McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
Department
Type of Structure
Structure Details
Advantages
Drawbacks
Corporate Leadership
Hierarchy
McDonald’s corporate leadership operates within a hierarchical structure. It includes the CEO, senior executives, and various departments like marketing, operations, and finance.
– Clear lines of authority and accountability. – Efficient decision-making process. – Well-defined roles and responsibilities.
Potential slow decision-making due to multiple levels of approval. Limited flexibility in responding to rapid changes in the fast-food industry.
Operations
Divisional Structure
McDonald’s has a divisional structure for its operations, with divisions based on geographic regions or markets. Each division has its own leadership team responsible for restaurant operations, supply chain, and local marketing.
– Tailored approach to different markets and regions. – Quick adaptation to local market conditions. – Specialization in restaurant operations.
Coordination challenges between divisions. May result in variations in menu offerings and marketing strategies across regions.
Supply Chain Management
Functional Structure
Supply chain management functions at McDonald’s follow a functional structure, with specialized teams for logistics, procurement, and inventory management. These teams manage the flow of products from suppliers to restaurants.
– Efficient management of the supply chain. – Specialized expertise in logistics and inventory management.
Potential challenges in cross-functional collaboration between supply chain and other business units. May not align with specific business divisions.
Marketing and Sales
Divisional Structure
McDonald’s marketing and sales operations follow a divisional structure, with divisions responsible for different regions or markets. Marketing teams develop strategies tailored to specific markets, and sales divisions oversee restaurant operations.
– Customized marketing and sales strategies for different regions and customer segments. – Quick adaptation to regional market conditions. – Specialization in restaurant marketing.
Coordination challenges between regional divisions. May lead to variations in marketing and sales strategies across regions.
Research and Development
Functional Structure
McDonald’s R&D department follows a functional structure, with specialized teams focused on menu development, product innovation, and quality assurance. These teams work on new menu items and improvements in food quality.
– Specialized expertise in menu development and quality assurance. – Efficient management of R&D activities.
Potential challenges in aligning R&D efforts with the broader business strategy.
Human Resources
Functional Structure
The Human Resources function at McDonald’s operates with a functional structure, focusing on HR-related functions such as talent acquisition, training, and employee relations. Teams handle HR matters across the organization.
– Efficient management of human resources and talent-related activities. – Specialized expertise in HR functions.
Potential challenges in cross-functional collaboration with business units. May not align with specific business divisions.
Table of Contents
Understanding the McDonald’s organizational structure
The current organizational structure of McDonald’s was implemented by incoming CEO Steve Easterbrook in 2015.
Easterbrook reorganized business units, cut costs, and sold more restaurants to franchisees to make the fast-food chain modern and progressive.
This structure was then refined to comprise of three divisions or business segments:
United States (US) – headed by McDonald’s USA president Joe Erlinger. This is the most important division of McDonald’s since a significant portion of company revenue comes from this region.
International operated markets (IOM) – a division encompassing wholly-owned markets and countries such as Australia, Russia, Spain, the United Kingdom, Canada, France, Germany, and Italy.
International developmental licensed markets (IDL) – the IDL division covers all remaining McDonald’s markets and corporate activities. There are more than 80 different markets in which the company has licensed its franchise rights.
Note that the IOM and IDL divisions are headed by Ian Borden. Both Erlinger and Borden report to current President and CEO Chris Kempczinski under a hierarchical leadership structure which we will analyze in the next section.
McDonald’s leadership structure
McDonald’s hierarchical leadership structure means there are multiple levels of management between the managers of individual stores and the CEO Chris Kempczinski. In other words, directives are passed from the CEO down the hierarchy to vice presidents, regional managers, restaurant managers, franchise owners, and other personnel.
Under the corporate banner, there are various executive vice presidents, senior vice presidents, and other staff in the following disciplines:
Global impact.
Strategic alignment.
Office of the CEO.
Digital customer engagement.
Marketing.
Finance.
IT.
Restaurant development and solutions.
Customers.
Supply chains.
Regional
There are also senior vice presidents in the regional divisions we mentioned in the previous section. For the IOM division, there are two positions:
Chief Marketing Officer and Corporate Vice President, and
Corporate Senior Vice President.
There is also a Senior Vice President for IDL markets and a Senior Vice President and Chief People Officer for international markets more broadly.
Functional
McDonald’s also operates six functional groups, with each group headed by either a senior vice president or vice president. These groups are:
Learning and Development.
Compliance.
Communications.
Technology.
Accounting.
Diversity, Equity & Inclusion.
Key takeaways:
McDonald’s has a predominant divisional organizational structure where each division is assigned operational responsibilities and strategic objectives. The current organizational structure of McDonald’s was implemented by CEO Steve Easterbrook in 2015.
Primarily, this structure consists of three divisions based on geographical location: the United States, international operated markets (IOM), an international developmental licensed locations, which comprise licensed franchises in over 80 markets.
McDonald’s also employs a hierarchical leadership structure where a raft of senior and executive vice presidents report to the CEO. In addition to leading regional divisions, these individuals also head various corporate and functional groups such as Global Impact, Strategic Alignment, and Diversity, Equity & Inclusion.
McDonald’s Organizational Structure Highlights:
Divisional Structure: McDonald’s utilizes a divisional organizational structure based on geographical divisions. These divisions are the United States, International Operated Markets (IOM), and International Developmental Licensed Markets (IDL).
Leadership Changes: The current organizational structure was introduced by CEO Steve Easterbrook in 2015 to modernize and improve the company’s operations.
Importance of US Division: The US division holds significant importance as a major revenue contributor to McDonald’s.
Geographical Divisions: The IOM division covers wholly-owned markets like Australia, Canada, UK, Germany, etc., while the IDL division includes licensed franchise markets across more than 80 countries.
Leadership Structure: McDonald’s hierarchical leadership structure involves various levels of management between store managers and the CEO. Directives flow down from the CEO to various levels, including vice presidents, regional managers, and restaurant managers.
Functional Groups: McDonald’s operates six functional groups, each headed by senior vice presidents or vice presidents. These groups cover areas such as Learning and Development, Compliance, Communications, Technology, Accounting, and Diversity, Equity & Inclusion.
Regional Senior Vice Presidents: Within regional divisions like IOM, senior vice presidents hold positions such as Chief Marketing Officer and Corporate Vice President.
CEO Reporting: Both the US division and the IOM and IDL divisions report to the CEO. The US division is led by the McDonald’s USA president, while the IOM and IDL divisions are led by the same individual.
Overall Structure: McDonald’s organizational structure supports a divisional approach for operational efficiency and a hierarchical leadership structure for effective decision-making and communication.
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Who Owns McDonald’s
The major institutional shareholders comprise The Vanguard Group (8.83%) and BlackRock (7.1%). Major individual shareholders include Kevin Ozan (Executive Vice President and Chief Financial Officer), Stephen Easterbrook (President and CEO), and John Rogers, Jr., an investor, philanthropist, and Ariel Capital Management founder. And a few other individual shareholders.
McDonald’s is a heavy-franchised business model. In 2022, over 60% of the total revenues came from franchised restaurants. The company’s long-term goal is to transition toward 95% of franchised restaurants (by 2022, franchised restaurants were 94.7% of the total). The company generated over $23 billion in revenues in 2022, of which $8.75 billion was from owned restaurants and $14.1 billion from franchised restaurants.
Of over $23 billion in revenue in 2022, $8.74 came from company-operated stores, while $14.1 billion came from franchised restaurants. Of over $23 billion in revenue in 2021, McDonald’s generated almost ten billion dollars from company-operated restaurants, while it generated $13 billion from franchised restaurants.
In 2022, McDonald’s generated $6.18 billion in net profits, compared to $7.54 billion in 2021. The company runs a heavily franchised business model, where it has reached its target of 95% franchised restaurants worldwide.
McDonald’s finally transitioned to a heavily franchised business model in 2022, reaching its long-term objective of 95% of franchised restaurants vs. its total restaurants worldwide.
Approximately 95% of the restaurants at year-end 2022 were franchised, including 95% in the U.S., 89% in International Operated Markets, and 98% in the International Developmental Licensed Markets.
McDonald’s had 150,000 employees in 2022, compared to 200,000 employees in 2021 and the same in 2020. The company runs a heavily franchised business model, where most stores are franchised restaurants vs. owned ones. In 2022, McDonald’s franchised locations employed over two million individuals.
McDonald’s runs a heavily franchised business model, where most of its margins come from franchised restaurants vs. operated ones. For instance, in 2022, franchised restaurants generated $11.75 billion in margins vs. its operated restaurants, which generated $1.37 billion in margins.
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McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
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In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.
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Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.
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The Coca-Cola Company has a somewhat complex matrix organizational structure with geographic divisions, product divisions, business-type units, and functional groups.
Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure.
Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue.
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Dell has a functional organizational structure with some degree of decentralization. This means functional departments share information, contribute ideas to the success of the organization and have some degree of decision-making power.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).
Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.
Nike has a matrix organizational structure incorporating geographic divisions. Nike’s matrix structure is also present at the regional and sub-regional levels. Managerial responsibility is segmented according to business unit (apparel, footwear, and equipment) and function (human resources, finance, marketing, sales, and operations).
Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.
Samsung has a product-type divisional organizational structure where products determine how resources and business operations are categorized. The main resources around which Samsung’s corporate structure is organized are consumer electronics, IT, and device solutions. In addition, Samsung leadership functions are organized around a few career levels grades, based on experience (assistant, professional, senior professional, and principal professional).
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
