Company before nation – by Robert Taylor Financial Times 13.12.2000


hursday Dec 14 2000
FT.com



Company before nation
by Robert Taylor
Published: December 12 2000 19:21GMT | Last Updated: December 12 2000 20:55GMT
McDonalds

Across the world, McDonald’s has become a symbol of American consumer capitalism – both good and bad. To the millions who eat there, McDonald’s is the ultimate cornucopia. To its enemies, however, the world’s largest fast food chain is an instrument of cultural imperialism.

The company employs at least 1.5m people in 25,000 restaurants in more than 116 countries. Its job training programme is larger than that of the US army. McDonald’s was the first employer of an estimated one in every 10 Americans. The company is more widespread than General Motors, Boeing and American Express.

When they venture overseas, many such US-based companies claim to pursue employment strategies that recognise local laws, customs and practices. But critics view the multinationals as threats to the ability of nation states to enforce minimum environmental and labour standards. Indeed, McDonald’s itself has been the target of violent protests. How do the company’s global operations measure up?

Tony Royle, an enterprising academic at Nottingham’s Trent University, has been trying to find out. His six years of research into Mc-Donald’s strategy towards its own employees is published tomorrow*.

He concludes that the company standardises not merely its basic menu but also its "management practices, largely regardless of cultural differences across societies". Although the company increasingly favours franchising out its business operations in the economies where it thrives, its headquarters in the US continues to retain "very tight control through careful recruitment, training and socialisation". Not surprisingly, McDonald’s hotly disputes this picture of its operations.

Mr Royle considers that McDonald’s employment practices are similar across Europe, in spite of different national legal systems of employment. From the allegedly flexible UK market to the supposed highly formalised social legislation in Germany, the US-owned company has successfully pursued a broadly similar employment strategy.

In a statement yesterday McDonald’s denied this, saying that its operations were decentralised and operated in each European country "within the framework of local, national and European culture and traditions".

Mr Royle points to the most salient of such similarities. In all European countries McDonald’s employees are "unlikely to resist or oppose strict managerial control". This is because McDonald’s tends to recruit its staff from weak and marginalised sectors of the labour market.

Most of its employees are young. In the UK, for example, two-thirds are under 21. It is true that in Germany and Austria very few of those under-18 are in McJobs, because their employment conditions are strictly regulated by national legislation. But in those countries, the company depends on foreign workers, mainly economic migrants from eastern Europe, who are marginalised by their uncertain status and insecure about their wider employment prospects.

As a result, Mr Royle argues, McDonald’s workers mostly "lack the previous experience, maturity and confidence to challenge managerial authority". Many are choosing to work for the company because of the lack of more attractive options. But Mr Royle also acknowledges that a McJob does appeal to those with short-term needs, such as students and married women who want flexible hours in order to be able to pursue other activities and responsibilities. This is why McDonald’s experiences a high annual staff turnover. The exceptions are in Germany, Austria, Finland and southern Italy, where other opportunities are simply unavailable.

The short-term nature of McWork also, Mr Royle contends, makes employees across the company’s European outlets "vulnerable to management manipulation and control". And not only those at the bottom of the heap. Restaurant managers who have to endure strenuous work schedules and discipline display a strong sense of corporate loyalty. The book argues that McDonald’s has been highly successful in preaching to managers its own values and symbols, which transcend national particularities.

Take, for example, membership of trade unions. Mr Royle believes the company has a hostile attitude towards trade unions, which he claims is inculcated into its managers. The company denies this, insisting it is a "personal choice" whether an employee belongs to a union. "McDonald’s is a highly decentralised business and it is up to the independent judgment of each country’s management to decide how to relate to national unions," the company has said in a statement.

But Mr Royle argues that the original non-union approach of McDonald’s is "still very much intact" across much of western Europe, even if in many countries workers have the right to join unions that play an official part in representing their interests.

Mr Royle argues that in a few cases – such as the Netherlands and Austria – the company has tried to accommodate trade unions by establishing collective agreements on pay and benefits. However, only in Sweden (where 90 per cent of all workers are union members) has Mr Royle found that McDonald’s "appears to have enjoyed positive relations with the unions from the beginning" – and he believes this is due to "the extremely hostile reaction of wider Swedish society when McDonald’s first entered the market".

But for the most part, Mr Royle argues, "McDonald’s is still trying to impose its American-based system and only making adaptations to host country systems where this is absolutely unavoidable". In Denmark, Finland and Germany, for example, there have been long-running battles between the company and unions over the negotiation of collective agreements and regulation of employment practices. In France, writes Mr Royle, "after 15 years of conflict, McDonald’s signed a union- recognition agreement but this did not apply to the 90 per cent of its restaurants that are operated as franchises and joint ventures". In Spain "the unions have been unable to gain recognition or develop any kind of relationship".

Interestingly, McDonald’s has enjoyed some success in ensuring its employees have not established works councils or other forms of consultative systems. In the company’s Dutch restaurants, for example, he found a union presence was "virtually non-existent", despite the collective agreements, because the unions in that country were unwilling to confront the company.

Mr Royle argues that McDonald’s favours "a paternalistic consultation regime that offers workers very little effective influence over decisions that affect them". In countries such as the UK, Ireland, Canada and the US, where there are no laws on information, consultation and co-determination, it finds no difficulty in ensuring "McParticipation".

Mr Royle also suggests that even in mainland Europe, where workers and unions have specific legal rights to representation that "directly contradict the corporation’s normal mode of operation", it has been possible for McDonald’s "to take advantage of weaknesses in national legislation". In Germany, for example, none of the company’s 50,000 employees is represented on a supervisory board because, under the 1954 American-German trade agreement, a US registered company cannot be forced to establish works councils for their employees.

"Although worker representation on a supervisory board would be possible in most of McDonald’s European operations, none has been established in practice," Mr Royle notes.

Moreover, where "collective agreements have either been imposed or established", the company pays its workers more and provides for them better.

"A strong union presence and stringent systems of regulation reduce inequality by improving the pay and conditions of low-skilled and low-paid workers," concludes Mr Royle.

However, McDonald’s said yesterday that it believed in "open, two-way employee communications at every level of the business" and that it had established a communications council to cover its European operations. The company also holds quarterly staff meetings in each of its restaurants and operates independently run employee satisfaction surveys.

The overall impression left by this important book is that a determined, strong-willed and focused global enterprise like that of McDonald’s can do much to establish a common corporate culture across a diversity of European countries that claim to enjoy robust regulations to protect and encourage worker and trade union rights.

We need to see more such studies in other sectors of the labour market before concluding that this research is generally true. At stake is the often complacent assumption that social rights in Europe can tame or at least moderate the policies of the most aggressive of US companies. Perhaps the much-vaunted social-market model is more vulnerable to external forces than its champions are prepared to admit.

*Working for McDonald’s in Europe: The Unequal Struggle. Routledge, London and New York, £60 hardback and $18.99 paperback