GLOBAL LEADERSHIP

S. Easterbrook’s Leadership analysis

Table of Contents
Table of Contents ............................................................................................................................................1
Introduction ....................................................................................................................................................2
Leadership profile ...........................................................................................................................................2
New Approach ................................................................................................................................................3
Financial Performance ....................................................................................................................................5
Brand Value.....................................................................................................................................................7
New Strategy...................................................................................................................................................8
Recommendations ..........................................................................................................................................9
References ....................................................................................................................................................10

Figure 1 Competences needed for a global leader .........................................................................................2

Figure 2 McDonald’s leadership team and its organisational structure .........................................................4
Figure 3 McDonalds leadership structure in international markets ...............................................................5
Figure 4 Cost of goods sold and gross profit...................................................................................................5
Figure 5 Net Income of McDonalds Corporation Worldwide .........................................................................6
Figure 6 Revenue of McDonald’s Corporation Worldwide by region .............................................................6
Figure 7 McDonald's global brand value.........................................................................................................7
Figure 8 Fast food TOP 10 in brand value .......................................................................................................7
Figure 9 McDonald’s trust and momentum 2015 vs 2019 .............................................................................8
Figure 10 Number of McDonald’s restaurants Worldwide.............................................................................9
Figure 11 Number of McDonald’s employees Worldwide..............................................................................9
Introduction

The McDonald's Corporation is the leading food service retailer worldwide. The Company operates
and franchises McDonald's restaurants that serve a local menu of quality food and beverages sold at
different prices. McDonald's global system consists of restaurants owned by the company as well as
franchised. McDonald's franchised restaurants are owned and operated within one of the following
structures-conventional franchise, development licence, or affiliate. The ideal ownership structure
for a specific business, trade region or market is dependent on a variety of factors including the
availability of persons with entrepreneurial expertise and financial resources, and the relevant legal
and regulatory climate in critical areas such as property ownership and franchising. The business
relationship between McDonald's and its independent franchisees is crucial to the overall
performance and to the McDonald's brand.
(Macrotrends 2019)
The aim of this report is to analyse McDonald’s CEO, Steve Easterbrook, leadership style and his
competences and to compare it with company’s financial performance during his leadership years
2015-2019. Recommendations will address leadership issues and how leadership performance could
have been improved to achieve better results.

Leadership profile

In 2015, McDonald’s corporation introduced its new CEO, Steve Easterbrook, a man that knows the
company inside-out. According to his previous employee: "Steve's an outstanding leader, man-manager
and all-round good guy. He's passionate about both the McDonald's customer and the McDonald's crew
that serve them. He leads from the front counter: […] Steve knows every inch of how the restaurant
works, having come up through the ranks […]" (O’Reilly 2015).

Figure 1 Competences needed for a global leader

Easterbrook cares about company’s customers and its employees: ‘Recognise that the sole pursuit of
profit is fruitless. Serve customers well, treat your staff well and have fun. Profit is invariably the
outcome’ (cited by Barnes 2013).
New Approach

In 2015, Easterbrook introduced a four-pillar approach to system-wide operational improvements

that highlighted organisational accountability, customer centricity, progress over perfection and
simplification of processes. Easterbrook introduced new changes in company’s organisational
structure in 1st of July 2015 (Dudovskiy 2016).

McDonald's Corporation has a structure of a divisional organisation. The business organisation is

divided into components in this type of structure which are given responsibilities based on
operational needs. Each division handles a particular area of operation or set of strategic goals. One
of the purposes of this corporate structure is to support autonomy and organisational flexibility in
meeting business needs in various organisational and market aspects. The organisational structure
of McDonald has the following characteristics, arranged according to the significance of the business
operations affecting food service:
• Global hierarchy
• Performance-based divisions
• Function-based groups
(Thomson 2019)
Global Hierarchy.
The McDonald's Corporation has a global hierarchy to cover all of its worldwide operations. This
feature of the organisational structure emphasises the management control and direction of the
company. By this strategic function, for example, McDonald's CEO controls the operations of all
business areas. Mandates and directives are transferred from the CEO to middle managers, as well
as restaurant managers and employees in corporate and franchise activities. This aspect of the
corporate structure of McDonald is characteristic of most large business organisations.
(Thomson 2019)
Performance-based divisions.
The most distinguishing characteristic of McDonald's corporate structure are the performance-based
units. McDonald's had the following geographical divisions in its organisational structure prior to its
reorganisation on 1 July 2015: (a) U.S., (b) Europe, (c) Asia / Pacific, (d) Middle East and Africa, and
(e) Other Countries & Corporate (OCC) including Canada, Latin America and Corporate. Following the
reorganisation, the company used performance in its organisational structure as the basis for the
new divisions: (a) US, (b) International Lead Markets, (c) High Growth Markets, and (d) Foundational
Markets and Corporate. The US division provides McDonald's with the largest regional sales
revenues. The combination of international lead markets also represents a big part of the company's
income. The high-growth markets account for a small minority of McDonald's revenues, although
these markets have significant business growth potential based on rapid economic development.
(Thomson 2019)
Function-based groups.
In its corporate structure, McDonald's maintains functional groupings. The company, for example,
has a People group for human resource management in corporate operations, and a Supply Chain
and Sustainability group for supply chain management and sustainability efforts. Each group is
headed by a corporate executive or senior executive. This characteristic organisational structure
allows McDonald's Corporation to address the fundamental functions in its business. As the
company grows and its target markets change, groups may be added or changed.
(Thomson 2019)

Figure 2 McDonald’s leadership team and its organisational structure

The McDonald's corporate structure can be described as divisional (Dudovskiy 2016). McDonald's
business operations are classified according to their geographical location into the following four
divisions:
• United States
• Europe
• Asia/Pacific, Middle East and Africa
• Other countries
Figure 3 McDonalds leadership structure in international markets

Under the leadership of Easterbrook, the formerly staid company also embraced innovation. It has
removed common items from the menu, redesigned drive-thru and restaurants, and updated main
meal dishes, including Egg McMuffins and Chicken McNuggets (Racke 2016). In addition, Easterbrook
has directed major changes in the internal structure of McDonald by bringing new executive
management and reducing corporate bureaucracy (Racke 2016). According to Easterbrook,
McDonald's ongoing transformation is based on recognition that the company was hampered by the
old ways of doing business (Racke 2016).
"We were and we are a great operational company, but perhaps you start naturally to run out of
ideas and need fresh perspectives, whether that's in communications or marketing or strategy, you
need people to come in with a fresh perspective’’ (Easterbrook cited in Racke 2016).

Financial Performance

Over the last four years there has been year-over-year improvement in McDonald's net income,
reflecting a consistent increase in profit for the regional fast-food leader. This could be due to recent
business developments, such as restaurants for refranchising, introduction of technologies, delivery
services and more.

Figure 4 Cost of goods sold and gross profit

Figure 5 Net Income of McDonalds Corporation Worldwide

Figure 6 Revenue of McDonald’s Corporation Worldwide by region

In recent years, the fast-service (or limited-service) restaurant market has become increasingly
competitive, and while McDonald's remains profitable, the revenue has been declining each year for
more than five years (Lock 2019).
Brand Value

Figure 7 McDonald's global brand value

"We’re fit for purpose with the right structure, right talent and right mindset. We’re behaving like a
leadership brand" (Easterbrook cited by Gwynn 2017).

Adjusting to the changes in the market, McDonald's, the most popular company in the BrandZTM Fast
Food Top 10, introduced enhancements dubbed "Experience of the Future." At many McDonald's stores,
consumers now have the option to order at the register, at a kiosk, or on an iPad, and to pick up the
order from a window or have it shipped to their table. (Brandz 2019)

Figure 8 Fast food TOP 10 in brand value

Operational changes to satisfy increasing consumer expectations for food quality and comfort have
helped McDonald's demonstrate its mission, strengthen the brand image, build loyalty and boost
Momentum (Brandz 2019).
Figure 9 McDonald’s trust and momentum 2015 vs 2019

New Strategy

Throughout high growth areas, McDonald's has grown its restaurant segments, which are markets
that continue to grow at an increasing rate. To further its development programmes, the
organisation has even adopted a growth strategy called the "Velocity Growth Program".
The Velocity Growth Plan is based on the three foundations, each focusing on building a better
company:
• Retain customer base solid and expand focus areas like breakfast and family incentives.
• Regain customers with an emphasis on food quality, comfort and interest.
• Convert regular consumers by spending more on coffee and other treats.
(McDonald's Corporation 2018)
Each foundation has developed sustainability frameworks that enable for more time, reliability and
effect to execute the programme. In addition, McDonald’s enhanced the overall customer
experience with hospitality, friendly service and improved convenience for customers on their terms
through the following three growth accelerators:
• Digital. Choices for ordering, payment and service are established through the evolution of
the technology platform by offering additional features in our global mobile app, self-control
kiosks and other enablers, such as table service and collection.
• Delivery. The added value of delivery takes product to the customer.
• Experience of the future. The goal is modernisation and technology of restaurants to change
the experience of restaurant service and to boost the brand.
(McDonald's Corporation 2018)

Recommendations

Steve Easterbrook came in with clear long-term vision for McDonald’s global corporation. During his
years as a CEO he made a lot of changes. From one point of view the improvements he done were
positive and heathy for the company. However, some of the improvements meant less job positions.

Figure 10 Number of McDonald’s restaurants Worldwide

Figure 11 Number of McDonald’s employees Worldwide

The number of restaurants were increasing every year, although number of employees were
decreasing significantly. Not only that new job positions were not created with increased company
growth, employees were replaced by innovative technology.
The biggest mistake done by global leader Steve Easterbrook was claiming how important it is to
take care of employees, but not actually doing it. Company has failed to address sexual harassment
issues that were happening within.
As one of McDonald’s employees stated: 'With the firing of Steve Easterbrook, we now know why.
It's clear McDonald's culture is rotten from top to bottom. McDonald's needs to sit down with
worker-survivors and put them at the centre of any solution' (Robinson 2019).
Company has forgotten their values, and are not providing safe work environment for their
employees.
References

Barnes, R. (2013) Do You Know Your CEO? The Eight Essential Leadership Skills [online] available from
<https://www.campaignlive.co.uk/article/know-ceo-eight-essential-leadership-
skills/1174126?src_site=marketingmagazine> [24 February 2020]
Brandz (2019) Top 100 Most Valuable Global Brands [online] available from
<https://www.brandz.com/admin/uploads/files/BZ_Global_2019_WPP.pdf> [24 February
2020]
Corporation, M. (2018) Annual Shaholders’ Meeting and Proxy Statement [online] available from
<https://www.sec.gov/Archives/edgar/data/63908/000120677418001176/mcd3291681-
def14a.htm> [27 February 2020]
Dudovskiy, J. (2016) McDonalds Leadership and McDonalds Organizational Structure - Research-
Methodology [online] available from <https://research-methodology.net/mcdonalds-
leadership-and-mcdonalds-organizational-structure/#_ftnref1> [27 February 2020]
Gwynn, S. (2017) McDonald’s CEO: ‘We’re Behaving like a Leadership Brand’ [online] available from
<https://www.campaignlive.co.uk/article/mcdonalds-ceo-were-behaving-leadership-
brand/1440482> [27 February 2020]
Lock, S. (2019) • McDonald’s: Revenue by Region | Statista [online] available from
<https://www.statista.com/statistics/219453/revenue-of-the-mcdonalds-corporation-by-
geographic-region/> [27 February 2020]
Macrotrends (2019) McDonald’s Revenue 2006-2019 | MCD | MacroTrends [online] available from
<https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/revenue>
O’Reilly, L. (2015) McDonald’s (MCD) CEO Steve Easterbrook Just Taught Us 3 Key Things About
Leadership - TheStreet [online] available from <https://www.thestreet.com/how-to/three-
things-to-learn-about-leadership-from-mcdonalds-ceo-steve-easterbrook-14356889> [27
February 2020]
Racke, W. (2016) McDonald’s CEO Steve Easterbrook Welcomes Change, Innovation - Chicago
Business Journal [online] available from
<https://www.bizjournals.com/chicago/news/2016/11/22/mcdonalds-ceo-embraceing-
change-at-fast-food-giant.html> [26 February 2020]
Robinson, M. (2019) McDonald’s’ British CEO Steve Easterbrook Admits ‘mistake’ in Email after Being
FIRED over an Affair | Daily Mail Online [online] available from
<https://www.dailymail.co.uk/news/article-7646839/McDonalds-British-CEO-Steve-
Easterbrook-admits-mistake-email-FIRED-affair.html> [26 February 2020]
Thomson, A. (2019) McDonald’s Organizational Structure & Its Characteristics - An Analysis -
Panmore Institute [online] available from <http://panmore.com/mcdonalds-organizational-
structure-analysis> [24 February 2020]
Figures:

Lock, S. (2020) • McDonald’s: Net Income 2019 | Statista [online] available from
<https://www.statista.com/statistics/219420/net-income-of-the-mcdonalds-corporation/> [27
February 2020]
McDonald’s Revenue 2006-2019 | MCD | MacroTrends (n.d.) available from
<https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/revenue?q=> [27 February 2020]
MCD Stock Rating and Data | McDonald’srp - GuruFocus.Com (n.d.) available from
<https://www.gurufocus.com/stock/MCD/summary> [26 February 2020]
McDonald’s: Revenue 2005-2018 | Statista (n.d.) available from
<https://www.statista.com/statistics/208917/revenue-of-the-mcdonalds-corporation-since-2005/>
[26 February 2020]
McDonald’s | Statista (n.d.) available from <https://www.statista.com/study/14355/mcdonalds-
statista-dossier/> [27 February 2020]
McDonald’s: Number of Restaurants Worldwide | Statista (n.d.) available from
<https://www.statista.com/statistics/219454/mcdonalds-restaurants-worldwide/> [26 February
2020]
McDonald’s: Brand Value 2019 | Statista (n.d.) available from
<https://www.statista.com/statistics/326059/mcdonalds-brand-value/> [24 February 2020]
McDonald’s Profit Margin 2006-2019 | MCD | MacroTrends (n.d.) available from
<https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/profit-margins> [24 February 2020]
McDonald’s Net Income 2006-2019 | MCD | MacroTrends (n.d.) available from
<https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/net-income> [24 February 2020]
McDonald’s Financial Statements 2005-2019 | MCD | MacroTrends (n.d.) available from
<https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/financial-statements> [24 February
2020]