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Chapter: Business Science - Strategic Management - Strategic Issues

Getting it Right at Mcdonalds

In the restaurant business maintaining product quality is a major problem because the quality of food, service, and the restaurant premises varies with the chefs and waiters as they come and go.


GETTING IT RIGHT AT Mcdonalds

 

In the restaurant business maintaining product quality is a major problem because the quality of food, service, and the restaurant premises varies with the chefs and waiters as they come and go. If a customer gets a bad meal or poor service or dirty silverware, not only that customers may be lost, but other potential customers, too, as negative comments travel by word of mouth. Consider then the problem Ray Croc, the man who pioneered McDonald‘s growth, faced when McDonald‘s franchises began to open by the thousands throughout the US. How could be maintain product quality to protect the company‘s reputation as it grew? Moreover, how could he try to increase efficiency and make the organization responsive to the needs of customers to promote its competitive advantage? Kroc‘s answer was to develop a sophisticated control system, which specified every detail of how each McDonald‘s restaurant was to be operated and managed.

 

Kroc‘s Control System was based on several components. First, he developed a comprehensive system of rules and procedures for both franchise owners and employees to follow in running each restaurant. The most effective way to perform such tasks as cooking burgers, making fries, greeting customers, or cleaning tables was worked out in advance, written down in rule books‘, and then taught to each McDonald‘s manager and employee through a formal training process. For example, prospective franchise owners had to attend ‗Hamburger University‘ the company‘s training centre in Chicago, where in an intensive, month-long program they learnt all aspects of a McDonald‘s operation. In turn, they were expected to train their work force and make sure that employees understand operating procedures

 

thoroughly. Kroc‘s goal in establishing the system of rules and procedures was to standardize. McDonald‘s activities so that whatever franchise customer walked into they would always find get what they expect from a restaurant, the restaurant has developed superior customer responsiveness.

 

However, Kroc‘s attempt to control quality went well beyond written rules and procedures specifying task activities. He also developed McDonald‘s franchise system to help the company control its structure as it grew. Kroc believed that a manager who is also a franchise owner (and receives a large share of the profits) is more motivated to maintain higher efficiency and quality than a manager paid on a straight salary. Thus McDonald‘s reward and incentive system allowed it to keep control over its operating structure as it expanded. Moreover, McDonald‘s was very selective in selling its franchises; the franchises had to be people with the skills and capabilities to manage the business, and franchise could be revoked if the holder did not maintain quality standards.

 

McDonald‘s managers frequently visited restaurants to monitor franchises, and franchises were allowed to operate their restaurant only according to McDonald‘s rules. For instance, they could not put in a television or otherwise modify the restaurant. McDonald‘s was also able to monitor and control the performance of its franchises through output control. Each franchise provided McDonald‘s with information on how many meals were sold, on operating costs, and so forth. So using this mix of personal supervision and output control, managers at McDonald‘s corporate headquarters would quickly learn if sales in a franchise declined suddenly, and thus they could take Corrective action.

 

Within each restaurant, franchise owners also paid particular attention to training their employees and instilling in them the norms and values of quality service. Having learned about McDonald‘s core cultural values at their training sessions, franchise owners were expected to transmit McDonald‘s concepts of efficiency, quality, and customer service to their employees. The development of shared norms, values, and an organizational culture also helped McDonald‘s standardize employee behavior so that customer would know how they would be treated in a McDonald‘s restaurant. Moreover, McDonald‘s tried to include customers in its culture. It had customers but their own tables, but it also showed concern for customer needs, by building playgrounds, offering Happy Meals, and organizing birthday parties for customer‘s children. In creating its family oriented culture, McDonald‘s was ensuring future customer loyalty because satisfied children are likely to remain loyal customers as adults.

 

Through all these means, McDonald‘s developed a control system that allowed it to expand its organization successfully and create an organizational structure that has led to superior efficiency, quality, and customer responsiveness. Its control system has played an important role in McDonald‘s becoming the largest the most successful fast-food company in the world, and many other fast-food companies have imitated it.

 


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