McDonald's: Management Matters

McDonald’s was in pretty bad shape in late 2003, as a recent AP article points out. The stock is up from $12 then to $55 today.

The AP attributes the improvement to better menus, better marketing, and "deft" management. What this analysis misses is that management accounts for product selection and marketing.

The improvements at McDonald’s are the by-product of management, plain and simple.

The story is even more extraordinary when one considers how many CEOs the company has had recently. Jim Cantalupo was CEO until he died of a heart attach and was replaced by Charlie Bell in 2004. Bell was diagnosed with fatal cancer shortly thereafter. Jim Skinner took over as CEO in lat 2004. At the time he took over McDonald’s shares had already doubled from their $12. Now, they have doubled again.

Management made the decision to expand overseas and to improve menus and coffee selections in the US, talking on Starbucks (SBUX) at the high end of the java market. Management also made the decision to increase the company’s dividend and buy-back shares.

There is nothing magic about the McDonald’s turnaround. A smart board kept the right people in the top job, and it worked.

Douglas A. McIntyre