Investigating the effectiveness of human resource management Essay

A) Terms of Reference On the 1st of October 2003, the management department requested a report written investigating the effectiveness of human resource management at McDonald’s Restaurants Limited, and how this operation helps the organisation achieve their strategic aims. The report was to be submitted on the 9th December 2003. B) Executive summary McDonalds has various business strategies being introduced over the next two years. The report investigates how the Human Resource Management (HRM) practice enables the strategic plans to be achieved. McDonalds are expanding the number of restaurants in India, while closing selected stores in the UK, plans to change packaging, deco and uniform will affect the culture of the organisation. McDonalds are also diversifying, ‘McKids’, brand of clothing, and toys. It is the HRM policies that will ensure a smooth change over. The major concern is the cultural change; HRM must ensure that staff are involved in the changes allowing them to ‘buy’ into the plans. The extension plans should run efficiently as all the policies and legislation should already be in place. The investment in ‘McKids’ could prove difficult for HRM, because they are dealing with a separate market. The current polices in place cover a wide range of issues, which are sufficient for McDonalds strategic plans. C) Introduction McDonald’s fast food chain began in America in 1954, developing into a recognised worldwide establishment. McDonalds now has over â€Å"30,000 restaurants serving more than 46 million people each in 121 countries and territories† 1. The first British restaurant opened in 1973, expanding to 1,184 restaurants; however â€Å"80% of McDonalds restaurants are operated by independent franchisees†2. D) Methodology The information was gathered using â€Å"textbooks† from the library, the Internet, and a â€Å"student pack† from McDonalds Limited. E) Their present and anticipated strategy In order for a company to reach its goals, aims and objectives, a strategic plan should be implemented, allowing the company to establish ‘whom they are’, ‘their aims and objectives’, ‘future position’ and ‘how they are going to get there’. Strategic planning also confirms the attainment of their goals. Lynch (2002) says, â€Å"Strategy can be described as the identification of the purpose of the organisation and the plans and actions to achieve that purpose†3. While Kenneth Andrews believes that strategic planning is † a pattern of decisions†¦which represents the unity, coherence and internal consistency of a company’s strategic decisions that position a company in its environment and to give the firm its identity, its power to mobilise its strengths, and in its likelihood of success in the market place†4. Alfred D Chandler (1962) states, â€Å"Strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals†5. Although varying, all are concerned with the company’s planning, objectives and goals. Strategic planning is organised by top management; the plan represents directions the company needs to take at different times. There are five steps in strategic planning; firstly, identify the business and develop a mission statement, showing the company’s overall aims and objectives. This statement is used to motivate employees, customers and other interested parties. McDonald’s mission statement is â€Å"McDonald’s vision is to be the UK’s best quick service restaurant experience†6. Secondly, translate the mission statement into strategic goals; thirdly, create an action plan to attain those goals. Fourthly, introduce the strategic planning, and finally evaluate the results to determine whether changes are required. McDonald’s currently holds the largest market share of restaurants chains, at â€Å"7.3%†7; the nearest competitor is Burger King holding â€Å"3%†8 of the market. UK sales have risen dramatically over the last 27 years, and in 2001 sales reached in â€Å"excess of à ¯Ã‚ ¿Ã‚ ½1.6 billion†9, however according to an Evening Standard report â€Å"pre tax profits dropped by 20% last year†10. McDonald’s intends introducing many new strategies, over the next two years. McDonalds, Chief Marketing Officer, â€Å"outlined a number of strategic global plans for McDonald’s† †¦Ã¢â‚¬ ¦ they â€Å"intend to roll out a healthy lifestyle programme called Go Active†, â€Å"Make greater use of Ronald McDonald the face of the brand†, and introduce â€Å"global licensing programme called McKids, initially applied to clothing and Toys†11. In a separate interview he reports of numerous plans being introduced, â€Å"A worldwide advertising campaign†, â€Å"launch of global packaging concept†, â€Å"ongoing review of staff training, new products, and uniforms and the introduction of a loyalty scheme†, and to become â€Å"a leader in healthy eating†12. McDonald’s are installing â€Å"Wi-fi nodes†13 in many restaurants, allowing customers’ access to the Internet. Expansion plans are also intended f or India, where â€Å"McDonald’s plans to double its outlets over the next three years†14 F) Its current HRM practices HRM deals with the ‘Human’ aspect of a company, such as recruitment, selection, training, provisions of contracts, equal opportunities, dismissals and redundancy, welfare and health and safety. HRM is responsible for issues affecting employees and their relationship with the company. HRM developed from personnel management in the 80’s. The concept of management practice dates back to the 19th century, when some employers became concerned about employees working conditions. Rowntree’s appointed the first welfare worker, in 1896, to â€Å"ensure the well being of women and children in the workforce and to watch over their behaviour†15. Welfare work is still an aspect of HRM, although not so necessary within today’s society. It is these early approaches of Rowntrees, Cadburys and Robert Owen, which clearly show the development of HRM. HRM is defined as â€Å"a rational approach to the effective recruitment, retention, and deployment of people within an organisation, including, when necessary, arrangements for dismissing staff†16. Within the UK, McDonald’s employs â€Å"47,735 people†17. McDonalds expects the highest standards of quality, service and cleanliness towards the customers from its employees; they also require staff to have a positive attitude towards themselves, customers and other staff members. McDonalds employs local people, and ensures that employees are selected, trained, promoted and treated on the basis of their skills. Their policy states that McDonald’s will provide career opportunities, challenging and rewarding work, providing pay on performance. There are two levels of recruitment within the company, management and hourly paid staff. McDonalds offers staff flexible working hours suiting individual preferences. The hourly rate for staff exceeds the national minimum wage, salaried management earning between à ¯Ã‚ ¿Ã‚ ½12000 and à ¯Ã‚ ¿Ã‚ ½64000. Staff are entitled to various benefits, health care, pension, company car, bonus scheme, sick pay and stock options. McDonalds supports the ‘Opportunity Now’ Campaign, increasing the number of women they employ, â€Å"43.30%†18 of their workforce is female. The company now allows qualifying staff up to eight weeks paid maternity or paternity leave. The company works closely with various disabled organisations, and employs where possible disabled people. The diversity development within the company insures the working environment is free from discrimination and harassment and job applicants and employees, will not be treated less favourably on the grounds of marital status, colour, age, gender, race nationality, ethnic origin or disability. McDonalds believes that â€Å"training is the foundation of their success and vital for improving the business†19. Hourly paid staff receive on the job training, supplemented by computer based and other training methods, Management staff receive training at one of the company’s six British training centres. McDonalds â€Å"restaurants work to the standards which meet those required by legislation†20, they also have various policies covering food quality and nutrition, also working closely with suppliers ensuring animal welfare. The company has a number of franchises, which means that although McDonalds controls the majority of establishments, legislations, laws and policies are the responsibility of the franchise operator. G) How the HRM practices enables the business strategies to be achieved. Many policies are in place, covering a wide range of topics; enabling HRM to support the company in achieving their overall strategic plans. McDonalds operates in 121 countries, HRM must be aware of the different employment and contract laws, religion, culture, currency differences, and labour costs throughout these countries. The extension plans for India should not affect the company severely as the operation guidelines and policies already exist. Within the UK and USA the company has Universities to train their management, and other staff are trained â€Å"in-house†. When they expanded to India, lack of training facilities; meant staff were brought in from other countries to employ and train staff. This could have caused problems; outsiders may have little or no knowledge of the country, laws or societal beliefs. As the company expands into ‘new’ countries they need to consider other issues such as uniform and eating habits, certain religions do not eat certain products, other cultures impose dress code, all these issues need to be considered by the HRM to ensure the placement of correct policies. Due to falling sales there are plans to change the image and culture of the company; introducing new decor, uniforms and packaging. Unless HRM have involved the staff in the planning stage of these changes, they will encounter great difficulty in obtaining cooperation; staff need to ‘buy’ in to changes. Although, the company does have training facilities around the country educating staff on theses changes. Customers may also object to this image change. The introduction of healthy foods may cause problems, staff will need to be re-trained, which may cause staff shortages, and increase training costs. Some of the stores situated in city centres are installing facilities to allow the customer connection to the Internet. The HRM will have to implant policies to ensure correct usage of the Internet; and take steps to ensure that ‘inappropriate’ websites are unavailable. McDonalds has a high ‘turnover’ of staff, suggesting the recruitment strategy is inefficient. Incorrect job advertisement possibly leads to the submission of applications by the wrong type of person. H) How the HRM practice reflects the theories of strategic HRM. There have been many investigations into the issues surrounding HRM, leading to many theories. According to the Harvard Model, â€Å"HRM polices need to derive from critical analysis of: the demands of the various stakeholders in a business and a number of situational factors†21. The belief is that because organisations are owned and operated by various people (stakeholders), the management’s task is to balance the returns to everyone involved. The Harvard Model is seen as the ‘soft’ approach to HRM, employees being stakeholders of the company. This model has four areas to address, human resource flow, reward system, employee influences, and work systems, there are also situational factors such as influence of trade unions, laws, and labour market, which are also relevant to the theory. The theory believes that the effectiveness of the HRM is related to the four ‘C’s’, â€Å"Commitment, â€Å"Competence, Congruence and Cost-effectiveness,†22. The Harvard theory is that employees are an asset rather than a cost, and investment in these employees provides long-term benefits to the company, this theory is similar to McGregor’s, theory ‘Y’ approach. There are a number of concerns with the approach, â€Å"how to measure the variables, conflicts between cost-effectiveness and congruence, huge variety of variables potentially relevant to any given HRM situation, and sometimes a technology or set of working conditions make it impossible to increase some levels of ‘C’s'†23. The alternative approach known as the Michigan model, being the hard approach, believes that employees should be treated like any other resources, â€Å"obtained cheaply, used sparingly and developed and exploited fully†24. There are common features in both these models, both mix the HR policies and business plan, line managers are responsible for people; both are unitarist, and stress commitment to the organisation. McDonalds has a mixture of both the hard and soft approach, store managers being responsible for the day-to-day running as in the soft approach, and training provisions show that staff are an asset and investment in them should provide long-term investment for the company. The organisation also has similarities to the hard approach, with staff receiving low wages (obtained cheaply), and restaurants are often run with minimum of staff (exploiting). Guests (1987) theory, is also included in McDonalds policy, Guest believes the organisation should, â€Å"aim for high level of commitment from staff, obtain high quality output, continually improve standards, flexibility from staff, no fixed job definitions, working practices and conditions and seek strategic integration through HR policies†25. McDonalds are â€Å"Continually improving standards† and â€Å"offer flexible working times for staff†26. These prescriptive approaches also believe that line managers should accept HRM policies and integrate them into strategic plans, allowing staff to change roles within the organisation. Known as culture, organisations have different values, ideas and beliefs that affect the way they operate. According to Handy, there are four types of culture; Power, Role, Task and Person. McDonald’s culture combines two of these, top management, reflects ‘power’ culture, making the overall decisions, allowing rapid response to decisions. Although there are similarities to the ‘task’ culture, the overall aim of the organisation is task orientated, focussing on team culture, and strong communication between all levels of staff. The contingency approach suggests that â€Å"different problems and situations require different solutions†27, both internal and external influences should ‘fit’ together making a logical solution. McDonalds has integrated this approach, by considering the environment with their packaging and adjusting menus to suit different cultures. This approach also influences staff promotions that the company offers, staff are offered appraisals, a means of increasing their job opportunities. Barney (1991) suggests that there is a â€Å"resource based model†; physical, financial, human and organisational resources are the main link between internal resources and the company’s performance. Suggesting that it is not enough to have HR in line with strategy, and developing people will raise their commitment to the company, and provide an advantage over competitors. Although McDonalds do invest in people â€Å"66.26%†28 are under the age of 20, suggesting the majority of these are temporary, so will not progress through the company, leaving training costs continually rising. Gould’s ‘Model of Morale’, should be considered, suggesting that high staff turnover, sickness, absences and low performance within the company, is caused by low staff motivation, job satisfaction and group cohesion. These problem stem from inadequate internal factors such as â€Å"perception of leaders, matching needs to the job and identification with organisational goals†29, and external factors such as â€Å"status, age, pay, conditions, job market policies, training, equipment and economic state†30. Hofstede undertook worldwide research into culture and concluded that different countries mainly have four different cultures, â€Å"individualism, power distance, uncertainty avoidance, and masculinity. Depending on how the country viewed these areas, Hofstede categorised the countries further, pyramid of people, well-oiled machines, village market and family. As McDonald’s operates in 121 countries; consideration for this theory may allow a better understanding of the needs and values of staff. I) Recommendations Suggested improvements: * Reducing staff turn over * Encourage long-term employment (minimising training costs – maximising staff) * Create a culture that people wish to work in * Promote training allowing staff progression to higher job opportunities * Increase wages    Bibliography Class Notes. McDonalds Fact File 2002. (Available from McDonalds) Http://www.mind-advertising.com/sectors/sector_restaurants.htm (Accessed 18/10/2003). Prynn, Jonathan. Evening Standard UK, 3 May 2003. Kleinman, Mark. 2003 ‘Mcdonald’s Media gets global review’. Marketing Magazine, 11 September, p.1. Kleinman, Mark. 2003 ‘McDonald’s gets back on track’. Marketing Magazine, 11 September, p.15. Burns, Stuart I. 9 October 2003. â€Å"The Internet @ McDonald†, [online] Available from URL Http://www.bbc.co.uk/dns/collective/A1338392 (Accessed 28/10/03). â€Å"McDonald plans Indian expansion†, [online] Available from URL Http://www.bbc.co.uk/1/hi/business/2924185.stm (Accessed 18/10/2003). Foot, M, Hook, Caroline. 1999. Introducing Human Resource Management. 2nd Ed. Addison Wesley Longman, London Hannagan Tim, 1995, ‘Management Concepts & Practices’, Pitman Publishing, London. Graham, H T. Bennett R. 1998 ‘Human Resource Management’, 9th ED. Financial Times, Pitman Publishing, London. Cole, G A. 2002. Management Theory and Practice. 5th Ed. Continuum, London. 1 McDonalds Fact File 2002 2 McDonalds Fact File 2002 3 Wang, Y. 2003. â€Å"Human Resource Management Strategies†, â€Å"Week 3†, (Classnotes) Lampeter University. 4 Foot, M, Hook, Caroline. 1999. â€Å"Introducing Human Resource Management†. 2nd Ed. Addison Wesley Longman, London. 5 Wang, Y. 2003. â€Å"Human Resource Management Strategies†, â€Å"Week 3†, (Classnotes) Lampeter University. 6 McDonalds Fact File 2002. 7 Http://www.mind-advertising.com/sectors/sector_restaurants.htm (Accessed 18/10/2003). 8 Http://www.mind-advertising.com/sectors/sector_restaurants.htm (Accessed 18/10/2003). 9 McDonalds Fact File 2002. 10 Prynn, Jonathan. Evening Standard UK, 3 May 2003. 11 Kleinman, Mark. 2003 ‘Mcdonald’s Media gets global review’. Marketing Magazine, 11 September, p.1. 12 Kleinman, Mark. 2003 ‘McDonald’s gets back on track’. Marketing Magazine, 11 September, p.15. 13 Burns, Stuart I. 9 October 2003. â€Å"The Internet @ McDonald†, [online] Available from URL Http://www.bbc.co.uk/dns/collective/A1338392 (Accessed 28/10/03). 14 â€Å"McDonald plans Indian expansion†, [online] Available from URL Http://www.bbc.co.uk/1/hi/business/2924185.stm (Accessed 18/10/2003). 15 Foot, M, Hook, Caroline. 1999. Introducing Human Resource Management. 2nd Ed. Addison Wesley Longman, London 16 Cole, G A. 2002. Management Theory and Practice. 5th Ed. Continuum, London. 17 McDonlads Fact File 2002 18 McDonalds Fact File 2002 19 McDonalds Fact File 2002 20 McDonalds Fact file 2002 21 Hannagan Tim, 1995, ‘Management concepts & practices’, Pitman Publishing, London. 22 Graham, H T. Bennett R. ‘Human Resource Management’ 1998, 9th ED. Financial Times. Pitman Publishing, London. 23 Hannagan Tim, 1995, ‘Management concepts & practices’, Pitman Publishing, London. 24 Graham, H T. Bennett R. ‘Human Resource Management’ 1998, 9th ED. Financial Times. Pitman Publishing, London. 25 Foot, M, Hook, Caroline. 1999. Introducing Human Resource Management. 2nd Ed. Addison Wesley Longman, London 26 McDonalds Fact File 2002 27 Hannagan Tim, 1995, ‘Management concepts & practices’, Pitman Publishing, London. 28 McDonalds Fact File 2002 29 Wang, Y. 2003. â€Å"Human Resource Management and Culture†, â€Å"Week 6†, (Classnotes) Lampeter University. 30 Wang, Y. 2003. â€Å"Human Resource Management and Culture†, â€Å"Week 6†, (Classnotes) Lampeter University.