Case Study McDonalds Crisis Management

The Johns Hopkins University

Case Study Introduction McDonalds Crisis Management

Virgil observed that love conquers all things (GoodReads, n.d.), but what happens when it blossoms in the workplace? This scenario was encountered by McDonalds Board of Directors (BOD) when company CEO and President, Steve Easterbrook, revealed that he had engaged in a consensual relationship with another McDonalds employee. On November 3, 2019, McDonalds published a press release announcing Easterbrooks separation from the company due to his company policy violation and demonstration of poor judgement (McDonalds Corporation, 2019). This crisis management example is important because the resolute steps pursued by McDonalds BOD positioned the company and Easterbrook to emerge with their reputations intact or even enhanced (PRovoke Media, 2020, para. 9). This case study examines the shifting public values, comprehensive code of conduct, and decisive crisis response associated with Easterbrooks termination and seeks to answer the question: What steps can public relations (PR) and crisis management professionals pursue to minimize the harmful impacts of a crisis?

Organization Overview

McDonalds is a global fast food chain which ranks 131^ston the Fortune 500list with approximately $21 billion in annual revenue and 210,000 employees distributed across more than 100 countries (Fortune, 2019). The companys impressive growth over the past 80 years can be attributed to its reputation for consistency. Todays franchisees learn to emphasize consistent restaurant operations procedures, service, quality and cleanliness the same way company founder Ray Kroc taught when he established the Hamburger University employee training center in 1961 (Rampton, 2016, para. 3). These standards make it possible for customers to encounter predictable menus, food, and brand presence at all of the nearly 40,000 worldwide locations (Statista, 2020). The same historical investment in training and standards likely contributed to the companys code of conduct which prohibits employees with direct and indirect reporting structures from dating and entering into sexual relationships together (Ellyatt, 2019).

Analysis

I selected the McDonalds crisis for this case study because I sympathize with Easterbrooks situation. More than two decades ago, I too dated a coworker; we have been happily married for the last seventeen years. And, I am not alone in this practice. A recent survey of 800 women between 18 and 35 years revealed 61% have dated a coworker and 55% met a romantic partner at work (Evans, 2019). My personal experience, and Evans findings, do not imply that Easterbrooks behavior was acceptable and should go unpunished. Due to his role as president, every McDonalds employee falls into his reporting structure which suggests a strong ethical conflict of interest that presents risks of favoritism during the relationship and possible sexual harassment claims if things do not work out (Lundberg, 2018, p. 21). Beyond the obvious conflict of interest, other factors that contributed to Easterbrooks remarkable fall from grace included shifting public values, McDonalds comprehensive code of conduct, and its decisive crisis response.

Shifting Public Values

In the late 1990s no one expressed concern when I started dating a coworker. Today, that same relationship would likely be subject to greater scrutiny. Public values have shifted and Easterbrook may have been a victim of poor timing which limited the BODs options. With the #MeToo movement still fresh in the collective psyche, many companies have taken significant steps to distance themselves from all forms of harassment while formalizing policies to prevent abuses of power (Ellyatt, 2019). This may well have been the case with McDonalds Code of Conduct which was published in the shadow of #MeToo during the month of September 2018 (PRovoke Media, 2020). In additional to the influence of timing, the situation may have ended differently if McDonalds happened to be headquartered in a different country.

Company cultures affect the way the public perceives events such as dating in the workplace. Guenfoud, 2019 called attention to the French publics reaction of shock and dismay when Easterbrooks termination was announced (para. 1). Guenfoud elaborates by sharing the French perspective that associates McDonalds anti-relationship rules with an assault on individual and sexual freedoms (para. 4). Across the English Channel, in Easterbrooks homeland, the British publics stunned reaction was buoyed by the relative rarity of policies that restrict employee dating. The founder of Moloney Search, Curly Moloney, observed that young workers in the UK expect the workplace to provide a social life and an environment where they can meet people (as cited by Keown, & Steiner, 2019, para. 14). Easterbrook likely learned a lesson in Americas public values when he encountered McDonalds strict and impartial enforcement of its code of conduct.

Comprehensive Code of Conduct

Easterbrook contributed greatly to McDonalds modernization and the companys stock price nearly doubled in value during his time as company president (Law, 2019) but that did not insulate him from the dispassionate enforcement of McDonalds Code of Conduct: A written, formal document consisting of moral standards and guidelines intended to help guide employee or corporate behavior (Giorgini et al., 2015, p. 124). Easterbrook signed the company policy and helped explain it to employees by stating, when the choice between right and wrong may not be immediately cleartake a moment to consider what is in the best interest of McDonalds (Keown, & Steiner, 2019, para. 5). It appears, Easterbrook did not heed his own advice and failed to lead by example. He had an excellent opportunity to act as a role model for all McDonalds employees; unfortunately, he demonstrated the type of behavior that should be avoided rather than emulated.

As McDonalds president, Easterbrook had an ethical obligation to represent the company in a positive light, a practice which he eventually fulfilled by acknowledging his mistake given the values of the company(Newburger, 2019, para. 3). The days of company executives hiding in ivory towers are long gone thanks to the advent of social media. Modern corner office dwellers live in the spotlight of Internet blogs, Facebook posts, Instagram images, and YouTube videos. Easterbrook was at McDonalds for less than five years but a Google search of Steve Easterbrook McDonalds revealed nearly 11,000 results. On average, that equals six Internet posts per day about the recent company president, a statistic that demonstrates the increasing trend of public access and visibility into todays corporate leaders. With limited tolerance for unethical behavior in America, accompanied by unprecedented visibility into executive activities, McDonalds had little choice but to conclusively sever ties with Easterbrook when he failed to act in accordance with the companys code of conduct.

Decisive Crisis Response

The McDonalds BOD response was quick and sent a clear message that it took corporate misconduct seriously with valuable consideration given to its employees and customers. By proactively addressing the situation while it was still in the early/potential stage of the issues lifecycle (Kelleher, 2018, p. 308), McDonalds prevented the issue from blowing-up in the press. The unwavering message and immediate identification of a well-suited successor, Chris Kempczinski, previously the President of McDonalds USA (McDonalds Corporation, 2019) helped answer unasked questions from the general public and stock market analysts. Stock symbol MCD fell by roughly 3% when the news of Easterbrooks termination was released but the share value quickly recovered following positive video posts about Kempczinskis business and technology qualifications by trusted experts such as Jeffrey Sonnenfeld, Senior Associate Dean of Yale University, RJ Hottovy, Consumer Equity Strategist at Morningstar, and Jim Cramer, CNBC Business News Analyst (Newburger, 2019).

The crisis management messaging did not end after the first wave of communications went out. Approximately two months after the story first made headlines, Kempczinski took control of the narrative by announcing ongoing steps to continue improving company culture. The new president surveyed employees at more than 1,000 McDonalds restaurants seeking insights to help restore a more professional environment (Lucas & Rogers, 2020, para. 4) with a focus on core values. With Kempczinskis renewed emphasis on corporate culture, McDonalds stock resumed its ascent. This timely public-facing communication demonstrates the importance of continuing to shape public discourse even after the immediate incident is in the rearview mirror.

One potential weakness of McDonalds crisis response is the glaring omission of posts related to the leadership transition via its social media accounts. The Easterbrook-Kempczinski transition announcement was limited to PR Newswire and absent from McDonalds Twitter, Facebook, Instagramand YouTubepages. This exclusion was certainly intentional, but to me, it presents the image of a company with something to hide. The PR Newswire route may ensure the story receives broad publication to all critical stakeholders but McDonalds could have improved its message by better capitalizing on its owned channels.

Conclusion

This case study examined the impact of shifting public values, a comprehensive code of conduct, and a decisive crisis response in the context of Easterbrooks separation from McDonalds Corporation. The company BOD demonstrated the value of taking quick, unwavering action to shape the narrative and enhance public perception even during the difficult transition. Additionally, the selection and announcement of a knowledgeable, well-known successor helped smooth the transition and minimize the stock decline. Lastly, the ongoing PR activities pursued during the months that followed the November 3, 2019 announcement showcased steps to improve company culture with consideration given to the organizations values, mission and goals. While I criticized McDonalds for not publicizing the leadership transition on social media platforms, I do not feel the crisis management campaign suffered for that oversight given the retention of positive reputations for the company and Easterbrook (PRovoke Media, 2020).

Shortly after the transition, press coverage regarding the transition decreased significantly and the stock price resumed its climb. McDonalds crisis illuminated the importance of core values, motivating executive leadership to redirect its attention to workers and their valuable feedback to help improve the work environment. Even Easterbrook ended up relatively unscathed from the experience. He received six months of severance pay, approximately $650,000 (Garcia, 2019), and was able to retain his lecturing position at Oxford University. Rupert Younger at Oxfords Centre for Corporate Reputation observed of Easterbrook, hes always been a great and extremely useful lecturer on corporate reputation, and he can now lecture from yet another perspective (Buckley, 2019, para. 2). Perhaps for Easterbrook, love does indeed conquer all things.

References

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