Executive Summary
The key to excellent business performance lies in the well being of an organization’s human resource component. McDonald’s, one of the leading retail fast food chains in the world promotes its employees welfare by providing numerous benefit packages that aim at protecting the employee’s health, social welfare, and financial security.
The corporation which was founded by Ray Kroc in the mid 20th century has managed to continuously deliver exceptional growth over the years despite the challenges facing the fast food industry in the modern economy.
This outstanding performance can be attributed to the company’s improved customer service and extensive marketing which saw a 3.8% sales increment in 2009.
To further improve its performance in the coming years, McDonald’s should focus more on employee’s welfare by providing a benefit package that motivates the existing pool of experienced labor and discourages high rates of employee turn over.
Currently, McDonald’s offers a wide range of benefits to its permanent employees. The corporation’s benefit program constitutes health and protection benefits which include medical plan, vision supplement, dental plan, spending accounts, short and long term disability, life and accidental death insurance, and travel accident insurance.
In addition, the company provides a wide range of enhancement benefits which include vacations and holidays, sabbatical program, short Fridays and leave of absence, adoption assistance, education assistance, free internet discount program, and international fitness club network among others.
Further, McDonald’s provides retirement benefits to its employees through profit sharing and savings, Mc$ave, McDirect shares, credit union, and financial planning services. However, McDonald’s offers a limited range of employee benefits to its part time employees working directly in the restaurants despite the risky nature of their work.
Further, the company’s plan to drop its employees’ health plan has faced a lot of criticisms in the media which may damage the image of the company among employees and consumers.
In response to this, McDonald should review its benefit plan scheme to incorporate an extensive benefit package for restaurant crew. It should also utilize its financial resources efficiently in order to obtain adequate revenue to maintain its employees’ health care plan and meet the required regulations.
In anticipation of revenue increment in the coming year, McDonald’s should invest more on its human resource by increasing the range of benefit coverage. However, if McDonald’s anticipates reduction in sales in the coming year, the company should focus more on maintaining health care and retirement benefits and restrict employee eligibility for recreational benefits.
Mc Donald’s Background Information
In the late 40s, two brothers, Dick and McDonald were seeking to improve performance in their little restaurant located in California. In response to this, the two brothers introduced self service, redid their menu, increased their production rates, and reduced their prices making them more competitive.
As a result, the company enjoyed remarkable success in the following years which prompted establishment of franchises to further increase its market. McDonald’s restaurant success story caught the interest of Ray Kroc, a 52 year old sales man who became their exclusive franchising agent for the entire United States.
In 1961, Kroc eventually acquired McDonald’s and this not only freed him from McDonald’s initial restrictive agreement but also enhanced his ability to pursue growth in McDonald’s and the fast food industry at large. McDonald’s continuous growth saw the take off of fast food industry in United States and later took the world by storm.
Ray Kroc emphasized on maintenance of cleanliness, quality standards, improved service, and value in all McDonald’s franchises which led to improvement in customer service in the rapidly growing fast food restaurant industry.
In 1965, McDonald’s issued its shares to the public which consequently transformed in into a public corporation and a year later, it was listed in the New York’s stock exchange.
The subsequent years were followed by increase in the number of restaurants and sales such that by 1970, the corporation had approximately 1600 restaurants located across all the states US and reported sales of $587 (McDonald’s 2011).
After achieving wide spread growth across United States, McDonald’s further sought to expand into international markets to further increase its market base. The first McDonald’s restaurant to be established outside US was in Canada after which the company ventured into the European, Australian market, and Asian Market.
Currently, McDonald’s is among the leading food service retailers in the fast food industry and has established more than thirty two thousand restaurants, which are spread across 117 countries (McDonald’s 2011).
With more than 75% of its restaurants being franchised, the company has provided opportunities for other businessmen to contribute to the success of the company and has provided employment to over 1.7 million people world wide (McDonald’s 2011).
McDonald’s continues to improve its performance by continuously improving customer service and promoting entrepreneurial spirit among the employees, suppliers, and operators (McDonald’s 2011).
In addition to its unique customer service, McDonald’s impressive performance in the industry can be attributed to personal and professional integrity whereby the company seeks employee trust by being dependable, ethical and truthful (McDonald’s 2011).
In addition, the company promotes good governance among its leaders and shows commitment to the same through annual reviews and monitoring which creates room for adjustment and continuous improvement.
According to McDonald’s (2011), good governance within the organization is the journey through which the company promotes integrity in its interaction with all the relevant stakeholders.
McDonald’s Employee Benefit
In the past, McDonald’s paid most of its employees the minimum wage. However, the current labor shortages have forced the price of wages to increase. Benefits such as health insurance and sick leaves were lacking in most franchises in US (Leidner 1993) and lack of tangible benefits was especially evident among restaurant crews most of whom are students and part time workers.
This resulted in very high employee turn over rates such that in 1984, the employee turn over rate average 153% and the rates increased in 1985 to 205% (Leidner, 2003). Today, Mc Donald’s strives to employ and maintain a competent pool of human resource capable of meeting and overcoming the challenges facing the fast food industry.
In order to achieve this, the company ensures that it awards flexible schedules and competitive payment packages for its part time employees working as restaurant crew. The restaurant crew benefits comprise of 24 hour nurse line access, free or discounted meals, and flexible hours.
In addition, these employees may be awarded other benefits eligible to permanent employees but these are subject to specific requirements and restrictions. McDonald’s benefit program attracts, retains, and engages competent personnel capable of promoting achievement of the company’s objectives.
The company’s employees at corporate, divisional, and regional offices are awarded benefits which are classified under four categories; health and protection, pay and rewards, investing in the future, and balancing between work and life (McDonald’s 2011).
Health and Protection
While many companies in the first food industry do not offer health coverage for their employees, McDonald’s provides medical plans for its workers at 10,500 US locations most of which are franchised (McDonald’s 2011).
The medical programs provide different options depending on employees needs. These plans incorporate a prescription drug program, preventive care, annual physical exams, child care and immunization as well as unlimited life time benefit maximum (McDonald’s 2011).
The cost of medical plan varies according to plan and number of people being covered. For mini-med plans, a single worker can pay up to $14 per week for an annual plan worth $ 2000 or $ 32 per week for coverage up to &10000 a year.
As of March 2009, the basic McCrew plan cost the employee less than $56 dollars a month, employees plus 1 at slightly over $117 per month, and the employee plus family at under $180 per month (McDonald’s 2011).
In the same time period, the mid 5 McCrew medical plan cost the employee $97 per month, employee plus 1 at $117 per month, while employee plus family cost under $320 per month (McDonald’s 2011).
Employees enrolled in either of McDonald’s medical plans may choose a vision supplement plan which covers a wide range of visual services such as eye glasses and contact lens replacement program. In addition, the company provides a dental plan which enables its employees to access dental services from the dentists of their choice.
McDonald’s provides flexible spending accounts for its employees which enable them to set aside pre tax income to pay for health care and day care expenses. Employees may set aside up to $5600 in health care spending account and up to $5000 in the day care spending account (McDonald’s 2011).
This enables the employees to comfortably cater for costs uncovered or partially covered by the medical plan. The company also offers short and long term disability coverage to its staff at no cost.
The short term disability plan provides benefits to employees who are incapable of working for ten consecutive days while the long term disability coverage covers 60% of employees base salary while he is disabled (McDonald’s 2011).
Employee and dependent life insurance is twice the employee’s base salary and is provided to McDonald’s employees at no cost. However, the employees can choose to acquire additional life insurance to cater for spouse and other dependents at his/her own cost.
The company also provides accidental and dismemberment insurance cover which benefits employees’ dependents upon accidental death of the employee and is equal to twice the employee’s base salary.
Further, the travel and business travel accident cover provides travel accident coverage of twice an employee’s base salary at no cost to employees. Depending on employee’s position, the coverage amounts to either $100000 or $200000 and incorporates travel accident coverage (McDonald’s 2011).
Retirement Benefit Plans
McDonald’s acknowledges the need for its employees to invest in the future in these economically challenging times. Consequently, the company offers savings and money management programs which assist employees in planning for the future.
The profit sharing and savings plan allows the employees to save up to 50% of their pay on tax deferred basis in 401(k) (McDonald’s 2011). The company contributes $3 for every $1 contributed by eligible employees of the first 1% of their contribution and a further $1 for each $1 contributed by employees on the next 4% of their contribution.
In addition, eligible employees are also entitled to a discretionary profit sharing match of 0% to 4% which is based on their contribution (McDonald’s 2011).
In addition, McDonald has established other investment packages such as Mc$ave which is a money market fund where employees invest part of their income in the prime reserve fund, McDirect shares which allows employees to buy customer shares and reinvest dividends in the company, Credit Union where McDonald’s employees enjoy services through corporate America Family Credit Union, and financial planning services which facilitates employees access to professional financial planning services through Ameriprise Financial or Merrill Lynch (McDonald’s 2011)
Balancing Employees Work and Life
In order to achieve maximum output from the human resource component, McDonald’s seeks to assist its employees in striking a balance between work and life outside the work place by providing a wide range of benefit packages designed to help employees maintain this balance.
The company offers paid vacations for corporate, region, division office and restaurant management employees (McDonald’s 2011). The vacation period depends on the duration in which an employee has worked for McDonald’s. Moreover, the company offers nine paid holidays to its full time eligible employees.
McDonald’s seeks to reduce the amount of time spent in the office by its employees by providing anniversary splash, sabbatical program, short Fridays, and leave absence (McDonald’s 2011).
In attempt to break the monotony associated with specialization and routine work, McDonald’s develops alternative work strategies where permanent employees have the option of flexible time or compressed work week while part time employees have the option of adopting the part time schedule or job sharing (McDonald’s 2011).
McDonald seeks to promote the social welfare in its human resource by offering child adoption assistance of up to $ 2500 per child to its employees. The company further seeks to promote improved child care among its employees by providing them with opportunities for discounted tuition.
For instance, McDonald’s has agreements with three national care providers; child time learning center, Knowledge learning center, and La Petite Academy which offer 10% discount on tuition for McDonald’s employees (McDonald’s 2011). In addition, eligible employees willing to further their studies may receive financial assistance from the company.
McDonald’s established the matching gift program which encourage employees to support NGOs, employee resource connection program which enables employees to manage their lives outside the office, international fitness club network where workers acquire fitness information and discounts on fitness equipment, auto and home insurance program which helps employees to purchase insurance through MetLife Auto and Home Insurance Program, and beyond work which is a free internet discount program for recreational products and services (McDonald’s 2011).
Recommendations
The fast food industry has gained world wide popularity due to its ability to provide quick service and inexpensive food to consumers. In the US market where McDonald’s has its most number of restaurants, the fast food industry has continued to grow with its market value being estimated at $ 51 billion in 2007 (Albala & Allen, 2007).
This growth can be attributed to emergence of a culture which favors longer work days and dual-income families. Despite the remarkable growth in the industry, McDonald has been a major target of the ongoing criticism regarding the quality of food served in fast food restaurants as well as its health care plan (Albala & Allen, 2007).
For instance, McDonald’s Bigger Big Mac was said to contain an entire day’s recommended allowance of saturated sales. In addition, the company’s plan to drop the health care plan for nearly 30,000 workers due to the new requirements of health overhaul has received a lot of criticism from the media, employees, and consumers (Adamy, 2010).
Health issues and numerous litigation law suits have significantly reduced sales revenue at McDonald’s. McDonald’s has been on the spotlight regarding its labor practices (Albala & Allen, 2007)
The restaurant crew is dominated by young teenagers, immigrants, elderly, and handicapped (Albala & Allen, 2007) and the working conditions are unsafe due to restaurants’ proximity to highways hence increased cases of armed robbery. Consequently, most workers in McDonald’s occupy their jobs for less than a year which leads to constant loss of experienced labor.
Despite the challenges facing the fast food industry, McDonald’s managed to deliver exceptional growth in 2009. Its sales revenue and market share continued to increase giving it a competitive edge over other fast food companies. McDonald’s should use its superior financial performance to improve working conditions in the company.
Employment on any level should be permanent and based on individual qualification upon which benefits such as those awarded to full time employees should be awarded to restaurant crew employees. Restaurant crew should be provided with health benefits and accidental insurance cover to protect them against the risks associated with their work.
McDonald should provide enhancement and investment benefits to part time workers in order to motivate them to work permanently for the company and to make them feel like they are part of McDonald’ team. The company should further seek to improve its image as an employer by ensuring provision of benefit plans to employees in the franchises.
Analysis of Benefit Package While Anticipating Revenue Increment and Revenue Reduction
If McDonald’s expects an increment in revenue in the next year, the company should invest heavily on employees by providing them with a wide range of benefit packages to further motivate them.
The company should increase employer contribution in the retirement benefit package and should introduce awards and recognition for exceptional performers. In addition, recreational benefits should be increased and the company should seek to contribute more to employees’ social welfare.
Further, McDonald’s should seek to meet the 2011 requirement by the department of health and human service which requires McDonald’s to spend 80-85% of its premiums on medical expenses rather than overhead expenses in its mini-med plan (Adamy, 2010).
If McDonald’s expects revenue reduction in the subsequent years, the company should seek to reduce its spending on employees benefits by reducing its contribution to recreational benefits package.
The company may discourage such benefits through restricting eligible members by demanding improvement in a performance for employee to be awarded holiday and vocational benefits.
McDonald’s may also increase employee contribution in the recreational benefits and drop some of the recreational benefits. Therefore, upon revenue reduction anticipation, the company should reduce the amount spent on employees’ benefits by the company but it should be careful not to send negative signals and discourage employees in McDonald’s.
Reference List
Adamy, J. (2010). Federal Agency Flexible on Mcdonald’s Plan. Retrieved from https://www.wsj.com/articles/SB10001424052748704789404575524502131067836
Albala, K., & Allen, J. G. (2007). The Business of Food: Encyclopedia of Food and Drink Industries. Westport: Greenwood Publishing Group.
Leidner, R. (1993). Fast Food, Fast Talk: Service Work and Routinization of Everyday Life. London: University of California Press.
McDonald’s (2011). Company’s official website, McDonald’s corporation. Retrieved from https://www.mcdonalds.com/us/en-us.html