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In the early 20th century, HRM had not yet come into existence and employee recognition and satisfaction was not of much importance for the companies. Then, Taylor had introduced a new concept of scientific theory, suggesting that the efficiency of any industry can only be increased by making the workers efficient by dividing the work into small workable groups and then assigning these tasks to the workers. Then, the time changed and some new industries started, which increased the need for HRM strategies. The scientific concept of Taylor had become the building block of making these HRM strategies. This paper deals with the various HRM strategies used for the employee recognition and satisfaction.
Retaining Talent with Salary Packaging: A Case Study of McDonald’s Employee Recognition
Many companies nowadays are ready to push every limit to provide the best set of remunerations, salary packages, employee recognition, and rewards for the employee attraction and retention of the company. Some companies spend a large amount of money and other resources to provide extensive training to the fresher employees, so that they can become acquainted with the working culture of the company. The company must make the work interesting and provide rewards and salary hikes so that the employees would not lose their confidence on the job and resign. In this paper, a detailed analysis of these various issues related to the HRM are discussed and arguments are created to find out the best theories related to the employee recognition (Nawaz, 2011).
One of the most common strategies to retain existing employees and attract new employees is the employee recognition. Employee recognition refers to the various planned rewarding schemes of the company that are active throughout the year. The main motivation behind employee recognition is to provide the rewards to the employees for which they are looking for and having some expectations from the company to receive those rewards. The company tries to keep these rewards on the top priority within the mind of the management, and the management is responsible to strive towards rewards with consistency.
One of the best examples who follow employee recognition strategies is McDonald’s. McDonald’s HRM has been built by preferring a criteria to provide employee recognition to all the employees who are working with the organization; without bothering about their employment level, i.e. whether they belong to working staff, supervisors, or managers. Every employee working for McDonald’s is provided with the best set of rewards and recognition within the company (Walsh, 2010).
The best kind of recognition that McDonald provides to the employee is peer-to-peer recognition. The Australian branch of McDonald’s, i.e. McDonald’s Australia is the largest employer within the country, having around 75,000 employees working for the company. It was the strategies of peer-to-peer recognition of the McDonald’s that helped many employees working as a crew member for the company to become restaurant managers within a few years of dedication and hard work to the company.
This strategy helped the company to build a workforce of young and energetic staff. Around 80 percent of the staff working for the McDonald’s belong to school students between 14-18 years of age. This strategy has helped the company to make a large pool of potential leaders and managers in the organization (Waiganjo, 2012).
Another strategy of McDonald’s to provide employee recognition is long term service rewards. The company provides rewards to the employees at every level of the workforce who have shown high performance and have achieved new benchmarks for the company. McDonald organizes annual events and developing programs, operating at both the corporate and staff levels to provide rewards to the outstanding performers.
The crew recognition program is provided under the store level to reward crew members who have shown a high performance to the restaurant during their shifts. Employees who have performed well during the month are also rewarded as an employee of the month. These staff members are provided more exposure through the monthly staff magazine ‘WRAPT’ and awarded with discount cards and gift hampers.
Meanwhile, many awards are also provided to the employees working under corporate level. The mangers working at this level nominate high performing employees who have contributed significantly to the delivered results or creating business strategies for the company. The senior management team is responsible for approving every employee. These employees are then provided with various rewards and gift vouchers at the bi-annual staff meeting (Hashmi, 2014).
Another strategy to provide employee recognition by McDonald’s is to provide best training and development to the employees. Every job can be made more interesting by best set of skills of the workers. However, it is not possible that every new employed employee of the company has already learned these skill sets, since every job requires different skill sets. The most common reason of employee dissatisfaction for a job is lack of his skills, and this is the reason why McDonald provides extensive training and development programs to their employees.
Training and development has been an integral part of McDonald’s business to meet the company standards. McDonald’s Australia has become a registered training organization, having an annual training budget of around $40 million. A great amount of this budget is invested to train the frontline crew of the company. The managers of the company make sure whether every training and development program is working properly or not, and they spend their 20-30 percent time in executive development and talent management (Becker, 2012).
There are many theories of HRM that supports the McDonald’s employee recognition scheme. The very first theory in this case is by F. W. Taylor. Taylor (1911) argues that the reason why many industries are not able to make their employees most efficient is due to the lack of labor force that works under the function of ‘rule of thumb,’ and tries to improve productivity by cutting down the work force, rather than making the employees more productive. After analyzing many such industries, Taylor proposed a scientific theory during the 20th century to understand the concerns related to employee satisfaction. Taylor insisted that the only way to make the employees of any industry more productive is through allocating the tasks into groups and distributing those groups of work to different employees; to achieve more output and favorable result (Siddique, 2007). Smith (2005) had further elaborated the scientific theory of Taylor and expressed following views: —
- Most people in general dislike any kind of work and had to be forced to complete it.
- Most employees are unreliable and untrustworthy and they must be supervised and directed.
- For the maximum output of productivity, each task must be divided into tasks and subtasks and would be allocated to employees having skills to handle the task.
- There must be a system or hierarchy to manage different tasks and execute management’s policy.
- The management should choose the right person and tools to complete every task.
- The management should ensure that a best solution should be chosen for the completion of every task and there must be provision of rewards for the best performing employee.
All the above suggestions to the company by the latest scientific theory has been properly adopted by the McDonald’s. The scientific theory has been implemented precisely by McDonald’s recruitment managers so that the task management activities can be completed properly. The managers at McDonald’s always give instructions to the employees and ensure that they are following proper task management strategies of the scientific theory.
In fact, some employee recognition strategies of McDonald’s are so phenomenal that George (1993) has described them as the concept of McDonaldization (Alam, 2013). The primary aspect of McDonaldization is that any task of the company must be rationalized. McDonaldization concept takes a task and breaks it into several smaller executable tasks. This is repeated until all the mandatory tasks are being broken down to the minimum possible level, so that they can be rationalized; to find out the single most efficient method of carrying out each task.
Another theory supported by the McDonald’s employee recognition scheme is the Porter and Lawler’s expectancy theory. Actually, Porter and Lawler’s expectancy theory is the extension of Vroom’s model. In simple terms, Vroom’s model is all about the expectancy to understand which level of support is required for a certain type of performance goal. The value of the outcomes of every goal for a person working on that goal is what motivates him or her. Different individuals have different perceptions and expectancy is the probability of a person, who is getting from effort into performance. As it has been shown in the figure 1 above, expectancy is the arrow from effort to the performance box and it is the first relationship.
In order to achieve the outcomes of the model, Porter and Lawler introduce a provision of intrinsic and extrinsic rewards within an organization. Intrinsic rewards are considered as intangible outcomes for the organization, while extrinsic rewards and tangible outcomes. However, it doesn’t matter whether the organization is using intrinsic or extrinsic rewards for employee recognition, since both will motivate the employees at the same level (Lunenburg, 2011).
McDonald’s has been successful to employ the expectancy theory at every level within the organization. The mangers working at the upper level understand the importance of both intrinsic and extrinsic rewards and employed them properly within the organizational structure. As it has already been discussed in the earlier section of this paper, McDonald is providing rewards both to the restaurant crew and to the corporate managers, having different sets of schemes for rewarding the best performer monthly, and then yearly.
McDonald’s has been a successful organization to manage the human resources properly and provide the best in class employee retention and attraction strategies to the whole world, but since McDonald’s is an MNC, there are still many strategies that cannot be directly employed by some NGO’s like Spastic Centre, mentioned in the case file of the assignment. McDonald’s is a large organization, having a large amount of budget earmarked for the different HRM strategies (HRM, 2007). At the same time, McDonald also provides free food products to the staff members working in the restaurant because it is easily available for the McDonald’s restaurant, without investing any extra amount for rewarding the employees. This strategy is considered as an economical and efficient of McDonald’s because the investment required in this case is null and the employees are provided with the best job satisfaction they can get from an organization like McDonald.
Most of the employees working in the restaurant chains of McDonald are college going students between the age of 14-18 years (Mujtaba, 2007). This is the reason why these employees choose to work with McDonalds because it can save their large amount of expenses for food. However, this type of strategic implementation is not possible for an NGO like Spastic Centre because the annual revenues earned by any NGO would not ever reach to that of an MNC’s restaurant chain like McDonald’s (Manzoor, 2012).
The best strategy used by Spastic Centre in the case file is salary packaging. Salary packaging is defined by the ATO (Australian Taxation Office) as the HRM strategy of sacrificing some part of the salary to get some additional benefits from the company. These additional benefits may be in the form of restaurant services, motor vehicles, or professional membership fees, as per the decision made by the HRM of the company. Salary packaging has been plausible in the case of NGO, since the NGO would not have to invest in the materials provided for providing the extra benefits to the employees. For example, Spastic Centre started providing many benefits like childcare center, gym, food and drink outlets etc. through their salary packaging program.
This NGO had leased the food outlets near the company offices and allowed the employees to get these benefits through swiping their ID cards at the point of sale (Jimoh, 2011). Spastic center allowed to offer up to $16,500 of salary sacrificed expenses on the benefits that they started providing through salary packaging. This way, the employees could get these benefits at discount rates and save taxes levied on the accountable salary. At the same time, NGO could provide necessary employee recognition without investing large amounts on any kind of programs like that employed by some MNC’s like McDonalds (Bradler, 2013).
McDonald’s Australia is a large organization that spends around $40 million for its annual training and development, but an NGO like Spastic Centre may not afford such type of high budget training for their employees. This is the reason why such NGO’s opt for salary packaging and other affordable employee recognition programs. Salary packaging is also beneficial for the employees of such organization since they can get the benefits like laptops, food services, cars, and memberships in easy and affordable prices, thereby also saving some amount on the income tax (Mujtaba, 2007). Charities and public not for profit hospitals can apply salary packaging plans efficiently because they can exempt themselves from fringe benefit tax up to a certain limit by providing such benefits to their employees (the maximum limit of fringe benefit tax is up to $9,0000 for not for profit public hospitals and $15,900 for public Benevolent Institutions). Additional benefits can also be provided above these limits using novated leasing, venue hiring, meals, and entertainment. The Australian government has allowed all NGO’s and public hospitals to adopt the salary packaging concept, so that the employees will be beneficial, but the organization also will get a chance to improve their potential (Danish, 2010).
HRM has been changing the scenario of employee satisfaction and recognition to a large extent. The scientific theory proposed by Taylor had become a building block of modern HRM strategies and now they have taken a crucial part of every company HRM. Nowadays, there are many industries like software where the employee recognition and satisfaction is crucial for the overall growth and profit maximization of the company. Every employee of a software company is a crucial asset of the company and his or her financial and mental wellbeing is mandatory for the growth of the company. Some MNC’s like McDonald have put an example in front of other companies of how a company can employ some HRM strategies.
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