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MGT3160: Services Management Assessment 2

Lecturer: Neelofer Mashood Due Date: March 2 2014 Submitted by: Isha Kembhavi MISIS number: M00378694

APPENDIX

Diagram 1:

Source: Jacobs and Chase, 2013, p. 156

Diagram 2:

Source: Jacobs and Chase, 2013, p. 156

Diagram 3:

Source: (Looy, Gemmel and Dierdonck, 2013, p.291) Diagram 4:

Source: (Looy, Gemmel and Dierdonck, 2013, p.292)

McDonalds took a week to finalize a script for an employee taking a customers order. The script says HiMayITakeYourOrder. This takes 1 second, but adds to the companys aim of reducing current customer time by 15 seconds, which could result in a 2% upsurge of sales (Jacobs and Chase, 2013, p. 156). To maximise customer satisfaction, a company providing any kind of service must ensure all the elements of its service match the organizational goals. It is thus important for an organization to set its service concept, which clearly states what they are aiming to provide (Zeithaml and Parasuraman et al., 1990). McDonalds has clearly fostered a service concept, regarded by consumers as well, as a fast-food restaurant aiming to provide high quality fresh food in the shortest of time. McDonalds also aims to provide its customers a standardized service, with almost no difference in food and service in its outlets worldwide. As over 30% of its revenues are from the US from company owned branches (mcdonalds.com, 2014), the essay focuses on these outlets to evaluate the theoretical theories in designing a service process and applying it to McDonalds. The essay further considers the importance of human resource in a service, HR management strategies and analysis of management policies adopted by McDonalds. Lastly, resource utilization theories are applied and analysed for McDonalds, concluding with suggestions to improve customer satisfaction.

SERVICE PROCESS
The service process allows an organization to clearly define its service functioning and how a customer perceives a service (Fitzsimmons and Fitzsimmons, 2000, p. 167). To design the process, organizations must be aware of the inputs (as physical facilities-servicescape, information, staff) they have to offer. Secondly, the process is where the actual service is managed where even the customer could be processed. This leads to value being added for consumers in terms of outputs. McDonalds earlier followed a service process (Diagram 1) that concentrated on using the Fordism technique in particular assembly lines to produce a number of burgers and store them until a customer ordered them. The employees in the kitchen would then just pass on the order to the front employees and then to the customer. Although this procedure ensured minimal cooking time after a consumer has ordered, it caused wastage and didnt ensure freshness of the product. To maintain short-cooking times, McDonalds although still follows the assembly line method in the cooking, it has now transformed the burger-making procedure into a high-capacity method (Diagram 2). Under current process design an employee judges present demand and places orders to balance inventory at a certain level. The made-to-stock process ensures maintain the minimal cooking time and maintain inventory during both off and peak times, allowing McDonalds to minimize wastage, ensure freshness and serve customers in a maximum of 2.5 minutes (Business Insider, 2012). Since there is almost no customization in the preparation method, the made-to-stock method has worked very well. To evaluate the service process adopted by McDonalds, certain theories can be linked. Based on the variety of products served, McDonalds has a Runners service process. This is when employees perform standard actions repetitively to reach high volumes, and managers are able to forecast demand with precision (Johnston and Clark, 2012). The recurring actions allow McDonalds to train employees to work faster on production and thus to keep up with the service concept of fast food. The above also helps describe the McDonalds service process as a commodity process, where the volume per unit is high and process variety is low. The advantage this method offers for the organization being able to provide a consistent quality of service, using the service employees, in a number of places (Looy, Gemmel and Dierdonck, 2013). This helps McDonald keep up their image of having standardized services worldwide.

Lastly, during the service process, customers interact with mainly two kinds of employees- the ones taking their orders and the ones handing out the order. They could be ones in the drive-through or at the cashier but they are the only ones consumers interact with. Employees in the kitchen ensure product and preparation quality, prepare the food, estimate demand and stock supplies and assemble food to ensure a smooth flow. The front staff needs to constantly work hand-in-hand with the back employees to ensure a flow in terms of stocking during off peak and peak hours, particular customer orders and much more. Front employees also need dedicated training for customer service, as their job design needs them to interact with customers they moreover need to be aware of customer mind-sets and moods. For instance, a customer walking into McDonalds expects fast service and while in queue, the customer in front takes longer than usual to decide. The employee has to take additional steps to manage the depleting mood of the second customer in queue, to maintain customer satisfaction levels (Johnston and Clark, 2012).

SERVICE PEOPLE:
The Services process involves both employees and customers. The simultaneity founds a vital relationship between employees behaviour, their motivation, capabilities and commitment and consumers opinion of service quality and henceforth satisfaction. As a result, Human resources play a crucial role in (Looy and Dierdonck et al., 2013, p.179) building an organization and growing revenues. Heskett defines this as the service profit chain. The essence of the model is that satisfied employees lead to satisfied consumers who naturally lead to increased revenues. Furthermore, This model is used to analyse the McDonalds service process in detail: Internal Service Quality emphasizes the importance of ensuring employee satisfaction by crafting a good job design, select the right employees, help them grow by training and development tools and have the right reward strategies. McDonalds focuses on crafting the right job for an employee and aims to ensure the position is right for the organization and the employee. Jobs are designed by the production-line concept-this minimized role conflict and diminish ambiguity by enhancing clarity to each position. They also follow a selective procedure like personality tests, written applications and interviews, for hiring employees at lower as well as higher positions. McDonalds also conducts on job evaluations to test employees skills just on customer satisfaction (McDonalds.com, 2014). McDonalds provides its employees rewards in terms of monetary payments and other benefits. In 2010, the company was under pressure because it released an article where it encouraged crewmembers to look for a second job as they paid the minimum wage for monetary payment. Employees surveys indicated low motivation, reduced loyalty and even increased intentions to quit (Shin, 2013). McDonalds were quick to take back their statements, increased intrinsic benefits like Best Employee Recognition programs, job performance reviews. Limited benefits other than monetary rewards like sick leaves, shift rotation and educational assistance were implemented (Examiner.com, 2014). The organization also understands the pressure crewmembers and team leaders face because of the nature of the fast food industry. McDonalds follows a strict policy of upholding serving time of a maximum of 2.5 minutes per customer (Business Insider, 2012). Like seen, employees follow the rigid pattern of preparation to meet the standardized service quality of the company. Also, the employees encounter pressure from customers of serving the right dish in right time. Therefore employees are constantly pressurized which results in low motivation, increasing stress levels and absenteeism. In order

to resolve this matter, McDonalds has implemented strategies like allowing flexible working hours, shift rotations and motivational schemes such as Employee of the Month (McDonalds.com`, 2014). Training and development contribute heavily to employee motivation (Johnston and Clark, 2012). McDonalds has been credited with the ABC award for providing exceptional training facilities to its employees. It includes training like job rotation where 1 crewmember takes up responsibilities of the team leader for some hours in the day. To maintain the organizations goal of standardized services, as a part of their training, employees encountering customers are given intensive training on customer service and are also given basic scripts, which they may alter in minimal ways (Hrmagazine.co.uk, 2014). McDonalds also runs a university to train candidates for its corporate roles (McDonalds.com, 2014). It focuses on leadership skills, back office practices like ensuring consistent quality in product sourcing. Happy employees lead to happy customers (Cooper, 2012). With 87% employee satisfaction

(Newman, Floersch and Balaka, 2012, pp. 2-8) and just 60% turnover rate (Industry 125%) , 75%
customers report Very high levels of satisfaction with McDonaldss customer service (Washington Post, 2013). McDonalds aims to increase revenues by retaining their current customers through developing strong customer relation (Thomas, 2012). Research indicates lifetime revenue stream from a loyal burger eater can be $8,000 (Harvard Business Review, 2014). Having motivated employees ensures better service performance, which results in happier customers. Despite these efforts, McDonalds has recently suffered from a minimal decrease in customer satisfaction that has been attributed to low front employee friendliness (AOL Jobs, 2013). Further research indicates employees are complaining about the monetary pay that is set at minimum levels. Although McDonalds investigated the matter earlier, the company had only implemented increased benefits for non-monetary benefits. To ensure they keep up with their service motto of happily serving happy customers McDonalds must consider increasing monetary benefits. Strategies like including bonus monetary rewards to the Employee of the Month program and gradual increase in wages may help them uphold their service satisfaction levels.

RESOURCE UTILIZATION.
Resource utilization refers to making the maximum effective use of operational resources, which is the core function of service operations. Ensuring that inputs such as staff, raw materials and information are utilized to the right level that affects not only the efficiency, but also costs and customer satisfaction (Johnston and Clark, 2012, p.276). An organization must be able to manage its capacity during its business cycle to ensure customer and employee satisfaction. For example, in case of under-utilization of resources, employees subjected to boredom and concern for their longstanding employment may not perform well, eventually decreasing customer satisfaction. Diagram 3 indicates the distribution of customers at McDonalds in a week, with diagram 4 indicating the sales throughout the day. While McDonalds may not have drastically different demands on different days, Fridays and Saturdays are comparatively busier. However, time does play a vital role, with afternoon time slots exhibiting maximum fluctuating demand- McDonalds has adopted the strategy of Chase Capacity. The strategy is primarily used when an organization caters to a high-volume changing demand and adapts to this rapidly. One of the biggest strategies implemented by McDonalds was to introduce a full-fledged breakfast menu. Jim Skinner, CEO stated that the breakfast was one of the most profitable decisions made (Qsrmagazine.com, 2014), which now accounts for 30% of the companys revenue (Forbes, 2014). He believes while they already had invested in physical restaurants, had employees working from 7:00 am, they had very few consumers walking in for burgers in the morning and so resources were being leaked. Such capacity leaks can often affect a business as apart from reduced profits by altering employee motivation and reduces customer satisfaction. McDonalds has applied the chase strategy to their service process. This strategy, allows them to change input (resource) levels based on demand, is especially beneficial for a commodity process (Johnston and Clark, 2012, p.219-223). To adopt this strategy, it has integrated flexibility into the companys service process, where as seen, the manager on duty forecasts demand and then stock half-prepared burgers. Based on consumer demand, burgers are then fully cooked and assembled. At the same time, the stock is restocked. This helps McDonalds adhere to their service concept of fresh food while maintaining fast service. It has also undertaken methods like employing staff on flexible hours. This allows managers to have more employees during peak breakfast, lunch and dinner hours, with fewer otherwise.

Consumers have also been incorporated into the service process. For instance, consumers at the restaurant are expected to collect their own order and to clean up after themselves. This saves utilizing an employee for just the clean up procedure, and positions him/her in the actual food process, saving increasing time efficiency. While this strategy has worked out well for McDonalds so far, the challenge this method possesses is the difficulty to maintain flexible resources while ensuring constant service standard, all at minimum expense. Despite these efforts, recent reports indicate customer dissatisfaction due to long waiting queues, especially with the drive through systems. Drive throughs are an increasingly popular trend with fast food restaurants, contribute to about 45% of McDonalds sales As per LA Times (2013), McDonalds at 190 seconds is currently behind its competitors, Wendys at 134 seconds in service time for drive through. McDonalds has seen a 0.8% increase in balking as consumers expect fast service from the restaurant and are willing to leave if they do not receive the expected (Team, 2014). To work on this, McDonalds has been recently upgrading their drive through queuing systems by introducing a third waiting window, other than the order-payment and collection windows (LA Times.com, 2014). To work further on time reduction at drive throughs, Mcdonalds can look into introducing parallel lines where possible and more efficient service production methods. Some methods the company could incorporate into their service process to counter employees entering the coping zone and affecting customer satisfaction could be by training employees to multi-task, adding automation in the service process, for instance, a machine that would slice breads instead of having an employee dedicated for it in the process, preparing schedules for each step along the process for employees to adhere to. Diagram 4 indicates the variable sales in a day, which are at peak during lunch and dinner hours. Both back and front employees are subjected to large amounts of pressure during these hours, which as seen can lead to reduced performance. The phenomenon can be referred to as the coping zone (Fitzsimmons and Fitzsimmons, 2000, p. 452) where consumers may notice deterioration in service quality in terms of unfriendly counter employees, dropped food quality and even increased queue lines. satisfaction drops and eventually may lead them to look for alternatives. Customer

To conclude, one can see how McDonalds have designed a well-integrated service design, which helps reach organizational goals of providing fast and fresh food to customers. It has done so by focusing on effectively and efficiently utilizing their resources, especially human resources. Well trained staff are able to efficiently forecast demand, which has allowed for policies like shift jobs and assembly line production technique to help the organization grow.

References
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McDonalds.com`. 2014. Recruitment & Training at McDonalds. [online] Available at: http://www.mcdonalds.co.uk/content/dam/McDonaldsUK/People/Schools-andstudents/mcd_recruitment_training.pdf [Accessed: 2 Mar 2014]. Newman,, J., Floersch, R. and Balaka, M. 2012. Employment Branding at McDonalds: LEVERAGING REWARDS FOR POSITIVE OUTCOMES. [e-book] The Magazine of WorldatWork. pp. 2-8. http://www.worldatwork.org/waw/adimLink?id=59396 [Accessed: 2 Mar 2014]. Qsrmagazine.com. 2014. McDonald's CEO Jim Skinner Talks Restaurant Success - QSR magazine. [online] Available at: http://www.qsrmagazine.com/executive-interviews/one-one-jim-skinner [Accessed: 2 Mar 2014]. Shin, L. 2013. How She Lives On Minimum Wage: One McDonald's Worker's Budget. [online] Available at: http://www.forbes.com/sites/laurashin/2013/07/19/how-she-lives-on-minimum-wage-onemcdonalds-workers-budget/3/. [Accessed: 2 Mar 2014]. Team, T. 2014. McDonald's Brewing Up Big Coffee Plans. [online] Available at: http://www.forbes.com/sites/greatspeculations/2014/02/04/mcdonalds-brewing-up-big-coffeeplans/ [Accessed: 2 Mar 2014]. Thomas, S. 2012. Culture Through a Customer Service Excellence Lens. The New Researcher, 5 Available at: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CDkQFjAC&url= http%3A%2F%2Fwww.newport.ac.uk%2Fresearch%2FJournals%2Fnewresearcher%2Fvol5%2FD ocuments%2F5NR3.docx&ei=qIwQU9H5BMrQ4QTw4EI&usg=AFQjCNF6SD0zBzwZuYgMppsHwX7gqu6emA&sig2=MXrXKOblZnodqww-O5sUQ&bvm=bv.62286460,d.bGE&cad=rja [Accessed: 2nd March 2014]. Washington Post. 2013. Fast food workers are staying longer on the joband wanting more. [online] Available at: http://www.washingtonpost.com/blogs/on-leadership/wp/2013/08/29/fast-foodworkers-are-staying-longer-on-the-job-and-wanting-more/ [Accessed: 2 Mar 2014]. Zeithaml, V. A., Parasuraman, A. and Berry, L. L. 1990. Delivering quality service. New York: Free Press.

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