A recipe for talent?

Case Study: McDonald's

A Recipe for Talent

How do you keep fresh ideas and innovation coming if your key people have never worked for another company? McDonald's looked to suppliers for inspiration.

McDonald's is well known for its rigorous approach to the training and development of its staff, or crew as it calls them. Depending on state legislation, teenagers as young as 14 or 15 can apply for a job.

If accepted, they start their training and embark on a well-defined path that gradually broadens their experience across restaurant roles.

This allows McDonald's to deliver consistent quality of service and, remarkably, to do so with people with no prior work experience. Many stay and it is not uncommon to meet someone aged 30 who has beenwith the organisation for 15 years.

"Training is the key to our success," McDonald's Australia vice-president of people resources Frank McManus says.

He is a case in point. Originally from Ireland, McManus has been with the organisation for 33 years, starting out as crew while travelling through Germany.

In Australia, 80 per cent of employees in restaurant management at McDonald's started their careers as crew. Of its seven global chief executive officers, four started as restaurant crew, including current chief executive Jim Skinner, who carries his career start in the kitchen as a badge of honour.

Another global chief executive who started as crew was the Australian Charlie Bell, who became chief executive in 2003 but tragically died of cancer two years later.

The ability of an organisation to grow and keep talent may well be the most important predictor for success. If its current success is something to go by, McDonald's must be doing something right in the way it manages its talent.

During the late 1990s, it lost its way for a while and the average net income for McDonald's Corporation per restaurant went down from 1999 to 2003, bottoming at $U528,900 ($32,564) in 2002. More recently, its 31,000 restaurants in more than 100 countries have been delivering outstanding results, with net income per restaurant at $US1l2,000 in 2006.

Australia, with some 65,000 staff, 760 restaurants and more than 1.2 million customers a day, is one of the restaurant group's seven big economic enginemarkets. Much of the success in Australia is driven by innovations such as McCafe (a Charlie Bell brainchild), salads, Deli Choice, low•fat muffins, Pasta Zoo and refreshing its brand image.

To maintain its success, McDonald's must maintain a relentless pace of innovation. However, having so many people who have been with the company for so long can be a two-edged sword when it comes to innovation.

"One of our biggest challenges is to come in to the business every day and look at it with fresh eyes," McDonald's Australia managing director and chief executive Peter Bush says.
This is particularly challenging for up•and-coming managers who started their career as crew, have never worked for any other company and have had to focus on short-term operational issues for most of their career. No matter how talented a person is, it is much harder to imagine a completely different future for McDonald's if their entire career has evolved inside the company.

Within the global organisation, McManus has a reputation for challenging the system and regularly coming up with new initiatives. In a world-first for McDonald's, he invited some of the company's suppliers to join its development program for high potential employees. This allowed the company's future leaders to benefit from exposure to external perspectives.

The development program, called McDonald's Australia Managing the Organisation (MAMO), was developed in collaboration with Melbourne Business School. The program falls under the Charlie Bell School of Management, the McDonald's training facility named after the former chief executive who was a great believer in training and development.

During a six-month period, all participants came together on four occasions for either two or three days. Much of that time was spent applying new concepts and ideas to professional and company challenges. In between sessions, teams continued to work on a company challenge with the aim of developing innovative ideas. At the end of the six months, each team presented its recommendations to the McDonald's leadership team.

The initial version of the program ran last year and was highly successful. Most McDonald's managers on the program had been with the company for more than 10 years, and about two out of three had never worked for another company.

The addition of managers from other companies to the program included participants from Coca Cola, IBM, McKey (supplier of food products) and H&K (supplier of kitchen equipment).
While it is not uncommon for companies to train their suppliers, this is usually done to help suppliers understand the client organisation or do a better job at servicing the client. An example is Qantas, which has trained staff from security companies that operate airport security screening points in customer service. McDonald's invites the suppliers because it wants to learn from, not instruct, them.

McDonald's managers on the program quickly recognised the value of external participation. "Having non-McDonald's partners in the program adds value to the whole journey, especially the project,"

McDonald's Australia senior legal counsel Duncan Mackay says. "Sometimes we need a non•McDonald's set of eyes to see solutions to McDonald's issues."

Examples include Coke's perspective on retail trends, or different ways to structure performance management. For McDonald's development manager Catherine Maddox, most value came from "obtaining feedback on McDonald's culture and how we are viewed in the marketplace".

McDonald's participants also felt they had learned how to view an issue from the perspective of a supplier, in this way improving future collaboration. This benefit was not limited to the suppliers that were in the program but will also extend to other suppliers.

Another benefit was the development of personal relationships across organisational boundaries. The national purchasing manager for McDonald's in Australia and New Zealand, Lisa Isaacs, believes the program improved relationships with its external partners.

"The intensity of working on actual projects combined with the personal nature of some of the program content has lead to some deep relationships that go beyond typical supplier relationships," she says.

Feedback from external participants echoes this sentiment: they have been able to obtain a much better understanding of McDonald's and have developed stronger relationships as a result.
Innes Belcher joined the program the week before he started as IBM's delivery project manager. It provided an invaluable induction into his new client organisation, he says. "Spending time with the team has given me a much greater understanding of what makes McDonald's tick. I've also built some great relationships along the way and really feel like a member of the business."

The strength of these relationships was illustrated last October when McDonald's held a getaway on the New South Wales central coast. The scheduled event was initially intended for McDonald's staff only. However, all external MAMO participants were invited by chief executive Peter Bush as members of the extended McDonald's family.

Published in BRW, 7 February 2008
This article was written by Maurizio Floris who is a program director at Mt Eliza executive education, part of Melbourne Business School. He also leads the MAMO program for McDonald's.