McDonald’s Needs More Than a Pay Raise to Win Over Millennials

McDonald'sYou’ve probably heard the good news, and if you didn’t let me repeat it: McDonald’s will raise wages by more than 10 percent and offer new benefits to 90,000 employees working in the 1,500 U.S. restaurants it operates.

You might think this is good news for McDonald’s. It’s true that $9.90 per hour, the new average salary (as of July 2015), is still far from the $15 per hour fast food workers demand (and the reason some see this raise as a cynical move), not to mention that the increase doesn’t apply to 750,000 employees working in about 12,500 McDonald’s franchises. Yet, you could still see it as a step in the right direction that will help the company in its efforts to “get the turnaround going.”

Well, that might be the case for the paid employees, but not so much for McDonald’s.

Here’s the reason: McDonald’s main problem these days is with millennials, who seem to prefer fast-casual restaurants like Chipotle, Five Guys and Shake Shack to McDonald’s, or as a McDonald’s memo bluntly describes: “McDonald’s is currently not in the top 10 of millennials’ (customers primarily ages 18-32) favorite restaurants.” If McDonald’s can’t solve this problem, its future is at risk.

However, rather than taking a more holistic approach to solve this problem, McDonald’s seems to be taking random steps that are supposed to get it on the millennials’ radar, including “plans to offer breakfast all day and to retool a grilled chicken sandwich to use an ‘artisan’ bun and remove ingredients like maltodextrin.” The raise in the pay is just another one of these random steps, and therefore I doubt if it’s going to help McDonald’s solve its problem.

My argument is based on an up-to-date design-intelligence framework (think of it as design thinking version 2.0), which is user-centered but at the same time is also grounded in the context in which the corporation operates.

Using this approach McDonald’s would start with need-finding of the customers it wants to attract (what’s the job to be done?) as well as need-defending of the business (what should we really be about?). Only when it has a clear understanding of both elements could it synthesize them together and move on to the next step, which will be about idea generation (how to address the job-to-be- done?) and contextualization (does it make us more resilient? does it work for our stakeholders?).

Let me start with the need-defining. Here I’d like to use a quote from Karen King, senior VP and chief people officer in McDonald’s United States division: “What we’re doing is just one of many actions we have underway,” she told the New York Times. “We are and will be a modern, progressive burger restaurant, and this is just one step toward that goal.”

With all due respect to Ms. King, modern and progressive burger restaurant is not the first thing that comes into mind when thinking about McDonald’s. I bet that if you ask 100 people on the street what burger place is ‘progressive and modern,’ most of them will think of high-end hamburger chains like Shake Shack or Five Guys and only one or two will think of McDonald’s.

However, it sounds very reasonable that “modern and progressive burger restaurant” is what McDonald’s wants to become. It’s important for McDonald’s not just to define very clearly what it wants to be about, but also to be honest about the journey it has to take to get there.

You can learn about the length of this journey from what Steve Ells, the CEO and founder of Chipotle, another fast food chain that could be described as progressive and modern, has to say about the differences between Chipotle and McDonald’s:

“What we found at the end of the day was that culturally we’re very different. There are two big things that we do differently. One is the way we approach food, and the other is the way we approach our people culture. It’s the combination of those things that I think make us successful.”

Again, this step (need-defining) requires honest reflection and clear vision: What does it actually mean to be modern and progressive? What values does it reflect? If McDonald’s wants to solve its problem it has to do it right.

The other part of the first step is need-finding. McDonald’s has to figure out what is the job-to-be-done that millennials hire places like Chipotle or Shake Shack to do. Is it about consuming quality fast food? Is it about going out with friends and having a good time in a cool place? Is it about the ability to see how your food is been cooked and customize your order? Is it about the customer service? Is it about the overall user experience?

I’m not sure McDonald’s actually figured this part out. So, when I read McDonald’s new CEO Steve Easterbrook explaining to the Wall Street Journal that the reason for the raise is that “motivated teams deliver better customer service,” and “delivering better customer service in our restaurants is clearly going to be a vital part of our turnaround,” I’m not sure if this would actually make a difference. If millennials seek, for example, a cool place to hang out with fast food that is not junk food at a reasonable price, would better customer service make any difference?

McDonald’s has a choice to make between taking a more holistic design-intelligence based approach and a more random, piecemeal approach. If it really wants to win over the millennials, it should know there’s a very small chance the latter one would work, with or without raising its employees’ pay.

Image credit: Roadsidepictures, Flickr Creative Commons

Raz Godelnik

Raz Godelnik is an Assistant Professor and the Co-Director of the MS in Strategic Design & Management program at Parsons School of Design in New York. Currently, his research projects focus on the impact of the sharing economy on traditional business, the sharing economy and cities’ resilience, the future of design thinking, and the integration of sustainability into Millennials’ lifestyles. Raz is the co-founder of two green startups – Hemper Jeans and Eco-Libris and holds an MBA from Tel Aviv University.