30th Mar 2012

Don Thompson to take over as CEO of McDonald's..

On July 1, Don Thompson is set to become CEO of the world’s biggest burger chain. Current McDonald’s CEO Jim Skinner will retire on June 30 after 41 years with the company. Thompson is himself a long-term employee with 22 years in, starting in 1990 as an electrical engineer and rising to his current position as President with responsibility for global strategy and operations. 

Thompson has sophisticated mathematical abilities that served him well as he rose through the company’s ranks, using his natural flair for statistical analysis to find ways of beefing up operational performance at the burger chain’s 33000 plus outlets. He’s not just a numbers guy though. Insiders have praised him in the press as a man with exceptional tact and social skills, qualities often lacking in people gifted with strong technical and analytical ability. It has been said that his charm and friendliness was instrumental in calming worried franchisees back in 2002 when it looked like McDonald’s was in serious trouble.

In late 2002 and early 2003 McDonald’s stock price hit a seven-year low. Earnings fell quarter after quarter. An article in Fortune described what happened as a “collapse.” The company’s largest shareholder, Fidelity, sold 60% of its stake. Franchisees were up in arms. Customers complained about the service, and competitors like Burger King started gobbling market share.

In 2004 Jim Skinner took over as CEO of a company which seemed to be losing its grip, and in the eight years of his tenure presided over one of the most celebrated corporate turnarounds in recent history. One immediate problem was that McDonald’s had expanded too far, too fast. Under Skinner the company scaled back on opening more new outlets in order to focus on improving the ones they had, tightening service procedures and enlarging the menu. The massively successful $1 range of products have yielded strong profits every year despite a brutal economic downturn. Little extras like drinkable coffee and low-calorie salads have helped polish up the brand’s greasy spoon image. The stock price has gone from a 2003 low of $13 to $96 today.

Skinner has become an industry legend based on his ability to deliver incremental growth year on year, a difficult feat based on endless vigilance and attention to detail. Thompson’s task will be essentially the same: to wring steady growth out of a corporation that is already a global behemoth.

As an internal hire, Thompson will face a unique set of challenges. He is a known entity within the organisation and has been ‘institutionalised’ in a sense. This can make implementing change more challenging than it might be for the external appointee. However, his experience and understanding of the acceptable norms and behaviours within the  company culture will no doubt work in his favour.

Though the stock market’s faith in the brand has never been stronger, it remains to be seen if Thompson will be capable of maintaining the current global dominance of the brand. So making an impact early, and accelerating his performance in the first 100 days will be crucial.

Hilda Goold

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