Getting Into Harvard Easier Than McDonald's Hamburger University in China

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Getting Into Harvard Easier Than McDonald's Hamburger University in China

Zhou Xiaobu runs from one end of atable to another, grasping a piece of a puzzle she and her teamare assembling as part of a leadership training exercise forMcDonald’s Corp. managers.

“Go, go, go,” yells their Taiwanese teacher, exhortingthem to work for the prize, a box of Danish butter cookies, forbeing the first to build the company’s trademark Golden Arches.Above their heads is a sign that reads: “Learning today,leading tomorrow.” The thick green binders stuffed withpaperwork on each of the 31 students’ desks indicate the nextactivity may not be as rousing.

This is McDonald’s Hamburger University in China, and it can be harder to get into than Harvard.
Zhou’s classroom, with its gray walls and carpet, is one ofseven in the management training center occupying the 20th floorof the 28-story building on the outskirts of Shanghaithat houses McDonald’s China headquarters. The art consists ofpictures of McDonald’s products and equipment, such as a milk-shake maker from the 1950s.

The 1,565 square meter (16,846 square foot) facilitydoesn’t have a pool or a gym and its one-room library holdsbooks with titles such as “Just Listen,” “PersonalAccountability” and “None Of Us Is As Good As All Of Us: HowMcDonald’s Prospers By Embracing Inclusion and Diversity.”

Selection Rate

There’s a coffee machine in the corridor. There’s nocafeteria, although students and staff can order food deliveredto the office pantry one floor down.

“I’m thrilled and proud to attend Hamburger University,”said Zhou, who in 2007 started as a management trainee in thecentral Chinese city of Changsha, a job for which she and sevenothers were among 1,000 applicants. That’s a selection rate ofless than 1 percent, lower than Harvard University’s record lowacceptance rate last year of about 7 percent, according to theschool’s official newspaper.

To get to the training center, Zhou competed with 43 otherworkers at her store to be made first assistant manager. Shedidn’t pay any tuition; it cost McDonald’s about 10,000 yuan($1,518) to put her through the five-day course.

The world’s biggest restaurant operator moved the trainingcenter from Hong Kong last year as it expands in mainland China,where its market share is less than half of KFC owner Yum!Brands Inc. McDonald’s opened a record 165 restaurants in 2010and will accelerate that growth this year to meet its goal of1,000 new outlets in the four years through 2013.

Expansion May Accelerate

“They are preparing a base that will allow them toaccelerate that rate of expansion,” said Peter Jankovskis, co-chief investment officer of Oakbrook Investments LLC, whichholds about 300,000 McDonald’s shares.

“They may well haveannounced a conservative store opening target and their trueplan is much greater.”
The school last year trained 1,000 of the almost 70,000employees McDonald’s has in mainland China, a region that doesn’t include Hong Kong, Macau or Taiwan.

Another 4,000 people will attend classes at the trainingcenter through 2014, said Susanna Li, the head of the trainingcenter. The classrooms are equipped for simultaneous translationinto English, Mandarin and Cantonese to accommodate studentsfrom Hong Kong and teachers from overseas.

“We’ll make sure the people pipeline is ready,” Li said.“Having the school here in China helps us provide trainingfaster than sending students to Hong Kong.”

Trailing Yum

Total sales for fast-food chains in China rose 12 percentlast year to 60 billion yuan, according to London-basedresearcher Euromonitor International. Yum’s restaurants, whichinclude Pizza Huts as well as KFCs serving fried chickenalongside Chinese dishes, accounted for 40 percent whileMcDonald’s had 16 percent, the researcher said.

Oak Brook, Illinois-based McDonald’s has 1,300 stores inChina and aims to have 2,000 by 2013. Yum has 3,700 restaurantsin China, where it earned 44 percent of its $1.33 billionoperating income in the first three quarters of last year.

Yum’s market value surged 40 percent last year, comparedwith McDonald’s 23 percent gain.

McDonald’s plans to increase its investment in China by 40percent this year after boosting spending in the world’s most-populous nation by 25 percent in 2010, it said last month,without providing dollar figures.

Sales at McDonald’s stores inChina open more than a year grew 12.7 percent in the threemonths ended September, more than double the global average. Inthe quarter ended December, sales growth was 5.2 percentcompared with a global average of 5 percent.

Nurturing Talent

The training center in Shanghai differs from those in sixother locations around the world in that it also offers seniormanagement courses, Li said. Running the school, which has seventeachers, will cost McDonald’s 150 million yuan in the fiveyears through 2014, she said.

McDonald’s set up its first Hamburger University in ElkGrove Village, Illinois, in 1961 to train managers as well asfranchise owners.

“It’s certainly possible to move up through thehierarchy,” said Jankovskis of Lisle, Illinois-based Oakbrook,which manages more than $2.6 billion. “Many people do considerfast food in general is kind of a dead end, but in the case ofMcDonald’s, they have a very strong professional organization.”

McDonald’s Chief Executive Officer Jim Skinner, who waspaid $17.6 million in 2009, started as a management trainee in1971 after serving in the Navy, according to the company’swebsite.

Unemployed Graduates

Getting into the school is competitive because more than 26percent of China’s 6.3 million college graduates were unemployedas of July 1, according to the Ministry of Education. Thatcompares with a 4.2 percent unemployment rate for China’s urbanworkforce, according to data compiled by Bloomberg.

Companies face rising labor costs in China, where annualeconomic growth has averaged 10 percent over the past threedecades. Urban Chinese average yearly wages surged to 32,244yuan in 2009 from 8,319 yuan in 1999.

Sun Ying, 25, started working part-time for McDonald’s in2005 during her freshman year as a tourism management major atEast China Normal University. When she graduated in 2008, sheopted to work full-time for the hamburger chain instead ofapplying for a job at a bank as her father advised.

The restaurant chain “offers many career opportunities,”said Sun, who in April was made store manager at McDonald’sXinhualian store in Shanghai’s central Huaihai Road. “I’m evenhappier to continue to grow with my team,” said Sun, who’s seenthe number of people she supervises grow to 55 from 45 since herpromotion.

Not Banking

McDonald’s Hamburger University in Shanghai and itstraining programs are meant to address its “No. 1 challenge,”which is to recruit and retain skilled workers, said JoelSilverstein, president of Hong Kong-based restaurant consultantsEast West Hospitality Group Ltd.

“It’s getting harder and harder to hire employees in thefood-service business,” he said. “The main reason thatMcDonald’s put up the Hamburger University is to professionalizethe sector, making it easier to recruit better people.”

Sun, the store manager in Shanghai, said she’s due for moretraining next month: a one-week course on “business leadershippractices.” Her next goal is to be made operations consultant,which involves supervising a group of stores.

“Now my father has stopped trying to persuade me to workin banking,” she said.

- Michael Wei and Margaret Conley in Shanghai. Editors: FrankLongid, Bret Okeson

To contact the Bloomberg News staff on this story:Michael Wei in Beijing at mwei13@bloomberg.net

To contact the editor responsible for this story:Frank Longid at flongid@bloomberg.net