Welcome to the world of McDonald’s Corp.’s Ralph Alvarez.
So instead of spending all his time making out name tags or
constantly visiting the more than 100 countries that have a
McDonald’s, Alvarez, the quick-service restaurant’s president and
chief operating officer, and the executive team use another way to
unify the company: through its differences.
Building off the company’s diversity has become as closely tied
to McDonald’s growth as the Big Mac or Chicken McNuggets.
Want McProof? Since its inception in 1955, McDonald’s has had
only one slip in its growth, posting a loss for the first time ever for
its fourth quarter of 2002. Despite heading toward $16.2 billion in
revenue in 2003, the company was facing its worst margins and
things looked bleak.
“We took our eye off the ball some from the funding and the
focus around these long-term plans,” he says. “While we were still
very good, we could see how this is something that if you’re not
stirring every day, you can have a situation where you can lose
some of the progress.”
So McDonald’s refocused on creating opportunities for different
cultures to shine, adding to the foundation of recruiting minority
employee owners and franchisees.
“It’s easier to cater to the masses,” Alvarez says. “That’s the reality. But when we celebrate our differences, we’re better because
we’re different. That’s better than a leadership team that looks and
talks and thinks just like you.”
To keep benefiting from those differences, Alvarez has worked
to keep McDonald’s focused on growing opportunities given to
minority employees and franchisees, and then he makes sure that
the company isn’t just meeting quotas but giving the minority opinion a seat at the executive table. As a result, the company has
sharpened its focus on serving its diverse customer base, and
McDonald’s is setting growth records once again, posting just
under $22.8 billion in revenue and nearly $2.4 billion in net income
Grow your programs
Alvarez isn’t just a fan of McDonald’s diversity programs, he’s a
glowing example. He was born in Havana, Cuba, and came to the
U.S. at the age of 5. He joined McDonald’s in 1994 and realized that
there was more room at the company for his ascent than anywhere he’d been before.
Still, he cautions that there’s one very un-McDonald’s portion to
continuing to build diversity: There’s no drive-up window. You
have to be willing to lay a foundation through educational and
“The results are long term, you don’t see them overnight,” he
says. “It’s developing talent, recruiting outside talent, and bringing
them into an organization and helping them through the growth
curve. These are long-term commitments, you won’t see an impact
this quarter or next quarter, you’re going to see an impact three to
four years from now and being able to do that, that is always the
Thinking for the future, McDonald’s has put programs into place
that not only enhance the power of minorities already in the company but that will also entice others to join. Employee networks
were created for blacks, Hispanics, Asians, women, and gays and lesbians so that there is a comfort zone for development. There are
also educational seminars provided regularly for anyone on a number of minority career development topics. Other simple steps like
converting the course materials at the company’s famous training
program, Hamburger University, into 28 languages have also been
Coupled with other programs, these ideas help recruit diverse
employees and owners for McDonald’s — 41 percent of all its U.S.
owners/operators are women or minorities — and improve company culture. Each network is given its own voice within the company to celebrate its diversity and educate others. One example is
McDonald’s had a Martin Luther King Jr. celebration this year with
a presentation on the leader’s influence on the world as a whole,
which was then followed by a speech at McDonald’s headquarters
from a few executives on what King meant to them.
“I guarantee you that if you work here, you know a lot about
African-American history because of the programs we do,” Alvarez
says. “It’s about pieces that make you a much more well-rounded
person, and that reflects strongly in our culture.”
The programs McDonald’s uses may not be exactly right for
every company, but the point that Alvarez wants people to see is
that the effort is there. When a company creates outlets for minorities — ways they can network, talk, be educated and feel at home
in an organization — those employees gain a sense of empowerment and are more willing to add ideas and effort that contribute
to your bottom line.
“Gathering our black owner-operators organization, our Hispanic
owner-operators organization, our employee networks that we
have, people see we want that to happen; that makes us stronger,”
he says. “Maybe they come in with one voice that’s more powerful
than the individual voices to get a seat at the table.”
The results of those educational forums also help knock down
walls that often exist between one group and another.
“I’ve learned so much from my fellow workers about what they
may have gone through growing up or the challenges of being a
woman in a male-led organization,” Alvarez says. “We actually sit
down, and we talk about that in an open forum that’s much less
threatening than it would normally be.
“It’s very important because you are changing society. Part of
what we know we have in the U.S. is companies that have had success in doing this have actively gone after making a difference
through their training programs, through their recruiting efforts,
through the organizations that they support, through counseling
and through support organizations, so you’ve got to have it be part
of the business plans.”
Alvarez notes that if a company wants to truly expand beyond its
home markets — particularly into overseas markets — there has to
be a good sense of how important diversity is to helping figure out a
“It starts from the top,” he says. “You have to have the commitment from the leadership of the company that has to stress why
this is important to the organization and why it’s part of the company’s values — so it needs to be part of the company’s values —
and why it’s good for business or good for the organization. That’s
critical. This is a long-term mission, and it fits within how our
country has come to be. And if you are an international company,
it absolutely fits in with having success with different cultures
because first you have to be diverse yourself.”
Give diversity a seat at the table
Among the list of executives you’ll find at McDonald’s is Patricia
Harris, global chief diversity officer. It’s not a job description that
every company has room for, but it’s one way McDonald’s ensures
that diversity remains on top of the priority list. Alvarez loves to
point out something that Harris often says about how you have to
go from counting heads to making heads count.
“It sounds clichéish, but it really hits home that it isn’t about the
numbers you have; it’s about whether the numbers you have are
actually in leadership roles,” he says. “And leadership does not
necessarily have to be title, it has to be the ability to influence the
allocation of resources and the strategies that get placed for success for the brand.”
That means having constant conversations at the top level about
how diversity development is coming along. Alvarez and the rest
of the executive team have regular talks about each of the aforementioned education and succession programs and look for gaps
in the system where minorities aren’t being served.
“We’ll talk about gaps we might have in the farm team and in the
pipeline,” Alvarez says. “If we see a gap or we see someone that
can get extra development that’s where we can allocate extra
There has to be a focus on that in every area and the financial
support to grow it, Alvarez says. McDonald’s makes sure that there
is succession planning made both internally and on the franchisee
side where diverse candidates are being adequately groomed to
That means regular visits from each of the company’s diverse
groups with senior leaders to hear what issues they bring to the
table. By writing diversity into the plan as a strategic initiative,
Alvarez and the rest of the senior leadership team have committed
the regular time to study such issues. And when it’s time to promote someone, the first place they look is to see where their management doesn’t match their consumer. Those opportunities have
created results: The company has won awards for its diversity
inclusion and currently more than 24 percent of its officers are
Overall, Alvarez says the changing business world will demand
diversity from your company. Not only will customers expect it —
and the more markets you get in, the more you will run into diverse
customers with that expectation — but your ability to grow will be
fueled by it internally. A diverse company will not only attract
minority employees, but it will attract employees who are excited
about opportunities they haven’t seen in other places.
“It definitely had to do with two pieces: understanding our customers better and understanding our constituents better,” he says.
“Both from what motivates them, from the customer side for purchase, for their belief that we’re the best choice for them when
they are eating out and for our employees in a recruiting mode for
our franchisees in a commitment to grow mode.”
The results at McDonald’s have helped evolve the company from
a hamburger restaurant to a global empire that comfortably markets more exotic products like breakfast McSkillet Burritos or
Southwest Salads to customers all over the world. That regular
redirection is caused by those diverse opinions at the table,
according to Alvarez. With a constant push from different mind-sets on where the quick-service industry is headed, McDonald’s is
able to push marketing campaigns and customer service issues
that keep it on pace with the times.
“When we started having the right advertising, level of research,
product testing and seat at the table for executives that were
diverse, and when they were at the table when the strategies were
being developed or the products were being developed — versus
just making an adjustment at the end to try to fit it — there’s been
a huge difference,” Alvarez says.
“There’s a subtleness there, but it’s been a big part of our success. I also know it’s made us better as an American company that
operates over 50 percent of our restaurants outside the U.S. It’s
made us better in understanding and bringing our different leaders and different geographies to the table as we make the strategies that are global strategies.”
HOW TO REACH: McDonald’s Corp., (800) 244-6227 or www.mcdonalds.com
AutoNation Inc. is the Hummer of automobile dealerships. Simply put, it's the largest dealership in the country, and Chairman and CEO Michael Jackson's take-no-prisoners attitude suggests he's ready to run over his competitors like a Hummer over, well, anything else on the road.
Jackson was brought in as CEO in 1999 by founder H. Wayne Huizenga to retool AutoNation's hodgepodge of companies.
"Everybody who didn't do it our way, we threw out of the company," Jackson says. "We hired people who did want to do it our way. Was it a battle? Absolutely. Is it over? Absolutely. The idea that you're going to run this business with 350 entrepreneurs all going in different directions is crazy. You're not going to add any value that way."
Jackson, who began his automotive career as a maechanic, arrived from Mercedes-Benz USA LLC, where he was president and CEO. At Mercedes he led a renaissance in the luxury vehicle brand's sales and marketing efforts. He saw a similar opportunity for growth at AutoNation.
"I thought something could be done in automotive retail that had never been done before," he says. "AutoNation was the company that could do that. It (also) gave me the opportunity to work directly with one of the great entrepreneurs of the 20th century."
It wasn't long before Huizenga took Jackson under his wing.
"Wayne is an unbelievable entrepreneur," Jackson says. "We developed a relationship where he was a great mentor. Working with someone from whom I could learn so much was an opportunity I couldn't let go by. Wayne hasn't disappointed me."
Huizenga may have created the company in 1996, but it is Jackson who has built it into one of the largest and most well-run organizations in the nation.
Under Jackson's direction, AutoNation has become America's largest automotive retailer, employing 28,000 people at more than 280 dealership locations representing more than 360 new vehicle franchises across 18 states. The company boasts more than $19 billion in annual revenue and ranked No. 97 on the 2004 Fortune 500 list, outselling all other automotive retailers in the United States.
The company is also the Web's largest automotive retailer of both new and used vehicles, generating $3 billion of revenue in 2003 via the Internet. For his efforts, a group of Jackson's peers last year at the Automotive Hall of Fame voted him "Industry Leader Of the Year."
The automobile dealer industry is extremely fragmented. Only 6 percent of dealerships are owned by publicly traded companies; the rest are operated by entrepreneurs, who are known for their independence. That made AutoNation's growth strategy of acquiring existing dealerships to bring under its umbrella a sometimes-tricky move.
"Five years ago, when I arrived here, that was a huge cultural issue," Jackson says. "It clearly had to be addressed and was going to be the key issue of whether we succeeded or not."
To overcome that issue, Jackson made sure every executive at the company understood and was willing to adopt the newly defined role of executive. Those who couldn't -- or wouldn't -- abide by the new profile were out of a job.
"The profile basically said that we want entrepreneurial energy, high ethical and integrity standards, but combine with that executives who have an understanding of the power of process and who want to be part of something big. And, we wanted people who get extreme motivation by creating something extraordinary," he says. "It's not all about them, the individual."
And, Jackson says, he expects his management team to have passion for their work.
"We had to ask quite a number of executives to leave the company," he says. "And we had to recruit executives who fit that profile. I'm happy to say, today, that's the culture we've created. It's not an issue. Everybody who is with the company is deeply involved in discussing how we do it, but not if we do it. That cultural war is over."
Jackson does not use the word war lightly. Nearly half of the company's executives never fit the profile.
"It took a full five years," he says. "When I started, 10 percent of the executives fit that profile. Fifty percent maybe fit that profile and 40 percent did not. Today, we have 90 percent who fit that profile and 10 percent are on their way there. That's a dramatic transformation."
The result of that transformation is evident not just in the company's top-line revenue of close to $20 billion, but also in its net income, which increased nearly $200 million from 1999 to 2003 as Jackson made the tough decisions and built a new corporate culture from scratch.
Efficiency also improved as a result of the moves.
"We look at every aspect of the business, from how we buy electricity to how we interact with the customer," he says. "And we systematically bring, on a given issue, the best people in the company together to figure out what is absolutely the best practice, best process for the customer and the company, and then systematically implement that across the company."
That would not have been possible in the old days, with each dealer operating independently.
"Everyone in this company (understands) the combined power of entrepreneurial energy with best practice process," Jackson says. "It's tremendously powerful combination. Where (with) small business, it doesn't make sense for all the incremental improvement, it makes sense for us because we apply it to such a (large) scale.
"For us, every time we find a 10-basis-point improvement, it means something. It means something to the existing business, and it means something to everything we acquire in the future. Imagine, by 10 basis points at a time over five years, we have created a 500-basis point advantage of cost over our competition, and we feel we have another 200 (to go). That's a 700-basis point improvement that we're creating in seven years. That's quite something, and it's very difficult for anybody else to match."
Entrepreneur at heart
While Jackson's changes at AutoNation were necessary to grow the business, as a former car dealer, he understood the power of the entrepreneurial spirit.
"Having grown up in retail, but also having worked in a large corporate environment where you get a broader view, you understand how big corporations work," he says. "You understand the power of process, the power of strategy. Without that background, I think it would have been very difficult."
That background has made it easier for Jackson to oversee AutoNation's operations, which are spread across 18 states. The company's largest presences are in California, Texas and Florida, and Jackson says there are no immediate plans to enter the remaining 32 states with physical locations. AutoNation does, however, do business in all 50 states through its Web initiative, a strategy Jackson has supported since the beginning.
"We always believed the Internet was going to change the balance of power between the consumer and business," he says. "You were going to have an educated, informed and empowered consumer, compared to what was possible in the marketplace five, 10 or even 15 years ago. We saw this as an opportunity."
Jackson says that's because informed consumers make it easier for AutoNation to facilitate a quicker, more convenient transaction time. And, with that in mind, Jackson tasked his team with finding ways to embrace the Net.
"We have been able to dramatically reduce our transaction times over the last five years through the arrival of e-commerce," Jackson says. "By having embraced it and not resisting it, by designing all our processes to take into consideration that you have an e-empowered consumer, that has been a big advantage for our customers."
Jackson cites studies that show 80 percent of his company's customers spend time researching cars, prices and loans before they ever contact an AutoNation salesperson or begin an online transaction. The company's processes are designed to be customer-friendly, he says, in an effort to meet or exceed customer expectations.
"It's been a big win for us," he says.
AutoNation's Web component may have exploded over the past few years, but Jackson says growth through acquisition is expected to continue at a much slower and consistent pace.
"The segment has only consolidated 6 percent by publicly traded groups, meaning it's still 94 percent independently entrepreneurial," he says. "It will be a very gradual consolidation. If, in the next five years, that begins to knock on 10 percent, that's about as fast as I can see it grow."
Jackson's arrival at AutoNation heralded a new era for the business in another way. In addition to sweeping away executives who wouldn't or couldn't adopt the new approach, Jackson eliminated those parts of the business that weren't focused on selling cars.
AutoNation, once part of Huizenga's Republic Services conglomerate, also owned Alamo Rent-A-Car and National Car Rental.
"The basic decision I made when I arrived was that AutoNation was going to be very good at one thing, and that's automotive retail," Jackson says. "We're going to be the best in the world at it. Anything else is a distraction."
Jackson's moves were quick. Just three months after his arrival in November 1999, the company exited the vehicle rental business. The spin off of Alamo Rent-A-Car and National Car Rental into publicly-traded ANC Rental Corp. was completed by June of the following year.
By year's end, Jackson had also exited the used vehicle megastore business, closing its AutoNation USA stores.
"Creating conglomerates is very difficult to do," he says. "General Electric has done it. They took 100 years to do it, but I don't have 100 years.
"I'm not sure with how the megastores were created in AutoNation, we could have ever had added value," he says. "There were many things that were done from a consumer point of view that were extremely positive, but the economic model was flawed. And we needed to put that behind and put our capital and our energy where we could create value."
Today, with its singular focus, AutoNation's revenue stream is divided among new vehicle sales at 61 percent; used vehicles at 23 percent; parts and service at 13 percent; and finance and insurance at 3 percent.
"The one number we would like to increase steadily is our service and parts business," Jackson says. "That's the foundation of our business. We service 25,000 vehicles a day. They are complex, highly sophisticated, technical products. We have a lot of added value and a lot of infrastructure that we've built in order to care for those vehicles.
"It's a high-margin business to do our high added value. That's a business we would like to disproportionately grow."
Based on Jackson's record, there's a good chance that 10 years from now, AutoNation will be running over its competitors in that segment of the industry as well.
HOW TO REACH: AutoNation, www.autonation.com or (954) 769-7000