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Employee Recognition in McDonald’s

Discuss about the Employee Recognition Culture in McDonald’s.
 

Organisations typically rely on a variety of resources and organisational inputs in order to realize their objectives. Such resources include physical capital, financial capital and a variety of inputs. Yet, regardless of the nature of an organisation or its industry of operation, the human resource component is one of the most widespread inputs. This is the first reason why the human resource component is so unique. The second reason for the uniqueness of the human resource component is its ability to significantly differentiate one organisation from another, in comparison to other organisational resources. The complex interplay of these two factors, that is, the ability of the human resource component to act as a source of competitive advantage despite its prevalence makes human resource management one of the most significant activities. This paper considers human resource management through a case study of McDonald’s Australia.

 Human resource management plays an important role in supporting the objectives of an organisation. This is through the different activities that the human resource department performs. One of these functions is recruitment and selection of employees. The human resource department is responsible for sourcing the organisation’s labour, thereby allowing the organisation to meet its objectives. The human resource department also caters for training needs of employees. An even more important function of the human resource department, particularly with regard to the current case study is its role in influencing the attitudes of employees and the overall organisational culture. Rugman & Collinson (2012) indicate that human resource managers usually utilize culture as a tool to foster certain behaviours like innovation, openness and dynamism within their organisations. Consequently, corporate culture is an important tool for human resource managers. In the case of McDonald’s, it has developed a culture of employee recognition. The entrenchment of recognition and its development into a cultural component has had significant positive impacts in supporting the organisation’s future leaders program.

Employee recognition is an important organisational practice, which has the capacity to support the organisations goals particularly with regard to its human resource component. This is because employee recognition encourages employees to work harder, thereby leading to improved performance (Markos & Sridevi, 2010). One the organisational goals of McDonald’s is to develop future leaders. Employee recognition supports this goal by allowing the organisation to determine those individuals who have the greatest capacity to be future leaders. This is because employee recognition encourages individuals to offer their best input, as they seek to receive the benefits of recognition.

Promoting Employee Retention in McDonald’s


Another way in which recognition contributes to McDonald’s attainment of its organisational goals, particularly its future leaders program, is by promoting employee retention. McDonald’s indicates that a majority of its employees are young individuals aged between 14 and 18 years (70 %). If these individuals are to become future leaders within the organisation, then they must stay at the company for a long period. Indeed, McDonald’s position is that it yearns to bring people through the ranks of the company because then, they have a better understanding of the business’s focus and purpose. This makes employee retention an important imperative. According to Hausknecht, Rodda, & Howard (2009), employee retention is important in organisations as it facilitates the retention of talent. Going by McDonald’s assertions, the company has, in the past, been able to retain employees and meet the goals of its future leaders program. The case study file indicates that in the past 30 years, three of the managing directors of the company originated as 15-year-old individuals working in the organisation.

From a review of the case study, it would appear that McDonald’s Australia recognizes the power of employee recognition. The company uses recognition as a tool to drive the performance of its employees. The use of employee recognition in this manner receives strong support from the social exchange theory (Saks, 2006). This theory portends that obligations are the culmination of sustained interactions between individuals in a reciprocal state of interdependence. In accordance with the theory, individuals’ interactions are governed by a set of rules of exchange, whereby each party responds to the actions of the other. In the case of McDonald’s, the organisational is in reciprocal interdependence with its employees. In order to get the best from its employees, McDonald’s uses recognition as an action to instigate a response from employees, and as a tool to reciprocate. This is in addition to other tools such as pay and benefits. In response, McDonald’s employees provide optimal performance, to fulfil their obligations within a social exchange perspective. Consequently, recognition is a useful tool that allows McDonald’s to realize its organisational obligations.

Employee retention is an important organisational imperative, which enables organisations to realize their long-term goals. As noted above, this process facilitates employee retention. There is a growing need for employee retention, particularly with prevailing trends of increased shortage of individuals with high skill levels (Allen, 2008). This need is further exacerbated by organisational trends of a convergence of organisational inputs such as technological resources. The human resource component is important as a source of competitive advantage for two reasons. First, from a cultural perspective, the human resource component typically has an ability to differentiate one organisation from another. This is because culture is an aggregate of the interactions of the various components comprising it  (Ismat & Bashir, 2011). Different components culminate in different inputs, making each organisational culture unique from the other.

Social Exchange Theory and Employee Recognition

A second way in which the human resource contributes to competitive advantage is through its qualities. Resources that offer a competitive advantage usually have four characteristics, the most important one being inimitability (Bingham & Eisenhardt, 2008). The other three are rarity, strategic value, and a quality of being “imperfectly substitutable” (Bingham & Eisenhardt., 2008). Of all other organisational resources, the human resource stands out as the most difficult to imitate. This is because although it can be imitated to a certain extent, it is impossible to duplicate the intrinsic business knowledge (Bobb & Harris, 2011). On their part, Tarique and Schuler (2010) argue that only those organisations that are able to obtain the right configuration of human resources will be able to obtain a competitive advantage within the global perspective.


An important imperative that has been pointed out is that organisations need to retain talent in their organisations. Talent management is one of the avenues through which successful organisations are able to harness the competitive advantage offered by human resources. According to Lewis and Heckman (2006), there is no concise definition of talent management in the literature. The approach, however, is embedded in the above view of the human resource component as a source of component advantage. Consequently, under talent management, human resource managers seek to identify those individuals with the greatest capacity to occupy vital positions in an organisation (Hughes & Rog, 2008). The management then engages in activities, which are aimed at preventing these individuals from leaving the organisation. The advantage of talent management as opposed to employee retention is that it allows the organisation to focus its energy and resources on those individuals who offer it the greatest value.

An implicit part of talent management is a focus on leadership. Tarique and Schuler (2010) indicate that leadership is an integral component of the cultures of organisations that are ultimately successful in talent management. Indeed, this can be seen through the case study of McDonald’s. Its recognition culture is built around its future leaders program. This is consistent with the argument in the literature. Secondly, the company also involves its senior leaders in its leadership endeavours, as depicted by the case of Frank McManus. This senior vice president and director for people resources in the firm indicates that about 30 to 40% of his time is spent on executive development and talent management. Again, this is also consistent with the assertion in the literature. Evidently, McDonald engages in astute talent management practices, which culminate in the retention of its top talents, and the success of its future leaders program.

Employee Retention as an Organisational Imperative

Apart from employee recognition, McDonald’s is also able to drive employee retention through employee satisfaction. Recognition in itself results in the satisfaction of employees, through a satisfaction of their higher-level needs. To understand this outcome better, one can consider some motivational theories such as Maslow’s hierarchy of needs. Under this framework, recognition fulfils the self-esteem needs of employees. At this level of need, individuals normally want to attain a high level of respect from others (Brad Shuck, Rocco, & Albornoz, 2011). When they are recognized, feelings of respect and esteem proceed, hence raising the job satisfaction of employees. Brad Shuck, Rocco, and Albornoz (2011) go on to highlight the motivator-hygiene theory by Herzberg, under which recognition is categorized as a motivator. Such factors encourage an individual to engage in their work. It is worthwhile to not that the absence of these factors does not lead to dissatisfaction. Based on motivational theories, therefore, McDonald’s recognition culture motivates employees to perform their duties, as they seek to satisfy their self-esteem needs. Ultimately, McDonald’s also offers its employees an opportunity to satisfy their highest level of need, the self-actualization need. At this level, individuals usually seek to become everything that they can (Brad Shuck, Rocco, & Albornoz, 2011). McDonald’s facilitation of the attainment of this need is through the outstanding achievers award, which is a corporate level recognition scheme. This award has the ability to help employees achieve all that they can while working as McDonald’s employees. In this way, McDonald’s is able to keep employees engaged, a phenomenon that will be discussed later.

While considering motivational theories, it is worthwhile to indicate that other factors of McDonald’s human resource management play an important role in supporting the recognition culture. One such factor is McDonald’s pay practices. McDonald’s has an elaborate pay structure, which seeks to involve employees to the greatest extent possible. Under its compensation policy, McDonald’s bases its pay structure on an objective framework. Moreover, the organisation strives to explain pay decisions to its employees on a sound basis, and to ensure that individuals have an exquisite understanding of their pay packages. Ultimately, the organisation also ensures that there is equity between roles. Factors such as pay are considered dissatisfiers under the two-factor theory, meaning that they have the capacity to result in employee dissatisfaction (Griffin, Phillips, & Gully, 2016). Employee dissatisfaction results in adverse outcomes such as lowered productivity and ultimately, a decision by employees to leave an organisation (Gregory, 2011). Under the Maslow hierarchy, pay falls at the lowest category of need, the physiological needs.

Human Resources as a Competitive Advantage

The Maslow hierarchy provides an important framework for organisations seeking to keep their employees satisfied and hence retain them. While applying the hierarchy, it is important to keep in mind the nature of the pyramid whereby needs diminish in intensity as they are satisfied, with the next level of need then predominating (Griffin, Phillips, & Gully, 2016). When individuals are unable to satisfy the needs at their particular level, they become vulnerable and start to seek an alternative approach to satisfy these needs. Consequently, it is important for organisations to evaluate their employees continuously, to determine their predominant level of need. As noted, employee dissatisfaction can lead to disengagement. In order to keep employees satisfied, and therefore engaged, organisations should strive to motivate them. The report by Penna (2007) develops a framework for employee engagement that is closely linked to Maslow’s hierarchy. In fact, this model is in itself a hierarchy, which they refer to as the hierarchy of engagement. The hierarchy has five levels akin to those of Maslow’s hierarchy. This framework is presented below.


The hierarchy of engagement provides a new way for organisations to understand and meet the needs of their employees and avoid turnover. Based on this pyramid, McDonald’s appears to be performing well at each level. Its pay and benefits policy are elaborate and well explained, and hence contribute to employee satisfaction. At the next level is learning and development. McDonald’s has an extensive training program, with an annual training budget in excess of $40 million. It therefore satisfies this second level as well. Opportunity, promotion and development needs are also catered for in the organisation. Employees at McDonald’s are able to aspire towards top positions, given the examples of individuals who have ascended the ranks of the organisation to get to the highest level. Leadership is a key tenet of McDonald’s, a feature that has already been discussed. Finally, McDonald’s also provides avenue for value and meaning through its recognition scheme. This illustrates a high level of engagement in McDonald’s. Indeed, the case study indicates that employee surveys have returned favourable feedback on employee engagement in the company.

The use of recognition by McDonald’s provides an avenue through which the organisation is able to retain its employees. This approach can be applied across different types of organisations to yield the same results. This includes non-profit organisations. Non-profit organisations can apply recognition as an avenue towards the retention of volunteers, this would be important, considering that like business organisations; non-profits also have to contend with a shortage of personnel. The approach, however, cannot be applied ubiquitously. Instead, it would depend on the nature of the non-profit and the nature of the volunteer. For example, in a review of motivational methods for baby boomer volunteers, Culp (2009) indicates that this class of volunteers are motivated by incentives rather than recognition. Consequently, the use of recognition schemes would be inadequate for such volunteers. In a different study, Warner, Newland, & Green (2011), report the indifference of noncontinuous sport volunteers to recognition. Nonethelesss, all other classes of volunteers reported that recognition was an important aspect.

Talent Management and Leadership

It appears that unlike business organizations where talent management techniques can be applied nearly universally, non-profit institutions require an audit of the individual non-profit as well as the volunteering individuals. Such an audit would allow non-profits to understand the key motivations behind the voluntaryism of different volunteers. Importantly, Shye (2010) reports that individuals seeking volunteering opportunities may be driven by altruistic or egotistical motivations. When a non-profit understands the motives behind a volunteer’s motivation, it is in a better position to meet the expectations of such a volunteer, thus leading to volunteer satisfaction. In the long term, this enhances the capacity of such an institution to retain such volunteers. Such retention is ultimately important for non-profits due to the significant costs of volunteer training, accompanied by the concomitant limitation of resources at the disposal of such institutions.

Conclusion

Employee recognition is an important practice that enhances the ability of a company to retain its employees. The importance of employee retention is underscored by a growing scarcity in the availability of skilled individuals. Successful organizations are therefore those that are able to foster cultures that promote retention, by catering for the various needs of individuals. Increasingly, companies need to focus on talent management, which requires an investment in leadership. When organizations engage in these practices, they are better positioned to retain their employees and achieve their organizational objectives. The recognition approach, however, cannot be applied universally across non-profits, due to differences in the nature of non-profits and volunteer motivations.

References

Allen, D. G. (2008). Retaining talent: A guide to analyzing and managing employee turnover. SHRM Foundation Effective Practice Guidelines Series, 1-43.

Bingham, C. B., & Eisenhardt., K. M. (2008). Position, leverage and opportunity: a typology of strategic logics linking resources with competitive advantage. Managerial and Decision Economics, 29(2-3), 241-256.

Bobb, L. M., & Harris, P. (2011, August). Information Technology and Information Systems: Its use as a Competitive and Strategic Weapon. Journal of Global Business Management, 7(2), 1-7.

Brad Shuck, M., Rocco, T. S., & Albornoz, C. A. (2011). Exploring employee engagement from the employee perspective: Implications for HRD. Journal of European Industrial Training, 35(4), 300-325.

Gregory, K. (2011). The importance of employee satisfaction. The Journal of the Division of Business & Information Management, 29-37.

Griffin, R. W., Phillips, J. M., & Gully, S. M. (2016). Organizational Behavior: Managing People and Organizations. Boston, MA: Cengage Learning.

Hausknecht, J. P., Rodda, J., & Howard, M. J. (2009). Targeted employee retention: Performance?based and job?related differences in reported reasons for staying. Human Resource Management, 48(2), 269-288.

Hughes, C. J., & Rog, E. (2008). Talent management. International Journal of Contemporary Hospitality Management, 20(7), 743 - 757.

Ismat, S., & Bashir, I. (2011). Determinants of Culture: An Analytical Study of Business Organizations Working in Faisalabad, Pakistan. Asian Social Science, 7(6), 177-183.

Lewis, R. E., & Heckman, R. J. (2006). Talent management: A critical review. Human resource management review, 16(2), 139-154. R

Markos, S., & Sridevi, M. S. (2010). Employee engagement: The key to improving performance. International Journal of Business and Management, 5(12), 89.

Penna. (2007). Meaning At Work. PENNA.

Rugman, A. M., & Collinson, S. (2012). International Business (6th ed.). Harlow England: Palgrave.

Shye, S. (2010). The motivation to volunteer: A systemic quality of life theory. Social Indicators Research, 98(2), 183-200.

Tarique, I., & Schuler, R. S. (2010). Global talent management: Literature review, integrative framework, and suggestions for further research. Journal of world business, 45(2), 122-133.

Warner, S., Newland, B. L., & Green, B. C. (2011). More than motivation: Reconsidering volunteer management tools. Journal of Sport Management, 25(5), 391-407.

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