Performance management is an important tool in assessing an organization's ability to conduct business in the short and long term. According to Beechler and Woodward, profitable organizations use the level of profitability as a measure of their performance (275). In this sense, profitability also includes the desired result of the organization. Performance measurement focuses on "three specific areas of company performance: financial performance (earnings, return on assets, and return on investment), product market performance (sales and market share), and shareholder return (total shareholder return and economic added value)" (Devinney and Yip 529). A typical approach to performance measurement involves setting goals for desired performance and then measuring actual performance against the goal.
This article recognizes that organizations have different desired outcomes. Thus, a discussion of organizational performance measurement cannot be concluded with a discussion of organizational performance measurement in general. Therefore, this article limits the scope of the discussion to multinational organizations, especially McDonald's Corporation. The organization is one of the largest fast food retailers in the world, serving fast food to more than 119 customers worldwide. McDonald's has approximately 33,500 restaurants and franchises, and the company continues to grow as the organization penetrates new markets in Asia. McDonald's tremendous success has been attributed to many factors, including a strong emphasis on customer engagement, appropriate leadership for the organization's business, and exceptional investment in organizational resources to improve performance. The purpose of this article is to explore how McDonald's Corporation measures performance with the goal of developing solutions to the problems facing the organization's performance management system, once the system challenges have been identified.
To achieve the above objectives, this research collects data and information through interviews, literature analysis and network research. This approach uses mixed methods research. The data collected is used to develop basic information about McDonald's. This section provides a detailed description and explanation of McDonald's performance measurement system, current problems and/or successes in providing high quality products or services. The final section provides suggestions on how McDonald's could improve its performance measurement system.
A study can be designed using one of four main approaches: qualitative, quantitative, mixed methods (pragmatic approach), and emancipatory approach (participatory or advocacy approach). A pragmatic research approach has been chosen for this study. The freedom to choose research methods depends on the perception and assessment of the researcher as to which methods are most appropriate for the specific type of research being conducted. The best option is to use approaches that complement each other. This aspect is the rationale behind the design of this study to use a pragmatic research approach that develops both quantitative and qualitative research aspects.
The Internet and libraries were searched to identify various sources of secondary data that discussed the mechanisms McDonald's developed to measure its performance. While such data may be important to achieving the goals and objectives of this study, performance management is a discipline shaped by changes in technology and the environment in which organizations operate. This suggests that secondary data may not be sufficient for McDonald's current performance measurement analysis needs. To address this challenge, we took a primary approach, which was to interview supervisors and line managers at McDonald's in California. The goal was to determine how McDonald's business leaders and managers measure the company's performance on a regional, national and international scale.
Background literature search
Data needed to measure organizational performance
Several scholars have begun to study the role of evaluating an organization's performance. Their motivation is the fact that if an organization cannot perform to satisfy its customers, it cannot remain viable in this competitive market. Therefore, it is sufficient for all executives and/or stakeholders of the organization to focus on the performance of their company at all levels, including the global level. While much has already been done to improve employee performance (e.g. training), it is important to determine the degree of association of such interventions with organizational performance.
Companies hire people with the required experience and education to do the job they have. In addition to this strategy, they continue to invest in continuous on-the-job training. Organizations conduct ongoing training programs to ensure employees know how to resolve any work-related issues. Training eventually becomes a tool for organizational motivation as well. When the company goes through the training process, it is hoped that these employees will see the importance of their contribution to the organization, which will allow them to work towards achieving the stated organizational goals. All of these strategies require a mechanism to evaluate their impact on performance.
Organizational performance can be measured by several dimensions. They include aspects such as financial performance, employee job satisfaction (reflected in turnover rates), customer service and social responsibility (Devinney and Yip 827). McDonald's considers talent one of the most important sources of success in delivering value to customers. In this pursuit, organizations ensure that they do not create situations that create employee-job conflict, resulting in high job turnover. These organizational concerns are in good agreement with the existing literature on the impact of work-life balance on employee performance.
Segara-Leyva et al. It examines whether employee work-life balance initiatives have indirect effects on employee retention in organizations by driving high job satisfaction among employees in SME environments. The study suggested increasing employee satisfaction to increase their retention (Cegarra-Leiva et al., 103). “The presence of a work-life balance culture in an organization increases job satisfaction, so it is critical that management teams commit to supporting a humane organization” (Cegarra-Leiva et al., 103). The recommendation is critical in defining McDonald's role in placing greater emphasis on ensuring employee satisfaction with their jobs to improve organizational performance
To improve performance, McDonald's has developed strategies to reduce turnover and strikes through workforce management. This effort is consistent with existing evidence on the role of HR in improving organizational performance. For example, effective HR practices "help improve the quality of life of employees, and as a result, employees are more satisfied, motivated, and loyal to the company" (Lambert 13). Satisfied employees perform better in their organizational role than dissatisfied employees. In fact, job satisfaction is related to employee motivation. Employee motivation and job satisfaction are both important elements in improving organizational performance (Lambert 13)
One of the most important examples for measuring McDonald's performance is its financial performance. Organizations perform best when they generate optimal profits. This is when they are able to reduce the cost of running their business. In this sense, one of the ways McDonald's measures its financial performance is its ability to reduce various overhead costs. By increasing employee job satisfaction, McDonald's can reduce all costs that impact financial performance, such as employee costs, absenteeism costs and work-related errors.
Strategies to increase job satisfaction are important because job satisfaction leads to a good quality of life and physical health of employees. These factors are crucial for improving the productivity and performance of the organization. Performance feedback and compensation models are important aspects to consider when measuring organizational performance.
performance feedback model
Any performance measurement process should have a mechanism to provide feedback on successful strategies that have been developed. As Devinney and Yip (828) revealed, "organizational performance is the most important criterion for evaluating an organization's behavior and environment."
Performance feedback, as shown above, can be provided by evaluating an organization's financial performance as performance improvement strategies are implemented. This includes assessments of the organization's return on investment, changes in organizational resources, and changes in organizational profitability. Feedback on performance management approaches can also be evaluated in terms of incremental gains in an organization's market share, changes in sales levels, and even changes in shareholder returns in the form of increased dividend margins.
A Balanced Scorecard captures all of the above success indicators of the organization's performance. An important indicator of an organization's performance includes determining the success of strategies implemented to improve performance, improving employee engagement through changes in management approaches, and ensuring that cross-cultural differences among employees related to diversity differences are skillfully addressed to raise global awareness. development of an organization. In this sense, the scorecard provides the feedback required by the performance management model.
During the hiring process, it is very important to consider the resources available to pay a certain amount of benefits and allowances to a particular employee (what the organization considers to be the highest offer of the organization). In fact, it is necessary to check carefully what wages and/or salary an employee with a certain professional competence is willing to accept as a starting salary. It forms the basis for identifying possible future improvements in employee performance and motivation. The psychological assessment of recruits allows organizations to identify those who are a good fit for the organization. Integrating into an organization means hiring someone who is willing to work hard to meet the job requirements and is paid according to the benefits and salary package offered by the organization. Job requirements are designed in such a way that they match the desired results of the organization in the short and long term. These comparisons of expected and actual results provide measures of organizational performance.
High-performing organizations focus on mechanisms that create wealth, which is then used to improve employee well-being. “People are always angry and frustrated about inequalities in the pay system” (Bowey 17). This means that if people succeed in motivating them through a reward system, the organization has the potential to improve their performance. This suggests that there is a direct relationship between wages and benefits awarded to employees and their level of performance in performing organizational tasks, contributing to higher profitability and thus better organizational performance.
McDonald's performance measurement system
The primary purpose of measuring organizational performance in terms of financial performance is similar to the need to ensure continued economic growth. McDonald's is expanding through the franchise model, opening its own stores in different parts of the world. To achieve this growth, financial resources must be accelerated. Measuring an organization's performance in this way can indicate the expected level of growth for McDonald's. The main purpose of measuring McDonald's performance against its financial performance is the need to determine the effectiveness and efficiency with which the organization converts inputs into outputs through the expenditure of financial resources in the form of input purchases etc. as raw materials and labor.
In measuring the effectiveness and efficiency of financial performance in the form of financial ratios such as return on investment, return on equity, liquidity ratio and profitability ratio, McDonald's Corporation is inspired by the premise that organizations must operate in a way that enables them to achieve their goals and achieve their results. Table 1 shows some measures of McDonald's financial performance based on various financial ratios. Financial efficiency is very important in terms of financial performance and in the interest of McDonald's investors. Investors are interested in an organization's ability to deliver value in the form of a return on investment (Herman and Renz 403). This means that McDonald's has a great responsibility to invest the owners' finances in a way that maximizes profits by reducing production costs.
McDonald's Financial Performance Ratios 2009-2012
|end period||31 december 2012||31 december 2011||312/12/2010||31 december 2001|
|gross profit margin||39%||40%||40%||39%|
|Margin before taxes||29%||30%||29%||29%|
|margin of profit||20%||20%||21%||20%|
|Return on net assets after tax||36%||38%||34%||32%|
Bron: ("Forexhandel: McDonald's Corporate Financials" 11)
People in an organization are one of the most important means to achieve the desired results. Maintaining commitment to the organization's goals and activities requires minimizing optimal profitability while accounting for all the costs incurred in increasing employee motivation to improve an organization's financial performance. In this regard, McDonald's measures the magnitude of its economic performance by assessing the degree of trade-offs in the various variables that must be combined in the right proportions to achieve economic growth.
These variables include input costs, litigation costs and employee benefits. While the argument (Herman and Renz 405) that organizations should not focus primarily on improving financial efficiency and effectiveness at the expense of employee benefits is valid, it is worth noting that such benefits and benefits are provided through financial resources of the fund. These resources can be increased by increasing the profit level of the organization. This is why McDonald's is very interested in measuring variables to determine if McDonald's can improve financial performance.
Another important concept in the example of measuring McDonald's performance in terms of financial performance is financial efficiency. McDonald's works under intense stakeholder pressure to ensure that its operations are conducted in the most efficient manner. In organizations including McDonald's, such pressures include developing policies to ensure cost control to reduce fraud while "improving customer service and aggressively pursuing key policy initiatives" (Herman and Renz 411). For McDonald's, the consequences of this pressure include giving high priority to improving organizational processes while using little financial resources to curb problems of overproduction and abuse of managerial power.
In this way, financial resources are only used in ways that are beneficial to the organization, consistent with the purpose and goals of the organization, including meeting the benefit needs of employees to ensure their motivation and commitment to the organization. to be effective without harming the organism Act in a counterproductive way. In this regard, McDonald's financial efficiency measure is a measure of how well its financial resources are used. The better it uses its financial resources, the better its financial performance will be measured as it is able to maintain high financial reserves for expansion on the global stage.
Higher levels of financial efficiency mean that McDonald's is more likely to remain profitable, thus best serving the interests of parties, such as employees who have an interest in its operations. McDonald's is a public company and its financial efficiency is measured by the example of its ability to optimize profits with funds raised in the form of debt and equity. In fact, for publicly traded organizations, the effectiveness of financial spending is best measured in terms of return on investment. Since efficiency and effectiveness mean more to all stakeholders of the organization, McDonald's management cannot deny that they emphasize both aspects when measuring their financial performance if they want to create a high-performing company in the long run.
Customer service and needs
McDonald's believes that talent is the most important resource for building lasting customer relationships. Having the ability to build great customer relationships means more sales, leading to better long-term financial performance for the organization. McDonald's products have been heavily criticized for the health problems that can result from eating high-calorie foods. To ensure that McDonald's customers remain loyal to the company's brand, McDonald's has developed and offered healthy meals on its menu. Therefore, McDonald's Corporation's ability to meet consumer needs based on emerging lifestyles is a measure of organizational performance. Table 2 below shows performance measures that reflect these issues. The intended outcome of this performance measurement is to ensure that the company's brand image continues to maintain a competitive advantage through customer satisfaction.
Table 2: Nutrition facts of McDonald's products
|Year||2005||year 2006||2007||Year 2008|
|The average number of items per menu item in the market contains at least 1 serving of fruit and/or vegetables||Does not apply||6.1||6.1||6.4|
|The average number of items per menu item in the market contains at least 1 or 2 servings of fruits and/or vegetables||Does not apply||9.9||10.9||11.9|
|Percentage of largest market offering nutritional information (discliner, brochures)||100||100||100||100|
|Percentage of nutritional information provided through restaurants (websites) in the 9 largest markets||100||100||100||100|
Document: ("McDonald's Global Corporate Responsibility Online Report: The Value We Deliver"8)
McDonald's measures its customer satisfaction performance based on creativity and new product innovation. The true measurement of performance against the paradigm of the ability to meet customer needs requires determining whether companies consistently offer alternative products in the event that customer tastes and preferences change as a result of intensive campaigns aimed at healthy nutritional needs. Based on this performance measure, McDonald's has determined that the Chinese prefer chicken to beef. So the company designed a burger made with chicken instead of beef. The current strategy ensures that McDonald's products perform well in all markets to proactively meet new customer demands.
McDonald's also measures its performance by determining whether it can maintain market share and attract new customers. In fact, it is impossible to increase an organization's market share without attracting new potential customers (Herman and Renz 109). To improve its performance in increasing market share, McDonald's invests in research into the motivational sources for eating in fast food restaurants and into the services and products of fast food restaurants. This concern has been fueled by McDonald's business philosophy of treating customers in such a way that vendors and communicators meet customer expectations. That's why McDonald's believes that its customers and employees are the most critical success factors in this competitive fast food industry.
Customer satisfaction is measured qualitatively by determining whether customers who try a McDonald's product for the first time rate the product as their favorite compared to a range of similar products on the market. In fact, “acquiring and retaining customers loyal to a particular brand is most useful when the customers collectively become the total user of the product” (Hill and Ettenson 87).
For McDonald's, according to different perceptions of McDonald's product brand loyalty, the company adopts effective strategies to increase the uniqueness, preference and awareness of the company's products and services. An important task in this endeavor is to ensure that the restaurant performs well in terms of customer service. This performance is measured by customer service arrivals and departures. If customers wait too long to be served, the organization may lose some loyal customers to competitors who are served faster. This realization prompted McDonald's to view low customer service numbers as an indicator of poor organizational performance.
While financial performance covers important aspects of measuring McDonald's performance, the company also measures performance in terms of how well it delivers value to its shareholders. Different stakeholders have different needs that organizations need to meet. Therefore, McDonald's not only focuses on profit maximization to improve financial performance, but also considers other alternatives that bring the greatest benefit to all stakeholders of the organization. In this effort, McDonald's measures its performance based on the decision-making ability of its managers, not necessarily based on optimal profit, but based on ethical rules such as consequential rules, laws, social contracts and ethical policies, as well as corporate social responsibility approaches inclusion. The company operates worldwide. Table 3 shows how McDonald's uses sustainable supply chains as a measure of CSR performance.
Table 3: Sustainable supply chain performance
|Year||2005||year 2006||2007||Year 2008|
|Percentage of Tier 1 suppliers of food, packaging and equipment that endorse our Code of Conduct||89||93,5||92||95|
|Number of verified meat processing plant suppliers (including beef, pork and poultry)||Chapter 521||Chapter 562||513||Chapter 484|
|Package Quantity Used Weight Per Transaction (Lbs)||0,139||0,138||0,35||0,129|
|Percentage of packaging material made from recycled paper||31.5||33.1||29.8||30.8|
Document: ("McDonald's Corporation: Global Corporate Social Responsibility Online Report: The Value We Deliver"8)
McDonald's approach to measuring its financial performance from a CSR perspective is supported by existing literature on the value of CSR in helping organizations achieve desired performance outcomes. For example, Schwartz argues that the first step in improving organizational performance is for "firms to consider what society might impose on the firm now or in the near future, as this may affect the achievement of the firm's objectives" (49). One of an organization's goals is to develop a strategic plan that ensures its long-term performance and survival.
It appears that McDonald's is spending money from its profit margins to improve the well-being of the communities in which it operates through corporate social responsibility to improve its performance in delivering value to local communities. Thus, the extent to which the organization improves the livelihoods of these communities can serve as a measure of McDonald's performance.
Critics have expressed their views on the role of increased focus on improving employee and community well-being as a measure of organizational performance, guided by the theoretical paradigm of the role of corporate social responsibility in improving organizational performance. the organisation. They argue that managers in organizations have a noble mission to serve fans and communities rather than focusing solely on improving the organization's financial performance. Kolodinsky, Bowen, and Ferris argue that employee-leader relationships are important for improving organizational performance (83). The question here is whether, regardless of the associated costs, investing in good employee relations alone translates into direct productivity for McDonald's Corporation, a key measure of organizational performance.
While McDonald's uses alternative performance measurement methods such as corporate social responsibility and customer satisfaction and improved customer service, quantitative performance measures rely heavily on traditional financial performance measurement systems such as return on investment and return on equity. Such approaches are incomplete and inappropriate because they lack strategic focus, especially in the highly competitive fast food industry. McDonald's believes that people are the most important source of organizational performance.
While CSR is important in terms of the ability to deliver value to people, it is recommended that organizations conduct performance measurements to determine the level of commitment of employees to the organization. The more engaged employees are, the more likely they are to be productive. Thus, this improves the performance of the organization. To measure employee performance and loyalty systems, Q12Recommended model.
Using the model to measure engagement can give people confidence that organizations are implementing employee engagement measures backed by a wealth of empirical evidence. While measuring financial performance can give McDonald's an idea of its financial position and expected financial benefits in the future, this benefit also increases when employee productivity increases. Understanding employee productivity levels is fundamental to determining appropriate strategies to correct their negative performance.
Through the methods described above, the success of employee engagement can be determined by how people organize their work teams. If employees organize into groups based on shared characteristics driven by personal concerns, such as an inability to integrate with people of different values, rather than professional characteristics required to complete their assigned tasks, this metric indicates: McDonald's is not doing well when it comes to employee engagement. This leads to ineffectiveness and ineffectiveness of the organization in achieving its goals and objectives. This effect is an undesired result in the performance management system of any organization seeking to leverage talent as a source of competitive advantage, such as McDonald's Corporation.
Beachler, Simon and Charles Woodward. "The global 'battle for talent'".International magazine for management15.7 (2009): 273-285. Print.
Bowie, Arthur. "Motivation: The Art of Putting Theory into Practice."Electron beam current20.1 (2005): 17-20. Print.
Cegarra-Leyva, Sanchez, Douglas Vidal, and Gabriel Cegarra-Navarro. "Work-life balance and retention of managers in Spanish SMEs."International personnel management magazine23.1 (2012): 91-108. Print.
Deveney, Richard and Johnson Yeh. "Measurement at the Business Unit Level: Aligning Management Mechanisms with Strategy."Academy of Management Journal31.4 (2009): 826-853. Print.
Forexhandel: McDonald's Corporate Financials. New York, NY: Foreign Exchange, 2013. Print.
Hermann, Raymond and Dixon Lenz. "Advancing Research and Theory on Organizational Effectiveness".Management and Leadership18.4 (2008): 399-415. Print.
Hill, Stephen Ettenson and Tyson Ettenson. "Reach the ideal brand mix."assessment of loan management2.1 (2005): 85-90. Print.
Kolodinsky, Wilberforce, Godfrey Bowen en Richard Ferris.Embracing workplace spirituality and managing organizational politics: servant leadership and political skills in turbulent times. Handbook of work spirituality and organizational performance, New York, NY: Armonk, 2003. Print.
Lambert, Johnston. “Collateral benefits: The link between work-life well-being and organizational citizenship behavior.”Academy of Management Journal 2.1 (2007): 7-32. Print.
McDonald's Corporation: Global Corporate Responsibility Report: The Values We Bring2009. Network.
Schwartz, Martin. "The 'Business Ethics' of Management Theory."Management History Magazine13.1 (2007): 43-53. Print.
In the design of goods and services, the objective is to develop the best product, given the resources and limitations of the fast-food company. In this case, McDonald's aims for high efficiency of service operations, and the standardization of goods.What performance appraisal methods does McDonalds use? ›
McDonalds use a 360 degree appraisal system (Ward 1995) where all the information on performance and feedback is derived from a number of stakeholders within the company.What steps did the McDonald brothers take to make their operation more efficient? ›
McDonald brothers brought efficiency by innovating assembly line operations for their restaurant. They focused on just a few high selling items such as burgers, fries and drinks, and figured out an efficient way of order delivery.What are the five performance objectives of McDonalds? ›
The performance of operations can be judged by their: Speed, variety, cost, quality and dependability. These five operational performance objectives mean different things for different businesses. For McDonald's speed refers to how fast customers can be served. Cost refers to the unit cost of a burger.What is an example of a good performance objective? ›
To use a quality-based performance objective example: Our objective is to reduce warranty spending from 2% to 1% by the end of Q4 2023. The company will achieve this by carrying out extra quality checks during production. Achieving this goal will benefit us by improving customer satisfaction and retention.What are the five performance objectives briefly explain? ›
The five key business performance objectives for any organization include quality, speed, dependability, flexibility, and cost. When it comes to business performance objectives you're likely aware that efficiency and productivity are crucial.How does McDonalds evaluate employees? ›
In Mc Donald's, Job evaluation involves deciding the wages and salaries of the employees on the basis of job analysis. Job evaluation is also referred as compensation in McDonald. The organization has its predefined standards for the evaluation of its employees based on their skills, knowledge and experiences.What is an example of performance appraisal process? ›
Here are a few examples: 360-degree – Collects feedback on the employee from a 360-degree view of all the people who work with them, from subordinates to supervisors to customers. Graphic rating scale – Rates workers on a numbered scale for their role's desired traits and behaviours.What is the most effective performance appraisal? ›
360-degree appraisal is hailed as the best approach because it's all-encompassing (the secret's in the name!) and can give such a well-rounded view of an employee.What is McDonald strategy plan? ›
McDonald's strategic plan focuses on a long-term outlook to deliver meaningful growth and increase guest counts, a reliable measure of the Company's strength that is vital to growing sales and shareholder value. We are targeting opportunities at the core of McDonald's — food, value and the customer experience.
A focus on digital, delivery and drive-thru during 2023 continues to be a focus for the quick-service restaurant. McDonald's stated that in its top six markets, digital ordering represents over one-third of systemwide sales, including ordering McDelivery or at restaurant kiosks.Who was the most responsible for McDonalds success? ›
America is a country of countless entrepreneurs, some more successful than others, but many who have strived to live the proverbial “American dream.” Ray Kroc is an extraordinary example of an entrepreneur who indeed lived the “American dream.” Kroc built McDonald's Corporation into one of the most successful and most ...What are performance key objectives? ›
Key Performance Objectives (KPO)
Depending on how your organization chooses to define them, key performance objectives (KPOs) are often used to refer to outcomes for your team, or measurements that determine how well they're performing.
Key Performance Indicator - McDonald Consulting Group.What are McDonald's important competencies and capabilities? ›
McDonald's best core competence is its ability to standardize its food service and delivery processes. Every McDonald's offering tastes and looks exactly the same, regardless of its geographical location or outlet -- after accounting for local tastes and exceptions.How do you write a measurable performance objective? ›
Objectives should state: • Who is involved: The people whose behaviors, knowledge and/or skills are to be changed as a result of the program. What are the desired outcomes: The intended behavior, knowledge and/or skill changes that should result from the program or activities.
Examples of objective performance measures in IT include: Server downtime: Server downtime measures the amount of time an organization's IT system is offline. IT professionals may track planned and unplanned downtime to assess server performance and develop improvements that lead to fewer disruptions.How does McDonalds motivate their employees? ›
“Those people are motivated by the training and development opportunities we offer, which is one of the reasons we invest more than $40 million on training annually.” By drawing on the strengths of their recognition and training programs, McDonald's can focus on identifying the strengths of crew members.What are performance objectives in food industry? ›
Performance Objective (PO) The maximum frequency and/or concentration of a (microbial) hazard in a food at a specified step in the food chain before time of consumption that still provides or contributes to the achievement of an FSO or ALOP, as applicable.What is McDonalds growth objective? ›
For growth, McDonald's is maximizing marketing. The company plans to invest in new, culturally relevant approaches to communicate its brand story, food and purpose effectively. It includes campaigns like the Famous Orders platform, the FIFA World Cup and the Raise Your Arches campaign.
Is McDonald's profitable? As of December 31, 2022, MacDonald's net profit was 26.65%. The company is one of the most successful restaurants globally, worth approximately $193.05 billion. McDonald's average annual sales for 2021 from more than 10,000 locations in the United States was over $3 million.