Organisational Behavior of McDonald's - Essay Example

TABLE OF CONTENTS Introduction. 2. Methodology. 3. Main findings. 4. Conclusions. 5. Recommendations. 6. Bibliography. INTRODUCTION. McDonald’s is undoubtedly the world’s largest fast food chain with a presence in 120 countries, 31 000 outlets and serving 15 million customers daily. Its annual revenue is a whooping $ 41 million per annum, of which 80% is from eight of its major regional markets including Japan, Canada, Brazil, France, Germany, Australia, the UK and the US. McDonald’s is synonymous with globalization and is often identified with a representation of American values and way of life. George Ritzer (1995), wrote a book titled The McDonaldization of Society, where he described McDonaldization as a process through which society adopts the characteristics of a fast food restaurant, which has four components; calculability, efficiency, predictability and control. However, McDonald’s has diversified beyond these traditional fast food items through the acquisition of restaurants such as Boston Market and Donatos Pizzeria. McDonald’s not only operates stand alone restaurants but also has presence in commercial establishments such as mall, gas stations and airports. What began as a simple drive through in 1941 has emerged to be the world’s largest fast food chain. There is a trans-generational connotation to McDonald’s as every American seems to have gone through it at one point or through out their lives. But how has McDonald’s managed to be such a global icon of success? McDonald’s is used as a learning tool, even by organizations out of the food and service industry. This implies that their strategy is well above global standards. It puts emphasis on staff training and development programmes, strict and consistent quality and service, continuous innovation and development and a centralized promotion campaign. The main emphasis of McDonald’s competitive advantage that has ensured that they have remained as a leader is the relentless quest for consistency and innovation. This is compounded by the fact that McDonald’s has put measure in place such as the quality assurance labs globally to ensure that only products of the highest standards are used in the production process. Despite the fact that the staff hired by McDonald’s is mostly untrained and inexperienced, these recruits undergo vigorous training on food preparation and customer care. While it is a global enterprise, McDonald’s operations are standardized through out. This has advantages such as the standardization of cost efficiencies and the management is able to make comparisons and learn from its various outlets. This also encourages healthy competition among its stores. The basic operation systems such as finance and leadership management, staff training and development and customer service are not only standardized but they are also cost and time efficient, McDonald’s has been successful at creating unique a brand identity and a unique taste for its menu items. METHODOLOGY. This report seeks to analyze the organizational behavior, leadership and management strategies of a diverse company. For the purposed of this study, McDonald’s has been selected due to its huge success globally. The role of behavioral and cultural factors in the success of the corporation is investigated. An evaluation of the leadership style on the culture, business structure and organizational behavior at McDonald’s is conducted. A review of the operational decisions and strategic activities of the senior executives is conducted. The main components of McDonald’s competitive advantage and the approaches to maintain the competitive advantage are critically analyzed. Surveys of several McDonald’s outlets are used for the provision of information. Information was also supplemented by wed based research on McDonald’s. The main areas of the research were: 1. What is the company’s organizational structure, culture, Human Resource strategy and leadership style? 2. What is the role of motivation and diversity in the attainment of high performance? 3. What is the leadership style at McDonald’s? 4. What are the challenges facing the implementation of change at McDonald’s and how have they dealt with these challenges? 5. What strategic options are available to McDonald’s to ensure its future success? 6. What are the components of McDonald’s competitive advantage? How can it be sustained? MAIN FINDINGS. Organizational behavior refers to the individual and group dynamics that are displayed within an organization. It is the study and application of the knowledge of how people, individuals and groups behave in an organization by taking a systematic approach. As is the case with all organizations, McDonald’s uses organizational behavior to create environments in which human relations thrive through the achievements of organizational, social and human objectives. According to Alice Branch (2003), corporate culture is the power to greatness. Culture is the intangible thing that determines how people in an organization interact, communicate, behave and handle change. Corporate culture has six main dimensions that can be sliced and diced: the easier it is for culture to be signed, the healthier the culture and consequently, the stronger the company’s business performance. McDonald’s has a very strong and powerful corporate culture, which is evident in the way that the workforce interacts. Truly, for McDonald’s, people are their most valuable asset. The success of has been positively influenced by the corporate culture. This has included the direct involvement of employees in the decision making process and the generation of the product and service. It is important that the employees appreciate and understand the organizations operations. McDonald’s culture is market driven and its practices are customer, employee and stake holder centered. The leadership at McDonald’s is action centered. Action centered leadership was originally introduced by leadership and management guru John Adair. According to him, the management has three basic functions; task accomplishment, team management and individual management. The management at McDonald’s has been successful in applying the action centered model into their business environment. As task mangers, McDonald’s managers have succeeded identifying the aims, resources, plan of action while setting standards. They also take part in the overall monitoring and evaluation processes of the plan’s performance and making regular reports. When managing groups, McDonald’s’ managers aim at establishing and maintaining open communication channels. They also set the pace for the culture and style of the organization so as to maintain ethics, integrity and discipline so as to remain focused on the organizational objectives. The workforce is then balanced and motivated so as to create a collective sense of purpose. At individual level, the managers try to understand the disparity in people’s personalities and by so dong, allocating responsibilities that are inline with the individual’s personality. This ensures that each individual’s capabilities and potential are realized to the full. Consequently, individuals develop a sense of authority and freedom. It is therefore apparent the leadership is no an exclusively innate ability but rather, a trainable and transferable skill (Adair 1988). As it the case with all organizations, the McDonald’s strategy aims at business stability. When life was easy, competition was minimal and the fear of change did not bother company executives. However, labor mobility, market transparency, global flow of capital and improved communication as forced companies to adopt changes. McDonald’s has not been spared. However, McDonald’s has been able to tackle change by intimately understanding the human aspect of change management, which includes the values, people, behavior and culture as directly governing results. During transformation, the reaction and cooperation of the work force coupled by the leadership approaches is crucial. Vroom and Jago, (2007) insist that it is important to involve subordinates in the decision making process, especially during a period of transition. McDonald’s has been able to maintain its unique culture and sense of identity despite the changes by involving the workforce in the process and consequently, led to the creation of commitment and ownership by the workforce (Jones, Aguirre and Calderone 2004). Change is an inevitable process as what may have been useful at one point may not be applicable at present. One reason for the need for change at McDonald’s was the growth of societies had led to excessive demand for the services, internal changes such as more food preparation stations and communication systems. Change is a motivator for improving on the status quo (Poll 2003). The McDonald’s management knew when to initiate change when: 1. The organizational structure was outdated and failed to reflect the objectives. 2. The workforce was unaware on how to accomplish tasks within the organization. 3. There were incidences of conflict on the roles of each staff member. 4. The communication channels were ineffective. 5. Employees were not realizing their full potential thus were not productive. 6. There was a general reduced business volume due to reduced customer satisfaction. It was necessary for McDonald’s to adopt the new look which they termed “Forever young” as the trouble of maintaining the same look for over 30 years was starting to become obvious. Despite the fact that a redesign is a risky McDonald’s and highly costly McDonald’s, McDonald’s moved to revamp its menu and premises so as to attract and maintain customers. This had included the introduction of health options such as salads, happy meals for children and McMuffin for the elderly. In the late 1980s, McDonald’s introduced play areas for children. McDonald’s has been successful in facilitating change by use of effective people management strategies. They include: 1. Involvement of staff in the change This led to the sense of responsibility and commitment. It is human nature to wan to be recognized and consulted. It also allowed for creativity and innovation as the staff gave their different opinions. People will willingly build what they helped create. McDonald’s involves its workforce in the implementation of change. 2. Statement of the objectives for change. This is definition of what the expected outcomes are and thus clearly identifying a clear direction or course of action. The team is then able to add their ideas and thus create a sense of ownership. The clear definition of the objectives that justify the changes at McDonald’s has encouraged the workforce to know their roles in the pursuit for excellence. 3. Slow change. Change is a delicate process that should be implemented systematically. It must involve a collaborative plan that includes planning, implantation and evaluation. Changes at McDonald’s have not happened over night but have happened over a period of time. 4. Open Communication channels. This allows the clear flow of information through the organization. McDonald’s has adopted a system that allows all members of the workforce to feel free to air their views. Clear communication channels also allow the speedy resolution of problems within the organization. Competitive advantage is the ultimate goal of any goal oriented organization and McDonald’s has successful captured it. The company examined and assessed the importance of organizational behavior management as it realized that the alternative would lead to a difficult attempt to reverse an inevitable downward trend. The major competitive advantage that McDonald’s has over its competition is that is has established an excellent reputation as a provider of quality food and services. This makes has created loyalty all over the world, thus a major international footprint. The fact that all its outlets are standardized ensures that there is consistency in its products. For example, a Mcburger in France is the exact same one as one in the US. This can go a long way into dealing with homesickness when one is away from home; sort of a sense of home away from home. The fact that McDonald’s is keen on corporate social responsibility by giving back to the societies that sustain them has also assisted in creating a McDonald’s impact. McDonald’s has been successful due to the fact that its leadership strategies aim at effective management of people. This is further reinforced by the use of the classic of hard human resource approach where the employees are directed to have their goals in sync with the organizational goals. Employees are the most valuable asset for any organization and unfortunately for many organizations, they have failed to direct necessary investments to the development of human capital. McDonald’s Human Resource strategy places emphasis on the importance of the training and the development of its employees, with an objective of inculcating life long skills, instilling a sense of self confidence and responsibility and the development of a sense of teamwork and responsibility. By ascribing to a powerfully empowering Human Resource Policy, McDonald’s is staffed by appropriate staff that possesses the necessary skills and attitudes. Over two thirds of the management team members began as hourly paid worker at the crew level. This is a clear indication that the organizational Human Resource structure is based on transparency during the recruitment and promotion process. The company has a global and diverse employment policy. By capitalizing on the productive diversity, McDonald’s has been able to maximize on the innovation and productivity of the different skills and talents of their workforce. It aims at the recruitment of professionals who are selected, trained and promoted according to their relevant qualifications, skills, talents and performance. It prides in being non discriminatory and non partisan. McDonald’s strives to recruit locally as much as possible as this empowers the youth in the locality and inculcates a sense of loyalty by the customers as they feel the need to appreciate the creation of jobs in their area. This indicates that the success of McDonald’s is pegged right at its grass root levels, irrespective of the geographical location of the outlet. By offering the employees training and development skills, it is expected that this beneficiaries not only develop necessary life skills but also maximize their full potential and are better equipped to handle pressure, challenges and issues of work. The management team undergo specialized management programmes which train the potential leaders who are usually selected from the crew staff. During this training, their management, communication and leadership skills are developed. After the training, the managers still under take follow up training and refreshment programmes to reinforce what they have learnt. These training and career advancement opportunities give options to individuals who want a challenge, change and personal development. Past and present performance is used as the key indicators during the targeted selection process. McDonald’s also offers its employees attractive enumeration packages that are above prevailing industry rates. Through formal performance reviews at all employee levels, rewards are presented to the individuals whose competencies and personal attributes have generally been oriented towards the attainment nod the organizational goals. Therefore, the Human Resource strategy at McDonald’s is aimed at the delivery of support and encouragement to the employees’ strengths and diversity. McDonald’s has been met by several major challenges and has many a times been at the firing line when anti-American sentiments arise. In the period between 2001 and 2003, a six quarters earnings decline was reported for the first time ever since McDonald’s went public in 1968. This was due to increased customer dissatisfaction resulting from a decline in the hygiene levels, quality of food and customer service. Another challenge was brought by the saturation of the market and stiff competition especially from Wendy’s and Burger King. In 2002, Jose Bove, a French national was jailed for destroying an ongoing McDonald’s building as a form of protest against US trade protectionism. Later in the same year, McDonald’s was braded insensitive to the plight of the millions of Africans after they launched a new burger called McAfrika. McDonald’s has also been heavily accused of promoting unhealthy lifestyles and causing life threatening diseases such as coronary failure and obesity. A group of Hindus living in the US sued the company for using beef flavoring in their French fries and cost McDonald’s $ 10 million in settlement. McDonald’s suffered its worst blow possibly in the McLibel trial, led by two unemployed Greenpeace activists. They circulated leaflets entitled “What’s wrong with McDonald’s?” which claimed that the company failed to conserve the environment, paid low wages to its employees, was cruel to animals and exploited children through misleading advertisements (Biz/ed 2006). RECOMMENDATIONS. Several recommendations can be made from the main elements of McDonald’s business strategy that can be applied to other corporations, even out of the industry. 1. There is need for extensive staff training and development programmes. This is because the workforce can be groomed to fit in the organizational goals and objectives. 2. The need for consistency in quality in product and service delivery cannot be overstated. There should also be emphasis on exceptional customer service as this ensures that customers are lured back for more services. An organization must be extremely selective in the granting of franchises. This is to ensure that there is consistency of quality at all levels of production. 3. An organization must appreciate that change is definite and must therefore be ready to make take the necessary measures to ensure that the transition process is smooth. This will encourage enthusiastic performance as the workers are self actualized. 4. Leadership must be people oriented. Collegial leadership involves teamwork and partnership. This leads to a responsible and self-disciplined work force. 5. It is important to create a powerful marketing strategy that is innovative and original. This should include extensive global advertising campaigns. It also helps matters is a unique identity can be created. 6. It is important that the organization takes a lead in corporate social responsibility programmes as these gestures goes a long way into encouraging loyalty form the customers. It also gives the organization a side that appeals to humanity. 7. With proper strategic planning and management, an organization’s growth and diversification can be successful and lead to high profits. 8. There is need for diversity during the recruitment process. This is so because there is a lot of potential in tapping into creative and different business ideas that can be useful to the organization. CONCLUSION In conclusion, McDonald’s has come a long way into becoming the global success it is to day through deliberate efforts. The following are the major pointers: 1. McDonald’s believes in the holistic development of people and taping into their diversity, therefore setting them at a competitive advantage. 2. McDonald’s is committed to the leadership and talent management as a crucial to the organizational fabric. This entails the development of people and giving opportunities to people across the board. McDonald’s was palled 14th globally by Fortune Magazine’s “2007 List of Global Top Companies for Leaders”. 3. The McDonald’s marketing strategy has been successful at identifying the consumers’ needs, meeting this need and maintaining loyalty. 4. McDonald’s has accepted that change is an inevitable and expected process involving the formulation and implementation. Change is likely to be face with challenges and resistance and thus strategy should be used in the implementation of change. 5. The corporate culture of McDonald’s has been systematically integrated and clearly articulated in its internal and external business practices. 6. Leadership at McDonald’s plays an important role in the sustenance of competitive advantage over its competition. 7. Competitive advantage is achieved when value is attained through the collective action of the entire workforces, who are the main drivers of the design and are the executors of the organization’s objectives. 8. It can be said that McDonald’s rigid standards have failed to entirely capture the changes in consumer preferences, placing them at a disadvantaged position with their clients. BIBLIOGRAPHY. Adair John. Fundamentals of Leadership. Hampshire: Palgrave Macmillan, 2007. Branch Alice. Corporate Culture: Power to Greatness. Retrieved from the World Wide Web on the 30th January, 2008 at http://www.futuresense.com/index.php/organization_development/compensation/consulting/corporate_culture_1 Biz/ed. What’s wrong with McDonald’s? Retrieved from the World Wide Web on the 30th January, 2008 at http://www.bized.co.uk/compfact/mcdonalds/mc19.htm Clegg Stewart and Martin Kornberger. Managing and Organizations: An Introduction to Theory and Practice. London: Sage, 2005. Jones John, Aguirre DeAnne and Calderone Matthew. 10 Principles of Change Management. . Retrieved from the World Wide Web on the 30th January, 2008 at http://www.strategy-business.com/resilience/rr00006?pg=all Poll Michael. Revitalize Your Organization by Changing it. Retrieved from the World Wide Web on the 30th January, 2008 at http://www.reslife.net/html/tools_1000a.html Ritzer George. The McDonaldization of Society. Los Angeles: Pine Forge Press, 1995. Vroom Victor and Jago Arthur. The New Leadership: Managing Participation in Organizations. New Jersey: Prentice Hall, 1988. Read More