Presentation Discussion Assignment
jusleag1510
presentation.pptxMcDonald’s and Facebook
And Never the Two Shall Meet:
Organizational Design as Strategy at Facebook and McDonald’s
McDonald’s Updates
In October of 2014, McDonald’s U.S.A eliminated layers of management while replacing the three domestic divisions (West, East, and Central) with four zones (Northeast, South, Central, and West), shortly after the replacement of Jeff Stratton with Mike Andres as McDonald’s USA President.
CEO Thompson retired effective March 1, 2015, replaced by Steve Easterbrook.
McDonald’s has tried to be more responsive to concerns from consumers and front-line employees: popular demand prompted their move to offer breakfast all day, and they have announced plans to increase wages for the (minority) of employees working at company restaurants.
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McDonald’s Structure
McDonald’s is a mechanistic organization with multidivisional structure.
Tasks performed in the organization are highly repetitive at every shop
Easterbrook reorganized McDonald’s markets into four segments: US, International Lead Markets, High-Growth Markets, and Foundational Markets. It is still a very mechanistic organization with multidivisional structure.
The US segment provides more than 40% of corporate operating income. International Lead Markets account for about 40% of overall income, and includes well-established markets abroad (Canada, Australia, UK, France, and Germany). High-Growth Markets add another 10%: countries like China, Russia, and South Korea which have more expansion and franchising potential. Foundational Markets cover the rest of the world, and also covers corporate-level activities.
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The Henry Ford of Burgers…..
McDonald’s exemplifies a mechanistic structure, even becoming our text’s poster child for the same. We shall look at each facet of such a structure, with reference to McDonald’s, and comment on how that fits in with their overall strategies of quick service, consistent product, and cost leadership.
I. Specialization
The case relates how employees are “trained to handle a few specific duties” instead of prepared to handle whatever tasks might be the most important at any given moment.
With adequate staffing levels each employee is able to work at a high level of efficiency
this not only increases the speed of service, but also thereby reduces the staffing need and thus helps in cost leadership.
This structure helps ensure that employees will do specific things very well, which means the output of a given employee will be consistent over time.
II. Formalization
Specialization is what a given employee does, formalization is how the employee does it, including training, protocols, etc.
McDonald’s Hamburger University has been ensuring consistent training since 1961. Although menu items come and go over time, any given menu item remains remarkably static and any customization is discouraged: the ingredients of the Big Mac are static enough that they became the lyrics for a memorable TV ad song.
McDonald’s uses “detailed standard operating procedures” across the globe. We imagine that translation is one of the few changes made to these procedures from one restaurant to another.
Formalization and Specialization
Formalization and specialization are both needed for the highest levels of consistency, since formalization enhances consistency from employee to employee, restaurant to restaurant.
“McDonald’s Way”
Enhances the speed of McDonald’s operations, because every employee knows the procedures
Remains at the cutting edge of efficiency due to process research
Helps to reduce costs, as standardizing ingredients and equipment lead to increased purchasing power and thus lower costs from suppliers.
Reduces waste: employees are not experimenting and thus producing scrap, but are making consistent product from the beginning of their employment
III. Centralization
The formalization evidenced by Hamburger U is an example of the top-down communication style of McDonald’s.
Not an open forum seeking inputs on burger-making philosophies; it is a place where people are trained to do things the way McDonald’s headquarters says things should be done.
McDonald’s today does not encourage ground-level innovation, and that is a negative of its mechanistic structure. This is a change from Ray Kroc’s day.
Positives to centralization for McDonald’s:
This structure supports consistency.
Ensures that the best (cheapest, fastest) operating procedures known to corporate will be followed company wide.
Reduces cost, because centralization means McDonald’s can—and wants—to hire people who don’t want to make decisions themselves, outside the top echelons. Thus they can pay lower salaries than if they were hiring people to think for themselves.
IV. Hierarchy
The Wall Street Journal claimed that McDonalds eliminated “layers of management” 2014 restructuring of its US division, but, the US division remained one of several SBU’s, and still had 22 regions, though now in four zones instead of three divisions.
The consolidation of McDonald’s into four market segments may reduce the amount of hierarchy, but still implies a tremendous amount of managerial overhead and levels of reporting.
McDonald’s is a very tall organization, and even if it is widening the span of control for some executives and managers, the extensive org chart leaves no doubt as to chain of command and control.
This amount of hierarchy seems to work against McDonald’s desire to cut costs, and no doubt no matter how many times new CEO’s trim bloated budgets, there is much waste and redundancy in McDonald’s.
Hierarchy is needful to maintain a mechanistic organization. The benefits to cost, speed, and consistency of that type of organization exceed the costs of the hierarchy, and thus enable McDonald’s to pursue its strategic goals.
Facebook Update
Organizational structure continues to evolve at Facebook, and is hard to pin down even at one given point in time.
David Wehner replaced Ebersman as CFO on June 1, 2014.
The Wall Street Journal quoted Annika Steiber in December, 2014 as saying Facebook “hasn’t really become that formalized or rigid in its management structure yet,” and called Facebook’s culture unique, even by Silicon Valley standards.
Facebook acquired WhatsApp and Oculus in 2014
decided to keep the headquarters of each intact in its current location.
Different strokes for different folks
Facebook is still relatively young and trying to settle on structure
Started with a Simple Structure
Grew to a Hybrid Structure: Business unit, acquisitions run as divisions, but development run like Simple Structure
Zuckerberg “is the ultimate arbiter of matters big and small,” according to a 2012 Fortune article. In development, Zuckerberg holds office hours, listens to interns’ suggestions, and works in the same open office space as the other developers. It will be interesting to see Facebook’s structure post-Zuckerberg, if it survives.
Facebook is much more organic than mechanistic. This befits its strategic goals of constant innovation and growing its user base.
We will focus on the organically organized development side of Facebook
I. Specialization
Facebook has made the conscious decision to nurture generalists rather than specialists.
Their hiring paradigm is “hire smart people independent of available job openings and then help them identify their top talents,” according to Fortune, which goes on to describe how Facebook (extreme even amongst organic organizations) requires engineers to devote a month every year or year and a half to working with a different team than they usually do, on a project unlike what they normally work on.
Facebook periodically mandates all-night “hackathons” in which developers are required to work on ideas other than those they work on daily.
These policies work well to promote their goal of constant innovation: they not only allow (force!) individuals to pursue their own ideas, they also minimize groupthink by having engineers work with different teams instead of always staying in the same group. Generalists may not be as efficient as specialists in using or advancing current technologies and ideas, but they are much better in adapting to new ones: and so are well-suited for a company which pursues change as the way to increase user base.
II. Formalization
Facebook puts new hires through a boot camp
very different from Hamburger U: it is not designed to teach procedures, but rather to help new hires learn and internalize the Facebook culture.
New hires are not taught to behave like other employees (Fastcompany’s look at them noted the Facebook motto “Bring your authentic self to work.”), but rather to share the same values at work as others, such as continual improvement.
This is typical for organic organizations, which emphasize shared ends instead of shared means; common goals, not common behaviors.
Consistency is viewed as a negative, not a strategic goal, since it hinders creativity and change.
Facebook wants its employees to have different ideas and behaviors from each other, to better advance the strategic goal and common value of innovation.
III. Centralization
Fastcompany mentioned “Nothing at Facebook is someone else’s problem” as another company slogan, while the Wall Street Journal remarked that Facebook employees have “unusual freedom to choose….” Part of the acculturalization process during boot camp is to have new hires fix bugs, changing the code running the platform used by a billion people.
Lowly interns can present ideas to Zuckerberg—and his “No,” though all-powerful, is not necessarily final. Developers have been known to improve ideas Zuckerberg rejected until they meet his blessing and become part of the platform.
Clearly, Facebook has a decentralized organization, with employees at every level empowered to make their own decisions.
This requires hiring brighter, more self-confident, and thus more expensive employees, and so is not ideal for a cost leadership focused company.
For a company that wants to innovate, it is the way to get new ideas.
There are always more people at the bottom than at the top, and when organic organizations allow substantive bottom-up communication, it opens the door to many more ideas than could come from a small, isolated group at the top.
IV. Hierarchy
Entrepreneur’s 2015 article remarked how Facebook’s commitment to flat organizational structure was evidenced by open office space occupied by developers at all levels through CEO.
Both Fortune and the Wall Street Journal describe Facebook managers as predominately “enablers” rather than bosses: they ensure their staff is able to be productive at their largely self-guided tasks, rather than tell them what to do. Facebook promotes the horizontal communication that organic organizations encourage, through:
Open Floor plan
Periodic month spent with different work team
All night hackathons
Fortune quotes a longtime employee that Zuckerberg is “happy to be proven wrong” when an idea he said wasn’t good is demonstrated to be great. This is a prime example of the organic organization’s emphasis on “mutual adjustment” by different parts of the hierarchy.
Lack of rigid hierarchy, with even the CEO working on code, means that all the bright minds at Facebook, managers as well as developers, are pushing innovation forward, with freedom to fail and support from the organization in their endeavors.
Culture: Not just for pearls any more.
McDonald’s and Facebook have disparate cultures as well as organizations. Following our text’s lead, we proceed to look at each culture, and then use the VRIO framework to evaluate the impact of culture on each firm.
Yes, it is hard to even SAY McDonald’s and Culture in the same breath…..
McDonald’s has powerful Cultural Artifacts, some of the best known corporate symbols in America.
Golden Arches
Ronald McDonald
Big Mac
The standardization of menu, uniforms, and procedures is reinforced by Hamburger U and top-down communication.
These Artifacts reinforce the homogeneity of McDonald’s
Yes, it is hard to even SAY McDonald’s and Culture in the same breath…..
Unfortunately, this culture seems to be only skin deep.
The lack of friendliness, rampant job dissatisfaction, and high employee turnover speak to the lack of internalized Norms and Values at McDonald’s, at least among the rank and file.
The case speaks of Kroc’s principles of quality, service, cleanliness, and value (cost leadership).
Cost Leadership is still a prime company value, and employees recognize this. Most McDonald’s emphasize cleanliness, but service is a struggle for the company, and quality has morphed into consistency in their value structure. We cannot speak of the culture at the executive level, but have seen enough obviously bored and borderline hostile McDonald’s employees to confirm the company does not have a strong culture
Limited Value in McDonald’s Culture
It is Rare to have Artifacts as strong, and very difficult to Imitate the level of awareness of such Artifacts.
McDonald’s has not been able to capitalize on their Artifacts Organizationally to nurture Norms and Values in their employees.
If they could, it would be of great competitive benefit, since employees would be friendlier and more customer focused. Clearly, whatever Founder Imprinting the McDonald’s brothers and Kroc did has faded over time, and with the low rates of success our text cites in changing corporate culture, we don’t look for McDonald’s to improve in this area any time soon.
How does one keep a Culture of change from changing?
Facebook does not have nearly so many Artifacts as McDonald’s: they have their logo, the ubiquitous Like Button, and Zuckerberg himself: and even they have all changed with time. Fastcompany talks about murals (no doubt often swapped out) and balloons denoting work anniversaries as prominent physical features at headquarters, but these, too, speak of change.
Contrary to McDonald’s, though, Facebook has some strong Norms, which show strong founder imprinting and are true assets to the company.
Long hours
“Can-do” attitude
Desires to push boundaries and accept failure
These help to manifest core Values which Fortune calls the “Hacker Ethos” and include continual improvement of an ever-better but always-flawed product, and innovation that is always customer-focused.
How does one keep a Culture of change from changing?
There is no doubt this strong culture is Valuable, as it encourages, and helps recruit employees who work hard and well, while preventing corporate stagnation.
It is Rare among companies the size of Facebook, since although it is common in start-ups, it is hard to Imitate Facebook’s success in keeping this strong culture as it developed past the Innovation phase. And Facebook has, so far, been able to Organize itself to take advantage of this resource in pursuit of its strategic goal of constant innovation.
Facebook’s culture is clearly a competitive advantage.
We cannot say how successful Facebook has been in socializing the employees of the companies they have acquired, nor can we predict how well the culture will survive growth and, ultimately, the departure of Zuckerberg.
We thus cannot declare at this point if that advantage is sustainable.
References
http://www.dailynews.com/business/20150504/mcdonalds-to-simplify-corporate-structure-focus-on-customers
http://www.entrepreneur.com/article/249174
http://www.fastcompany.com/3049282/lessons-learned/inside-the-creative-office-culture-at-facebook-ideo-and-virgin-airlines
http://fortune.com/2012/05/16/inside-facebook-2/
http://news.mcdonalds.com/Corporate/news-stories/2013/McDonald-s-Announces-Initial-Steps-In-Turnaround-P
http://news.mcdonalds.com/Corporate/Press-Releases/Financial-Release?xmlreleaseid=123072
http://news.mcdonalds.com/press-releases/mcdonald-s-adds-new-senior-leadership-talent-nyse-mcd-1219246
http://news.mcdonalds.com/press-releases/mcdonald-s-announces-key-management-changes-nyse-mcd-1171998
http://news.mcdonalds.com/press-releases/mcdonald-s-announces-new-usa-president-following-retirement-of-jeff-stratton-nyse-mcd-1139653
http://news.mcdonalds.com/press-releases/mcdonald-s-appoints-robert-gibbs-as-global-chief-communications-officer-silvia--nyse-mcd-1199926
http://newsroom.fb.com/news/2014/02/facebook-to-acquire-whatsapp/
http://newsroom.fb.com/news/2014/03/facebook-to-acquire-oculus/
http://www.motherjones.com/politics/2015/04/mcdonalds-wages-increase-some-employees-credited-rising-economy
http://www.statista.com/statistics/208917/revenue-of-the-mcdonalds-corporation-since-2005/
http://techcrunch.com/2014/04/23/facebook-cfo-stepping-down/
http://www.wsj.com/articles/facebooks-millennials-arent-entitled-they-are-empowered-1419537468
http://www.wsj.com/articles/mcdonalds-to-change-u-s-structure-1414695278
https://en.wikipedia.org/wiki/Facebook#2013.E2.80.93present:_site_developments.2C_A4AI_and_10th_anniversary
