Drive High Performance at McDonald's with Strategic Performance Management
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This document discusses performance management at McDonald's. It defines performance management and describes its role in strategic HR and contributing to good corporate governance. McDonald's faced internal challenges like a lack of common performance standards globally. It addressed this by implementing a Performance Development System to better align goals, provide feedback, and tie rewards to top performance. This led to improved business results, growing sales by 40% and tripling the stock price. The system also promoted ethical decision-making in line with corporate governance principles.
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Drive High Performance at McDonald's with Strategic Performance Management
- 1. Performance Management Driving a High-Performance Culture Lance Whitworth Kate Johnstone Vicky Wong ChidanandaKamath
- 2. Define Performance Management Describe the role of Performance Management in strategic HR Describe the role of Performance Management within McDonalds Recognise how Performance Management contributes to goodCorporate Governance Evaluate McDonald’s approach to ethical behaviour Identify key learning insights Session objectives
- 3. What is Performance Management? The process through which managers ensure that employees’ activitiesand outputs are congruent with the organisation’s goals(Kramar,2010). A continuous process of identifying,measuring, and developingthe performance of individuals and teams and aligning performance with the strategic goals of the organisation(Aguinis,2007).
- 4. Using Performance Management strategically
- 5. Company type: Public (NYSE) Founded: May 15, 1940 – California Employees: employing 1.5 million + people Locations: US, Europe, Asia-Pacific, Middle East, Africa, Latin America, Canada. Net income: $4.949 billion USD (2010) McDonalds has become a symbol of globalisation. McDonalds – At a glance
- 6. 20 of the top 50 worldwide managers started in McDonald’s restaurants, including the current CEO. Locally, 80% of restaurant managers commenced their career as crew. 67,000 McDonald’s restaurant managers and assistant managers started as restaurant staff. McDonald’s invests 1 billion+ annually on training. Continued…
- 7. In 2003 the stock price was significantly lower than it had been in a decade. Competition intensified. Growing anti-Americanism in the global marketplace making it difficult to expand. External challenges
- 8. Global performance management practices did not share a common set of standards. Difficulty in identifying and rewarding top talent. Managers lacked a common understanding of what ‘high performance’ should look like. Globally, performance appraisal was interpreted differently. Open conversations between employees and managers were not occurring regularly. Internal challenges
- 9. Driving a High Performance Culture To drive a high performance culture, the company needed to: Better differentiate performance at the individual level. Support managers in giving their employees open and honest feedback. Tie rewards to the highest performance.
- 10. PDS was designed to drive the performance & development of employees: Align individual performance goals with the business Performance Evaluations based on what gets done and how it gets done. Process for identifying employees ready for advancement Distribution of rewards based on individual performance Performance Development System (PDS)
- 12. IPP & Year-End Assessment
- 14. As of 2007 the company is delivering the strongest business results in the last 30 years PDS has enabled this success by ensuring alignment of individual performance goals with the business strategy Grew sales by 40% Increase of $6 billion in revenue Share price tripled McDonald's corporate website The PDS Impact
- 15. Performance Management & Corporate Governance 3. Promote ethical and responsible decision-making. 9. Remunerate fairly and responsibly. 7. Recognise and manage risk. 8. Encourage enhanced performance.
- 17. How has Performance Management evolved? What are some of the weaknesses of Performance Management? Is the Forced distribution method an effective approach to measuring performance? Insights – Aspects to consider
- 18. Who is currently experiencing ineffective performance management in their organisation? Line Managers – how might you change your approach to the performance management of your staff? Questions
- 19. Kramar, Bartram, et al. 2010, Performance Management – Human Resource Management in Australia Ed. 4 , McGraw Hill. Aguinis, K. 2007,Performance Management - Performance Management and Reward Systems in Context , Pearson Prentice Hall. Levensaler, L. October 2007, Driving a High-Performance Culture - McDonald's Leverages Its Global Performance Management Practices. Bersin and Associates. ASX Corporate Governance Council. 2003, Principles of good corporate governance and best practice recommendations , ASX stock exchange. McDonalds corporate website 2011,http://mcdonalds.com.au/about-us/responsibility Shiba.Q,2006 Ethical Criticism of McDonalds http://www.echeat.com/essay.php?t=28470 References
Editor's Notes
- - Each team member to introduce themselves and what content areas they’ll be presenting Brief explanation of why this topic was selected Promote and welcome two-way interaction: Encourage questions, statements of concurrence or objective. Acknowledge the Rich and divers range of knowledge and experience within the room, either as Line Managers managing staff, as HR practitioners facilitating organisation wide processes or as a team member being managed and assessed in accordance with a framework
- At session objective 3 – pose the following two questions to the class:Raise your hand if you’ve ever held employment with McDonalds? Keep hands upRaise your hand if you have a family member or friend who has ever held employment with McDonaldsFrom the number of hands raised its not hard to appreciate the extent to which McDonalds has played a role in the careers of either ourselves personally, or family and friends.
- Raise the following question before revealing the two definitions:“So what exactly is Performance Management?” What sorts of things does this term raise for people when they hear or refer to ‘Performance Management as a concept or initiative?Emphasise and clearly articulate how we’ll be referring to Performance Management throughout the presentation; i.e. a structured process, framework or systematic approach to cascading organisation goals, through top, middle and first level management layers as well as the all important team member who is largely involved in the day-to-day operational activities of the business.Reference 1: p. 335 Chapter 10: Performance Management – Human Resource Management (2010 Edn 4) Kramar, Bartram, et al.Reference 2: p. 2 Chapter 1: Performance Management and Reward Systems in Context – Performance Management (2007)- Herman Aguinis. Pearson Prentice Hall
- Provide hand out here. Direct audience to this image.
- Employee numbers: http://www.mcdonalds.ca/en/aboutus/faq.aspx, Who here has worked at McDonald’s? Who has a friend or family member who has ever worked at McDonalds?
- Promote ethical and responsible decision making: By utilising a standard and transparent Performance Management Framework, organisations and their managers are better positioned to make performance appraisals (and subsequently identify top performers for reward and advancement and underperformers for training). Performance Management is always going to have an element of subjectivity about it, but by creating competencies (which clearly articulate expected levels of performance) and implementing calibration roundtables (to minimise rating inflation) organisations are in a better position to make ethical and responsible performance decisions. A rigorous performance management framework assess both WHAT has been achieved as well as HOW it was achieved.Recognise and manage risk: Performance appraisal records can be used by dismissed employees to challenge the decision to terminate their employment. It is important to include all material relating to performance in a formal record, particularly information relating to poor performance and counselling. Organisations should ensure that they are implementing performance management processes that are legally robust. Without a robust framework, employers expose themselves to unfair dismissal claims. More than 6000 unfair dismissal claims were lodged against employers between mid 2008 and 2009.Encourage enhanced performance: As we’ve already seen throughout our presentation in the context of McDonalds, a Performance Management Framework helps organisations to identify what the expected levels of performance are, and thereby creating a system whereby individuals can create goals and individual development plans which contribute to higher levels of individual, team, and organisational performance.
- 1. Traditionally, the formal appraisal system was viewed as the primary means for managing employee performance. It was seen (and continues to be seen by many organisations) as an administrative duty performed by managers and it was primarily the responsibility of the HR function.2. Stifles teamwork, too much subjectivity around performance appraisal, additional workload to time poor managers, on-going coaching and constructive feedback required of managers to implement an effective performance management framework tends to be done poorly as managers are not equipped with the skills to undertake these tasks.3. Page 349