McDonald's Problem Case Study Analysis

Emi Deck

ISC 351

Written Case Analysis #3

4/5/18

McDonald’s Problem

Situation Analysis

        In April 2015, after much protest from the public about the wage floor issue and the “Fight for $15 campaign, McDonald’s responded by saying they would pay all corporate-owned stores in the United States at least $1 above the local minimum wage. This change was said to not only motivate workers to better customer service, but also improve the McDonald’s restaurant experience overall. The increase in starting wages was also a part of an expanded benefits package that included paid time off. These changes were a step in the right direction for the public and McDonald’s employees. However, McDonald’s statement did not directly address whether employee’s pay would remain $1 above local requirements as those wage floors continued to rise. Many McDonald’s employees were left frustrated with the empty promises and said they will continue to lose workers. McDonald’s was accused of staging a publicity stunt with the $1 raise and now is faced with the problem of ignoring the criticism, or finding a solution to the wage issue.

Problem Definition

• McDonald’s lead employees to believe that the $1 raise would increase as minimum wages increased as well.
• The $1 increase was only for corporate owned McDonald’s and did not include franchises.
• High turnover rate due to workers depart for better job options in a tightening labor market.
• Falling behind competition such as Wendy’s and Burger King with drive through times.
• The chain’s “Experience of the Future,” a suite of changes to menus, technology and food delivery, has meant performing more tasks without commensurate staffing expansions or pay increases.
• Not only are they suffering in worker retention, but recruiting future employees will become increasingly challenging due to their reputation.

Alternative Solutions

1. Stick to the promise that employees believed McDonald’s made in the first place and increase wages to $1 more than current minimum wage and continue to adjust as minimum wages changes.
2. Make a public apology for the miscommunication and continue with the current wage method and explain why the business cannot afford to pay their employees $1 more than the minimum wage.
3. Hire less employees and raise current employees’ wages. Especially with the rise in technology and fast food restaurants testing out ordering apps, it may allow them to have room for downsizing workers.

Evaluation of Solutions

Pro 1:

• This option will make the people the happiest.
• It will put an end to their criticism from the media and the “Fight for $15.”
• It will promote employee retention and encourage new employees to apply.
• It will be an investment to create a better work force and environment.

Cons 1:

• Lose money
• As the economy changes and the government applies new minimum wage regulations, McDonald’s will have to continuously come up with a business plan so they do not lose money in the business.

Pros 2:

• It will give the public a chance to hear McDonald’s side of the situation. They may be forgiving if they have a good reason for their actions.
• Saves money.

Con 2:

• Highly unlikely that the public will be sympathetic because they feel like McDonald’s let them down.
• Might create more frustration because in the end, they still did not get what they wanted.
• Might generate more negative publicity for McDonald’s.

Pro 3:

• Less workers but train more quality workers by investing in them with higher wages.
• Employees will be happy.
• May not have to lose money.
• May create a better environment because of high quality workers.

Con 3:

• Not a quick fix. It will take a long time before changes are made because technology is still being tested.
• Not promising because new technology is still being tested.
• Puts people out of work.
• May create criticism for downsizing their work force.

Recommendation to Management

        I would recommend to management that McDonald’s increase wages to $1 more than the minimum wage and continue to adjust as minimum wages progress. Although they will lose money, they should view it as an investment to their employees because it will result in quality workers and better environment. They may face challenges to come up with new businesses plans while the economy changes and the government applies new minimum wage regulations. However, McDonald’s is a multi-billion dollar company so they should be able to hire highly skilled business strategists and accountants to help them overcome those obstacles. I do not think they will have a problem overcoming those challenges. I think the problem is whether or not they want to put that kind of work in just so their employees can get paid better. If McDonald’s want to retain current employees, attract new potential employees, and make a comeback on their overall company performance, then doing a little extra work to make that possible will benefit them in the long haul.