Introduction

to
Strategic
Resource Management

Human

SHRM can be defined as the linking of Human resources with strategic goals
and objectives for improving business performance and developing
organizational culture with innovation, competitive advantage and flexibility.
To identify the need of SHRM means to accept and have the HR function
involved as a strategically important partner in the formulation and
implementation of the companys overall strategy.
To explain it elaborately, Strategic HRM defines the organizations intentions
and plans on how its business goals should be achieved through people. It is
based on three propositions:
First, that human capital is a major source of competitive advantage;
Second, that it is people who implement the strategic plan;
Third, that a systematic approach should be adopted to defining where
the organization wants to go and how it should get there.

Review of Literature
Journals:
1) Strategic Management and HRM
Mathew R. Allen and Patrick M. Wright
2) Human Resource Management
Karen Legge

Websites:
http://en.wikipedia.org/wiki/McDonald's
http://www.mcdonalds.com/us/en/our_story/our_history/the_ray_kroc_story.ht
ml
http://www.scribd.com/doc/16448162/McDonalds-Project

www.hrm guide.com
www.hr-topics.com
http://www.aboutmcdonalds.com/mcd/investors/annual_reports.html

http://finance.yahoo.com/news/mcdonalds-reports-first-quarter-2013115800163.html
http://www.csrwire.com/members/12873-McDonald-s-Corporation
http://jpkc.szpt.edu.cn/english/article/Human%20Resource
%20Management.htm
http://www.studymode.com/essays/Hrm-In-Mcdonald-s-952331.html

Methodology
Primary and secondary source of data was used in order to study Strategic
HRM in the light of McDonalds and Nokia.
Primary source of data includes journals by eminent personalities referred
above.
Secondary data includes online material through various websites related to
HR and McDonalds.

Analysis and Results

Introduction to McDonald
McDonald is the worlds largest chain of fast food restaurant, spanning over
119 countries and serving around 68 million customers daily. The company
had its installation in 1940 as small hamburger stand in California by Richard
and Maurice McDonald. Initially operated as barbecue restaurant, it was
reorganized in 1948 to offer hamburger as a product. Later on the company
witnessed a period of massive growth after Ray Kroc joined the company as
a franchise agent in 1955 and purchased the chain from the McDonald
brothers. The first filed U.S. trademark for Mc Donalds was on 1961 which
provided the Drive-In Restaurant Services. With the global expansion of
McDonald, it has been a symbol of globalization and has spread the
American way of life across the world.
The primary products of Mc Donalds are hamburgers, cheeseburgers,
chicken items, French fries, breakfast items, soft drinks, milkshakes and
desserts. In response to changing consumer tastes, the company has
expanded its menu to include salads, fish, wraps, smoothies and fruit. Its
headquarter is situated in the United States, operating in more than 34,000
restaurants worldwide where more than 75% are operated by independent
owners, creating an opportunity of employment to about 1.7 million people.
McDonald is often referred as a benchmark for its standard policies and

practices relate to human resources, social responsibility and moral and

ethical values.

Role of SHRM in Hospitality Industry:

SHRM is an important factor for attaining a dominant market position. The

need of SHRM for Hospitality industry is important and prominent in the
tourism and hospitality based organizations go for the same. The quality and
nature of service product offered depends on the skills and competencies of
the human resources that are employed to deliver particular product
offerings. SHRM is important for successful operation of the organization in
short term as well as in the long term for attaining a dominant market
position.

For a multinational company like McDonald, adopting SHRM enables it to

focus on:
1) Organizational growth in a global market.
2) Foster competitiveness in the market in which the organization is
operating.
3) Adjustment to the rapid change in technological factors.
4) Adherence to the different cross-cultural issues.
5) Changes in the factors in the economic environment.
6) Identifying new issues in the workforce environment and developing of a
pro-active approach to adjust to these issues.

Long-term HR Planning a Necessity than a Luxury:

Long term HR planning is an integral part of Strategic HRM. HR planning is

the process of determining an organizations human resource need.
In todays business world, competition is an important factor to exist in the
business. For an organization like McDonald, operating in 119 countries with
68 million customers served daily by 1.7 million employees, the presence of
SHRM is critically important. Long term HR planning generates a bigger
picture of the future demand and supply of the organizations human
resource and the ways that organization is supposed to deal with the issue.

SHRM Strategy in McDonald

HR strategy identifies the role of the HR as being transformational and
change oriented. HR strategy differs from short term to long term. Unlike
traditional HRM where rigidity is stressed, strategic HRM focuses on broad,
flexible and team-work form of job design. The most crucial factor in

effective HR strategy is the identifying people as important asset of the

organization and investment in enhancing of their knowledge.

Appraisal of McDonalds HR Strategy

HR strategy provides a roadmap for an organization to visualize the future

direction and scope with regard to its human resources. It is a long-term
strategic plan which facilitates the organization to analyze the opportunity
and threats, assess internal strengths and weaknesses, and identify
competitive advantage. Developing of HR strategy is a crucial and
challenging managerial activity
HR strategy identifies the role of the HR as being transformational and
change oriented. HR strategy differs from short term to long term. Unlike
traditional HRM where rigidity is stressed, strategic HRM focuses on broad,
flexible and team-work form of job design. The most crucial factor in
effective HR strategy is the identifying people as important asset of the
organization and investment in enhancing of their knowledge
McDonald has been one of the most prominent in the global hospitality for
many years. The continuous growth of the company in a global market
addressing various issues regarding the Human resources hailing from
countries with different culture is really an interesting matter of study.
Generally a HR strategy involves the careful development of various
components of the HRM. A general discussion of the HR strategy of
McDonald has been made as follows:
1)
2)
3)
4)
5)
6)

1.

Organizational Structure
Job Analysis and Job Evaluation.
Recruitment and Selection Process
Training and Development
Motivation Performance management and Appraisal
Reward and Employee Benefits

Organizational Structure

McDonald has 3 different categories in their structure:

The corporate staff controls the company and manages the franchises
worldwide.
The Franchisees are given restaurants to manage them following the
standard of practices set by McDonald.
Restaurant workers are the lower-level wage based employees who are paid
in hourly basis.

2.

Job Analysis and Job Evaluation

Job design specifies the content of the job and the methods of performing
the job. Where job analysis provides with job related data as well as the skills
and knowledge expected of the incumbent to discharge the job, Job design
involves a conscious efforts to organize tasks, duties and responsibilities into
a unit of work to achieve a certain objectives. As such job design follows job
analysis.
A process of attaining an effective job design involves following steps:
1)
What tasks are to be done? : Specification of individual tasks.
2)
How are the tasks performed? : Specification of the methods of
performing each task, and
3)
What is the sequence of performing tasks? : Combination of tasks into
specific job to be assigned to individuals.
Job design provides with a pathway for determining the content of the job
and how the job shall be performed. The most important factor while
designing a job is taking in to consideration of the requirement of the
organization and individual needs of the job holder. An effective and
successful job design can be attained only via striking a balance between the
requirements of the organization and the competencies of job holder.

3. Training and Development

Skill development of the employees in one of the important ongoing concern
in an organization. Human resources need to be developed continuously to
achieve organizational goals efficiently and effectively. Skill development
activities of an organization are focused on developing competencies of
people resources in organization. Organization executes various activities
focusing on the development of the varied skills of the employees. Generally
an organization makes use of various interventions or behavioral techniques
that are designed to teach new skills and knowledge for its employees to
perform the designated tasks swiftly.
Training and development of employees is of vital concern for a globalized
company like McDonald. McDonald has a Management Development
Program (MDP) designed to develop the potential leaders. For example, each
year, McDonald trains about 55,000 employees. It also invests more than
$10 million to ongoing employee trainings, providing valuable skills and
knowledge to its franchisees all over the globe. It has a designated
Hamburger University as a management training center for its valued
employees.

Training is inherent in the McDonald's work culture, and the link between
training and development within the company is overt. The organization has
proven that a fully trained crew is more productive; employees who are
being trained will be less effective and are also likely to produce more waste.
Successful completion of a range of tasks leads to a small pay increase.
Training employees is used as a retention tool. Individuals are trained to work
as a team and feel part of the organization. Training is given to all
employees, this includes all part time staff, encouraging the team.
The morale of the team is of crucial importance in its ability to cope and
work together as a team. Crew members fill in satisfaction surveys, where
they are asked to rate the individual elements of their job role. There is a
correlation between the number of fully trained staff and employee
satisfaction levels, which in turn affect customer ratings.
Restaurants with high levels of training tend to have lower rates of staff
turnover and lower turnover costs. Among leisure retailers an average staff
turnover rate of 188 per cent, while the better performing McDonald's
restaurants averaged 64 per cent .The restaurants that reach the above
average in the training department were inclined to have lower employee
turnover.

Benefits of Job Analysis and Training considered together

1) Improvement of competencies:
Employees competencies can be enhanced via improving their knowledge,
skills and abilities by proper development of a job design and execution of
the training activities accordingly.
2)

Enhance the effectiveness of the employees:

Well formulated job design ensures productive performance of the
employees for achieving
goal effectively.

3)

Fostering of the team work:

When employees become aware of the tasks to be performed by them and
each other, conflicts regarding job execution are eliminated. Various skill
development activities are designed to enhance the climate of trust,
knowledge sharing, effective communication and so on.

4)

Increase job satisfaction:

Job design developed via matching the need of the organization and the
capability of the employees will help to boost-up the morale of the
employees and thus better job satisfaction.

5)

Improve decision making:

When employees are aware of their tasks and are provided with opportunity
to enhance their skills and knowledge, they can have a greater control over
what they perform. Thus it ensures better decision making.

6)

Managing conflicts and changes:

Well formulated job design outlines the duties and responsibilities of
employees and thus conflicts of overlapping duties and tasks are eliminated.
When a job design is developed appropriately, integrating required skill
development training and activities, not only an improvement in the
performance of an individual employee will be noticed but also the whole
human resources of the organization will perform excellently. Individual
conflicts, de-motivation, conflicts and tensions will be reduced and thus a
congenial environment will be developed for a harmonious team work via cooperation and collaboration.

4. Recruitment and Selection Process

McDonald screens the applications submitted by the individual applicants. A
well devised recruitment policy is formulated for the selection process. The
screening of the applicants is based on the merit, institute of previous
employment, experience and so on. Candidates passing through this are
further processed for selection.
Recruitment is easy for the organization; it establishes itself as an employer
of choice by paying top wages for high quality employees and providing a
benefits package which exceeds the minimum required by the local
employment legislation, retention starts at recruitment.
The organization recruits locally and has a strategy of internal promotion.
This helps to attract career minded individuals that will commit themselves
to the organization. Over 60% of their current managers started their careers
as crew in the restaurants .The Company has opened employment up to a
wide range of candidates. The organization is committed to equal
opportunity policy that extends beyond race, gender, ethnic origin, marital
status, color, nationality or disability, to encompass people with very
different backgrounds and experience.

The main focus of the organizations recruitment policy is the ability of the
individual to be customer focused. The right attitude is viewed as more
important than technical ability. This is part of the ethos of customer service
and standardization. The ability to understand and adopt McDonald's
customer led culture is worth as much as the more usual career entry
requirements.
With the graduates development programme, later in the selection process,
the company also looks at specific skills and general knowledge. This is to
develop leadership skills. The organization has been awarded graduate
employee of the year.
Successful Management applicants, who pass the initial screening, are

invited to work in one of the restaurants before a final decision is made. This
gives applicants the chance to try out the job, and provides McDonald's with
the opportunity to see how they function in the environment in which they
will work. This method will reduce the number of employees who leave
shortly after joining the organization.

5. Performance Appraisal
The performance of the employees is appraised on a regular basis. Absence
of appropriate performance appraisal leads to employee dissatisfaction and
frustration. McDonald makes use of various performance appraisal methods
like Graphical rating scale and 360 degree feedback.

6. Compensation and Employee Benefits

Compensation in McDonald includes:
Direct financial payments: wages, salaries, bonuses and commission.
indirect payments: financial benefits like paid insurance
Employee Benefits in McDonald includes perks and benefits like:
Free life insurance after 3 years of employment,
Medical and hospital facilities,
Provident fund, etc.

Development of appropriate SHRM Policies

Devising of appropriate Strategic Human Resource Management has been
the focal point of most of the globally operating organizations in the recent
era. Increased competition, turbulent political forces, socio-cultural changes
are some of the factors responsible for this change. For a multinational
hospitality company such as McDonalds, the need of SHRM is even more vital
due to its confrontation with various critical factors including the
management of diverse culture, political instability, and enormous
competition.

Impact of various factors on devising of SHRM policies

(Analysis of Macro Factors):
PESTEL model is widely used for macro-environmental analysis of a business
entity. PESTEL model measures the impact of Political, Social and Cultural,
Technological, Environmental and Legal factors on operation of business
organization.
With revenues of about $23 billion, human resources of 1.6 million
employees and global coverage, McDonald is a leader in convenient foods
and beverages industry. The corporations increasing success has been the
result of its effective marketing strategies, competitiveness, and high
standard of performance, personal and professional integrity of its
employees and standard business processes and practices.

Political factors:
The global operation of McDonald is highly influenced by the political
scenario of the particular country in which it operates. Companys
operational policies are highly influence by the political system of the host
country. McDonald is confronted to different political consequences in
different countries. For example, some pressure groups in the US time and
often raise voice demanding state action pertaining to the health
implications of consuming fast foods.

Economic Factors:
McDonald is confronted to risk related to foreign currency exchange and the
risk of inflation. Franchises of McDonald suffer badly when the economy of
the host countries are marked with inflation and change in the currency
rates. In addition to this, McDonalds should also adapt itself to the local
economic factors. For example, due to low purchasing power of Indian
nationals, McDonald offers cheapest product to its target people in India
backed by its economies of scale in operation.
Socio-cultural Factors:
Managing human resources coming out of different cultural and social
background is a vital task when the organization is multinational. Over the
years, McDonalds has been able to manage the workforce diversity it retains
under its umbrella. The organization has to address the unique cultural
needs of its diversified customers across the globe. For example, keeping in
mind the vast majority of Hindus in India, McDonald removed Pork and
Mutton products from its menu in India.
Technological Factors:
Though adaptation to the sophisticated technology is a must, a tradeoff
between the cost of technological installment and its desired benefit is
necessary for a firm. Adapting to the modern technology, McDonald makes
use of Facebook and Google advertisements, collaborates with various
websites, makes use of hoarding boards, banners, and stars endorsements
and so on. In this connection, McDonald has also infused its operation with
the new technology-such as technology friendly inventory system and supply
chain.
Legal Factors:
Operating in a global environment requires a company to comply with the
varied legal system across the globe. McDonald has to comply with various
regulatory systems requiring it to be flexible in its operating policies and
other labor policies. For e.g.: McDonald provides its customer with
appropriate information regarding the ingredients of the products and this
has been made mandatory in many countries. Similarly, the company also
takes into account of various legal factors like: employment standards, tax
obligations, and so on.
Environmental Factors:
In this current time when the issues of global warming, climates changes,
carbon emission etc are the emerging global issues, McDonald has also faced
various environmental problems regarding its operation. The most notorious
allegations to McDonald have been the employment of non-biodegradable
substances for their drinks glasses and Styrofoam coffers for the meals. In
these connections, McDonald has to control the use of such substances and
make its customers aware of these factors. It has to invest in those elements

within its domain that promotes the conservation of environment, in any way
it can.

Role of Strategic HRM in developing Organization Culture

Strategic Human Resource Management (SHRM) encompasses decisions and
actions which concern with the management of employees at all levels of the
business and is related to the implementation of strategies for sustaining
competitive advantage with regard to its competitors. SHRM is the HRM
planned at the strategic level. The central idea of SHRM is to gain
competitive advantage through human resources management by
integrating it with overall business strategy.
Organization culture is the set of values, beliefs, behaviors, customs, and
attitudes that helps the members of the organizations understand what it
stands for, how it does things, and what it considers important. It is the basic
foundation of the internal environment of an organization and highly
influential to the behavior of the employees. It is developed over a long
period of time. Companys leadership and its success, symbols, stories and
heroes shape-up and enhances organizational culture.
Strategic human resource management is a vital part of the overall business
plan of an organization. It shapes the basic standards of values and ethical
practices of an organization. Devising of SHRM policies are based in a way
that shapes and modifies employees behavior in long run to attain the
overall business objective. In connection to the Organization culture, SHRM
makes following consideration for attaining business strategy:
1)

Whether or not an organizational culture is supporting the

SHRM?
SHRM and organization culture is inter-related to each other. While
formulating a SHRM policy, a HR manager must consider organizational
culture. For e.g.: while bringing a change in HR policies regarding
implementation of new technology, a youth based organization may accept it
wisely because of having a to-do organization culture.

2)

Whether or not an organizational culture is supporting the longterm business strategy?

Organization culture being inter-related and inter-dependent to SHRM, in turn
also influences and gets influenced by overall business strategy of an
organization.
With regard to the organization culture, McDonald has been an outstanding
example. Its dedication, care, respects and recognition to the employees and
fair treatment has made the corporate values of McDonald strong. The
culture of McDonald has holistic approach that covers the society as a whole.
The benchmarking culture of McDonald is facilitated by:

Fair and ethical treatment to employees.

Quality food at affordable cost.
High standard of food safety.
Improvement of the animal welfare

Areas of Improvement
A well devised Human resource strategy can enable any organization to
develop its human resources to achieve the overall business strategy. In case
of McDonald, its effective human resources strategy has enabled it to
achieve a great deal of success till date. However, McDonald should focus on
making its human resource strategy more comprehensive and adoptive to
the emerging human resources concerns. Specifically, focusing in the
following areas shall benefit the company in making its human resources
strategy more effective.
1)
Communication of its human resource strategy to its employees
effectively.
2)
Inclusion of the mechanism for identifying the talented and qualified
workers, grooming of the workers and providing various kinds of scholarship
and facilities.
3)
Formulation of effective motivational schemes such as payment of
higher wages for the part-time employees.
4)
Making the recruitment and selection policy more adoptive to the
legislation of the host country along with the recognition of issues related to
the workforce diversity.
SHRM policies should focus on succession planning of its employees via
continuous amendment of Job design and appropriate enforcement of HR
training and development programs.

Conclusion
The organization now operates on a global scale with competition through
other key players. This rapid expansion has opened up new cultures, which
are managed through their global HR policies. The organisation pays
employees in new markets above average wages; this is used to attract large
number of candidates.
All employees are managed by global HR policies, with the only exceptions is
where local employment legislation differs from that of the organisation.
Therefore all employees receive the same benefits, training and control,

leading to standardisation of employment. To the customer this

standardisation is of both product and service.
The organisation trades on this standardisation, therefore this is part of the
ethos, and integrated into all HR policies. The training plan for all employees
is a global policy, so they all follow the same route. Where this training is
standardised, it is a rigid framework. All employees know what stage they
are at with their training. This adds stability to the employment.
McDonalds successfully attracts potential employees, this is essentially
through word of mouth. The majority of candidates have either relatives or
friends employed at MacDonalds. This not only reduces advertising costs,
prospective employees already know about the role. This will reduce the
number of candidates that leave soon after appointment. They know about
the role before they apply.
The majority of managers are promoted within, this demonstrates a good
career path, and retains skilled employees. The promotion ladder is well
documented; therefore all employees can plan their career routes within the
organisation. The success of retaining employees for the management
training scheme warrants a full study of its own.