Introduction
The fast food industry has been growing steadily in the past decade, making it one of the largest in the U.S. Naturally, it is one of the largest employers in the country and generates billions of dollars for the American economy. However, the success of businesses in the sector is pegged to its human resource assets. A company that is able to recruit and maintain the best talents in the sector not only reduces their overhead costs but also increases its chances of success in the highly competitive market (Iqbal, Guohao, & Akhtar, 2017). However, recently, organizations have been looking to adopt automated solutions and innovations to make their operations cheaper and more effective. Even though such an approach has worked impressively in other businesses, innovation in the fast food business has had a retrogressive effective due to high employee turnover. Lack of proper training, poor remuneration, and increased workload are some of the factors that are pushing talented employees out of companies such as McDonald’s and fast food sector in general.
The Opportunity
Innovation is shaping modern businesses by reducing costs and improving efficiently. More companies are looking towards automated solutions to either replace or complement human labor with astonishing results. For example, the manufacturing sector has continuously automated operations making the sector more effective and less labor intensive. The same result has been observed in the banking sector where innovation has reduced the red tapes and inefficiencies that previously plagued the sector. Such examples have prompted other organizations to embrace technology in the aim of serving their customers better, faster, and more efficiently. McDonald’s has been a household name in the American fast food sector for decades. Naturally, the company keeps on looking at ways to maintain its competitive edge in a highly competitive and dynamic market, and with the emergence of the digital edge, innovation has become inevitable as the company looks to prepare for the future.
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In the past few years, McDonald’s has been revamping its operations with new technology to give its customers an experience of the future. However, the use of technology is not a novel idea in the fast food sector. Several companies have already fully or partly automated their operations to give their customers a unique and efficient experience, while keeping the costs low. With calls to increase the minimum wage gaining momentum in the U.S., fast food companies are looking towards innovation to keep the operation costs low, consequently keeping the prices of the products. One such company is Spyce, a startup which successfully executed the use of automation and human labor to not only make its operations efficient and cost effective, but also to maintain a human touch in its service delivery ( Engel, 2018) . The company has stood out by having possibly the world’s first robotic kitchen. Created by MIT students with an interest in robotics, the restaurant is characterized by robotic solutions that dispenses the ingredients onto a rotating belt that cooks the meals through a process of electromagnetic induction ( Engel, 2018) . The technological solution enabled the company to keep the costs low enough for its target customer base of college students who see cheap and readily available food. The mixture of robotic technology and human labor enables Spyce to reduce the traditional overhead costs to a point that it is able to provide health options in its menu at a cheap price point (Holt, 2018).
To retain its human touch, the company also has some human workers to complement its robots. The problem with automation is that it can make the services feel impersonal to the customer. Even though some customers might be undeterred by this, some consumers prefer services with a personal human touch to feel valued and satisfied. For example, the company uses the services of Chef Sam Benson to develop its menus. In addition, human workers also help in the food prep and assist customers to make their orders in the touch screens (Holt, 2018). However, the majority of the work is done by the robots ensuring that the human contingent is not overworked. According to its CEO and cofounder Michael Farid, the company’s ability to have a team of robots working alongside humans make it unique and competitive ( Engel, 2018) . The success of the company is apparent with the interest of investors. Despite its unconventional approach, the company managed to secure an additional investment of $21 million to expand its operations in the east coast (Holt, 2018). Even though the company is smaller in terms of scale when compared to perennial giants such as McDonald’s, it is a clear testament that automation can be adopted without causing high employee turnover if it is approached in the right manner. Since its opening in Boston, Spyce has a big fan following mostly due to its use of technology from the instance a customer walks into the restaurant to when they receive their meals with minimal assistance from the human staff. It is clear that its formula is a winner not only on the HR front, but also from a business strategy perspective.
Current Situation
McDonald’s is one of the largest fast food franchises in the U.S. The company has managed to maintain its competitive edge for decades by being able to be dynamic and innovative. The digital age means that companies have to embrace technology in order to stay abreast or ahead of their competition. This is also the case in McDonald’s as the company seeks to retain its position as one of the market leaders in the American fast food business. The company embraced new technology, revamped its menu, and adopted a curbside pickup system to give the customers a better experience in its franchises. However, even though the changes were expected to enhance the customers’ experience, it has resulted in an unintended problem, high employee turnover. It is not unnatural for employees in the fast food sector to move from company to company. Nevertheless, workers in McDonald’s are quitting instead of having to deal with new menu options and technology (Patton, 2018). According to an Article on the Financial Post by Leslie Patton, states that the efforts by McDonald’s to give its customers the “Experience of The Future” might fail due to claims of inadequate staffing, increased workload, and low pay. High turnover has already slowed the drive through times by 30 seconds to 239 seconds in 2017 (Patton, 2018). Patton (2018), also states that turnover in the fast food sector in the U.S. has increased by 150 percent, meaning that for a store employs 20 employees will go through 30 annually (Patton, 2018). Furthermore, quick-service restaurants are facing a challenge when recruiting workers since the pace of work and technology are not conversant with the low wages. Even though the McDonald’s CEO Steve Easterbrook has succeeded to increase the company’s sales by 3.6 percent in 2017, the initiatives which have been adopted in the context of innovation have made it difficult to retain employees (Patton, 2018). According to the company, it employed 235,000 employees in 2017, and each of the employees generated $97,000 each when compared to $65,000 the previous year (Patton, 2018). These statistics might point towards increased efficiency. However, these statistics, must be viewed through a realistic lens, which is the company is stretching thin its inadequate number of workers.
Innovation enables McDonald’s customers to order through mobile phone apps, in-store kiosks and at the register. As a result, the number of orders have caused more stress and confusion for the employees. The working environment is no longer suitable for employees causing high turnover in the company. The biggest risk of this development is that it will consequently affect the customer experience, a crucial factor for customer retention in the competitive industry (Kotteeswari & Sharief, 2014). Once the customer experience begins to wane, then the company faces the reality of losing out to its competitors. Inadequate staffing means that customers will have to wait longer for their orders and there are high chances that errors will be made in cases where the orders are overwhelming.
Key Success Factors
For McDonald’s to succeed in its quest to embrace automation and innovation, it has to consider several factors. Firstly, it has to have the right number of employees to handle the demands of the new systems. Overwhelming employees with the demands of new technology will lead to employee turnover. Therefore, innovation should be backed by adequate human resources. For example, Spyce has fully automated its services but it has human employees playing a supporting role. Since the automation handles the bulk of the work, the workforce is sufficient to handle the workload efficiently. Another success factor is training. The employees have to be trained to be able to handle the new technology effectively. If the employees are well versed about the new technological changes and how they can handle them, confusion and stress will be reduced significantly, making the workplace more suitable for workers (Kotteeswari & Sharief, 2014). Finally, the workers need to be adequately compensated for the additional responsibilities brought by the new systems. Underpaid employees feel unappreciated and have a high chance of seeking better opportunities elsewhere (Osibanjo, Adeniji, Falola, & Heirsmac, 2014). Therefore, in the context of McDonald’s, the main points of success in its efforts to retain and attract talent from the job market is to offer training, attractive wages, and to hire an adequate staff based on its needs.
Analysis of Alternatives
One of the alternative solutions to the challenge is to pull the new initiatives adopted by the company. This means scrapping the app orders and the in-store kiosks and going back to the traditional manual ordering system. This solution is not practical since the fast food industry is embracing digital technology and robotics to make operations effective and cost efficient. Another solution is to fully automate the systems in the company and put human labor on a supporting role similar to the system adopted by Spyce. Under such a system, the workers will not be overwhelmed and the need to hire would be reduced freeing up finances to increase the wages and make the work environment more attractive for employees. The final solution would be to begin training programs and to increase the minimum wage to make the job more attractive for current and future employees. Even though this solution would cost the company more, it would create a suitable balance between automation and employee retention required to move the company to the future.
Strategic Solution Option
The strategic solution in this case would be to train the current employees and give them additional compensation for the increased workload. Training will ensure that the employees are not confused by the new systems and that they are capable to serve the customers more effectively. Furthermore, additional pay will make the employees feel appreciated and rewarded for the efforts, reducing turnover (Iqbal, Guohao, & Akhtar, 2017).
Benefits and Risks of Strategic Solution Option
Benefits
The strategy will allow its company to retain its current human resources hence reducing hiring costs
Training would ensure that the employees are well equipped to handle innovation and its demands
Additional compensation would make the company attractive for current and potential employees hence reducing turnover
The strategy creates a balance between human resource and innovation. One is not sacrificed at the expense of the other positioning the company to be competitive in the long term
Risks
The company will have to incur costs in training of the employees
The strategy might take time to change the employees’ attitude towards innovation
Final Recommendation
McDonald’s should embark on a program that ensures that its human resource is trained about the initiatives being adopted to enhance the experience of the clients. The HR department should prioritize training for its current and new employees to ensure that they have the right skills and knowledge to serve the customers effectively. Shutting out employees from the process of adopting innovative changes is disastrous for organizations since it increases the chances of failures as is the current case in McDonald’s. Training would ensure that the employees are well informed and involved in the process of innovation adoption. In addition, increase in wages should also be prioritized by the HR department so that the workload of the employees is reflected in the compensation. The training should start immediately and run for 6 weeks to ensure that the employees are well educated about the new systems and how they work. However, since the employees are already contending with high workloads, their wages should be increased immediately to motivate them.
References
Engel, J. (2018 Oct, 9). Robotic Kitchen Startup Spyce Grabs $21M to Open More Restaurants . Xconomy. https://xconomy.com/boston/2018/09/07/robotic-kitchen-startup-spyce-grabs-21m-to-open-more-restaurants/
Holt, S. (2018, June 15). Full service: Automation in restaurants is changing the food industry . Greenbizz. https://www.greenbiz.com/article/full-service-automation-restaurants-changing-food-industry
Iqbal, S., Guohao, L., & Akhtar, S. (2017). Effects of Job Organizational Culture, Benefits, Salary on Job Satisfaction Ultimately Affecting Employee Retention. Review of Public Administration and Management , 5(3), 1-7.
Kotteeswari, M., & Sharief, S. T. (2014). Job stress and its impact on employees’ performance a study with reference to employees working in Bpos. International Journal of Business and Administration Research Review , 2(4), 18-25.
Osibanjo, A. O., Adeniji, A. A., Falola, H. O., & Heirsmac, P. T. (2014). Compensation packages: a strategic tool for employees' performance and retention. Leonardo Journal of Sciences , (25), 65-84
Patton, L. (2018, March 13). McDonald's workers quitting in droves over 'complicated' technology, new menu items . Financial Times. https://business.financialpost.com/news/retail-marketing/mcdonalds-workers-quitting-in-droves-over-complicated-technology-new-menu-items
