Understanding the McDonald’s Leadership “Special Sauce”

McDonald’s has a well-deserved reputation for consistency. Wherever in the world you go, you know what you’re getting when you walk underneath their golden arches.

The announcement of Jim Skinner’s upcoming retirement as CEO of McDonald’s closes a remarkable chapter that ought not to go unnoticed by anyone who aspires to learn from management best practices. The company proved that its “system” can cook a consistent burger anywhere in the world—as well as manage top executives and execute strategy on a grand scale in a massive, global organization.

Not many people remember that Jim Skinner was seen almost as an “accidental” CEO. On April 19, 2004, McDonald’s CEO James R. Cantalupo died in the early morning hours of a sudden heart attack. Cantalupo had served in the position for less than a year and a half. The McDonald’s board met immediately and—on that same day—announced his replacement, 28-year company insider Charles Bell.

Six months later, tragedy struck again, as Bell resigned due to his diagnosis with cancer.

Jim Skinner, himself a 33-year McDonald’s veteran, who had risen from humble, burger flipper to the executive suite, was given the CEO position. He was the sole remaining member of the management trio—consisting of Cantalupo, Bell and himself—that conceived and implemented the Plan to Win, which revitalized the company.

Not many organizations can survive four leadership changes in two years. Great credit goes to the McDonald’s board for having had the foresight to implement an effective management succession program encompassing 1,400 positions worldwide prior to a crisis. This program has resulted in deep bench strength that allows the company to fill the vast majority of executive openings internally.

In the case of the McDonald’s CEO position, the company’s succession plans enabled it to keep a capable, steady hand at the rudder in the person of Jim Skinner at a time of great danger. “If an outsider had been hired instead,” Richard R. Floersch, head of the company’s HR department, told Korn/Ferry’s Briefings magazine, “there is a good chance that the Plan to Win would have been abandoned in favor of a different strategic path.”

Just as the company studied and documented the minute details of the process to properly cook a McDonald’s hamburger, the HR team studied, continually refined and documented a process to manage high-potential executives.

The McDonald’s plan was influenced greatly by leading business strategist Ram Charan and two colleagues, Steve Drotter and James Noel. In their book, The Leadership Pipeline: How to Build the Leadership Powered Company, Charan and his colleagues identify six “passages” every leader goes through. They show how any company can develop leadership throughout their organization by defining and honing the skills needed as people progress.

Driven by this vision, the McDonald’s team developed standards and metrics and have never looked back. In a world of hyper-competition, their talent management “system” provides sustained, competitive advantage. Having had the privilege of getting to know Skinner during his time as CEO of the Year in 2009, I was immediately struck by his humility and understated charm.

But what really had an impact on me was Skinner’s constant reference to McDonald’s, not as a “company,” but as a “system.” When the scale of his enterprise—which includes more than 33,000 locations and 1.6 million employees with average employee turnover exceeding 100 percent—is taken into consideration, the realization strikes one that the only way to manage such a behemoth is through process and documented “systems.”

Lest any other CEO believe that “systems” only apply to hard sciences and could never achieve the nuance needed to manage high-achievement executives, Jim Skinner and his extraordinary level of success at the helm of McDonald’s over the past eight years proves that to be foolish thinking.