert System I is defined as exploitative authoritarian which typically uses intimidation, such as threats to job security, in order to motivate compliance from employees. It provides very high control systems to induce productivity and nearly every decision is made at the management levels and directed downward with demands for compliance. Advantages to this system could be found in a manufacturing environment with tight controls that lead to increased product outputs. Because of the high controls and strong management presence through threat, employees are coerced to meet production or service goals at risk of job loss or other disciplinary action. The Likert System I approach is a disadvantage as it leads to demotivated workers and could increase retention costs if dissatisfied employees exist the organisation in favour of better work environments. McDonald’s could not be involved with Likert System I practices due to its focus on human development and coordinating personal growth through human resources policies. In a high-turnover industry, control through threats would lead to severe personnel problems. A successful strategic plan includes developing huma capital, emphasizing ethical attitudes, and setting a purpose in order to provide competitive advantage (Phipps & Burbach, 2010). Likert System I does not allow for this. Likert System II is defined as benevolent authoritative and motivates through rewards aimed at ego or through certain bonus compensation. This system still uses orders to get productivity goals met and decision making occurs at the top and the moves downward. The only significant difference is that System II provides employees with rewards that are equal to their productivity and efficiency outputs. McDonald’s looks to adopt these principles as it offers rewards (such as promise of promotion) in some divisions where decision-making remains at the highest levels and compliance is demanded through policy. Mid-level managers are often exposed to this type of system when sales decline or they cannot meet productivity goals, leading to potential job security issues. The largest advantage is that it provides extrinsic motivation to perform by receipt of rewards and can improve efficiency and productivity. “In times of economic hardship, engaging and motivating your employees is crucial if you want to drive business and succeed” (Williams-Gardner, 2009, p.16). Its main disadvantage still lies in causing retention problems from employees who might desire more autonomy in their job roles with some level of cooperation and interactivity in policy formation. Likert System III relies on top-level decision-making, however employee input is considered when creating new policy or guidelines for performance. This is the only real difference from Likert’s other two systems that demand control. This type of philosophy might be common at McDonald’s in specific restaurant locations where store managers pull together meetings to come up with new change policies, seeking input from staff before making a decision and then implementing controls. Its advantage is improving motivation in employee groups by giving them the perception of having a voice in corporate matters, however it can complicate decision-making that needs to be created quickly in chaotic or risky situations. In these cases, subordinate input is often not warranted and if used often, they might expect to be consulted on every business decision. Likert System IV reflects a participative organisation that has balance. Decision-making has involvement from all employees in attempts to reach consensus and communication between levels is ongoing and consistent. “Miscommunication quickly leads to poor performance” (Ventrice, 2009, p.1). This is quite common in liberal restaurant locations at McDonald’s that focus on teamwork, cooperation, and strong customer service focus. By allowing input from employees, it shows the business cares about their career goals and their personal developmental needs. Its largest advantaged is improved motivation, better cooperative goal-setting, and attaining competitive edge through human capital development and brainstorming of new ideas to better the company. Its only disadvantage is that a structure like this can limit senior decision-making when there is pressure to consult with lower-level or sometimes peer knowledge groups. Another human resources approach involves the use of Blake & Mouton’s Managerial Grid, which identifies five characteristics of management philosophy related to employee needs and productivity. Each style is positioned on a grid with the x and y axis representing either a high or low level of productivity versus a high or low level of employee concern. The first management style is the impoverished style, which is usually a result of poor management capability or misbalanced organisational structure. It has little concern for the productivity of the business nor for the employee (mindtools.com, 2010). The disadvantages to this approach are quite obvious leading to poor performance or efficiency outputs and demotivated staff members whose needs are rarely, if ever, considered when decisions are made. McDonald’s could have such leadership focus as their managers are trained to be diverse, competent leaders with a discipline in meeting both needs. The grid also defines country club leadership, which is positioned on the grid with low level of concern for productivity but very high involvement with satisfying subordinates. If employees are happy, under this belief, they will automatically provide quality outputs, thus few controls are put into place. McDonald’s would abandon this principle as it would give low-level employees too much autonomy that could disrupt service philosophy. The advantage to this style is a very well-defined team philosophy and positive culture, but leads to the opportunity for low performance outputs when socialisation is put before meeting timelines or performance demands. The next type of leadership on the grid is produce or perish leadership, with very strong control systems to ensure compliance to performance guidelines but with little concern for concentrated human resources and motivational strategies. Demands are often placed with consequences for failing to meet guidelines clearly spelled out. McDonald’s rarely uses this, as it is sometimes intimidating, in order to get results as it goes against its strong HR policies on employee development. The largest disadvantage to this approach is the demotivated employee and high turnover probability, while its advantage is in better product or service (or performance) outputs that lead to profitability. The final type of leadership under Blake & Mouton’s model is the team style approach where there is high concern for employees as well as meeting productivity demands. It is usually based on mutual group respect and will lead to higher productivity through ongoing controls and policies. McDonald’s looks to be a supporter of this type of leadership style as productivity and service gains are very important to stay profitable, while never allowing employees to go without rewards and extra training. The largest disadvantage is that such high focus on both factors could over-complicate managerial roles and cause them to defect from the excessive job responsibilities. Its advantage is a satisfied employee population who understand that performance is just as important as building relationships. There is a fifth approach called middle of the road leadership on the grid, which essentially is just a balance between employee needs and productivity needs. However, it sometimes allows for too many concessions to be made that can impact employee satisfaction or sacrifice short-term productivity goals. McDonald’s usually makes no such concessions and would not be apt to adopt this leadership style in real practice. Its advantage is having a system that considers both important factors, while its disadvantage is that leaders might be apt to settle for just average performance rather than holding higher standards. Conclusion Whether a company chooses the human relations approach or the human resources view on managing people, there should always be a focus on needs fulfilment to improve areas of motivation, retention, and improvement of different training policies and programmes. All of the listed models and approaches, especially the Likert and Managerial Grid models, require considerable investment from managers in order to stay competitive and avoid problems within the organisational culture at the social level. Comparatively, the human resources approach has the most advantages for most businesses, especially for McDonald’s which is an excellent example of a company that blends both successfully, using more of the Theory Y approach and elements from the Maslow model of motivation. 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