Executive Insights | May 2010 | By Staff

One on One with Jim Skinner

The CEO of McDonald’s sat down with QSR to discuss the five principals guiding his industry-leading company.

Since taking over the burger giant, which now has 32,000 restaurants worldwide, CEO Jim Skinner has restructured McDonald’s, redesigned the restaurants, and revolutionized the menu. Aside from the addition of premium coffee offerings, McDonald’s menu also features healthier choices such as Fruit & Walnut Salads and Chicken Wraps. Skinner also earns high marks for offering better value and improved marketing.

His winning strategy, christened the Plan to Win, focused all team members’ attention on improving service, food, and ambience and not necessarily on opening new stores.

Aside from reducing energy output and working with suppliers to establish healthier environmental operations, Skinner puts a lot of muscle behind talent management and leadership development. High-potential employees are put through a leadership institute, and diversity is an important value at the company. Those are just some of the reasons Skinner was not only the cover subject of QSR’s May 2010 issue, but also why he was selected as one of the industry’s 10 Most Innovative People.

Hear from Skinner himself what propels his company to the top of the segment.

QSR: Where did the idea for the Plan to Win come from?

Jim Skinner: The advent of the Plan to Win was in the spring of 2003 when we were in at the start of a revitalization.

“Yes, our traffic increases, but a lot of it was from customers who had always gone to McDonald’s.”

There were a number of tenets to the revitalization, the most important one was focusing on the things that were important for our brand and the restaurant business for 40 plus years before we had this little blip in performance, and that is to our customers and the restaurants.

So the Plan to Win was an aspirational plan to get our system focused on what was important both to our customers and for us as an organization. That was the operating plan, so that Plan to Win served us well.

Has anything about the Plan changed since then?

When you look at the tenets of the Plan to Win, the five P’s, I always like to say it’s not profound in itself but the alignment around people, products and place, the opportunity to strategize through those five things is infinite, the continuum of trying to do a better job for your customers.

So nothing has changed except for the fact that we try to get better at what we do in each of those strategies around the Plan to Win. And in every market, in every segment, in every country around the world. If you were me, you’d be delighted to know that every team has its own Plan to Win, even the restaurant solutions group.

So nothing has changed. The format has not changed, and all our planning around the Plan to Win remains the same. This is our vehicle for strategizing and trying to give our customers a better experience at the front counter or the drive through, which I always like to say is the moment of truth. It is the only place where we could make a difference.

We spend millions of dollars on marketing, but when I screw up your order at the front counter or the drive-thru, it’s all lost, because you don’t care how good our last commercial was.

What improvements are happening at the company moving forward?

First, if you look at people. The ability of the crew and the managers in our restaurants to deliver this better experience at the front counter and drive-thru through the enhancement of technology and the point of sale in particular, the cash registers, is very, very important.

And training and educating our people, we’re ramping up our efforts around that.

And then also staffing. We’re one of the fortunate companies today that can hire, and continued to hire, not just because we’ve opened new restaurants but because we’ve been successful.

And then of course there’s the reimaging. We’re ratcheting up our efforts at re-imaging—we’ll probably re-image 2,300 restaurants or more this year. If you look at capital expenditures, we’ve upped that by about $300 million. Much of that will go against re-imaging, but we’re also going to open a thousand new restaurants, which is up from a year ago.

POS systems are ever-changing. The technology is ever-changing. It’s important for us to have the appropriate interface capability for our crew and management, so it’s easier for them with the face of the keyboard and the complexity of the menu, it’s a point of importance in terms of being able to point to the product. Instead of having to go through four different steps, you end up having one or two steps, for the speed of the order-taking.

What is the reaction from the franchisee community regarding all of this?

Good. Cash flow is at an all-time high here in the U.S. We’ve always had a good relationship with our franchisees, but it’s always better when the results are better.

We didn’t have a lot of dissention around the combined beverage program. But any time you’re embarking on a billion-dollar project and implementing something in 14,000 stores, 85 percent of them managed by franchisees, you’re going to have a difference of opinion on how to implement that. That was nothing more than the normal collaboration of leadership of franchisees and McDonald’s, which we pride ourselves on…working out the kinks in terms of how we’re going to implement this.

What’s your favorite menu item?

The Angus burger is outstanding. It’s now my favorite. I have a lot of favorites on the menu, but that sandwich is a good sandwich.

Will the Great Recession leave a permanent impression on McDonald’s?

I don’t think so, because what people have to realize is we have changed our menu as much. The only thing we’ve changed is now we have a Dollar Breakfast Menu across the nation. The rest of the dayparts, we were operating from a position of strength as we went into the recession because we had everyday affordability and value.

It was a luxury for us not to have to change.

“When I screw up your order at the front counter or the drive-thru, it’s all lost, because you don’t care how good our last commercial was.”

We’ve never been at a point where we moved up and down because of our strategic response to the economy. We price according to what’s appropriate for the marketplace, for our consumers, and making sure that they get a great value.

We perform better in a robust economy than in a down economy. There’s a lot of bad information out there about us being cheap eats—“Oh, what’s McDonald’s going to do now that the economy is coming back?” We increased market share last year and the year before that, and we will be getting our fair share if we get more traffic and more spending from consumers.

This notion, Oh, I can’t go to a white tablecloth restaurant, so I’m going to go to McDonald’s. Yes, our traffic increases, but a lot of it was from customers who had always gone to McDonald’s. It didn’t change their lifestyle relative to McDonald’s.

What mark would you like to leave on McDonald’s?

If you just looked at the financial results, I’d say the best, ever. But it would be meaningless for me to say that. I think my legacy will be one of talent management and development—making sure that we had the right people in the right place and they developed their successors.

If we just looked at your five year results and your track record, I could name the starting line-up…That’s all well and good, but call me back in three years after I’m gone and tell me if McDonald’s is still the best in class and that you can really say the previous three year’s results were really because of what Skinner did while he was on his watch, you can call me the best.

When you’re in the job, there are any number of things you could do. But the true test of a legacy is to leave a better system. I’m proud of every person I’ve nurtured and put into key jobs.