Employee Recognition at McDonalds

Question: Discuss about theEmployee Recognition at McDonalds. Answer: Abstract The retention of talent is an increasingly important imperative in todays organisations. The importance of talent retention is underscored by increased and more aggressive competition across various industries, with a concomitant shortage of skilled individuals. Organisations must then invest in practices that will enable them to retain employees. One such practice is employee recognition, which McDonalds has successfully harnessed. The employee recognition culture at McDonalds enables the organization to retain highly talented individuals. This retention is important in allowing McDonalds to satisfy its future leaders program. Some of the theories underpinning McDonalds human resource practices include motivational theories, social exchange theory and talent management theories. Retention is also essential for non-profits but unfortunately, the recognition approach cannot be universalised since the motivational needs of volunteers do not necessarily correspond to those of individual s seeking paid employment. Employee Recognition and Talent Retention Human resource management is an important function within any organisation that facilitates the attainment of organisational objectives. The process mainly involves managing the human resource component of the organisation. Given increased competition and greater ubiquity of organisational inputs, the versatility of the human resource makes it one of the most significant considerations for firms. This is because while other resources and organisational inputs are imitable to a significant extent, the human resource component is not as easily imitable. Consequently, when organisations have a unique human resource base, they can easily harness a competitive advantage over their competitors. In this regard, it is important for organisations to attract and retain suitable talent. This paper argues that employee recognition is an important practice, with theoretical groundings in motivation, performance management and talent management concepts, which enables organizations to retain talen t. Employee retention is important in offering a competitive advantage to organisations. This is because of the unique factors embedded in employees such as knowledge. Knowledge is an important feature that can provide a competitive advantage to companies, especially when such knowledge is idiosyncratic and non-substitutable (Ahammad, Tarba, Liu, Glaister, 2016). By retaining employees, organisations can retain such knowledge. McDonalds practices are indicative that the organisation recognises the importance of attracting and retaining top quality employees. This is illustrated in the companys culture and other organisational practices such as training and remuneration tendencies. McDonalds culture is underpinned by five key strategies, one of which is people. The emphasis on people as part of its corporate strategy illustrates McDonalds recognition of the importance of the human resource component. One of the most pertinent components of McDonalds strategy is its recognition scheme. The case study file highlights that the company has a strong recognition culture, which is manifested through formal events and corporate programs. The recognition culture plays an important role in supporting McDonalds culture, as well as attracting future leaders. The key thing about McDonalds culture is that the company endeavours to develop future leaders, with a majority of its business leaders and managers having started out as crewmembers in McDonald outlets. Specifically, this is the case for 80% of its restaurant managers. Arguably, this is indicative of apt retention practices, which can be attributed to employee recognition. This is because according to Gregory (2011), one of the main reasons why employees elect to leave an enterprise is due to the lack of recognition. Other factors include a lack of opportunities for career growth and communication problems. Given that employees will cho ose to leave an enterprise when they fail to be recognised, then it is evident that recognition contributes to employee retention. The contribution of recognition to McDonalds culture through employee retention cannot be understated. This is because of the significance of employee retention. For starters, employee retention in an organisation is important in ensuring that an organisation retains its top talents (Hausknecht, Rodda, Howard, 2009). As noted, there is a prevailing tendency within the labour market of a scarcity in individuals who are highly skilled (Allen, 2008). The implication for companies is that they either have to attract and retain top talents, or alternatively, be forced to contend with a labour force that is understaffed and underqualified. Apart from the shortage in talent within the labour market, another reason why the retention of talent is important is due to the significant costs associated with labour. The costs envisaged here are not just those of selecting and recruiting employees, but further, sunk costs associated with employees who elect to leave an organisation. In particular, the costs associated with labour turnover can be classified into three categories as either hard costs, soft costs or opportunity costs (Tracey Hinkin, 2008). Hard costs are those that will involve direct monetary expenditure in the pursuit of new and suitable talents. These will include the costs of advertising, selection and other related costs that are reflected as expenses in a companys financial statements. Soft costs, on the other hand, do not translate into direct financial expenses. Rather, they entail such aspects as the distraction of management from other value adding activities (Butali, Wesang'ula, Mamuli, 2013). Finally , opportunity costs are those related to missed revenues or the investment of money to acquire labour, whereas such monies could have been invested into other activities. Another aspect of cost is sunk costs, which entails the costs associated with the training of outgoing employees. Finally, Ton Huckman (2008) highlight costs of operational disruption and employee demoralisation. These are indirect costs, whereby operational disruption regards the specific human capital possessed by outgoing employees, including specific knowledge about a companys processes and activities. Employee demoralisation, on the other hand, affects remaining employees and may occur due to close social relationships with their colleagues who are departing, or due to an increase in the workload, as the current labour demand is reapportioned. Evidently, there are significant cost implications associated with employee retention. By engaging in employee retention through its recognition scheme, McDonald is able to optimise on these costs, by avoiding sunk costs and opportunity costs. McDonalds huge investment of $40 million on its annual training underscores the extent of its re tention practices. Employee recognition is important to McDonalds future leaders program, by virtue of the mediating effect of employee retention. When a firm retains employees, it not only optimises on costs associated with securing human resources, but further, it benefits from the essence of employees as human capital. Employees have a particular firm-specific expertise, which an organisation cannot exploit if these employees leave (Urbancov Linhartov, 2011). When employees have been in an organisation for some time, they acquire valuable (tacit) knowledge about the firm and its processes(Ton Huckman, 2008). Moreover, employees who have stayed at a firm for longer have important experience, which the firm can harness through appropriate retention. This accumulated experience and tacit knowledge constitute part of the features that a firm will look for in its potential managers, since such positions require people who have an extensive understanding of the firms processes. Employee recognition is further important in allowing McDonalds to realise its organisational objectives. This is because McDonalds operates in a service industry, where employees exercise a high level of contact with customers. Thus, employee attributes have a greater impact on customer satisfaction, as opposed to manufacturing industries where employees and customers rarely come into direct contact. The quality of service provided to customers influences their behavioural intentions, which in turn influences their intention to engage with the firm in future or to provide positive recommendations (Saha Theingi, 2009). Since service quality is the intermediary between employees output and the customers experience, it is important to ensure that employees provide excellent output. In fact, according to Brown Lam (2008) the perceived quality of service has a complete mediation effect on the job satisfaction-customer satisfaction relationship. Consequently, in order to improve customer satisfaction, it is necessary to ensure that employees are themselves satisfied. Here, the contention is that improving employee satisfaction will result in better quality of service, which, in turn, will lead to customer satisfaction. The contention that employee satisfaction results in improved quality of service is based on the theory of social exchange. This is according to Yee, Yeung, and Cheng (2008), who further go on to elaborate that this theory anticipates justice to prevail in social interactions. Specifically, when individuals receive certain gifts, they experience feelings of gratitude and a yearning to reciprocate. Consequently, when employees experience positive aspects such as favourable working conditions and recognition from their employing organisation, they feel compelled to reciprocate. In the context of McDonalds, the recognition scheme encourages employees to provide their best input towards achieving the organisation' s goals. One can also understand McDonalds recognition scheme by considering theories such as motivational theories. Employee motivation is one of the tools that human resource practitioners use to drive employee behaviour. While there are many different theories of motivation, one of the most prominent ones is the Maslows hierarchy of needs. This theory views human needs as being fashioned like a pyramid, whereby there are base level needs and higher-level needs. As one ascends the pyramid, the needs decrease in number but increase in complexity. In order to move to needs at a higher level, one must first satisfy the needs at the lower level(Zeb, Rehman, Saeed, 2014). The pyramid is broken down into two categories of lower level needs and higher level needs. Lower level category needs include physiological needs, safety needs, and belonging needs. The higher-level category needs are the esteem needs and the self-actualisation needs. According to DuBrin (2011), the yearning for individual su ccess identifies with the last stage. Consequently, McDonalds recognition scheme caters particularly for the needs at the higher level. This is because when employees are recognised, they esteem needs are satisfied. Moreover, the sense of achievement that they realise upon such recognition contributes to their self-actualisation. McDonalds recognition scheme also finds strong support in theories of performance management and talent management. Performance management typically seeks to realise the most efficient utilisation of the human resource component of the organisation, by optimising employee performance. Thus, performance management will involve the evaluation of employees job performance(Gruman Saks, 2011). As part of the performance management process, managers not only set expectations for employees and measure the realisation of these expectations, but further, they also reward performance(Farndale, Hope-Hailey, Kelliher, 2011). In the context of McDonalds the company achieves this imperative through its recognition scheme. Performance management results in such benefits for the organisation as effectiveness and efficiency in the process of executing the companys strategy(Yeoh, Richards, Wang, 2014). To realise these benefits, however, employees must perceive that there are fairness and justice i n the performance management process(Farndale, Hope-Hailey, Kelliher, 2011). McDonalds is able to satisfy these imperatives since according to the case study file, the company makes its pay decisions based on an objective framework, and further provides a sound basis for explaining pay decisions to its employees. Moreover, the company also ensures equity between different roles, while ensuring that employees understand their total pay package. Making employees aware of the pay structure and their pay package not only enhances the transparency of its remuneration process, but it also promotes employees comprehension and contentment with organisational processes. The other theory is talent management. Talent management is a relatively new area of focus in the employee retention discourse, and thus lacks adequate definitions in the literature (Hughes Rog, 2008). Talent management is embedded in an understanding of the employee as a vital and valuable resource who has the capacity to provide an organisation with a competitive advantage. Talent management is different from employee retention based on the scope of individuals targeted. Unlike employee retention, which seeks to reduce the overall rates of labour turnover, talent management is primarily concerned with the retention of top talents, individuals whom the organisation has identified as having the capacity to occupy key positions. One of the problems with blanket retention policies is that they result in the retention of employees including those who record average to low performance (Hausknecht, Rodda, Howard, 2009). With talent management, however, a company is able to focus its eff orts and resources on employees who have been identified as having the potential to occupy top positions in the firm. Talent management is well illustrated by McDonalds, particularly when one considers its future leader's program. McDonald's is able to identify and retain top talents, by recognising them. McDonalds human resource management approach is characterised by practices such as performance management and talent management. The company emphasises on providing training to its employees. It also invests in employee recognition, which encourages employees to provide their best output. This approach is thus important in allowing the firm to realise its objectives while satisfying the needs of its employees. The approach is a dynamic one that can be applied even in a not-for-profit organisation such as the Spastic Centre. This is because the approach is embedded in satisfying and motivating employees. Thus, not-for-profit organisations can adopt a similar approach where they recognise volunteers. However, the approach cannot be applied directly and instead has to be adapted. While the recognition approach is efficient in facilitating employee retention by McDonalds, such an approach would not be applicable in retaining volunteers in a non-profit organization. This is because the factors that motivate people to work in a business may not necessarily be the same factors that lead individuals to enlist as volunteers. Yet, the challenges that businesses face are somewhat the same as those that non-profits face. Just like business organisations struggle to attract and retain suitable talent, so do not-for-profit institutions(Wong, Chui, Kwok, 2011). Additionally, Millette Gagn (2008) indicate that increasingly, there is a scarcity of long-term volunteers. This makes it important for non-profits to retain volunteers. Evidently, there are many similarities between the challenges that businesses such as McDonalds and non-profits such as the Spastic Centre face. In the same breath, theories such as Maslows hierarchy of needs are applicable within a wide range o f institutions, situations, and contexts. Consequently, it is possible for non-profits to apply these concepts in a similar fashion to McDonalds. The key differences that a non-profit would have to make in applying the approach is to consider the motivation belying a volunteers act of voluntaryism carefully. An understanding of the reasons behind individuals volunteering will then facilitate the designation of programs that are capable of meeting volunteers expectations and promoting their retention. By meeting the expectations of volunteers, non-profits are able to satisfy volunteers. This is important since according to Wong, Chui, Kwok (2011), volunteer satisfaction has the capacity to allow organisations to retain volunteers. This paper has argued that employee recognition is an important organizational practice that promotes talent retention in an organization. McDonalds is an excellent example of an organization that has successfully done so. The company has been able to source 80% of its restaurant managers from within its own ranks. This is an apt illustration of its success in nurturing talent. McDonalds employs recognition at various levels, starting at the store level, all the way to the corporate level. Recognition promotes employees satisfaction of their motivational needs. While this approach is a successful one, its use cannot be replicated in non-profits, mainly due to the difference in personal motivations that drive individuals within the two types of institutions. References Ahammad, M. F., Tarba, S. Y., Liu, Y., Glaister, K. W. (2016). Knowledge transfer and cross-border acquisition performance: The impact of cultural distance and employee retention. International Business Review, 25(1), 66-75. Retrieved December 9, 2016 Allen, D. G. (2008). Retaining talent: A guide to analyzing and managing employee turnover. SHRM Foundation Effective Practice Guidelines Series, 1-43. Retrieved December 9, 2016 Brown, S. P., Lam, S. (2008). A Meta-Analysis of Relationships Linking Employee Satisfaction to Customer Responses. Journal of Retailing, 84(3), 243255. Butali, N. D., Wesang'ula, P. M., Mamuli, L. C. (2013). Effects of Staff Turnover on the Employee Performance of Work at Masinde Muliro University of Science and Technology. International Journal of Human Resource Studies, 3(1), 1. Retrieved December 9, 2015 Farndale, E., Hope-Hailey, V., Kelliher, C. (2011). High commitment performance management: the roles of justice and trust. Personnel Review, 40(1), 5-23. Gregory, K. (2011). The importance of employee satisfaction. The Journal of the Division of Business Information Management, 29-37. Gruman, J. A., Saks, A. M. (2011). Performance management and employee engagement. Human Resource Management Review, 21(2), 123-136. Hausknecht, J. P., Rodda, J., Howard, M. J. (2009). Targeted employee retention: Performance?based and job?related differences in reported reasons for staying. Human Resource Management, 48(2), 269-288. Retrieved December 09, 2016 Hughes, C. J., Rog, E. (2008). Talent management. International Journal of Contemporary Hospitality Management, 20(7), 743 - 757. Retrieved December 09, 2016 Millette, V., Gagn, M. (2008, March 8). Designing volunteers tasks to maximize motivation, satisfaction and performance: The impact of job characteristics on volunteer Engagement. Motivation and Emotion, 32(1), 11-22. Saha, G. C., Theingi. (2009). Service quality, satisfaction, and behavioural intentions: A study of low-cost airline carriers in Thailand. Managing Service Quality: An International Journal, 19(3), 350-372. Ton, Z., Huckman, R. S. (2008). Managing the impact of employee turnover on performance: The role of process conformance. Organization Science, 19(1), 56-68. Retrieved December 09, 2016 Tracey, J. B., Hinkin, T. R. (2008). Contextual factors and cost profiles associated with employee turnover. Cornell Hospitality Quarterly, 49(1), 12-27. Retrieved December 09, 2016 Urbancov, H., Linhartov, L. (2011). Employee turnover and maintaining knowledge continuity in large and small organisations." (). Central European Review of Economic Issues, 14, 265-274. Retrieved December 09, 2016 Wong, L. P., Chui, W. H., Kwok, Y. Y. (2011). The volunteer satisfaction index: a validation study in the Chinese cultural context. Social indicators research, 104(1), 19-32. Yee, R. W., Yeung, A. C., Cheng, T. E. (2008). The impact of employee satisfaction on quality and profitability in high-contact service industries. Journal of operations management, 26(5), 651-668. Retrieved December 09, 2016 Yeoh, W., Richards, G., Wang, S. (2014). Benefits and Barriers to Coprorate Performance Management. The Journal of Computer Information Systems, 55(1), 105-116. Zeb, A., Rehman, S. u., Saeed, G. (2014). A Study of the Relationship between Reward and Recognition and employees Job Satisfaction: A Literature Review. Abasyn University Journal of Social Sciences, 7(2), 278-291.