Reference no: EM133299407

THEORY INTO PRACTICE

McDonald's UK

During the 1990s negative impressions about employment at the McDonald's restaurant chain were fuelled in the UK, as elsewhere, by the growth in usage of the term 'McJob' as a generic label for low-status occupations. The term first appeared in 1991 in the bestselling novel Generation X written by the Canadian writer Douglas Coupland, where it is defined as a low-pay, low-dignity, low-benefit, no-future job in the service sector'. In 2003, much to the irritation of the company, the term 'McJob' appeared in the Oxford English Dictionary for the first time, defined as 'an unstimulating, low-paid job with few prospects, especially one created by the expansion of the service sector'.
The McDonald's UK operation tended to suffer from negative connotations about its employment practices more than was the case in most of the other countries where the company operates. This is partly because food service work in general tends to be accorded less prestige in the UK than is the case elsewhere in the world and partly because of the extraordinary growth that McDonald's enjoyed in the country during the 1980s and 1990s when the company opened between 50 and 100 new restaurants each year. This mass expansion was accompanied by limited central direction as far as employment practices were concerned. Local managers and franchisees were given responsibility for staffing up their restaurants, leading to the adoption of inconsistent approaches. They often struggled to recruit and retain effective employees, and were not always particularly choosey when deciding who to hire. This led to the development of the widely held view that anybody could get a job 'flipping burgers' at their local McDonald's just by turning up and asking for a job.
McDonald's UK responded by carrying out a staff attitude survey which found that the popular characterisation of its jobs was by no means accurate. In 2004, 74% of the company's employees reported being satisfied with their jobs and happy to 'recommend working at McDonald's to a friend', 77% stated that they were committed to their work, while 86% were happy with the training and skills development opportunities they were given. Staff were particularly positive about the flexibility that their jobs gave them to juggle work and home responsibilities, the career paths that were provided for them to follow and the enjoyment they got from working as a member of a team. The definition accorded to the term 'McJob' was not therefore a fair or correct reflection of the lived reality for a good majority of people working in the company's 1,200 UK restaurants.
However, the survey also revealed that staff were generally dissatisfied with their pay and that only 60% agreed with the statement 'I am proud to work at McDonald's'. Staff turnover was also running at very high levels in 2004. The annual rate had reached over 80%, while the ninety-day turnover rate (i.e. the proportion of new starters leaving before they have completed three months' service) was running at 24.5%. It appeared that poor hiring decisions were being made too often and that the company was not effectively managing the expectations of new starters about exactly what their jobs would involve on a day-to-day basis. The 2004 staff attitude survey thus showed that, although the company had plenty of scope to improve its HR operations, its poor reputation as an employer in the UK was by no means at all justified. The definition of the term 'McJob' was a thoroughly unfair characterisation of the experience of working in the company's UK outlets.
The company addressed these issues in a variety of ways, investing substantial sums in initiatives that were designed to improve retention and engagement, while also radically altering the company's reputation as an employer:
• A state-of-the art corporate development centre was established offering highly flexible training programmes and the opportunity for staff to gain a range of qualifications up to
degree level. Management development was the major priority.
• A discount scheme was set up which could save employees many hundreds of pounds on a range of retailed products, on holidays and driving lessons.
• More flexible working initiatives were launched including family and friends contracts which allowed groups of people to decide for themselves who would work which shift.
• A range of employee involvement initiatives was introduced enabling, for example, staff to play a role in determining uniform styles.
• Additional investment was put into the organization of social events for staff, often revolving around raising money for charities.
Managers at McDonald's in the UK are generally very happy with the impact that their initiatives have had. Between 2004 and 2010 the percentage of staff stating in surveys that they were committed to the company increased from 77% to 88%, while the percentage of those stating that they are proud to work for McDonald's went up from 60% to 84%. Increased staff satisfaction was also reflected in the figures for employee turnover. The crude annual rate for staff working in McDonald's restaurants declined from 80.2% in 2004 to 37.9% in 2010. The ninety-day turnover rate, a measure of the number of new staff leaving within the first three months, stood at 24.5% in 2004, reflecting the tendency for people to have false expectations about what their jobs would involve and the number of unsuitable people that managers were hiring. By 2010 this had fallen to just 2.4%.

Question: What other factors, aside from the introduction of these HR initiatives, might explain the striking reduction in staff turnover levels that McDonald's achieved between 2004 and 2010?