"Coaching" Change at McDonald's

Not all retailers are alike. In the old and tired camp, there are the 'turnaround' travails of J. C Penney and Sears.

On the other hand, the high performers like Wal-Mart and Target appear to winning in this tough economy.

And then there's McDonald's. It's doing both: aggressively turning its business around and continuing to win while doing so. And the company has just performed an out with the old and in with the new trick by appointing a new leader for its U.S. business.

Value oriented consumers (Aren't we all?) may especially like what happens as a result of the latest changes at McDonald's as the company is signaling a more aggressive approach to pricing.

After Missteps, McDonald's Replaces Its U.S. President says this about the "coaching" change:

"McDonald's replaced the leader of its U.S. business in a sign that the restaurant chain is wasting no time in trying to correct a series of missteps.

The company on Thursday named Jeff Stratton, currently global chief restaurant officer, to succeed veteran McDonald's executive Jan Fields.

"This is a signal that McDonald's is very serious about reinvigorating the U.S. business and they're attacking it with a strong sense of urgency," said . . . a restaurant analyst at Robert W. Baird & Co.

The company began stumbling in the second quarter, when profits fell. In October, McDonald's posted another quarterly decline in profits. And last week McDonald's reported its first drop in monthly same-store sales in nine years. Investors were expecting weakness in Europe and Asia, but the 2.2% drop in U.S. same-store sales came as a surprise.

McDonald's . . . said Ms. Fields and Chief Executive Don Thompson "had some good meaningful talks and decided it was time for Jan to make a change. There is no one factor that goes into a decision like this. All of us acknowledge it's a challenging business environment and we make decisions for the long term. We consider monthly sales a short-term factor and wouldn't make a personnel decision based on a short-term factor."

McDonald's began the year with U.S. menu items priced, on average, 3% higher than the prior year, which may have proved too expensive for a lot of consumers, said John Glass, an analyst at Morgan Stanley.

In the spring, the company pulled the plug on the pub burger, a new product that didn't go over well in consumer testing, leaving a marketing hole that the company had to scramble to fill with existing sandwiches. Also in the spring, Chicken McBites were replaced with a spicy version that didn't have as much appeal as the non-spicy chicken pieces. And it wasn't until October that McDonald's introduced its first new burger of the year, the Cheddar Bacon Onion. McDonald's also emphasized smoothies instead of cheaper soft drinks. Combined with a soft economy and increased competition from rivals, the missteps took a toll.

"It's a lot of little things, but they added up," Mr. Glass said.

Ms. Fields, 57 years old, is credited with expanding the company's beverage lineup, updating restaurants and pushing for nutrition initiatives such as the addition of apple slices to Happy Meals and the move to voluntarily post calorie information on menu boards.

Like many McDonald's executives, Ms. Fields started out as a crew member making french fries more than 30 years ago. She had been a top contender for the CEO job, which instead went to Mr. Thompson in July, after his predecessor retired.

Mr. Stratton, 57, also started out as a crew member at a Detroit McDonald's and over the next 40 years held many field operations positions in the U.S. before becoming president of the West Division and later, chief restaurant officer for McDonald's USA. As global chief restaurant officer, a role he assumed in 2005, Mr. Stratton was behind the world-wide effort to modernize restaurants, which has helped boost sales."

Summing Up

Like all good companies, McDonald's makes mistakes from time to time. Just not real big ones.

And unlike others, great companies recognize their mistakes early on and move fast to get things back on track. They keep the car on the road and out of the ditch, so to speak.

So that's what McDonald's is doing now and in advance of the holiday season. Tweaking its business model and operations so it can keep winning and satisfying customers.

Taking what may appear to some like a ready, fire, aim approach early on is the sign of a strong company. My guess is that customers will welcome better deals as McDonald's works hard to regain the market share they've lost recently to competitors.

 Satisfying free to choose customers one-at-a-time-and-each-and-every-time separates the winners and losers in the marketplace.

McDonald's is all about focusing on and helping its customers manage their MOM better.

Their KISS grounded customer centered in real time approach seems to me like the right thing to do.

It's never the avoidance of mistakes and playing it safe that matter the most. That's the losing way.

Instead it's always trying new things to please customers, learning in real time which of them work and which don't, and then quickly building on the early winners and just as quickly addressing and correcting what needs changing.

At that McDonald's excels. Always.

Thanks. Bob.