Case study McDonald’s compensation plan

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Casestudy: McDonald’s compensation plan

Themanagement of McDonald’s should use a single compensation plan formanagers working in all 1,800 company-owned locations. A singlecompensation plan will benefit the McDonald’s corporation in fourways. First, a single compensation plan will ensure that allmanagers are given an equal consideration. For example, the benefitsgiven to all managers will be assessed using the same criteria thatinclude customer satisfaction, operational excellence, andprofitability. Using the same criteria to determine managers’salaries and benefits will create a perception that McDonald’sfoster equity in its operations. The perception of equal treatment ofemployees is among the key factors that boost their morale. Whilediscussing about the benefits of observing equity when dealing withthe workforce, Mayhew stated, “Doing the right thing (treatingemployees equally) can boost employee morale, which in turn candecrease turnover” (1). This implies that a single compensationplan will help McDonald’s overcome its fear of losing its highlytrained and experienced managers to competitors.

Secondly,a single compensation plan is useful tools that will help McDonald’scomply with the laws that require employers to treat their employersequally. When analyzing the principle of equity, Equity and HumanRights Commission stated, “everyone doing equal work (the same orprobably similar or work of equal value) should be treated equal”(1). Similarly, all managers heading different restaurants owned byMcDonald’s should be treated equally. This will reduce chances formanagers developing a perception that they are being compensated in adiscriminating way. Therefore, McDonald’s will be able to avoid thepossible litigations that might be brought about by managers who feelthat they are discriminated against. The law states that employerswho fail to give a substantially equal compensation for peoplecarrying out similar job functions should be held guilty ofdiscrimination (Chris 2). Avoiding conflicts with the judicial systemwill help McDonald’s save on finances by reducing court fines andenhance its image in the society. In addition, this will help thecompany attract talented and experienced managers, who will helpMcDonalds’s achieve its goals.

Third,a single compensation plan will create a platform for the transparentpay system, which is one of the key factors that motivate people tojoin and remain in the workforce of a given company. The principle ofa transparent pay system holds that employees should understand theirrate of compensation and different components of individual paypackets that include the allocation of various benefits (Equity andHuman Rights Commission 1). A transparent compensation system helpsthe company escape the challenges associated with uncertainly as wellas perception of unfairness. Moreover, a transparent compensationsystem reduces the chances of individual claim since managersunderstand that criteria that will be used to determine theircompensation even before they join the company’s workforce.Therefore, a single compensation plan is an effective way ofaddressing multiple compensation challenges.

Lastly,a single compensation plan is easy to design and implement. This isbecause McDonald’s management will only be required to determinedifferent components that should be used to evaluate the performanceof restaurant managers. The plan should then be implemented uniformlyto all restaurant managers. Therefore, there is a high probabilitythat a single compensation plan will give better results (such asemployee motivation) than a differentiated compensation plan.

Inconclusion, using a single compensation plan is among the mosteffective approaches that can help the management of McDonald’sCorporation avoid its current human resources challenges. This isbecause the system enhances the sense of equity, motivates employees,and reduces the rate of turnover.


Chris,J. Whatare the benefits of equal pay for women and men?Santa Monica: Demand Media. 2015.

Equityand Human Rights Commission. Benefits and equal pay. Equityand Human Rights Commission.2015. Web. 27 April 2015.

Mayhew,R. Whatare the benefits of equal opportunity policies?Santa Monica: Demand Media, 2014. Web.