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Unit Code: MBS535

Unit name: Organizational Change Management

Enrolment mode: Internal

Date: 16 May 2018

Assignment number: 02

Assignment name: Group report: Training Report

Tutor: Mike Smith

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Executive Summary (231 words)

This report on McDonald’s case study provides analysis and evaluation on the issues that
have been facing since 2012 mainly due to the market competition and the demand of the
customers. The CEO has taken the initiative on organizational restructuring as McDonald’s
has been on a drastic decline of customers. The report will be analysed based on the historical
facts and figures on four key change initiatives: Menu Innovation, Store Renovations, Digital
Ordering, and Delivery.

The report finds the current situation is not favorable and needs further analysis and
intervention of the management. Menu innovation gives numerous choices to the customers
to their preferred meals but challenging for the employees to get customer satisfaction.
Renovations of the traditional stores to a modernized design will attract more customers and
will be costing approximately $6 million but sudden change may be stressful to the
employees and leads to inefficient customer service delivery. Digital ordering and delivery
will be implemented in partnership with Uber Eats Drivers to give door-to-door service using
the UberEats App that creates job opportunities for the uber drivers but technology and
traveling are the issues.

The proposed recommendations are to cut off the complicated menu, provide training on the
use of new technology features, compensation for redundant employees, and order tracking
system for delivery.

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Introduction:

McDonalds, one of the most popular fast food American Companies in the world aims to
improve its strategies to gain back its market share and attract more customers in order to
cope within the competitive food business market. With its velocity growth plans launched in
2017 with three key pillars for growth strategies namely; retaining existing customers,
regaining lost customers and converting casual customers into more committed ones, it aims
to achieve sustainable growth and productivity (CNBC 2017). Further, to achieve these
pillars, four key initiatives focusing on menu innovations, store renovations, digital ordering
and delivery will be implemented. In the process, McDonald’s will undergo organisational
restructuring which will streamline bureaucracy leading to some staff layoff. McDonald’s
believes that having the right structure and people will ensure that it is dynamic and
competitive, further improving the communication between the corporate and restaurant
employees.

According to Recardo and Kleigh (2013, 23-31) some best practices for restructuring are to;
start with top sponsorship with the Executive top level managers agreeing that a change is
required and willing to actively participate and contribute to it; design by strategy (define,
design and implement) to address any business issues and collect data and use it
comparatively. Further any restructuring design needs to include a team of senior managers,
middle managers and operational specialists who know well about how a business works and
understand organisation’s strategies (Recardo and Kleigh 2013). For any change initiative to
take place, the management also needs to clearly communicate the motive behind it, train the
employees if any additional tasks will be given to them and assign responsibilities according

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to their competencies and skills and provide mindfulness programs to deal with stress related
situations.

Depending on the type of organisational change that has been initiated, some employees are
likely to face increased levels of stress, new learning challenges, altered status and power
bases, breakdown in communication flows, effects on psychological contracts, employee
frustration and decreased motivations (Dahl 2011, 242). Similarly, for McDonald’s, under
each of the four change initiatives proposed, there will be impacts on the employee status,
wellbeing and the organisational functions overall. To address these issues, this report
provides important recommendations under each initiative focusing on achieving safety and
wellbeing of the employees, increasing innovations and creativity for the food products,
providing and development measures, technological improvements, addressing HR issues in
line to achieving long term sustainability and organisational restructuring goals and
objectives.

Four change initiatives:

1. Delivery: (Tshering Choden)-350 words

Under the four change initiatives, McDonalds also plans to introduce Online Food Delivery
(OFD). McDonald’s has finalized deals with Uber Eats to enable delivery of food to the
customer’s doorsteps in line with digital ordering initiatives. This will be carried out through
the UberEats App which will immensely avoid time spent by the customers in visiting the
restaurants, further helping extend McDonald’s services to more customers no matter where
they are located and provide job opportunities for Uber Drivers and make its services more
efficient and effective.

However, the strategy is also associated with some challenges. For instance, Li, Mirosa and
Bremer (2020, 6-10) found that OFD can have economic impacts such as poor working
conditions the delivery staff are subjected to, limited training they have received and risks
they may experience on their personal safety during the delivery process leading to staff
attrition. Although Uber drivers might receive high demands on food deliveries, during
certain instances when they are required to deliver food into far off unknown locations and

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with the limited knowledge on how to handle certain situations can be troublesome and life-
threatening instances. Further OFD can lead to serious environmental issues such as
generation of large amounts of paper and plastic wastes questioning sustainability in terms of
how we need to deal with these wastes further leading to massive carbon footprints in the
long run. Additionally, customers will also be dissatisfied if the Uber delivery goes beyond
the expected delivery times due to traffic which can result in losing some potential customers.

McDonalds can use the ‘Lewin’s Model of Change’ to implement this change initiative. This
model implies a three step process of unfreezing from old practices, moving and changing
the company into new directions based on the identified needs and refreezing into more
effective modes (Medley and Akan 2008). It will further provide practical and theoretical
insights to refine company missions and successfully engage in the change process for
McDonalds.

2. Menu Innovation (Sengthida)- 350 words

Menu innovation is one of the four strategies that Steve Easterbrook, the CEO, has
announced previously. This change will indeed be beneficial for customers because they
are provided more options to choose meals as per their preferences. However, it also
negatively affects employees' work processes as this change creates more complexity for
employees who prepare food which causes a slower time to serve the customers. This
lagged process contributes to customers' dissatisfaction with the services, and
McDonald's has received a high number of customer complaints throughout the year.
McDonald's needs to ensure that their customers are always satisfied both with food and
its services. Because there is a higher rate of fast-food competition, retaining existing
customers is as crucial as attracting new customers because customers are the company's
hearts who can add value to the company and speed up the company profits.

Furthermore, it was reported by the MIT Technology Review which is a magazine

published by the Massachusetts Institute of Technology that new technologies and
productivity expectations from the company influence the increase in the number of staff
turnover, especially for temporary and part-time employees. This will indeed affect the
company budget and time spending on training new employees (Al Mamun and Hasan
2017). Moreover, the high employee turnover rate will directly affect McDonald's
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 restaurants' overall productivity and profitability. Specifically, it will affect the quality
and services that McDonald’s provides for the customers (Chikwe 2009). For example, if
an experienced kitchen staff leaves, the process and quality of food will be affected as a
newcomer will need time and training to get used to the work. This will incur a heavy
budget for McDonald's in recruitment, selection and training costs. Therefore, it is vital
to retain skilled and experienced staff when McDonald's faces a highly competitive
market such as Wendy's and Burger King. The company can use the “General Model of
Planned Change” in order to implement change. This model will help in terms of
carefully planning and diagnosing the problems, as well as implementing and evaluating
the change to complete the whole process of change (Dianne et al. 2016, 43-45).

3. Store Renovations (Khem)- 357 words

The store renovation is one of the main pillars of change initiatives taken by McDonald’s to
give a facelift to the existing traditional model stores to modern look. McDonald’s has come
up with some change initiatives to re-modify around 9000 restaurants modernized look with
estimated budget of $6 billion. It a joint investment between McDonald’s and franchisees
across the globe to attract the customers. Also, there has been some resistance from the
franchisees and investors as the deadline for completion of works was set for 2020 and
postponed to 2022 (Klein 2018). These change initiatives have been one of the plans to
execute strategies to win the global market competition by differentiating the five P’s that are
People, Product, Place, Price, and Promotion. As of date McDonald’s has over 36,000 fast-
food chains of restaurants worldwide (Nagarajan 2019). The strategies of McDonald’s are to
“Think Global” to attract the customers to meet the demand by modernizing the store.
Besides, focusing on capital outlay through strategies expansion of the business in the
competitive global market, McDonald's has realized its potential growth in the market and
plans to add up some more restaurants primarily outside the USA (Vignali 2001).

The COVID-19 pandemic is another driving force that puts businesses in crisis. Similarly,
McDonald’s has initiated “Accelerating the Arches” not just focusing on food products but
3D’s, “digital”, “drive-thru” and “delivery” and drive-thru pickup lanes was encourage with
with store renovation and as result, it was experienced a stressful situation for employees to

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give effective customer services delivery with sudden change to drive-thru where employees
need to be efficient and fast (Yazdanpanah 2020).

Lewin's theory of change management is applicable in three different steps unfreezing,

freezing, and refreezing which is suitable for this type of unforeseen situation like the change
in the drive-thru in McDonald’s. Lewin's model is appropriate for planned change but still it
can be applicable for unplanned change as well. For instance, during a disaster or any other
unplanned change that occurs (Pryor et. al 2008).

4. Digital Ordering (Ajantha)- 358 words

Digital Ordering is one of the main strategies with innovations in McDonald's restructuring
process. According to Daniel Henry, Global Chief Information Officer of MacDonald's, this
strategy's prime goal is to ensure a "more personalized experience for the customers'' (quoted
in Maidenberge 2019). The digital ordering process enables customers to skip queues at
counters and choose their meals according to their preferences with making alterations.
Moreover, customers facilitate the process of cashless payments through online payment
options. The customers with busy schedules in the modern context enable them to make
orders via various access ways convenient to them, including mobile, web, Kiosk or drive-
through and stay at their comfortable place to obtain orders. According to Easterbrook, the
CEO, (cited in Akcam 2020), they offer future experience by enhancing customer experience
through technology innovations.

According to Daniel Henry, (cited in Maidenbergr 2019), this strategy is not only a strategy
focused on customer experience, and it is a strategy focused on their behaviours. Digital
Ordering will be a reliable and accurate information source for future menu upgrades and
business promotions. Digital Ordering linking with artificial intelligence solutions enable to
filter customer behaviours and their preferences by linking with their other online searches
and profiles across Macdonalds profile. This strategy will empower management to maintain
a personal profile for each customer with their preferences and favourite tastes and create a
great link to deal with customers bringing the correct information to the right customer

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according to their choices accurately and the ability to retain customers. Moreover, this
strategy identifies the bottlenecks in the order delivery process and diagnoses the issues to
maximize service efficiency and transforms the organizational culture and environment to
manage future challenges effectively. In an institutional change, the impact of cultural change
on its productivity is very high (Waddel 2016).

However, Digital ordering transformation may increase employee stress by the risk of layoff
with new technological adoptions (Lucas 2020) and work with complicated technical
solutions with busy work hours (Akcam 2020). Additionally, it will increase employee
frustration by adding more extra work such as table delivery, complex meal options with
busy schedules. Furthermore, the complexity of technology does not make it equally
accessible to all social strata, and groups of people with lower literacy may be reluctant to
access it. Customer frustration and dissatisfaction can result from the shortcomings of a busy
restaurant staff and the long wait to get orders.

McDonald’s Recommendations:

1. Delivery:
● McDonalds should reduce food delivery times with efficient delivery tracking
systems in place, provide training on OFD to Uber drivers to reduce staff
attrition. Further, delivery services such as the condition of the food delivered,
service quality provided by the Uber drivers, attitude and work ethics need to
be improved.
● Policy makers need to ensure full occupational health and safety for the
delivery personnel and provide work related incentives to ensure long-term
economic sustainabilities.
● Provide advocacy on waste management to customers through social media
and encourage the Company to develop sustainable and environmentally
friendly packaging materials (can remove if necessary).

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 2. Menu Innovation: McDonald’s should develop a plan to take off some
unpopular items to provide quicker and better services. The company must
consider cutting some more complicated items and require a lot of time to
prepare, like premium burgers. This plan will help reduce staff workload as
well as increase the level of customer satisfaction.
3. Store renovation: Training on effective communication and customer service
delivery to develop skills in handling food and beverages to provide efficient
and effective customer service delivery that can fulfill the overall objectives of
McDonald’s with the accomplishment of maximum revenue generation with
introduction of drive-thru.
4. Digital Ordering: A separate plan must design for the improvements to retain
the best talents and future layoff predictions with new technological
innovations. It should develop with compensation and layoff plans. Training
and development on how to deal with new technologies are essential for
retaining staff to reduce stress and reduce the complexity of orders. Moreover,
It will require continuous improvements on security of the payments methods
and information security of the personal information of their customers.
Enabling multilingual support of these technological changes will add more
attraction and advantages for the customers all over the world.

Conclusion

McDonald's has embarked on a successful strategic approach to regaining its lost market
share in the highly competitive global fast food industry. The restructuring is expected to
provide a technology-enabled service aimed at customer satisfaction within an integrated
strategic restructuring plan covering all sectors. However, McDonald's restructuring will not
achieve the expected impacts unless a formal forecast and proper evaluation on resistance
from internal and external environments are followed for these changes.

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