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103107 cs mc_donalds_ll_final


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  1. 1. CASE STUDY BERSIN & ASSOCIATES Driving a High-Performance Culture McDonald’s Leverages Its Global Performance Management Practices —Leighanne Levensaler, Principal Analyst | October 2007 IN THIS CASE STUDY In 2003, leading food service retailer McDonald’s Corporation FOCUS: faced an unprecedented set of business challenges, including extraordinary competition, a sagging share price and a wave of PLANNING anti-American sentiment in the global marketplace. To improve& STRATEGY performance and deepen customer relationships, the company committed to a turn-around plan with clear objectives. Senior CONTENT management recognized that, to be successful, it needed to instill aDEVELOPMENT culture that matched the company’s strategic aspirations. LEARNING At McDonald’s, company culture is not taken for granted nor is it PROGRAMS offered as “lip service” to the employees – it is proactively managed. LEARNING Well-known as a company with a strong culture supporting internalTECHNOLOGY development and mobility, McDonald’s recognized that it needed to: ANALYTICS & • Improve global management practices to align employees to theMEASUREMENT business strategy; TALENT • Ensure that every employee is held accountable for improvingMANAGEMENT performance; and, • Share top talent as a truly global practice. BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL
  2. 2. DRIVING A HIGH-PERFORMANCE CULTUREIn partnership with senior management, the global HR design group KEY POINTfurther enhanced the Performance Development System (PDS) – aset of global performance management practices designed to build “People have alwaysalignment, hold employees accountable, and identify, develop and been McDonald’s legacy.reward talent consistently around the world. I also appreciate the factThis case study describes how one of the world’s most successful that, in an organizationcompanies and most recognizable brands drives a high-performance like McDonald’s, peopleculture, and proactively manages talent on a global scale. and profitability areHighlights include: inexorably linked. You cannot have one without• The business drivers for implementing PDS; the other.”• The key components of PDS; – McDonald’s Corporation chief• Process step descriptions with example evaluation scales; and, executive officer• Best-practice guidance and lessons learned for organizations that are designing and implementing integrated performance management initiatives.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 2
  3. 3. DRIVING A HIGH-PERFORMANCE CULTURE TABLE OF CONTENTS Company Overview 4 The Business Environment 6 The Challenges That Occurred 7 Talent Management at McDonald’s 7 Performance Development System 8 Overview 8 Key Components of PDS 9 Individual Performance Plan 10 Individual Development Plan 11 Mid-Year Review 11 Year-End Review 12 Performance Calibration Roundtable 13 Talent Review Roundtable 15 Compensation Decisions 15 Plan to Win and Performance Development System 15 Global Versus Local Perspectives 16 Governing PDS 16 Technology 17 Lessons Learned and Best Practices 18 Looking Forward 20 Conclusion 20 Appendix I: Table of Figures 22 About Us 23 About This Research 23BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL
  4. 4. DRIVING A HIGH-PERFORMANCE CULTURE Company OverviewMcDonald’s is the leading global foodservice retailer with more than30,000 local restaurants serving more than 52 million people in more than100 countries each day. One of the world’s most well-known and valuablebrands, the company holds a leading share in the globally branded quick-service restaurant segment of the informal eating-out market in virtuallyevery country in which it does business. The world goes to McDonald’sfor some of its favorite foods – World-Famous French Fries, Big Mac,Quarter Pounder, Chicken McNuggets and Egg McMuffin. Figure 1: At a Glance Company Name: McDonald’s Corporation Company Type: Public (NYSE: MCD) Industry: Leisure – Restaurants and Cafes – Fast Food and Quick Service Restaurants Founded: May 15, 1940 in San Bernardino, California Employees: 447,000 (2005) (1.6 million in the global McDonald’s System) Headquarters: Oak Brook, Illinois, U.S. Locations: U.S., Europe, Asia-Pacific, the Middle East, Africa, Latin America and Canada Founder: Ray Kroc, corporate founder 2006 Revenue: $21.60 billion 2006 Net Income: $3.54 billion Website: Source: Bersin & Associates, 2007.To the world, the McDonald’s brand means something more than ahamburger and fries. With the successful expansion of McDonald’sinto many international markets, the company became a symbol ofglobalization and the spread of the American way of life. Communitiesaround the world benefit from its deep links to businesses, charities andcivic organizations.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 4
  5. 5. DRIVING A HIGH-PERFORMANCE CULTURE Figure 2: At a Glance (cont’d) Jobs and Opportunities • Twenty of the top 50 worldwide managers started in McDonald’s restaurants, including the current CEO. • Sixty-seven thousand McDonald’s restaurant managers and assistant managers started as restaurant staff. • McDonald’s is the only restaurant organization to receive credit recommendations from the American Council on Education (ACE). People • McDonald’s invests more than $1 billion annually in training. • Hamburger University® has had more than 275,000 graduates worldwide, with some eligible for college credits. • “Best Place to Work for Minorities” – Fortune Magazine, 2005. • “Corporate 100, Best Places to Work for Latinos” – Hispanic Magazine, 2005. Community Commitment • McDonald’s franchisees are local business owners and entrepreneurs. • Ronald McDonald Houses® are homes away from home for families with seriously ill children – with more than 265 Ronald McDonald Houses in 28 countries worldwide. • Ronald McDonald Care Mobile™ program is a fleet of state-of-the-art vehicles that deliver cost-effective medical, dental and educational services directly to underserved children in their own neighborhoods. Source: Bersin & Associates, 2007.The “McDonald’s System” provides employment and growth opportunities KEY POINTfor more than 1.6 million people around the world. The business ismanaged as seven distinct geographic segments or major markets: “If we are going to go• United States; anywhere, we’ve got to have talent. And, I’m• Europe; going to put my money• Asia-Pacific; in talent.”• The Middle East; – McDonald’s corporate founder, Ray Kroc• Africa;• Latin America; and,• Canada.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 5
  6. 6. DRIVING A HIGH-PERFORMANCE CULTUREIn 2005, McDonald’s celebrated its 50th anniversary – a celebrationthat highlighted the unique opportunities McDonald’s has createdfor millions of people over the past half century. Estimates are thatone in 10 people in the U.S. at some point in their lives have worked“under the arches.” At McDonald’s, people can learn what it takes tosucceed – many move on to careers in other fields, taking with themessential workplace skills and values, while others move up withinthe organization to roles in the corporate home office, within theirrestaurants or out in the field. The Business EnvironmentIn 2003, McDonald’s stock price was significantly lower than it had beenin a decade. Competition was intense and growing anti-Americanism inthe global marketplace brought significant challenges to expansion efforts.Senior management was focused on improving company performanceand supporting initiatives that would deepen customer connections.McDonald’s launched a revitalization plan called the “Plan to Win” –which serves as the global business strategy and framework for deepeningthose customer connections. The plan has five areas of focus – People,Products, Place, Price and Promotion. The global “People Principles”provide a framework for people-related programs and practicesworldwide. This reflects the company’s commitment to an inclusive,supportive workplace environment – and to recognizing and rewardinggood performance. Global performance management was viewed as oneof the initiatives that could help to drive a high-performance culture, anddeliver better company and individual performance.In early 2007, McDonald’s CEO reaffirmed McDonald’s commitment to“Plan to Win,” stating that it, “... is the foundation for our current and future success. In fact, since we began our revitalization in 2003, we’ve grown systemwide sales by almost 40 percent, an increase in revenues by $6 billion. We’ve delivered double-digit increases in our average annual earnings per share. Our share price has nearly tripled and we are serving six million additional customers every day.”BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 6
  7. 7. DRIVING A HIGH-PERFORMANCE CULTUREThe Challenges That OccurredMcDonald’s global performance management practices did not share A N A LY S I Sa common set of standards and, as a result, it was difficult for thecompany to systematically identify and reward its top talent. Managers In most organizations,lacked a common understanding of what “high performance” should the “talent” is currentlymean. For example, the five-point rating scale represented different defined as a set of keythings in the various locations around the world. Also, candid directors and executives.conversations were not occurring between employees and managers. Over time, Bersin &To drive a high-performance culture, the company needed to: Associates believes that organizations will• Better differentiate performance at the individual level; redefine talent and• Support managers in giving their employees open and honest associated practices feedback; and, to encompass all employees, including• Tie rewards to the highest performance. contingent and contractWith the support of the McDonald’s leadership team, the global HR group redesigned and launched the Performance DevelopmentSystem (PDS). Talent Management at McDonald’s At McDonald’s, talent management ensures that the company has the leadership talent in place to drive business success both today and in the future. Talent management within McDonald’s has an overall goal with three main objectives: 1. Every key position has a high-performing, committed leader; 2. A deep, diverse pool of replacement talent is available for every leadership position; and, 3. The company’s culture demands and supports learning and development.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 7
  8. 8. DRIVING A HIGH-PERFORMANCE CULTURE Performance Development SystemOverviewPDS is designed to drive the performance and development ofMcDonald’s employees, with several important purposes:• Provide a structure to align individual performance goals with business strategies;• Foster individual growth and enable sustained performance;• Support performance evaluations that are based on results achieved KEY POINT (e.g., what gets done) and demonstration of performance drivers (e.g., how it gets done); McDonald’s founder Ray Kroc once said, “Take• Provide a process for identifying employees who are ready for advancement; and, good care of those who work for you and you• Allow for a differentiation in performance assessments which, in will float to greatness turn, allow for differentiation in distribution of rewards. on their achievements.”This is a “system” because it is integrated with other programs andsystems within McDonald’s. From an HR standpoint, it links intotalent management, compensation, recruitment, and learning anddevelopment (L&D). Employees and managers are responsible forunderstanding and implementing PDS.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 8
  9. 9. DRIVING A HIGH-PERFORMANCE CULTURE Figure 3: Example of of an Integrated Talent Management Processaround Performance Management Figure 3: Example an Integrated Talent Management Process around Performance Management Sourcing 2 3 Known Performance & Recruiting Competencies Management to Succeed Gaps in Operational Gaps in Operational Skills Gaps Roles and Skills Roles and Skills 1 4 Talent Strategy Learning & & Planning Gaps in Leadership Development Pipeline Compensation Recommendations HiPo’s and Succession Planning Leadership 7 Candidates 5 Compensation Succession Planning 6 Leadership Development Source: Bersin & Associates, 2007.Key Components of PDSThe key components of PDS include:1. Individual Performance Plan;2. Individual Development Plan;3. Mid-Year Review;4. Performance Calibration Roundtable;5. Year-End Review; and,6. Talent Review Roundtable.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 9
  10. 10. DRIVING A HIGH-PERFORMANCE CULTURE Figure 4: 4: Establishing the Individual Performance Plan Figure Establishing the Individual Performance Plan Manager and Employee Roles When Managers Employees Managers and Employees December– Communicate the Develop individual Meet to review, January following information to performance plans, modify and employees: current year including performance approve individual objectives, measures and objectives, measures performance plans. targets for the workgroup. and targets. Source: McDonald’s, 2007.The PDS timetable begins with the creation of business strategies andtheir alignment with individual performance plans, and ends with year-end reviews and strategic people-planning.Individual Performance PlanThe Individual Performance Plan (IPP) helps employees focus on the KEY POINTobjectives that matter most in supporting McDonald’s priorities. Thisplan is the foundation that allows accurate assessment of performance “Cascading goals” is theand the differentiation of performance levels among employees. process of adopting goalsBeginning in December, managers work with employees to create an at different levels withinIPP as a tool to align their objectives for the coming year with that a company to ensureof the business unit, department, and team strategies and initiatives. alignment between theThese objectives should be “SMART” (Specific, Measurable, Achievable, organization’s objectivesRelevant and Time-bound). One or two of these objectives should befor personal development, reflecting the areas in which employees to individuals’ activitiesintend to take specific action steps to develop their skills, knowledge and goals.or experience. Those who manage people should also have one ortwo “people development” objectives. During the year, employees areresponsible for meeting the objectives and are encouraged to documenttheir achievements. Managers are responsible for providing feedback,coaching and support to their employees throughout the year.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 10
  11. 11. DRIVING A HIGH-PERFORMANCE CULTURE Figure 5: 5: McDonald’s Individual Performance Plan and Year-End Assessment Figure McDonald’s Individual Performance Plan and Year-End Assessment Individual Performance Plan and Year-End Assessment Individual Performance Plan Information about you (Employee completes) Name Title Rating Scale Region/Division/Department Band Descriptions ----- S el ec t ----- Person you report to Performance period Date of mid-year review Date of year-end review Results achieved (Manager completes at year-end using the ratings from the Performance Calibration Roundtable ) 4 Exceptional Results Accomplishments were significantly beyond target performance levels. Contributions to business unit, team, or department result s were exceptional. 3 Significant Results Accomplishments met and sometimes exceeded target performance levels. All requirements and expectations of the job were fulfilled. 2 Some Improvement Required Accomplishments met some but not all target levels and/or basic job requirements were not consistently met. Performance is unsa tisfactory and improvement is required. 1 Unacceptable Few objectives were met and basic job requirements were not maintained. Performance improvement must be achieved. Objectives and accomplishments (Employee completes) Write objectives that are Specific, Measurable, Achievable, Relevant, and Time-bound (SMART). You and your manager should work together to develop goals, dates for completion, and ways to measure achievement of your objectives. For the mid-year review and year-end review, enter accomplishments for each of your objectives. Objectives that support your teams business Date to Measur ement Accomplishment strategies (List 3 to 5) complete Team Objectives and Individual Objectives that support your individual development Objectives (List 1 or 2 based on performance drivers or functional competencies) Rating Exceptional Results Significant Results Some Improvement Required Unacceptable Page 1 of 6In the U.S., at McDonalds, employment is at will. This means that employees are free to terminate their employment at any time, for any reason, and McDonalds reserves the same right. 2.20.03 The president of McDonalds is the only person who may make an exception to this, and it must be in writing and signed by the president. McDonalds reserves the right to amend or modify the policies and procedures described in this guide at any time without prior notice. The information and processes contained in this guide do not create any contractual obligation between McDonalds and its employees. The legal import of PDS varies from country to country. If you want more information concerning the legal import of PDS in your country, please contact your local HR Department Head. 2003 McDonalds Corporation. All Rights Reserved.Individual Development PlanThe Individual Development Plan (IDP) focuses on core and leadershipcompetencies, and job-specific or functional competencies thatemployees need in order to be successful in their current or futurepositions. The IDP should identify the plan for an employee’s careeraspirations. The goal is to have employees thinking about the skills theywant to acquire and how to continuously improve.Mid-Year ReviewMid-year reviews take place by the end of July of each year. Duringthis review, an employee and his / her manager review year-to-dateBERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 11
  12. 12. DRIVING A HIGH-PERFORMANCE CULTURE Figure 6: 6: Examples of Individual Performance Plan Objectives Figure Examples of Individual Performance Plan Objectives Objective Date to Complete Measurement Lower product costs by directly December 31 Realize a product cost savings of identifying and contributing a $350 per store. project cost savings. Find ways to improve administrative End of 4th quarter Redesign process flow for expense processes and reduce the vouchers to reduce cycle time from amount of the manager’s time 8 days to 5 days. devoted to administration. Obtain a lower cost on one office Monthly during the Total office supplies expense not to supply item each month. 2003 fiscal year exceed $10,000 for the 2003 fiscal year. Source: McDonald’s, 2007.performance progress on objectives and his / her demonstration of theperformance drivers. This is the time to revise annual goals based onshifting business priorities.Year-End ReviewAt the end of the year, employees submit their accomplishments to theirmanagers. Each employee and his / her manager have a face-to -facemeeting to ensure the manager understands the accomplishments andcan present them at the calibration roundtable. These accomplishmentsare rated and, along with employee’s performance drivers ratings, are usedin the year-end performance review and to assess advancement potential.In January of the following year, employees are evaluated on theiroverall contribution for the year. Two major areas are considered:• Results achieved on performance objectives or the “What” (75 percent weight); and,• The display of McDonald’s performance drivers or the “How” (25 percent weight).McDonald’s performance drivers include:BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 12
  13. 13. DRIVING A HIGH-PERFORMANCE CULTURE• Sets clear objectives with results accountability; A N A LY S I S• Coaches and values people; To create and sustain a• Acts in the best interests of the system; high-performance culture,• Communicates effectively; an organization must have meaningful differentiation• Embraces change, creativity and innovation; and, among employees.• Has strategic focus. Many use the “20-70- 10” distribution to rankThese ratings are combined to determine an overall performance rating. employee performanceFigure 7 shows the rating levels, along with the distribution guidelines. – to identify top talent,Managers review the year-end IPP and assign a preliminary rating on results give promotions, decideachieved, performance drivers and overall performance for each employee. on merit increases, offer specific developmentIn late January, managers attend a performance calibration roundtable interventions or forand talent review roundtable during which they meet with their downsizing.peers and common supervisor. They discuss and share input onemployees’ performance for the previous year in order to arrive at afinal performance rating for each employee. Performance calibrationroundtables and talent review roundtables may be combined.Performance Calibration RoundtableThe purpose of the performance calibration roundtable meeting isto improve the overall quality and fairness of the ratings by ensuring Figure 7: Overall Performance Ratings Figure 7: Overall Performance Ratings Numeric Label Distribution Rating 4 Exceptional Performance 20 percent 3 Significant Performance 70 percent 2 Some Improvement Required 10 percent (divided between Some Improvement Required 1 Unacceptable Performance and Unacceptable Performance) Source: McDonald’s, 2007.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 13
  14. 14. DRIVING A HIGH-PERFORMANCE CULTUREthat a common standard is being applied. Performance calibration BEST PRACTICEroundtables offer the following advantages.• Rating inflation will be minimized by having the roundtable For companies using a members discuss what the various rating scales mean. standard distribution for performance ratings,• A diverse group in the roundtable brings different perspectives about each employees performance over the past year. performance is evaluated as both absolute and• Through group discussions, the members will ensure that all relative. Performance employees are considered on results achieved and on each calibration roundtables performance driver. are an essential practice to determine an employee’s relative distribution placement. Figure 8: Four Classifications of of the Readiness for Advancement Process Figure 8: Four Classifications the Readiness for Advancement Process RN RF NP CL Ready Now Ready Future New to Position Current Level Describes employees Describes employees Describes employees Describes employees who are capable who, assuming who have been who, at the time of the of immediate development continues, promoted or hired into assessment, are not consideration for a are expected to the organization viewed as being ready promotion to a be capable within within the last for a promotion to position of significantly 2 years or less of 12 months for whom it a position of greater responsibility consideration for a is too early to assess significantly greater in the specific function promotion to a position their potential for the responsibility within within the business to of significantly next level of 2 years or less. This which their greater responsibility responsibility. category includes development is being in the specific many outstanding directed. functions within the performers (“aces in business to which their places”) as well their development is as individuals with no being directed. interest in advancement at this time. Source: McDonald’s, 2007.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 14
  15. 15. DRIVING A HIGH-PERFORMANCE CULTURETalent Review RoundtableAt the same time a manager assesses overall performance, he / shedetermines an employee’s readiness for advancement. At a talent reviewroundtable, managers identify and discuss employees who are ready for A N A LY S I Sadvancement, agree on specific action plans for those employees andfinalize ratings. To enable comprehensive discussions during the talent Many companies (duereview roundtables, managers should also collect information about to their size or timetableeach employee’s strengths, development needs, development action plan, constraints) combine thecareer aspirations, mobility, recommended moves and turnover risk. performance calibration and talent review sessionsApproximately 25 percent of employees will fall in the “Ready Now” and into one event – although“Ready Future” categories. a common theme weSome additional talent review roundtable meetings are conducted by the hear is the desire tolead functional executives at the home office in order to assess readiness separate the events.for advancement of senior directors or officers in their functions.Compensation DecisionsWhen ratings are finalized after the calibration roundtables, managersuse a web-based tool to make their compensation decisions andallocations. Each manager is given a sum or pool of availablefunds to allocate among his / her reports. Managers submit theirrecommendations for bonus and merit increases, along with theperformance ratings. This information is bubbled up to higher levelsin the organization to ensure there are enough funds available.By March 1, increases and bonuses are granted. Plan to Win and Performance Development SystemNow in its fourth year, Plan to Win continues to keep McDonald’sefforts focused on the right things. PDS incorporates corporate goalsthat ultimately cascade from Plan to Win for performance planning andobjective-setting. This ensures company alignment and helps to driveindividual accountability for Plan to Win.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 15
  16. 16. DRIVING A HIGH-PERFORMANCE CULTURE Global Versus Local PerspectivesIn order to sustain success in global performance management, global BEST PRACTICEefforts must be balanced with local perspectives. Given that each marketand organization within McDonald’s is unique, the company applied In complex, globalthe “Freedom within a Framework” philosophy to PDS that is used by corporations, theother key systems. The framework identifies what is negotiable and what “Freedom within ait is not negotiable. For example, the revised four-point rating scale and Framework” philosophyperformance drivers (including their definitions) are non-negotiables. is essential to successfullyConducting a performance calibration roundtable to finalize ratings isa strong recommendation, but in some cultures it may not work. HR deploying and managingbusiness partners help to translate PDS to be in-line with the operating enterprisewide programs.environment, while abiding by local laws, regulations and procedures. Governing PDSBeginning with the initial redesign effort, the global HR design grouphas worked hard to ensure executive support, to collaborate on strategyand design with HR business partners from the major markets, and toseek input from line managers and employees on PDS.• McDonald’s Human Resource Leadership Council (HRLC) BEST PRACTICE provides the overall strategic direction and ensures investment for PDS. Leverage key competencies across all• The Talent Management Department is the primary team accountable for PDS strategy and design. talent-related programs to reinforce your• Global HR Business Partners support and localize execution of organization’s desired PDS within the major markets. culture.Additionally, the global leader for PDS initiated an advisory team of linemanagers that meets once a month to incorporate different perspectives.This advisory team represents the line managers who use PDS everyday– and who see first-hand what is and what is not working. (Officerssometimes do not hear or interpret the feedback the same way the linemanagers would interpret it directly from employees.) To assemble thisBERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 16
  17. 17. DRIVING A HIGH-PERFORMANCE CULTUREteam, HR generalists around the world were asked to identify managersand directors who would have a passion for giving feedback and whowould be excited to be part of the team. In terms of giving input forfuture changes, this team is just as critical as the HRLC.Global governance of the execution of PDS is a challenge without aweb-based performance management system. Ultimately, it is up to theHR business partners in the various countries to monitor complianceand report outcomes. They look at the 20-70-10 distribution andhow the organizations are doing in terms of meeting expectations. Atthe home office and in U.S., HR business partners are able to use thecompensation system to analyze a wide range of information. Theylook at data about diversity in terms of the distribution of ratings andcompensation. Additionally, they look at whether people are truly usingthe full range for compensation. But this type of data is not capturedon a global basis since compensation practices and systems vary fromcountry to country.Employees provide direct input to PDS through the annual employeeopinion survey – which is reviewed by the talent management group tocontinuously improve PDS. TechnologyPDS is currently administered through a combination of MicrosoftWord and Excel templates, email, and several regional compensationmanagement systems. When asked about the lack of a web-basedsystem, the global lead for PDS said, “It is a disabler that PDS is not a web-based system – but not a deal-breaker. It is more important that people are engaged in the process and are executing on their performance plans.”Still, the company realizes that technology can further enhance PDSand related initiatives, such as the talent review process and meritpay. The global lead for PDS hopes to achieve many benefits withtechnology, including:BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 17
  18. 18. DRIVING A HIGH-PERFORMANCE CULTURE• Realizing greater efficiencies in the process;• Providing the ability to monitor compliance and ensure the effective use of the system and global consistency; and,• Enhancing the experience for managers and employees.In 2007, foundational activities are being conducted to preparefor the implementation of an integrated system supporting criticaltalent management functions, including performance evaluations,development planning, talent readiness / succession management andmerit-pay allocation. Lessons Learned and Best PracticesThrough several years of global experience with PDS, McDonald’s haslearned many lessons and offers some wisdom (whether you are lookingto redesign your company’s performance management approach or youare attempting to expand it).• Be prepared that it will take multiple years before people really understand and embrace the system. At the time of its inception, PDS represented significant changes to many existing approaches for annual performance evaluation around the world. Many people were very fearful of a perceived forced distribution at McDonald’s – they were concerned that PDS would force people out of the company unwillingly. Communication and change management are essential to dispelling misconceptions like this one, reducing fear of change and ensuring successful adoption. Remember to continuously focus on change management. It is equally important to communicate why and how the current process is changing, as well as how it is not changing.• Keep it simple. These things can get complex. You forget that, for HR, this is the main part of the job. It might seem simple but, for a line manager (whose functional area is architecture), people development is just another thing they have on their plates. It is important to make sure managers understand that developing andBERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 18
  19. 19. DRIVING A HIGH-PERFORMANCE CULTURE managing their direct reports is a key responsibility of their jobs no matter what their jobs are.• Include both the “What” and the “How” as part of the overall performance rating. The two major areas to consider are the performance results (or the “What” an employee accomplishes) and the performance drivers (or the “How” the employee accomplishes them). The “What” helps you evaluate if the behavior is consistent with your culture and company values.• Implement performance calibration roundtables. These are critical to get managers on the same page as to what high performance looks like. If the managers are doing it in a vacuum, it is really hard for them to ever change their mental models. For example, it is not the amount of hours a person spends in the office or how hard he / she works – it is the results he / she achieves.• Start with the officers of the company. In year one, McDonald’s only rolled out PDS to the company’s officers. In order to ensure success in the global implementation at the staff level, the company felt it was essential to get that group’s buy-in and support. Officers were able to communicate why this was the right system for McDonald’s and even championed the change management kick-off sessions.• Reinforce the concept of shared accountability for managing performance. Define the manager’s role as a coach who provides tools, information and direction as needed. Expect employees to drive the process and take ownership for their own performance. Use the performance management process as a key way to engage people in the business and as a mechanism for helping them understand how to improve performance and impact business results.• Provide opportunities for ongoing performance support and training on performance management. When McDonald’s launched PDS, the company set up change management sessions and just-in-time training around the world. After the initial launch, all new managers and employees are introduced to PDS during the new employee orientation program. Within the first month of employment, new employees are invited to attend brown-bagBERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 19
  20. 20. DRIVING A HIGH-PERFORMANCE CULTURE sessions on PDS. In addition to PDS documentation, McDonald’s offers an e-learning module for both the employee and manager, which documents the step-by-step annual process. How managers evaluate performance results and drivers is critical to employee satisfaction and engagement. For a successful performance management process to work, managers must feel proficient and confident in the process. Looking ForwardMcDonald’s is committed to continuously improving its performanceand talent management practices. Near-term plans include phasing outthe current performance drivers and using the competencies from thecore competency model to support the individual performance anddevelopment plans. To ensure effective change management, the globalHR design group will work with the HRLC and the global HR businesspartners on the communications and deployment strategy. Additionally,the governance groups will continue supporting the global HR designgroup in development of a technology strategy, business case anddeployment approach. ConclusionThis case study provides a mature model of a business-driven talentmanagement initiative. To transform into a high-performanceculture, McDonald’s:• Analyzed its performance management practices; and,• Designed an integrated approach to support the organization to: o Identify, o Develop,BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 20
  21. 21. DRIVING A HIGH-PERFORMANCE CULTURE o Reward talent, and o Devote significant resources to global governance and change management.Today, the company is delivering the strongest business results inthe last 30 years. PDS is a critical enabler to this success by ensuringalignment of individual performance goals with the business strategyand continuously cultivating ready talent for the future.“i’m lovin it™”BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 21
  22. 22. DRIVING A HIGH-PERFORMANCE CULTURE Appendix I: Table of FiguresFigure 1: At a Glance 4Figure 2: At a Glance (cont’d) 5Figure 3: Bersin & Associates Integrated Talent Management Process around Performance Management 9Figure 4: Establishing the Individual Performance Plan 10Figure 5: McDonald’s Individual Performance Plan and Year-End Assessment 11Figure 6: Examples of Individual Performance Plan Objectives 12Figure 7: Overall Performance Ratings 13Figure 8: Four Classifications of the Readiness for Advancement Process 14BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 22
  23. 23. DRIVING A HIGH-PERFORMANCE CULTURE About Us Bersin & Associates is the only research and advisory consulting firm focused solely on WhatWorks® research in enterprise learning and talent management. With more than 25 years of experience in enterprise learning, technology and HR business processes, Bersin & Associates provides actionable, research-based services to help learning and HR managers and executives improve operational effectiveness and business impact. Bersin & Associates research members gain access to a comprehensive library of best practices, case studies, benchmarks and in-depth market analyses designed to help executives and practitioners make fast, effective decisions. Member benefits include: in-depth advisory services, access to proprietary webcasts and industry user groups, strategic workshops, and strategic consulting to improve operational effectiveness and business alignment. More than 3,500 organizations in a wide range of industries benefit from Bersin & Associates research and services. Bersin & Associates can be reached at or at (510) 654-8500. About This Research Copyright© 2007 Bersin & Associates. All rights reserved. WhatWorks® and related names such as Rapid e-Learning: WhatWorks® and The High Impact Learning Organization® are registered trademarks of Bersin & Associates. No materials from this study can be duplicated, copied, republished, or re-used without written permission from Bersin & Associates. The information and forecasts contained in this report reflect the research and studied opinions of Bersin & Associates analysts.BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL 23