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CTDO Magazine

Turnaround Time for a Fast-Food Behemoth

Thursday, June 15, 2017

L&D, led by CLO Rob Lauber, is key to the ongoing transformation at McDonald's.

Rob Lauber was hired in 2014 as the first chief learning officer at McDonald's. In late 2016, the company and Lauber took bold steps to begin to globalize worldwide learning and development across all McDonald's functions and company-owned franchises—which for the past 60 years had been decentralized and disconnected.

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Lauber notes that the talent and learning functions have evolved significantly at McDonald's over the past three years. "It's part of building a better McDonald's," he says. "We are working differently and very closely, and for the first time we have truly strategic people priorities. For the first time we have learning and development organized into one sub-function."

So, what happened?

Steve Easterbrook, a British executive who had left McDonald's for a time but returned in 2013, moved into the role of CEO in February 2015 and quickly laid out a turnaround agenda to get the business momentum moving in the right direction. An example was the launch of all-day breakfast in the U.S. business as an action that kick-started the change.

"Now that we have the business turned around, and we have momentum, we're taking big steps to accelerate that momentum and grow our business," Lauber explains. "Our CEO, Steve, is on fire about building a better McDonald's. He doesn't want us to be different for the sake of being different. He wants us to be different to be better. Better for our customers and better for our people."

In March 2017, Easterbrook and senior leaders unveiled a new global growth plan to company investors. Called the Velocity Growth Plan, it is focused on modernizing the overall restaurant experience. That includes greater use of technology to enhance the customer experience, and a plan to offer customers the convenience of delivery to their doorsteps through a third-party partnership. In short, not your mother's McDonald's.

Easterbrook told company leaders in mid-December, "We're putting together a team to take delivery to a totally different level at McDonald's and we're going to begin in Florida. Let's go!" In four weeks they were doing the first deliveries to customers in Florida. Traditionally, it would have taken years for McDonald's to examine the pros and cons, explore the risks, conduct limited testing, and examine the results.

A centerpiece of the company's plan to unlock meaningful growth and retain and regain customers is called the Experience of the Future. Prototype components of the Experience of the Future have been assembled for a short time in a downtown Chicago warehouse. The prototype features self-ordering kiosks, a sleek new look inside, and car lanes for picking up orders selected ahead of time on a mobile app. Scores of visitors, including investors, board members, and hundreds of restaurant operators, have had a sneak preview of the future of McDonald's. It's an empirical way to lead change across the business. Several Experience of the Future restaurants already are present around the world, with even more set to open by the end of 2017, including about 2,500 in the United States.

At the table

The overall goal to build long-term growth and get more people to choose McDonald's more often goes beyond leveraging and developing new technology. With that technology in place, the company is able to put a greater emphasis on one-on-one hospitality with a focus on personalized service and greater convenience.

The Global People Team, which comprises Lauber's L&D Center of Excellence, the Talent Management Center of Excellence, as well as others, will play a key role in readying employees to accelerate growth and deliver enhanced service to the most customers in the shortest amount of time. The team's work will focus on enhancing and evolving the company's overall culture of hospitality, including building associates' digital capabilities and the use of technology in restaurants and in the drive-through lanes.

Preparing McDonald's employees to deliver those services across the world in 2017 and beyond requires major learning and development efforts. "My team is working with our digital team on the learning and development requirements for enhancing people's digital capabilities," says Lauber. "For example, our associates will be prepared to help customers if they have problems with the mobile app or the self-ordering kiosks."

With the enhanced focus on hospitality and personalization, some employees will be coming out from behind the counter to interact with customers, deliver food to their tables, and help them use ordering kiosks and mobile payment options. Lauber and his L&D team are working to identify and deliver the new skills and behaviors employees will need to offer these new hospitality services.

Special delivery

To provide the new delivery service, McDonald's uses third-party operators such as UberEATS and Foodora, a European ride-hailing service.

"We're partnering across our organization globally to build people's understanding of the opportunity that delivery provides for us from a sales growth perspective," Lauber explains. "We're also developing all the learning and development around the what, why, and how the delivery experience will be executed."

The growth of delivery companies and the technology that supports them has upended parts of the casual dining industry at a rapid rate. Quick-service customers expect to be able to use apps to order, pay, and provide instant feedback about service, just as they do when ordering rides from Uber or vacation rentals from Airbnb.

Business analysts speculate that, given its large global footprint, McDonald's could become a leader in food delivery. In its top five markets (the United States, France, the United Kingdom, Germany, and Canada), 75 percent of the population lives within three miles of a McDonald's. In China, South Korea, and Singapore, McDonald's is one of the largest providers of delivered food, which already represents a $1 billion established business.

Financial targets for L&D

The McDonald's growth strategy addresses financial targets, including targets for cash return to stockholders and new financial targets for sales, operating margin, earnings per share, and return on incremental invested capital. Lauber's group is looking for greater efficiencies in its global L&D operations.

"We're looking very hard at our business models in tandem with the rest of the business. We're looking at optimizing our learning delivery platforms, whether that's for Hamburger University, learning management systems, digital-based delivery tools, or instructor-led models.

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"We're also looking at core content such as how to onboard a new crew person consistently in 120 countries. We want to move faster and more efficiently as a globalized team."

L&D is a small group serving a large audience, and to leverage their efforts, they partner with other teams across their function and the company as a whole, such as talent management, communications, and marketing.

Marketing is a big stakeholder in the new growth plan. "Part of our hospitality initiative is driven by what our brand promises—making delicious, feel-good moments that are easy for everyone. So, how do we bring that to life in what we do in our restaurants? How do we help employees understand this promise of our brand? These are conversations we engage in across the business. And all of this is founded on the evolution of our culture as a way of working differently and driving new behaviors," Lauber explains.

Progress is good so far

In mid-2016, Forbes magazine reported on the initial success of the McDonald's turnaround strategy. The company reported a 6.2 percent increase in comparable sales in the first quarter of 2016, primarily on the back of the success of the all-day breakfast offering of low-priced breakfast items sold throughout the day. The company also enjoyed a 6 percent improvement in the overall customer satisfaction score in the United States compared with 2015.

To attract customers, McDonald's is testing several new menu items in all price ranges. A "signature collection" of premium menu items debuted in the United Kingdom in early 2016. There is a new version of the brand's signature Chicken McNuggets, without artificial preservatives; Big Macs now come in three sizes; and in Hong Kong there are menu options such as a salad bar and quinoa.

Forbes magazine's analysis of McDonald's found that "adapting to changing customer preferences with a focus on the quality of ingredients is a very important sales driver for the company."

CEO Easterbrook would agree: "We have a bold vision for the future and the urgency to act on it. We're moving with velocity to drive profitable growth and be a better McDonald's serving more customers delicious food each day around the world."

Read more from CTDO magazine: Essential talent development content for C-suite leaders.

About the Author

Pat Galagan is the former editor-at-large for ATD. She retired in 2019 after a long career as a writer and editor with the association. She has covered all aspects of talent development and interviewed many business leaders and the CEOs of numerous Fortune 500 companies.

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