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Retaining Talent with Salary Packaging

Executive Summary

It is an argumentative essay which intended to provide a structured argument on the McDonald's recognition system. The extensive research on academic literature is performed, and the points like McDonald's HR policies and its relation with motivational theories are discussed. The motivational theories used and argument provided within the essay are expectancy theory, Taylor's scientific management and Maslow's hierarchy of needs. The discussion is also focused on researching the human resource literature based on employee attraction and retentions, motivation and satisfaction, performance management, remuneration and rewarding schemes. It will also discuss how recognition system supports McDonald's culture and attract future leaders. Usefulness of HR approach in the non-profit organisation is also discussed. The case study on which the arguments are based is "Retaining talent with salary packaging."

                                                                                                         Introduction

In today's competitive business environment it's become crucial for the organisation to attract and retain a skilled workforce. The employees working within the organisation wants to be noticed and recognised for the hard work done by them. The organisation also uses various HR policies and strategies to motivate and retain the skilled workforce.  It is determined that McDonald's well-known about the fact of motivating and retaining employees and hence, they run various recognition schemes, rewards, competitive wages and monetary incentives to motivate and retain employees. Certain motivational theories found to provide support to recognition scheme. All these facts are discussed, and arguments are presented on the facts wherever necessary.

Role of the recognition scheme in McDonald's culture

McDonald's is one of the leading organisations in fast food market; it is attracting customers and qualified employees. McDonald's is making all efforts to create a healthy atmosphere in all of its restaurants setting the standard of quality, cleanliness and services provided (DeChernatony & McDonald, 2010).

To develop its future leaders is the part of McDonald’s culture. Among the managing directors of the company, three of them are started their career in McDonald at the age of 15. According to the case study, near about 80% of managers at the McDonald's were started their job as crew members in a restaurant. About 70 of McDonald staff are School children aged between 14 to 18 years (Fair & Silvestri, 2012). These statistics indicate that McDonald's has the culture of developing leaders through their employees, instead of hiring new leader or manager. It has become possible due to the HR policies, strategies and training, and development program for the company. McDonald has a strong culture which focuses on its people (Kasperkevic, 2015).

McDonald’s meets it standard through training and development program, and training budget of a company is $40million which spent on training frontline crew (Kasperkevic, 2015). Five key strategies of McDonald's culture are people, products, places, price, and promotion. A high recognition culture also helps the company to build strong leaders and managers. It runs many recognition programs like Crew Recognition, under this scheme, the highest performing crew members are awarded on a monthly, quarterly and yearly basis. They got recognised in front of their peers, managers, and sometime franchisee meetings too which give the boost to their confidence. Also identified members named at monthly magazines, WRAPT and awarded with gift vouchers (Kasperkevic, 2015).

The awards are also given at corporate level, where manager recommend employees by their performance. Senior management approves the award-winning employees, and the award is worth $500gift voucher. Such schemes, HR policies, and company culture help McDonald to attract future leaders (Andrew & Kent, 2016).

A well-known multinational whose current CEO is Jim Skinner is a good leader & taking all initiatives in the organisation. He has been working with this renowned organisation since 35 years. He has started his journey from "restaurant manager trainee" to many corporate positions throughout his tenure. He reinvented the fast food business with new ideas & direction.

 

McDonald's is providing ample of opportunities and growth for team members from different backgrounds who are spread across the world. This is comprised of more than 30000 local restaurants & serving fifty million people in more than 100 countries every day. The largest food retailer in the world & is part of the American part of life. McDonald's is developing new strategies for motivating employees & teaching them leadership quality to excel in their field. Hence many of the people are more interested in working with such an organisation. It can also be called as an ideal employer in food restaurants as compared to other food industries in the market as it is fetching many individuals for opportunities. 

McDonald's restaurant is not a stressful job. Hence, many people like to work in such a stressful environment. Students from high school are fonder of joining in McDonald's as they get their same age friend working in & they feel comfortable working there with a good environment. Also while working, they meet many people with whom they get known by meeting day by day & make friendly relations which can help them when they work outside. Sometimes they build such a bond that they share their experience with each other. McDonald's provide an opportunity to youngsters while studying, it can be called as earn while you learn. These people make good relation with their team mates & this makes working atmosphere happy & cheerful. Leaders seen in the McDonald's stores are performing their tasks in such a way that not a single person who is leaving restaurant can go without satisfaction; this shows the teamwork as well as bonding.

This provides 100% satisfaction in the minds of customers. Also, leadership in right way leads to a good example for crew members to work with unity. Working here gives the lifelong opportunity to individuals to nurture their future. It motivates employees for learning more through work. McDonald's understands that their social responsibility is to deliver quality service to customers. McDonald's believes in team work rather than focusing on individuals. McDonald’s culture is to stick to high standards of quality, cleanliness and service. The World is changing day by day & hence the McDonald's also need high-efficiency leaders who can inspire newcomers to set the standard. It requires leadership as well as the management role. McDonald's Values and demonstrates leadership for all positions & levels.

Supportive theories for McDonald's Recognition Scheme

Expectancy theory

According to the expectancy theory, the attractiveness of the job is based on the function of valence, instrumentality, and expectancy. Here, the function of valence means desiring to provide the reward for individual's hard work; instrumentality means performing to secure the reward; and expectancy is the belief that his or her hard works impact performance and is going to be recognised by someone (Ajila & Abiola, 2014). The Expectancy theory argues that efforts made by employees are based on the type of rewards and expectation that they will achieve rewards through successful job performance. The expectancy theory and assumptions are argued by some authors like Chris & Awonusi, and they stated that monetary benefits could influence the extrinsic motivation (depends on pay and rewards) but not impact intrinsic (depends on performing interesting work) one (Chris & Awonusi, 2015).

McDonald’s adopt the HR strategies where managers reward the employees with incentive payment in addition to salary. It is called as Target Incentive Plan by the company. This strategy can be argued, and the argument on this is such reward and incentive can generate job motivation but not sure to achieve job satisfaction. If rewards do not provide on the equity basis, then it may result in job dissatisfaction and loss of interest in performing a job. Job satisfaction achieved when employees feel that reward they are getting is equitable. McDonald also focused on performing effort to gain performance expectancies. They aimed to generate confidence among employees and make them feel that they can perform a job successfully. In this context, the company arranges training programs, sessions and seminars, where employees get to know about their job role and responsibilities and ways to perform the job efficiently (DeChernatony & McDonald, 2010).

McDonald's first goal is to provide best services to their customers. To achieve this goal the company training to their employees like staff or team development, shift management, information system management, managing restaurant activities, and business management (for restaurant manager) (Frey, 2016). The training is provided to different levels employees starting from new joiners to first and second assistance managers and restaurant manager. To get recognised and achieve rewards employees should perform these jobs successfully and that achieves customer satisfaction, perform effective teamwork, maintain restaurant standards, cleanliness and sophisticated behaviour at the workplace.

 Taylor’s Scientific Management

In the scientific management theory of Taylor, he assumed that money should be used as a motivational factor in organisations. The theory focused on finding the most significant way of performing an activity. The theory also recommended payment method and named it as "piece rate" which is based on "fair day's pay." It results that employees work fast and efficiently to get the bonus (Campbell, McCloy, Oppler, & Sager, 2013).

In the case study (retaining talent with salary packaging), second part it is stated that McDonald's uses competitive wages scheme as their payment policy. This policy is similar to the piece rate method of Taylor where workers can get the increase in their wages through hard work. However, competitive wages is not the only motivator McDonald uses, but along with it the company also uses the methods like life insurance for employees, educational support, flexible working hours and many other benefits. Hence, we can say Taylor’s theory is supporting part of McDonald’s recognition scheme, and part of the theory is used to design company's HR policy.  

Maslow’s Hierarchy of Needs

The author divided needs of the employees into five classes, and that are physiological needs, safe work environment, love and belonging needs, self-esteem needs, and need of self-actualization (Delaney & Huselid, 2016). Among these needs, McDonald's does not focus on lower order needs like safety and physiological needs. This is because McDonald's restaurant is safe enough to work and second most of McDonald's employees are students, and their physiological needs get satisfied by their families (Kramar, et al., 2014). However, company bound to provide flexibility in working hours to their employees and also has a clear recognition of needs of their workforce. And the company aligned HR policies to satisfy needs of their employees through Maslow's hierarchy of needs.

Agency theory

It is also one of the important theories of motivation, supporting the human resource management alignment at McDonald’s (Kramar, et al., 2014). This theory focused on the divergent interest of firm's stakeholders and the approaches of using employees’ compensation to align stakeholder interests and goals. The theory work by separation of ownership from management means what best for the manager is not always best for owners (Dunham, 2016). The theory also creates agency costs.

McDonald is known for generating strong team spirit along with numerous HR policies and processes which include the recognition system of the company.  McDonald developed a strong organisational culture which helped the firm to make good leaders and managers within the organisation (Kramar, et al., 2014). The training and development facilities provided at McDonald are best among the world organisations. These strategies help to attract new staff, retain the existing one and also maintain a pool of potential leaders.

McDonald's human resource management approach

In today's competitive business environment, whether it is the profit giving organisation or not-for-profit organisation both have to adopt reward and recognition strategy to attract the skilled workforce. So, there is no problem in adopting the McDonald's HR approach in Spastic Centre organisation in Australia. It is working for maximising the living of people with complex disabilities in the South Australian region. Spastic Centre, not-for-profit organisation was founded in 1950.

The organisation is believed in doing work with the clear purpose of providing benefit to community, enthusiasm, and sense of fun. The organisation has the positive environment and diverse culture and has lots of career development opportunities.  Resource dependency theory is applicable for this organisation as its functions and activities are depends on outside resources like fundraising, donations, etc. (Kramar, et al., 2014). Resources and organisation's dependence on resources could explain the evolvement of HR practices from the interaction within a nonprofit organisation and their environment to the deployment skills and behaviours of employees (Akingbola, 2013).

The competitive business practices generate many challenges in front of organisations and attracting and retaining skilled workforce is one of those challenges. Human assets are most significant one for any firm including not-for-profit firm (Bishop, 2014). Hence, to get skilled, qualified workforce, motivating and satisfying employees is necessary. The rewards can be intrinsic and extrinsic one. In the extrinsic rewards, monetary needs of employees are satisfied. The extrinsic rewards are given in the forms of bonus, monetary benefit, job security, promotion, etc. The intrinsic and extrinsic reward system used in the McDonald's also needs to be adopted in Spastic Centre to achieve employee motivation and satisfaction (Fair & Silvestri, 2012). The employees at non-profit organisation's Spastic Centre would be motivated with the help of recognition scheme as it is performed in McDonald.

Intrinsic rewards are intangible one, and they are most useful and significant in the non-profit organisation because providing monetary incentives is not always possible for the firm. The psychological rewards like providing the appreciation for the performed work, or after overcoming new challenges are necessary (Delaney & Huselid, 2016). Similarly, positive and caring attitude towards employees, recognising the work in front of the peer, job rotation after fulfilling the goal are such HR strategies that remain employees motivated and satisfied from their job role. Frey argues that once payment is exceeded at a substantial level, then intrinsic factors of motivation get more importance and are become the strong motivational factor (Frey, 2016).

In the not-for-profit organisation, personal interest, the passion of doing work for a community, an intention for volunteering the social cause is mandatory and more important than the will of getting promoted and earning money. Hence, the intrinsic factors play a major role in the not-for-profit organisation such as satisfaction at doing a good and social cause, and a personal feeling of doing something worthwhile (Dunham, 2016). Hence, the management of Spastic Centre only needs to adopt the intrinsic HR policies of McDonald's, i.e. the recognition scheme which help this not-for-profit organisation to achieve employee motivation and satisfaction and attract and retain the skilled workforce.

Conclusion

Every motivational theory provides the different approach to motivate and retail employee. Expectancy and Taylor theory propose monetary incentive approach while Maslow provides the hierarchy of needs. All of these theories are discussed and McDonald's used all theory to perform their HR policies. Finally, after revising all theories under reward system, it is determined that they are equally significant for McDonald to motivate employees and achieve organisational objectives. The organisational culture of McDonald's also helped them to build and attract future leaders. The non-profit organisation also helped by these HRM approaches where they just need to understand nature of business and interest of employees working within an organisation.


References

1.      McDonald's plans to launch a charity partnership to draw in millennials (2015).

2.      Ajila, C., & Abiola, A. (2014). Influence of Rewards on Workers Performance in an Organisation. Journal of Social Science, 8(1), 7-12.

3.      Akingbola, K. (2013). A Model Of Strategic Nonprofit Human Resource Management. Voluntas: International Journal Of Voluntary & Nonprofit Organizations, 24(1), 2014-240.

4.      Andrew, D., & Kent, R. (2016). The impact of perceived leadership behaviours on satisfaction, commitment, and motivation: An expansion of the multidimensional model of leadership. International Journal of Coaching Science, 1(1), 35-56.

5.      Bishop, J. (2014). The Recognition & Reward of Employee Performance, Journal of Labor Economics. The New Economics of Personnel, 5(2), 36-56.

6.      Campbell, J., McCloy, R., Oppler, S., & Sager, C. (2013). A theory of performance (2nd ed.). San Francisco: Personnel Selection in Organisations.

7.      Chris, A., & Awonusi, A. (2015). Influence of Rewards on Workers Performance in an Organization. Journal of Social Science, 8(1), 7-12.

8.      DeChernatony, L., & McDonald, M. (2010). Creating Powerful Brands (2nd ed.). Butterworth Heinemann: Oxford.

9.      Delaney, J. T., & Huselid, M. A. (2016). The impact of human resource management practices on perceptions of organisational performance. Academy of Management Journal, 39(8), 949-969.

10.  Derdak, T. (2015). McDonald's. International directory of company histories, 67, 108-109.

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12.  Fair, E. M., & Silvestri, L. (2012). Effects of rewards, competition and outcome on intrinsic motivation. Journal of Instructional Psychology, 56(16), 3-9.

13.  Frey, B. (2016). On the Relationship between Intrinsic and Extrinsic Work Motivation. International Journal of Industrial Organization, 15(8), 427-439.

14.  Kramar, R., Bartram, T., Cieri, H., Noe, R., Hollenbeck, J., & Wright, P. (2014). Human Resource Management: Strategy, People, Performance (5th ed.). North Ryde: McGraw Hill Education.

15.  McDonald, M. (2009). Marketing Plans: How to Prepare Them, how to Use Them (6th ed.). Amsterdam: Elsevier.