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McDonald’s Reason Why It Triumphs Over Any Economy

At any given time, McDonald’s CEO Jim Skinner could well be in one of his 12,804 locations in the U.S., inspecting its kitchen. He scrutinizes food preparation areas with a rigidity that most other top executives may just reserve for financial and sales reports. He can very well explain, in grand detail, the “hash browns review” that the chain has initiated several years ago. No, he is not a micromanager – he is merely paying attention to the efficiency, competence and performance of the company that he is running, and the vast, multi-faceted infrastructure that holds it up.

If one has not been in any McDonald’s restaurant, you might just think that the chain has simply become a beneficiary of the besieged American economy, and its outstanding sales is merely a result of the tight-fisted consumers’ option to eat at fast-food restaurants instead of at sit-down dining places. But to be able to deliver the inspiring numbers that McDonald’s was able to do the past years– and to withstand the present mayhem – takes more than that.

Jim Skinner had to come up with ways to entice new diners while retaining their hard-core customers who love fries and Big Mac. Today, as you stroll into one of McDonald’s restaurants, you can order a variety of stuff other than shakes and burgers—its new products snack wraps, smoothies and lattes are the reasons why McDonald’s locations came up with higher sales. The average sales per store in 2010 leaped to $2.4 million, a far cry from 2004’s 1.6 million.

The Operational Whiz

What things have to be done to pull off this global transformation? Crew trainings for the preparation of new food items; test kitchens that comes up with captivating recipes; suppliers that can deal with large orders; and marketers who need to deliver effective ways to sell them – on top of constantly dodging the industry watchdogs who continuously examines the nutritional value of their food. It’s a good thing that Skinner is an operations expert who was able to transform the giant chain into a well-oiled mechanism, taking a firm stand on right planning and accountabilities—even small items like hash browns need to be reviewed.

Managing Through Experience

It’s really no wonder why Skinner is familiar with the goings-on of a McDonald’s kitchen—he also once donned a restaurant uniform as a service crew there, just like 40% of the company’s executives, back in 1962 when McDonald’s employees still blanched, peeled and cut potatoes for fries. Years after, following a career in the Navy, he became a restaurant manager at McDonald’s.

Over the years, as he was assigned in international operations and had the chance to work all over the world, he became known as a devoted McDonald’s man, and a silent one at that. Someone who would always do his homework and would not feel the need to flaunt it. From his international stint, he returned to U.S. operations in 2002, to a pretty much struggling McDonald’s. The firm was then over-focused on expansions– opening at least three units a day, and as a result, food and service quality deteriorated, as well as the company’s profits and stock price. He became part of the executive team who fixed the problem, this time they focused on growth by way of increased sales at existing locations rather than by opening new stores.

Instilling the Right Values and Principles

When he took on the role of CEO in 2004, the no-drama executive did not implement a new approach – he just came in with the same policies, emphasizing that a change in leadership does not necessarily mean a change in strategy. True enough, under his wing, McDonald’s soared higher.

The challenge at that time, as it was said, was how to continue the growth of something that is already huge. Skinner continuously tells everyone—the employees in all locations, in their smart restaurant uniforms, his office staff and executives—that the success of the company does not center on customers trading down during tough times; what’s important is that when consumers want to spend, they’ll come to McDonald’s and spend it there.

They do not pursue one-hit wonders – instead, they pursue what’s known in the fast food industry as “platforms.” Chicken is considered the platform; McNuggets is one of its products. One of their new beverage platforms, McCafe, has augmented about $125,000 worth of sales per location and is the firm’s grandest launch in some 35 years.

Skinner made sure that the company’s never loses sight of the fact that its roots remain to be the burger business. Most businesses diversify, and McDonald’s did the same, too, acquiring business stakes in Mexican food, hotels and others, but they soon let go of that. When Skinner became top honcho, he sold all the other stakes to maintain their focus on their focal point – burgers. In any new venture that they plan on doing, the question he asks is, “Would it make a difference to the burger business? Will it help?” If the answer is no, then they forget about it.

He is also a firm believer of good talent, encouraging his management staff not to be afraid of their number twos. He requires all his executives to train no less than two probable successors—one who is capable of doing the executive’s job today and another one who is a potential replacement in the future. Skinner is known to be unsympathetic to those managers who are not capable of handling the idea of having a staff behind them who can tackle their job at any given time. “We should not be afraid to surround ourselves with people who are smarter than we are.” This way, the team does not weaken and continuously trudges on towards it goals.