Waseem Sayegh

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The sample page that was released by Google to demonstrate Knol is far too advanced for most Internet readers. Knol should not target the knowledge market niche advanced segment. Instead Knol should position itself to target the intermediate segment of the market. We would like Knol to contain articles that are as readable as Times Magazine. Furthermore, Knol should include tools to enable programmers to access Knol’s knowledge directly. These tools will not only create a buzz with bloggers and techno geeks to viral market Knol, but will also position Knol at the center of knowledge on the Internet.

By: Wasim AlSayegh, Aleksander Apostolov and Martin Lapointe

What does “love”, “smile”, “magic”, “fun” and “good times” have in common? Here is a hint: “I’m lovin’ it.” Here is another: “Do you believe in Magic?” What about: “We love to see you smile.” Still not sure? These are all words that McDonald’s typically use in its slogans. McDonald’s surely sells burgers and fries, but we believe that its biggest product is the fun experience that its customers associate with the name McDonald’s.

McDonald’s is not a mom-and-pop shop, but a huge corporation with a global footprint that spans more than 100 countries. McDonald’s corporate website boasts that it serves more than 52 million people each day. With access to this many people on a daily basis, McDonald’s is an empire whose decisions impacts not only people that it serves but also their families and loved ones. In other words, McDonald’s has the power to influence and affect societies across the world.

This paper will discuss McDonald’s power and political behavior, its social influence and communication, its professional image construction, and its ethics and decision-making. We will not stop there, as we will also provide recommendation for how we think McDonald’s should proceed to get on a better track.

How McDonald’s Portrays Itself

We did a 360 degrees study of McDonald’s culture and values. We first looked at how it communicated its ideas and strategy from the inside out to its customers, investors and employees. This was done by studying McDonald’s 2006 annual report, several news articles and a book extract. We then looked at McDonald’s from the outside in to learn about how its customers and the public viewed it.

Ray Kroc, the founder of McDonald’s once said: “We have found that we cannot trust some people who are nonconformists. We will make conformists out of them in a hurry. The organization cannot trust the individual; the individual must trust the organization (Hawken, 2002).” This quote is the cornerstone of McDonald’s culture. When a McDonald’s employee gets ready for work by putting on his uniform, he is not only changing into his work clothes, but he is also putting his individuality aside. McDonald’s formal rules and guidelines are spelled with great details in its Operation and Training manual which is referred to as the ‘Bible’ by managers. The manual covers everything from the correct placement for ketchup and mustard in the preferred five-point ‘flower’ pattern to determining the correct size of pickles to be placed on each type of hamburgers (Royle, 2001). Simply put, McDonald’s uses rules defined in its ‘Bible’ as a mean of social control.

On one hand McDonald’s communicates a tightly regulated culture to its employees. On the other hand McDonald’s communicates a theme of smiles and happiness to its investors and customers. This is nowhere more apparent than its 2006 annual report, where this artificial positively charged atmosphere is underscored on almost every page. McDonald’s does not stop there, instead it goes further. McDonald’s markets itself directly to children, and positions its brand as an important part of a healthy lifestyle. It uses creative marketing ploys to appeal to children. The so called “Happy Meals” are served to kids with a toy to entice then to come back for more. “Ja Ja Mundo” which translates to “Haha World” in English is an example of a McDonald’s program that brings Ronald McDonald’s appearances to create an atmosphere that attracts kids. Furthermore, McDonald’s associates its name with healthy eating. McDonald’s does so by sponsoring sporting events such as the Olympic Games and the FIFA World Cup. During these events viewers are bombarded with images of McDonald’s unhealthy food alongside active and healthy athletes.

The Power and Ethics of McDonald’s

In December 2007, McDonald’s was approached by the Seminole County School Board to help ‘‘reward students for good grades and attendance during the 2007-8 school year with Happy Meals. The ‘report card incentive’ is published on the jackets in which the children receive their report card (Elliott, 2007).’’ Is the decision of McDonald’s to go with this program ethical or not, especially since childhood obesity is a growing concern in the United States (Barnes, 2007)?

We learned that ‘‘power is the ability to influence someone else. Influence is the process of affecting the thoughts, behavior and feelings of another person (Nelson & Quick, 2006).’’ We will see how McDonald’s uses its power to influence children in the ‘report card incentive’ program.

The Program’s Forms of Power

There are several players in this program: McDonald’s, the school board, students and parents. At first glance we notice that the school board, the agent in this part of the relationship, uses “reward power” to influence the children to do better in school. The school board makes the connection clear between the behavior and the reward by printing the cartoon of Ronald McDonald’s, McDonald’s Golden Arches logo, and photographs of Happy Meal items on the sleeves of the students’ report card (Elliott, 2007). Students are reminded on regular bases that they can be rewarded with a Happy Meal if they get an A or a B, especially since they have to get their report cards signed by their parents.

In this relationship McDonald’s power is mysterious. We can argue that McDonald’s, the agent in this part of the relationship, uses a form of “referent power” to attract the children to its establishment. Nelson & Quick describe referent power as that of a charismatic individual. Even though McDonald’s is not an individual it surely has this mystique that captures and allures children. One can only back this point up by empirical evidence. A study published by CBC News showed that “any food packaged by McDonald’s tastes better to most preschoolers (CBC News, 2007).” This study demonstrates the mysterious referent power McDonald’s has over children.

Though, behind this program is yet another subtle form of power. “Coercive power” is used by the children, the agents in this part of the relationship, to force their parents to take them to McDonald’s to redeem their reward. After all, parents are guaranteed an unpleasant experience filled with nagging if they do not cooperate with their children. This “coercive power” is known in the advertising industry as “pester power.” Barbara A. Martino, a vice-president in Grey Advertising Inc.’s 18 & Under division, described this power when she said: “we’re relying on the kid to pester the mom to buy the product, rather than going straight to the mom (Wechsler, 1997).”

Is this Power Relationship Ethical?

We put this complex multifaceted power relationship to the test developed by Nelson & Quick to see if it is ethical. One question out of three raised a red flag. Does the Behavior Respect the Rights of All Parties? No! “Parents” were the only party to this relationship that was never identified as an agent. Tables have turned, instead of parents being agents that decide what their kids owe to eat, McDonald’s and the school board intervened and striped them from this right. Susan Linn, director of Campaign for a Commercial-Free Childhood, put it best when she said: “Turning report cards into ads for McDonald’s undermines parents’ efforts to encourage healthy eating (Elliot, 2007).” Since this power-related behavior did not pass all three questions, we can confidently conclude that this program is not ethical.

McDonald’s Another Smile Factory

There are a lot of similarities between Disneyland and McDonald’s. From having 500 pound manuals that spell everything out for its workers to having their employees greet their customers with a smile. Such corporations are looked at in a different light. These corporations on one had use rules and restrictions to influence its employees while using referent power to attract its customers (typically a young audience that does not know about what goes on behind the scenes). These are the corporations whose extrinsic values do not agree with their intrinsic management systems.

McDonald’s the King has No Clothes

From the New York Times article we learn that the program was previously run by a Pizza Hut for 10 years. Furthermore, no complaints were received during that period. Complaints started rolling in after McDonald’s took over the program from the Pizza Hut. This begs the question: Why did complaints start rolling in after McDonald’s took over the program?

We learned from our “When Company Values Backfire” reading that “When employees sense that a leader’s decision are at odds with company values – even when they’re not – they are quick to conclude that the leader lacks personal commitment to the values. He’s seen as a hypocrite (Edmondson, 2002).” We believe that this logic is not limited to company leaders. Instead it extends to any agent that attempts to use referent power. To rephrase: when targets sense that an agent’s decision are at odds with the values portrayed through his referent power, they are quick to conclude that the agent lacks personal commitment to the values. He’s seen as a hypocrite.

Allow us to explain. We previously argued that McDonald’s uses referent power to lure children to its restaurants. McDonald’s has created, similarly to Disneyland, very high expectations and values amongst its clients. Any action that goes against these high expectations and values causes consumers to yell: “foul… the king has no clothes.”

McDonald’s was one of the companies that “agreed to stop advertising to children under 12 products that do not meet certain nutritional standards (Barnes, 2007).” This ‘report card incentive’ program goes against the spirit of this agreement. Furthermore, McDonald’s culture that promotes happiness, smiles and good time with family members surely is at odds with serving unhealthy happy meals to children. McDonald’s attempts to associate itself with healthy eating, yet promotes less nutritious happy meals directly to children. These two faces of McDonald’s seem to popup everywhere and we believe that they are ingrained in its culture. Thus, McDonald’s culture played a big part of attracting complaints from customers. One can only imagine that no complains would have been filed if McDonald’s had the slogan “You know that our food is unhealthy.”

How McDonald’s Can Get its Act Together

McDonald’s needs to fix its public image. To do so it should follow what Edmondson suggests in “When Company Values Backfire.” McDonald’s should play a more proactive role in getting feedback from their customers. McDonald’s should also open the floor to genuine dialogue with its biggest critics. This should not be limited to publishing a toll free number for customers to call with complaints. Instead, McDonald’s should involve their customers and consumer protection groups in its decision making process. McDonald’s can leverage its nationwide presence to its advantage. Town hall meetings can be setup at different local McDonald’s restaurants to allow its customers to voice any concerns to high ranking officials at McDonald’s. These town hall meetings should not serve as another venue for McDonald’s to push its agenda. Instead, McDonald’s should use these town hall meetings to listen to what their customers have to say. We are confident that these meetings will bring about positive changes McDonald’s could have never dreamt up.

Chatman argues in “Using Organizational Culture as a Leadership Tool” that “formal rules, policies, and procedures will enable your organization to perform at an average level but not to reach the level of outstanding performance on your strategic objectives (Chatman, 2004).” From this quote we can deduce that McDonald’s ‘Bible’ might be more of a curse than a blessing. The ‘Bible’ that is filled with formal rules, policies, and procedures limits McDonald’s performance level to average. McDonald’s employees should have more ownership over their actions rather than feel like robots that follow McDonald’s guidelines. McDonald’s should allow more room for their workers to express their individuality and creativity. Simple things such as allowing employees to decorate their restaurants can bring about this sense of ownership.

Implementing direct feedback channels with its customers and a work environment free of rules will enhance McDonald’s public image. With these changes McDonald’s will no longer be seen as two-faced. As for the ‘report card incentive’ program, we feel that McDonald’s panicked and pulled out of the program too quickly. Had McDonald’s reached out to the parents and asked for their input McDonald’s might have been able to improve and continue with the program.

Works Cited

Hawken, P. (2002, June 2). A Ronald McDonald fantasy. San Francisco Chronicle , (pp. D-5).

Royle, T. (2001). Labour Relations in the Global Fast-Food Industry. New York: Routledge.

Elliott, S. (2007, Dec 6). Straight A’s, With a Burger as a Prize. The New York Times.

Elliott, S. (2008, Jan 18). McDonald’s Ending Promotion on Jackets of Children’s Report Cards.

Barnes, B. (2007, Jul 18). Limiting Ads of Junk Food to Children. The New York Times.

Nelson, D. L., & Quick, J. C. (2006). Power and political behavior. In Organizational behavior : Foundations, realities, and challenges (5th ed.) (pp. 355-379)

Edmondson, A. C., & Cha, S. E. (2002). When company values backfire. Harvard Business Review, 80(11), 1-3.

Wechsler, P. (1997a), “Hey, kid, buy this!”, Business Week, No.June 30, pp.62-7.

CBC News. (2007, August 7). Kids think food in McDonald’s wrapper tastes better: study. Retrieved February 2, 2008, from CBC News: http://www.cbc.ca/consumer/story/2007/08/07/mcdonalds-advertising.html

Chatman, J. A., & Cha, S. E. (2004). Using organizational culture as a leadership tool. In S. Chowdhury (Ed.), Next generation business handbook: New strategies from tomorrow’s thought leaders (pp. 22-38). Hoboken, NJ: John Wiley & Sons

Last week’s “Finance Course with Finance Practitioners” guest lecturer was Tullio Cedraschi, the CEO of CN Investment Division. During the lecture he handed out “Tullio’s 20 Red Flags”. These flags are meant to help investors with their investment decision making. According to Tullio these flags have stood the test of time. Before going into the flags let’s make sure that you’re clear on the following rules:

1-3 red flags: probably no problem
4-5 red flags: watch out
6-20 red flags: sell or do not do the deal

Here are Tullio’s 20 Red Flags:

1. Creative accounting: High reported earnings with large deferred expenses. Accounting too complicated for even the most knowledgeable analyst.
2. Unfocused business strategy: The company enters unrelated businesses on a whim. The oil company entering the real estate business, the real estate company entering the computer business. Nobody can be an expert in all industries.
3. Promise of assured high returns without risk: Risk-free high returns on business are a sure sign of fraud. The business world is very competitive. High returns mean high risk.
4. Speed of deal making: Management is involved in too many deals at once.
5. Share structure with voting and non-voting common stock: A controlling shareholder who can control the company through a small number of voting shares can be tempted to disregard the interest of the non-voting (or low voting) shareholders in his action.
6. Excessive taste for leverage: Too much debt. Because of low interest, attention has been removed from this critical fact: Excessive debt can lead to bankruptcy.
7. Excessive tax avoidance: Tax planning is, of course, very much a part of the modern corporation but when tax evasion becomes the raison d’etre of the corporation, it is possible that shareholders will also fall victims to the schemes used to defraud governments.
8. Lying and excessive hype: The company bends truth about its products and markets, and hypes itsadvertising far beyond the quality and usefulness of its products.
9. Too much litigation: Too many court cases pending against the corporation. Constant hassle with security commissions and stock exchanges.
10. Conflicts of interest: Management or controlling shareholder dealing their assets or buying from the company at non-market values, or leasing personal real estate to the company.
11. Too many insiders on the Board: How can the Board judge management if it is stacked with Vice-Presidents and close personal friends of th CEO?
12. Nepotism: Too many family members of the CEO in the top management.
13. Excessive indulgence by management and Boards: Personal use of corporate jets; business meetings held at only the best resorts.
14. Excessive executive compensation: There is nothing wrong with very high management compensation. Indeed, any company should attempt to attract the very best – and pay to keep them. But consistent, very high compensation, combined with steady deteriorating shareholder value, signals a problem.
15. Lousy investor relations: Refusal to answer legitimate questions from analysts. Painting too rosy an earnings picture followed two weeks later by profit warning. Erratic disclosure of important corporate events. Systematically misleading the financial community about the outlook of the company’s business. Leakage of information to related shareholders.
16. Insider information: Trading by management and board members reflecting abuse of insider information.
17. Disorderly corporate books and meetings: Contracts not properly documented. Board meetings called and canceled. Management late for meetings. Minutes do not reflect decisions taken.
18. Megalomania: CEO has a Napoleonic streak, acts like a dictator, does not tolerate dissent. He sees himself running a Fortune 500 company, when presently his is a small cap company and should remain small.
19. Complicated corporate structures: Corporate legal structure too complicated for an outsider to understand. Large number of intricate and non-transparent offshore holding companies involved with the listed public company.
20. Doubtful history of main promoters: Promoter or CEO was previously invovled in shady deals, associates with suspicious characters. New management appears in town, without anyone knowing where they came from or their previous history.

This report was compiled to provide KPMG with guidelines to handle scenarios that were outlined by Mr. Colin Sharman, UK Senior Partner at KPMG. These scenarios include What KPMG might do if:

1. it were to become obliged to formally separate the accounting function from the consulting function
2. consultants demand more work/life balance

Following the suggested action plan will ensure that KPMG maintains its position as a major enterprise in a swiftly changing global business environment.

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While Bombardier has strong cash flows, we believe that it has low quality of earnings, because these cash flows diverge significantly from its reported earnings:

• Its inventory valuation and cost of sales involve very large “program estimates”. If these estimates change by even 1%, the resulting difference is about 30M. Furthermore, they appear to be managing their excess over average production cost account (EOPAC) to smooth income.
• They appear to have taken a “big bath” when they restructured in 2003-2004, creating “restructuring reserves” and expensing special items in such a way as to smooth earnings.
• Bombardier has an aggressive revenue recognition policy with its airplanes. While its competitors only recognize revenue when the plane is delivered. Bombardier often recognizes it when the customer gives signoff on “interior fitting”.

While Bombardier is able to meet its short term obligations, it nevertheless has a bad credit rating. Moody’s and Standard and Poor’s have both rated Bombardier as being slightly below investment grade. Part of the reason for this is Bombardier’s very high level of long term debt, as compared to the industry average.

Furthermore, Bombardier has a very low operating profit margin, and seems to be relying on its high asset turnover. Given the steep global competition that Bombardier faces, many analysts are predicting that it will continue to lose market share. After all, its direct competitor, Embraer, is more liquid, much more profitable, and significantly less indebted than Bombardier.

Due to the aforementioned reasons, we recommend that Investa Group sell off its current holdings in Bombardier.

PDF version includes complete report.

Something intriguing happened to me the other day, while I was browsing the Internet I saw the huge void between the Western and Middle Eastern cultures. I was browsing cbsnews.com, an American news Website, and my eyes were glued to the streaming video of the Iranian president’s interview on “60 Minutes ,” a television newsmagazine. The interview was filled with political rhetoric, though behind all of that was the void. In the right hand corner was the CBS reporter grilling the Iranian president with his American style investigative journalism. In the left hand corner was the Iranian president starting his interview with a Persian poetic tone by saying: “It’s in the afternoon of an autumn day. We’re in the open air in a garden. And the air is pleasant. And fall, little by little, is settling in, mixing with the summer breeze.” Both the president and the reporter were a perversion of two distinct cultures that when put together only differences could be noticed. From our reading material, one can say that the interview would have had less of a sparring tone had both sides been close to agreement or one of the sides crossed over and behaved in accordance to the other side’s culture.
Can one easily change cultures? Can culture be situational where a person can switch to another culture in an instance? In this paper, we will explore these questions and more in a context of an organization and learn more about culture and when to change it.

Effective negotiation skills are an essential tool for any business person in today’s global environment. Despite the abundance of available research, many experienced business people rely on their instincts and innate qualities, which often combine both effective and ineffective techniques. Mr. Anthony Chamy correctly identifies preparation as an essential component to a successful negotiation. Anthony also identifies his BATNA and reservation point; however, he lacks a little in the area of identifying interests, positions, targets for both himself and the other parties and BATNAs and reservation points of the other parties. Anthony correctly identifies the importance of building trust and a strong relationship through the use of knowledge-based trust techniques. Further, Anthony employs effective techniques when dealing with negative emotions from the other parties. By adding the techniques described herein, Anthony can generate more value and more positive outcomes in the negotiation process. The negotiated outcomes will allow Anthony to fully realize his interests and priorities while at the same time creating value for the other parties.

In the case “Organizational Transformation in a Taiwanese Company” Eva Chen, the agent of change, has a huge task ahead of her to transform YUAN Group’s culture into one that makes it a serious global competitor. From the case one can deduce that the YUAN Group is an organization in its midlife that embodies the personality of Mr. Pan, YUAN Group’s CEO. Mr. Pan’s personality is that of a “father figure” that “cares for his employees very much”. YUAN Group’s culture focuses on human interaction and compassion amongst employees. For example, management was always present at employee’s functions and employees would mingle in the company’s annual outing. (continue reading…)

McKinsey & Company, the firm that governments and large companies consult when facing growing pains, is facing difficulties with handling its own rapid growth. The case “McKinsey & Company: Managing Knowledge and Learning” chronicles the evolution of McKinsey’s attempts to capture its associates knowledge to effectively apply it to clients’ problems. At the core of the case is a simple problem definition: How can McKinsey & Company develop, capture and leverage knowledge in service of its clients worldwide? After all, knowledge is the single most important asset McKinsey & Company has. (continue reading…)