November 1, 2011
Posted by Joan V. Gallos
Every year the Hay Group does a study of the Best Companies for Leadership. I wasn’t expecting to find McDonald’s high on their list (#7).
Mea culpa, I wasn’t associating serious things like leadership best practices with Ronald McDonald. I stand corrected. We can all learn from looking at McDonald’s recipe for assuring the right leadership at all levels of the operation. The company emphasizes:
2. proactive performance management with clear and consistent expectations and high standards
3. attention to education, training, coaching, and leadership development, and
4. leadership continuity through an impressive retention rate of over 95% of the graduates from the company’s internal accelerated leadership program.
The result is a strong, consistent corporate culture, with reliability in product delivery and innovation to stay ahead of the competition in a globalized, customer-centric, fast-changing, fast-food market.
How are you doing on important dimensions like teamwork, performance management, leadership education and training, and retention in your business? What could you be doing more or better?
To get you thinking, here are excerpts from the Hay report on how McDonald’s talks about the issues.
What are the leadership practices that differentiate McDonald’s?
It starts with having high standards. Performance management is at the core: we employ a 20/70/10 performance distribution model across the organization: 20 per cent at the exceptional level, 70 per cent significant and then 10 per cent needs improvement. We make sure we keep these standards high. Also, around talent, when we talk about people being ‘ready now’ and ‘ready future’, the ‘ready now’ candidate has to be someone who can be better than the incumbent over time. And, if every time you have an opening you put somebody in that’s stronger, you’re going to increase your organizational capability.
How is McDonald’s adapting to all the shifts that are happening in demographics, globalization and technology?
We’re a very team-based environment. So whenever we have a business issue, our natural inclination is to put together a team of people to look at it. It’s typically cross-functional and in some cases cross-geographic as well. This focus on team goes back to the restaurants. All you have to do is walk into a restaurant during the lunch "crush" and see 15 or 20 people working hard together. The whole culture revolves around working as a team. We’re preparing leaders for what they will face in the future, with two accelerated development programs for different levels of leader. There’s a heavy emphasis around technology, globalization and speed of change. The programs include a business simulation component; an action learning component, a lot of coaching, assessment, self insight and awareness.
Can you talk a little about what you’re doing on the goal setting and coaching side?
We have a pretty good process of cascading our major business goals to our business units. If there is one thing important at McDonald’s, it’s having this alignment of business strategies. I think our team-based approach helps immensely in this regard. We actually hire and promote people based, in large part, on their ability to be able to work effectively in teams. People are generally working at McDonald’s over the long haul. It’s not uncommon to find people at McDonald’s that have been with us 35, 40 years starting out at the restaurant level. So, I think the combination of all of these things drives a lot of alignment.
Beyond core financial results, how do you track the success of leadership programs?
We look at retention, which at 95 percent plus, is where we want it to be. And we look at the percentage of people who are promoted that come out of the accelerated development programs. This program has a big impact on retention. It’s actually one of the most visible signals of how much we are investing in you.
What are you working on for the future of leadership at McDonald’s, say 10-15 years from now?
Our CEO and COO have put together five strategy teams that we believe are going to help us continue our performance run. One is on talent management. We have a cross-geographic, cross-functional team that’s looking in particular at strategic workforce planning – anticipating what resources are going to be required to deliver against our business plans. We also plan to work more collaboratively as a senior team on developing top talent proactively. Third, we want to make sure that whenever we fill key jobs that we put a lot of discipline and rigor into the process. This helps us to improve our ability to make the right call on filling critical jobs – there is nothing more important than this. So far, this team’s work is paying off.