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Change management in McDonald's

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 Change management in McDonald's
Javad Yazdanpanah

Introduction
The universe is continually changing, and the survival of the universe's particles depends on these
changes. Change is happening in all the world's phenomena, not limited to a specific spectrum.
Change existed before the creation of humanity and will always exist. Otherwise, the transfer to the
next time and conditions will not be possible in any situation and moment. Humanity has always
sought to create positive change, curb negative change, fight its effects, and manage change to avoid
its harmful effects. Businesses are also continually evolving in today's fast-paced world, and
organisations can survive to create a competitive advantage for their survival.
For large businesses like McDonald's, which have a long history and have expanded globally, change
management is vital. How a business has grown and survived over the decades and in different
countries and cultures, is an important question. Understanding McDonald’s change management
strategies as a successful business can provide valuable experiences for other companies to formulate
their change strategies. This understanding is vital to survive and expand in such a changing world.
This paper is aimed to answer this question of what strategies McDonald's has used to manage
changes over the past decades?

Company overview
McDonald's is one of the largest fast-food chains in the world. Two McDonald brothers opened the
first branch in 1948. (McDonald’s, 2020). The restaurant's initial menu consisted of hamburgers,
cheeseburgers, fries and soft drinks to deliver cheap food to their customers as soon as possible. In
1940, Richard and Maurice MacDonald moved the sandwich kiosk several miles to San Bernardino,
California. They named the restaurant "McDonald's Bar-B-Que". Their menu consisted of 25 dishes,
most of which were grilled. Their restaurant was one of those restaurants where people sat in their
cars in the parking lot, and the waiters took their orders and delivered the food to them.
In 1948, the two brothers realised that their most significant profit came from selling hamburgers.
They changed their menu, this time, including only hamburgers, cheeseburgers, potato chips, coffee,
soft drinks and apple cakes(McDonald’s, 2020). They made major changes to the restaurant in the
first year. Fries and milkshakes have replaced potato chips and apple cake in the menu. Moreover, the
restaurant changed from serving food in the car to a self-service. They also designed their restaurant
kitchen to be the most productive. The restaurant was renamed McDonald's and reopened a few
months later(McDonald’s, 2020).
Nevertheless, Ray Kroc's acquaintance with the two brothers paved the way for McDonald's business
expansion. Ray Kroc, a Milkshake blender dealer in 1954, discovered that eight of these devices were
used in the restaurant's San Bernardino branch. He became curious and went to McDonald's
restaurant. Crack suggested to the McDonald brothers that they set up branches in other countries as
well. The two brothers were initially a little sceptical. Still, eventually, Kroc was able to convince them
to take over their overseas branches' management and operation. Under a contract, they agreed to
give half of each per cent of sales to the McDonald brothers. The restaurant opened its first branch in
1955 near Chicago(McDonald's, 2020). McDonald's restaurants grew slowly over three years, reaching
34 in 1958. In 1959, Crack opened 68 new restaurants, bringing the total number of branches to
102(McDonald's, 2020). The company continued to grow until Crack bought a $ 2.7 million stake in
the McDonald Brothers in 1961 and paid 1.9 per cent of annual sales to the two brothers, making it
the most successful restaurant chain in the United States.

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By 1991, about 37 per cent of the restaurant's massive sales came from overseas branches. In 1967,
the restaurant opened its first foreign branch in British Columbia, Canada. This trend continued until
the following years. In the early 1990s, it was able to open more than 3,600 branches in 58 countries
such as Japan, Canada, Germany, the United Kingdom and France(McDonald's, 2020).
In 2020, McDonald's with 38,695 and 205,000 worldwide achieved annual sales of $20.8B, making
McDonald's one of the largest fast-food chain restaurants in the world(Forbes, 2020).

The Drivers of Change

Change is inevitable in the business world, and is one of the leading forces of improvement, strength
and progress. For a global and large business like McDonald's, change is doubly essential. Firstly,
McDonald's operates in different countries with different laws and cultures. Secondly, this business
has been operating continuously for several decades. These two reasons can make McDonald's
business one of the businesses that need leading change strategies. From this perspective,
understanding the driving motivations for change can be helpful. Understanding the drivers of change
can prepare companies for the changes that an organisation may face. Without this understanding, a
business may find itself where it has built the "perfect" system, yet nobody willing to use it. Customer
adoption goes hand-in-hand with how well the business leader understands the need and process of
change, and how well that process is communicated throughout(Lambertson, 2018).
To understand business changes, it is essential to discover the factors that drive that change. Because
it can help in adopting the right strategy for change, this is very important because if there is internal
inconsistency or a misunderstanding about the scope of the need for change, implementing that
change is difficult for everyone involved(Lambertson, 2018).
The "Drivers of Change Model" illuminates what creates the need for change, especially
transformation change, and depicts these drivers' sequence(Anderson and Anderson, 2002).
As Dean Anderson and Linda Ackerman Anderson (2002) explain, there is a demand-response
relationship between these different catalysts. However, many forces are repetitive and can interact.
The “change drivers model” shows that “change in larger external domains, such as change in
environment or market, requires a change in more specific areas of business strategy and
organisational design” (Anderson and Anderson, 2002). This type of change requires a change in
human spheres of culture and the behaviours and way of thinking of individuals. External areas
including the environment, market, business and organisation are more familiar to business leaders.
In contrast, internal areas such as culture, behaviour and mindset are new to most people but just as
essential. (Anderson and Anderson, 2002).

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Figure 1: The drivers of change model

Dean Anderson and Linda Ackerman Anderson (2002) defined these drivers as below:
Environmental: The environmental driver is the dynamics of the larger context in which organisations
and individuals operate. These forces include social, commercial and economic, political,
governmental, technical, demographic, legal, and environmental forces.
Marketplace Requirements for Success: This driver includes the total customer needs that determine
what is needed for a business to succeed in its market and meet customer needs. Besides covering
the real needs of goods or services, this driver also includes needs such as delivery speed,
customisability, quality level, need for innovation, and level of customer service. Changes in market
requirements are the result of changes in environmental forces.
Business Imperatives: As one of the drivers of change, Business Imperatives, determine what a
company needs to do to succeed strategically, given the changing needs of its customers. These may
require a systematic review and change in its mission, strategy, goals, business model, products,
services, pricing or brand. Basically, business Imperatives are related to the organisation's strategy to
meet customer needs successfully.
Organisational Imperatives: Organisational Imperatives refer to factors that must change in the
structure, systems, processes, as well as technology, resources, skills, and even staff of the
organisation in order for the organisation to implement its strategic business needs successfully.
Cultural Imperatives: Cultural Imperatives refer to how norms change, or the collective way of
working, working, and relationships in a company must change to support and guide the
organisation's new plan, operations, and strategy.
Leader and Employee Behavior: Collective behaviour is the creator and exponent of organisational
culture. Behaviour goes beyond obvious actions and explains how people change their lifestyles to
create a new culture. Therefore, the leader and the employee's behaviour indicates how leaders and
employees should behave differently to create the organisation's culture to successfully implement
the new plan.
Leader and Employee Mindset: Mindset includes worldviews, assumptions, beliefs, or mental models
that make people behave or act like them. Becoming aware that each of us has a mindset that directly
affects our behaviour, decisions, actions, and results. Mindset is often the first fundamental step in
building the individual's capacity and the organisation to transform.

Different types of change

Strategic change: This type of change involves extensive and long-term changes that take place
throughout the organisation. Strategic change is a transition to a new situation than defined in the
vision, mission, and grand strategy. This type of change in the context of external competition,
economic, social environments, internal resources, structure and Organisational culture happens
(Naghibi and Baban, 2011).
Operational change: Operational change is related to the operation, systems, and technologies that
have an impact on the order of work within a part of the organisation and have a more significant
impact on behaviour in compare with strategic change(De Toni and Tonchia, 2005).
On the other hand, Dean Anderson and Linda Ackerman Anderson (2002) classified different types of
change into three categories:

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Developmental change: Developmental change is related to improving skills, knowledge and
performance. It also keeps people changing, always growing, agile, and diligent toward a new level of
performance. The motivation for this type of change in the organisation is an improvement. There are
two basic presuppositions in any type of development change: a) People can be motivated. b) If they
receive training, motivation, and appropriate resources, they will definitely improve.
Transitional change: Transitional change is about redesigning strategies, systems, and technology
processes. The orientation of this type of change is a broad focus on structure, technology, and
project-oriented tasks. The purpose of creating it is to solve a problem. Transitional change means
replacing something utterly different. This type of change begins when the organisation managers
realise a problem that has not been followed up. Richard Beckhard and Reuben T. Harris (1987))
determined three transitional change stages: a) Current state b) Transition state c) Future state. One
of the vital aspects of transition change strategies is to clarify the fundamental difference between
the current state and the desired situation. This operation set is called "impact analysis", which
assesses human and organisational impacts and provides essential information for creating a proper
change plan and reducing human harm. The work analysis determines what aspects of the current
state will benefit the future state and what aspects should be left out altogether.
Transformational change: It is the most complex type of change and means a fundamental change
from one state to another. In this type of change, the mental form must change, and the direction of
this change requires change in culture, behaviour, and mental form. In this kind of change, changes in
the market and the environment are crucial that deep and rapid progress in individuals' worldview is
necessary to realise that the new situation has replaced the current operation.
In another view, change is divided into four categories based on the “Extent of change”, as well as the
“nature of change”, which are “Incremental change”, “Big bang change”, “Transformation” and
“Realignment”(Balogun et al., 2008). According to these element businesses can choose the proper
strategy, which illustrates in the figure below:

Figure 2: Different kind of changes

McDonald’s Change strategies

At McDonald's, change has a long history of the business. The first record of changes at McDonald's
back to 1948 when the McDonald brothers realised that 80 per cent of their sales were just
hamburgers, and " the more they hammered away at the barbeque business, the more hamburgers
they sold" (Love, 2008). They closed their restaurant for three months and rebuilt their business into a
self-service restaurant where customers could make their own favourite sandwich. As a result of
these changes, they fired 20 of their waiters and replaced the restaurant's metal utensils with paper
containers and cups. As a result, there was no need to hire people to wash the dishes. They simplified
their menu and increased the number of options to nine. This change in strategy, in two years,
doubled their profits (Gilbert, 2008). In fact, in those years, the marketplace requirements forced the
McDonald brothers to redesign and change their business and services. These changes, which are

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considered an operational change, were made according to new market requirements and customer
needs estimates. This historical example of McDonald's operational change back to the years when
the restaurant was confined to a city in the United States and had not yet gained worldwide fame, so
it cannot be compared to what McDonald is currently facing. Because both the scope of the
company's operations has expanded and new and complex issues have arisen globally that require a
more sophisticated and advanced change strategy, but from a perspective that reflects the antiquity
of change at McDonald's It is important.
Business conditions in the New World have put McDonald in “the turnaround situation” over the
years. A turnaround situation occurs when a company's performance deteriorates to the point that it
requires a fundamental change in strategy and possibly structure and culture (White, 2004). If a
business is not aware of these changes, it can lose its competitive advantage over competitors and
eventually lose its market share.
In McDonald’s, the turnaround situation came about due to the rapidly expanding speed around the
world and the change in people's attitudes towards fast food, which is now considered by many to be
unhealthy food. Also, the enormous growth in competition in the fast-food industry and some
organisational stagnation and management failure are other reasons for McDonald's turnaround
situation (White, 2004). One of McDonald's' turnaround situation was in the 1990s when many
McDonald's plans and their advertising campaigns failed. McDonald's extensive branches were
established around the world to become an enemy of the brand. Newer branches were taking
customers away from older branches, and that was hurting McDonald's revenue. In 1998, it was for
the first time since 1965, when McDonald's shares went public, its revenue was declining, and
McDonald’s had to lay off many of its employees.
The turnaround situation can have various consequences for businesses. This situation can force a
business to consolidate and divestment, change its business model, change key personnel, or change
its strategy. Besides, it can lead to a change in the structure or even a change in the culture (White,
2004). At that time, McDonald's used various programs and strategies to get out of the crisis. For
example, Improve its current business model by reducing prices and speeding up services.
McDonald's also launched a $ 20 million advertising campaign to recreate its brand image. The
changes also included a change in the company's management and the previous CEO returned to the
company. McDonald also closed several stores and closed restaurants in three countries to
compensate for financial losses and increase profitability. Besides, McDonald's introduced a new
range of new foods and products (White, 2004). However, all these changes that took place at that
time were operational changes that did not lead to a change in the strategy, structure and culture
that governed McDonald's.
On the other hand, in recent decades, people's lifestyles have changed, and healthy eating concerns
have increased. This lifestyle change is a significant challenge for McDonald's, as its menu is full of
fatty and unhealthy foods. The change forced McDonald's to include vegetarian foods in its menu and
use less fat in food preparation. For example, following the rise in child obesity and criticism of
McDonald's as one of the largest fast-food restaurants, McDonald's launched a campaign to promote
healthy eating and exercise, targeting children and adolescents (Rowley, 2004).
McDonald's activities have also come under crisis in recent years as environmental concerns have
grown. As people became more aware of the importance of protecting the environment, McDonald's
also decided to minimise plastics in packaging and containers and use recyclable materials. In addition
to health and environmental issues, this change is crucial because it can change McDonald's brand's
image into an environmentally friendly business(Xu, 2014). In this regard, McDonald's driving “Climate
action” to find new ways to reduce emissions, dispose of waste from nature and conserve natural
resources with the participation of franchisees, suppliers and producers(McDonald’s, 2020). Although
there have been critics of McDonald's performance in environmental pollution, McDonald's has tried

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to set its policies and standards to reduce greenhouse gas emissions and use of renewable energy, as
well as to contribute to the advancement of agricultural practices to introduce itself as the “first
global restaurant company to set a science-based target to reduce emissions”.
The Covid-19 epidemic, on the other hand, is another situation that has changed business conditions
and put many businesses in crisis. In this situation, McDonald's, based on its change management
strategy, has tried to adapt to these changes. The company is trying to turn the pandemic crisis into
an opportunity, and as McDonald's CEO announced they expect to be a winner in a landscape
transformed by COVID-19 (Kowitt, 2020). McDonald's strategy for the pandemic situation is called
“Accelerating the Arches” and is not just focused on its food products, but is in line with its strategy to
focus on 3D’s. These 3D’s include “digital”, “drive-thru” and “delivery” which are based on
McDonald's “growth pillars”. The company is working to increase the speed and convenience of
shopping, test drive-thru pickup lanes for digital orders and a restaurant concept that offers only
drive-thru, delivery, and takeaway(Kowitt, 2020).
Besides, technological change is another area that has challenged businesses. The type of response to
these changes and the extent to which they benefit can affect the expansion or regression of a
business. In terms of adapting to technological changes, McDonald's has also been trying to adapt its
business based on the new situation. McDonald's continues to invest in digital technology and the
growth of research and development activities in new technologies to ensure that it is one step ahead
of the pace of change and becomes the fastest fast-food chain in the digital age(Fleming, 2019).
All of the given examples for McDonald's exposure to global change show that, in general, McDonald's
strategy for coping with these changes has been adapting strategy in most cases. This adaptation has
also occurred in the face of changing global conditions and due to regional and local situations.
McDonald's adapting strategy has made the company so flexible that it has made different changes to
its menu based on people's food culture and tastes in different countries. Based on the examples
given of McDonald's exposure to various changes over the past decades, it can be concluded that the
most crucial factor in the continuation and development of McDonald's business is adapting to new
conditions and changing programs and products based on new needs.

Conclusion
Changing global conditions demand that businesses have the right strategy to cope with new changes
and conditions. As one of the largest restaurant chains globally, McDonald's is one example of a
business that needs an effective strategy to cope with change. This paper is aimed to answer this
question of what strategies McDonald's has used to manage changes over the past decades?
The need for change in the organisation arises from various drivers, including; “Environmental”,
“Marketplace Requirements for Success”, “Business Imperatives”, “Organisational Imperatives”,
“Cultural Imperatives”, “Leader and Employee Behavior”, and “Leader and Employee Mindset”. The
history of McDonald's change shows that at different times, each of these drivers has created the
need for change in McDonald; When the McDonald brothers closed their restaurant for three months
in 1948 to redesign their business, and now in 2021, when McDonald's struggles with the Covid-19
pandemic, tries to turn this challenging change into an opportunity for further growth.
Also, different categories were presented for different types of change, and according to the “nature
of change” and “extent of change”, four strategies were introduced, including; “adaption strategy”,
“evolution strategy”, “reconstruction strategy”, and “revolution strategy”. Examples of McDonald's
exposure to change over the years show that its strategy in change situations has been adapting
strategy. McDonald's has tried to adapt to needs and changes, both globally and locally, and to use
the new conditions as a factor for further progress.

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