Macro, Meso, Micro: McDonalds
In the October edition of TIP, I threw out some bait to test your interest in a recurring department on linkages between I-O and business strategy. Im pleased that many of you responded, and even offered to write about the science and practice youre doing in the area. Our first example of I-O alignment with strategic business goals comes from McDonalds Corporation where people are a key organizational strategy. Special thanks to the McDonalds I-O team for offering this first look at I-O alignment work in practice. I welcome other academic and practice pieces that further address human capital and business strategy drivers of I-O work. Write to me at
I-O Psychologists Roles in HR Systems
Dana Moore, Alyson Landa, and Sandra Nelson
The foundation of business has changed. Low unemployment rates, changing workforce demographics, and employees desire for worklife balance (among many other people factors) have accelerated the HR evolution. This economic trend and shift in personal values has brought about an unprecedented emphasis on employees. Fortunately, I-O psychologists have seized this opportunity to show their worth to organizations by demonstrating how meeting these values and needs (e.g., offering development opportunities, alternative work arrangements), affects bottom line results. Thus, I-O psychologists have taken on a dual role in organizations: change agents driving the change of organizational cultures to focus on people, and measurement specialistsconnecting people practices to business results.
Tying people-related initiatives to business results will allow us to maintain the momentum around people even when the economy takes a downward turn. David Ulrich, the HR strategist, captures this sentiment perfectly. Ulrich (1997) writes, The impact of HR practices on business results can and must be measured. HR professionals must learn how to translate their work into financial performance (p. 18). The focus on measurement and people is promising news for I-O psychologists. Many companies, large and small are hiring I-O psychologists for the first time. The McDonalds Corporation is one of these companies.
Challenges of the Business
McDonalds is facing the same challenges that many industries facehow to obtain and retain a quality workforce in a time of low unemployment in order to achieve the system and customer growth desired. To achieve their business goals in upcoming years, McDonalds has identified People as one of the three global corporate strategies for success. By identifying their employees as a competitive advantage, McDonalds has committed to making this happen by aligning human resource programs and practices with a key business strategy called the People Promise.
As in the past, much of McDonalds success is the result of delivering quality, quick service, cleanliness, and value. In the quick service restaurant industry, McDonalds has set the standard for operational excellence by identifying and measuring key indicators of product quality, and fast and accurate service. These indicators are familiar to most businesses as they fall in the area of financial performance, operational performance, and customer satisfaction. However, McDonalds continues to enhance its strategic position by further evaluating additional factors critical to the equation, such as an employees perception of the organization and store environment on the customer experience. Within McDonalds, these issues and others are being addressed by establishing strong partnerships between its HR Design Center and other parts of the organization (i.e., operations, finance, business research).
HR Design Center
In 1997, McDonalds HR Function was restructured to increase customer focus, enhance quality service, improve cost effectiveness, eliminate redundancy within the function, and build strategic HR capabilities needed to improve overall business performance. To accomplish this HR was divided into three groups: the Service Center (focused on administrative, transactional activities, and consulting to franchisees), HR Business Partners (providing strategic HR consulting to line and staff organizations), and the HR Design Center. The HR Design Center is a center of excellence employing a group of HR subject matter experts that partner with other departments to develop, test, and implement leading-edge people systems and tools designed to improve overall business results. Through these partnerships, the Design Center has contributed by designing core HR processes for the company, leveraging best practices, and most importantly for I-O psychologistsmeasuring success.
The Design Center is divided into four practice areasMeasurement and Organizational Effectiveness, Leadership Assessment and Development, Competency-Based People Systems and Culture, and Recruitment and Retention. Projects within these practice areas are designed to impact all levels of the organization from the CEO to the front counter employees in the restaurants.
The Measurement and Organizational Effectiveness group has taken on such projects as the creation and implementation of an annual employee commitment survey, creating a functional Human Resources Scorecard and participating in a data standardization initiative, to name a few. In addition, in the past 2 years, partnerships with other departments have facilitated research projects aimed at identifying people practices and approaches that substantially impact outcomes such as turnover, productivity, customer satisfaction, sales, and profitability. This research has been critical to developing a competitive business model that places emphasis not only on financial and operational factors, but also on people factors that improve business results by driving employee commitment, retention, productivity, and customer loyalty.
Another practice area that I-O psychologists have played a critical role in is with Leadership Assessment and Development. This practice area houses the executive succession planning process, senior management 360 feedback and coaching, as well as other senior leadership development programs. I-O psychologists in this practice area are involved in assessing the development needs of our senior leadership and measuring the success and value of such programs. Elaine Sloan wrote an insightful article in TIP (January 2001) entitled, Identifying and Developing High Potential Talent: A Succession Management Methodology that describes much of the work in this area.
The Competency-Based People Systems and Culture practice area uses I-O psychologists for competency development associated with selection, performance development, assessment, and succession planning. By implementing competency-based people systems, McDonalds is building intellectual capital, providing the tools needed to help each person deliver business results, and making the investment required to support continuous learning and development as a business strategy. I-O psychologists contribute through identifying development needs, targeting development curricula, as well as by leading other more typical I-O projects such as developing staffing models, profiling job competency requirements, and designing performance appraisal instruments. The People Promise initiative also lies in this practice area. Partnering with all functions of the organization, I-O psychologists are facilitating this culture change initiative by identifying metrics that are meaningful to everyone in the organization and measuring the success of this key strategy.
There is a lot of exciting work for I-O psychologists taking place here at McDonalds, and this bodes well for the potential contribution of I-O psychologists to organizations everywhere. More than ever, I-O psychologists are being asked to serve a role that balances the I and O sides, in contrast to a historical role that emphasized the I side to a greater degree. We now have the opportunity to change how organizations approach people issues, using empirical data for support of these initiatives. In addition to our expertise in conducting job analyses and test validation studies, comes the ability to construct and assess methodologies appropriate for capturing critical factors that measure overall business success. I-O psychologists at McDonalds are, like never before, positioned to play a key role in defining the landscape, identifying key signposts, and measuring how far an organization has gone to reach its overall goals.
Ulrich, D. (1997). Human resource champions: The next agenda for adding value and delivering results. Boston, Massachusetts: Harvard Business School Press.
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