Analysis of Employee Turnover at McDonalds

1.0 Introduction

In a perfect world it would be best for any organization to have employees who love their jobs, enjoy working with their co-workers, are happy with the salary, willing to work hard for their managers and never leave the organization. However, in the real world employees do leave either because they want more money, hate the work environment, hate their co-workers, want a change or because their spouse gets a dream job in another state (Sharma, 2008). Many organizations nowadays face ‘high attrition rate’ or turnover mainly due to a highly competitive market. Staff attrition or turnover has been cited as one of the primary concerns facing organizations and businesses in any industry. Staff attrition or turnover relates to those who leave an organization due to resignation, termination and retirement. According to the latest CIPD survey (CIPD, 2007), the annual employee turnover rate in the UK was at 18.1 percent. The report also found that the annual turnover levels differed considerably from one industry to the other industry, with the highest average rates being 22.6 percent and these were found in private sector organizations and, within this sector, the hotels, catering and leisure industry reports rates of turnover at 10 percent higher than the average for the sector of 32.6 percent. High turnover rates creates particular pressures for the HR department, which is primarily responsible for replacing those who leave, but also for line managers who face disruption to production and service standards. This is the necessary result of having to induct new employees, who are usually less experienced and productive compared to those whom they replace. It takes some time for the new recruits to perform at their optimum levels. This results in the organization failing to meet its objectives, reduction in productivity and higher costs. It is therefore important for HR managers to measure staff attrition, monitor its impact and take appropriate action to minimize its effects(Banfield&Kay,2008).

Globalization has led to the rapid expansion of multinational fast food companies e.g. McDonalds and KFC. Even at this present time of global economic recession, these fast food companies are growing and generating profits. The customers, who were eating out at a high profile restaurant, are now looking for something reasonable and affordable. McDonalds is offering good hygienic food at a reasonable price to these customers and are benefitting from this global economic downturn. This has lead to a fierce competition between these fast food companies and each of them is trying to give the best quality product and service to its customers. In a company like McDonalds, giving a quick and high quality customer service is essential for its success. However many of the McDonalds restaurants are experiencing high employee turnover which could affect the overall productivity and profitability of the respective McDonalds restaurants. One of the senior executives at McDonalds put the chain’s annual employee turnover at nearly 44 percent. According to the chief human resource officer of McDonald’s Mr. Floersch the managerial turnover was at 20% globally while that of the crew members averaged between 80 percent and 90 percent. This however, varied from country to country (The Wall Street Journal, 2008). In this research, the researcher would like to investigate the main reasons for experienced employees leaving the organization i.e. McDonald’s and what sort of challenges the managers face due to the high turnover. The researcher would also like to find out any retention strategies adopted by the HR department to curb the high turnover rate. For this, the researcher decided to choose few selected restaurants in London.

1.1 The Overall Aim

The researcher’s main aim in this study is to find out the main reasons for high employee turnover at McDonalds, the way it affects the managers and the organization, and steps taken to retain employees.

1.2 Research Objectives

The researcher in this research would like to find out the main reasons for having high turnover rate in McDonalds and the challenges that the managers face and also how they can curb the rate of staff turnover.The researcher also intends to study the following:

1. To find out the main causes of high employee turnover
2. To find out the various retention strategies adopted by McDonalds in order to retain employees.
3. To find out the various challenges faced by managers due to employee turnover.

2.0 Background-Company Overview

McDonalds has 31,000 restaurants in 116 countries and is one of the biggest family restaurants in the world. The first restaurant in UK was opened during 1974 in Woolwich High Street and the first franchised restaurant opened in 1986. In UK there are now 1,190 restaurants employing more than 70,000 people, of which 51% is operated by franchisees. McDonald’s main vision is to give the family the best experience, something that they will never forget and would want to come back to. They achieve this through its people they employ. McDonalds realizes that its employees can only perform well when they are given the right working environment and for this, they strive to provide various rewards and benefits which would suit each and every individual working in the organization. McDonalds is one of the largest global brands and it offers a culture of flexibility, opportunity, equality and diversity. It has one of the most diverse cultures within the UK (McDonald’s, 2009).

2.1 Recruitment at McDonald’s

McDonalds policy is to hire those ‘Crew Members’ who can bring a smile to the workplace. This brings in positive energy and creates a good friendly atmosphere. The recruitment procedure for a ‘Crew Member’ is a two-step process. First the applicant needs to apply online and if successful, the second step will be to invite the candidate to a restaurant for On job evaluation (OJE) and interview. The on job evaluation helps evaluate the candidate’s customer service skills and his ability to keep up with the high energy environment. This will last for 15 minutes after which the candidate will be interviewed by the Business Manager for another 15 minutes. Once the crew members are hired, they will attend a welcome meeting which will be conducted at their chosen restaurant or the recruitment centre. The welcome meeting involves viewing a DVD which gives important information about the company and also gives the manager an opportunity to interact with the new recruits. They also attend a compulsory online Health & safety and Food safety test when they start working (McDonald’s,2009).

McDonalds also recruit ‘Trainee Business Managers’ who need to display some strong leadership skills. In this, McDonalds makes sure that the candidate is right for the job. A candidate applying for this position has to go through four-step selection process. The first stage is the initial screening process, this helps in ensuring that the candidate meets the basic criteria for selection. If successful, the next step is an online personality questionnaire that the candidate will have to complete. This ensures if the candidate has the desired attributes to be working in McDonald’s environment. The next step is a restaurant based ‘On Job Evaluation’ or OJE. In this the candidate works for the entire day in order to find out what it’s really like to work in a McDonald’s restaurant. The final step of the process is an interview with the Senior Manager of the restaurant (McDonald’s,2009).

2.2 Training in McDonald’s

McDonalds success depends on its well trained crew and managers who maintain company standards of providing high quality, good service and cleanliness at each of its restaurants. McDonald’s has a company policy to provide career opportunities that will allow employees to grow and meet their full potential. They have included career development programmes for crew and operations management which will allow them to progress to a senior management position. The company believes in promoting people on their merit. The crew members are trained by the Crew Trainers and they learn the skills necessary to run each of the workstations in the restaurant, from the front counter to the grill area. They are also trained on how to take deliveries and store the frozen food into the chiller, this is then further used in cooking and making the necessary burgers. Major part of this training is floor based and this helps the crew members learn faster and are also able to retain the information provided. After the initial training period the crew members are monitored by the use of ‘observation check lists’ (OCRs) on an ongoing basis. The observation checklist is a score sheet that marks all aspects of work in the restaurant. The ratings derived from these checklists goes towards their performance appraisal. The restaurants do promote the good performers to management positions where they will have the responsibility to runs shifts within the restaurant. For this, training is given to crew members in areas such as Customer Care, First Aid, Taste of Quality and Food & Restaurant Safety. On successful completion of the management entrance exam, the employees will attend a training course provided by the Training Department before they start working in management position (McDonald’s, 2009).

2.3 Retention Strategies of McDonald’s

McDonalds provides high levels of training to its employees working in various positions at the restaurants. This helps in reducing staff turnover and lowers the turnover costs. Employees that perform well are given recognition by awarding them with ‘Employee of the month’. It provides medical insurance and offers health care. McDonalds now gives quarterly bonus to its crew and manager’s instead of yearly bonus, this was a step taken towards motivating it’s employees. The organization gives five weeks holiday per annum and they are going to increase that to six weeks from April 2009. Computerized English language classes are conducted; this can be enjoyed by the crew members between shifts (The Wall Street Journal, 2008). In 2009, McDonald’s aims to provide Apprenticeships to up to 6000 of its 72,000 UK workforce and later will be increased to 10,000 from 2010. This will give the staff an opportunity to gain valuable and nationally recognized qualification that is equivalent to five GCSE grade A*-C. McDonald’s senses the importance of investing in their staff says the Senior Vice President David Fairhurst of McDonald’s UK. This has been done purely to retain the existing staff and also to attract new ones towards working for McDonald’s, which, is a global brand name (McDonald’s Latest News, 2009).