McDonald's - THE Most Impressive Turnaround?

McDonald’s reported another set of impressive results this morning, something which they have been doing now for thirty-five consecutive months. Results for March show same store sales in U.S. grew 6.6% for the month and the quarter.

Do you remember when it was a basket case? A little over three years ago, it announced its first ever quarterly loss - $343m, ditched Chairman and CEO Jack Greenberg, while analysts wrote the obituary, not just of McDonald’s but the fast food segment in general.

Today, the Oakbrook, IL based hamburger behemoth is a poster child for corporate turnaround. Just as those tarnished Golden Arches a few years ago led the downward consumer attitude to fast food, now it is leading consumers and media back up that perception curve.

The best decision the corporation made in recent years was also one that got little initial favorable reaction. McDonald’s invited ex-Vice Chairman Jim Cantalupo to be Chairman and CEO in January 2003, after it exited Greenberg.

I and many others could not see the logic of bringing back to the organization a man who had retired but eight months previous and however you look at it, must bear some responsibility for the appalling results the company had been generating. In his memoir, In the Arena: A Memoir of Victory, Defeat and Renewal, Richard Nixon wrote that the most creative time of his life was after he left the White House. He had time to think without the mad pressures of day to day activity.

Maybe the eight months out of the organization allowed for the same creative thinking and clarity of vision for Cantalupo. The man who unfortunately only lasted sixteen months in the position before taken by an apparent heart attack, returned with a very clear and compelling vision as to what a successful McDonald’s unit might look like. At his first investor conference – Jan 16, 2003, he proclaimed “Clean restrooms and hot food served in our restaurants would be a change.” He repeated that line consistently while his successor as CEO, Charlie Bell regularly said “We will have the cleanest restrooms in the industry.”

Analysts were not impressed at Cantalupo’s ideas following that conference call. Comments included:
“A continuation of the recent past”
“Plans were vague and did not inspire confidence”
“Unimpressed,” suggested another industry sage.

In my book, Why Ireland Never Invaded America, I reference the concept of The ER Factor – Drivers of Corporate Health. The idea is that E (Execution) of an R (Relevant) strategy will drive corporate health. I admit I dreamed that concept up after listening to Cantalupo and Bell speak on a number of occasions. Bell, in particular spoke about being “relevant” to the McDonald’s consumer and executing properly. Today, the corporation truly is offering relevant products and being rewarded for it. I’ll comment on their premium coffee at a later stage.

The bottom line is it went back to basics and got it right. It updated its menu, it has positioned itself as a provider of healthier offering, but the first and most important thing was that Chairman Cantalupo demanded the restaurants get back to basics – clean restrooms and hot food.

I write and speak a lot on corporate and personal vision. Some of the vision and value statements expounded by companies are garbage, dreamed up by executives during a corporate retreat in Naples Florida or Laguna Beach, California. But sometimes, executives get it AND make it happen. Cantalupo could clearly see and visualize what a successful unit would look like and demanded it happen. He was lucky that McDonald’s had their Premium Salads ready to roll out some three months after he took office (although one year BEHIND the launch of Wendy’s Salad Sensations.) This was an “innovation” that the hamburger giant implemented exceptionally well and which helped re-energize the organization, something that is obvious in the results it continues to generate.

Cheers

Conor Cunneen - C.A.S.H.
Consultant, Author, Speaker, Humorist