103107 cs mc_donalds_ll_final

CA

SE S

TUD

YDriving a High-Performance CultureMcDonald’s Leverages Its Global Performance Management Practices

IN THIS CASE STUDYIn 2003, leading food service retailer McDonald’s Corporation faced an unprecedented set of business challenges, including extraordinary competition, a sagging share price and a wave of anti-American sentiment in the global marketplace. To improve performance and deepen customer relationships, the company committed to a turn-around plan with clear objectives. Senior management recognized that, to be successful, it needed to instill a culture that matched the company’s strategic aspirations.

At McDonald’s, company culture is not taken for granted nor is it off ered as “lip service” to the employees – it is proactively managed. Well-known as a company with a strong culture supporting internal development and mobility, McDonald’s recognized that it needed to:

• Improve global management practices to align employees to the business strategy;

• Ensure that every employee is held accountable for improving performance; and,

• Share top talent as a truly global practice.

BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL

BERSIN & ASSOCIATES

PLANNING& STRATEGY

CONTENTDEVELOPMENT

LEARNINGPROGRAMS

LEARNINGTECHNOLOGY

ANALYTICS &MEASUREMENT

TALENTMANAGEMENT

FOCUS:

—Leighanne Levensaler, Principal Analyst | October 2007

2BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL

DRIVING A HIGH-PERFORMANCE CULTURE

In partnership with senior management, the global HR design group further enhanced the Performance Development System (PDS) – a set of global performance management practices designed to build alignment, hold employees accountable, and identify, develop and reward talent consistently around the world.

Th is case study describes how one of the world’s most successful companies and most recognizable brands drives a high-performance culture, and proactively manages talent on a global scale.

Highlights include:

• Th e business drivers for implementing PDS;

• Th e key components of PDS;

• Process step descriptions with example evaluation scales; and,

• Best-practice guidance and lessons learned for organizations that are designing and implementing integrated performance management initiatives.

“People have always

been McDonald’s legacy.

I also appreciate the fact

that, in an organization

like McDonald’s, people

and profi tability are

inexorably linked. You

cannot have one without

the other.”

– McDonald’s Corporation chief executive offi cer

K E Y P O I N T

BERSIN & ASSOCIATES © OCTOBER 2007 • NOT FOR DISTRIBUTION • LICENSED MATERIAL


TABLE OF CONTENTSCompany 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 23



Company Overview

McDonald’s is the leading global foodservice retailer with more than 30,000 local restaurants serving more than 52 million people in more than 100 countries each day. One of the world’s most well-known and valuable brands, the company holds a leading share in the globally branded quick-service restaurant segment of the informal eating-out market in virtually every country in which it does business. Th e world goes to McDonald’s for some of its favorite foods – World-Famous French Fries, Big Mac, Quarter Pounder, Chicken McNuggets and Egg McMuffi n.

To the world, the McDonald’s brand means something more than a hamburger and fries. With the successful expansion of McDonald’s into many international markets, the company became a symbol of globalization and the spread of the American way of life. Communities around the world benefi t from its deep links to businesses, charities and civic organizations.

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-Pacifi c, 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: www.mcdonalds.com

Source: Bersin & Associates, 2007.



Th e “McDonald’s System” provides employment and growth opportunities for more than 1.6 million people around the world. Th e business is managed as seven distinct geographic segments or major markets:

• United States;

• Europe;

• Asia-Pacifi c;

• Th e Middle East;

• Africa;

• Latin America; and,

• Canada.

“If we are going to go

anywhere, we’ve got

to have talent. And, I’m

going to put my money

in talent.”

– McDonald’s corporate founder, Ray Kroc

K E Y P O I N T

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 fl eet of state-of-the-art vehicles that deliver cost-effective medical, dental and educational services directly to underserved children in their own neighborhoods.




In 2005, McDonald’s celebrated its 50th anniversary – a celebration that highlighted the unique opportunities McDonald’s has created for millions of people over the past half century. Estimates are that one 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 to succeed – many move on to careers in other fi elds, taking with them essential workplace skills and values, while others move up within the organization to roles in the corporate home offi ce, within their restaurants or out in the fi eld.

Th e Business Environment

In 2003, McDonald’s stock price was signifi cantly lower than it had been in a decade. Competition was intense and growing anti-Americanism in the global marketplace brought signifi cant challenges to expansion eff orts. Senior management was focused on improving company performance and 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 deepening those customer connections. Th e plan has fi ve areas of focus – People, Products, Place, Price and Promotion. Th e global “People Principles” provide a framework for people-related programs and practices worldwide. Th is refl ects the company’s commitment to an inclusive, supportive workplace environment – and to recognizing and rewarding good performance. Global performance management was viewed as one of the initiatives that could help to drive a high-performance culture, and deliver better company and individual performance.

In early 2007, McDonald’s CEO reaffi rmed 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.”



Th e Challenges Th at Occurred

McDonald’s global performance management practices did not share a common set of standards and, as a result, it was diffi cult for the company to systematically identify and reward its top talent. Managers lacked a common understanding of what “high performance” should mean. For example, the fi ve-point rating scale represented diff erent things in the various locations around the world. Also, candid conversations were not occurring between employees and managers.

To drive a high-performance culture, the company needed to:

• Better diff erentiate performance at the individual level;

• Support managers in giving their employees open and honest feedback; and,

• Tie rewards to the highest performance.

With the support of the McDonald’s leadership team, the global HR design group redesigned and launched the Performance Development System (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. Th e company’s culture demands and supports learning and development.

In most organizations,

the “talent” is currently

defi ned as a set of key

directors and executives.

Over time, Bersin &

Associates believes

that organizations will

redefi ne talent and

associated practices

to encompass all

employees, including

contingent and contract

workers.

A N A LY S I S



Performance Development System

Overview

PDS is designed to drive the performance and development of McDonald’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 (e.g., what gets done) and demonstration of performance drivers (e.g., how it gets done);

• Provide a process for identifying employees who are ready for advancement; and,

• Allow for a diff erentiation in performance assessments which, in turn, allow for diff erentiation in distribution of rewards.

Th is is a “system” because it is integrated with other programs and systems within McDonald’s. From an HR standpoint, it links into talent management, compensation, recruitment, and learning and development (L&D). Employees and managers are responsible for understanding and implementing PDS.

McDonald’s founder Ray

Kroc once said, “Take

good care of those who

work for you and you

will fl oat to greatness

on their achievements.”

K E Y P O I N T



Key Components of PDS

Th e 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.

Figure 3: Example of an Integrated Talent Management Process around Performance ManagementFigure 3: Example of an Integrated Talent Management Process around Performance Management


Talent Strategy & Planning

Sourcing& Recruiting

1

2PerformanceManagement

Learning &Development

4

SuccessionPlanning

5

LeadershipDevelopment

6

3

Compensation

7

Gaps in LeadershipPipeline

Gaps in OperationalRoles and Skills

Gaps in OperationalRoles and Skills

HiPo’s andSuccessionPlanning

LeadershipCandidates

CompensationRecommendations

Skills Gaps

KnownCompetencies

to Succeed



Th e PDS timetable begins with the creation of business strategies and their alignment with individual performance plans, and ends with year-end reviews and strategic people-planning.

Individual Performance Plan

Th e Individual Performance Plan (IPP) helps employees focus on the objectives that matter most in supporting McDonald’s priorities. Th is plan is the foundation that allows accurate assessment of performance and the diff erentiation of performance levels among employees. Beginning in December, managers work with employees to create an IPP as a tool to align their objectives for the coming year with that of the business unit, department, and team strategies and initiatives. Th ese objectives should be “SMART” (Specifi c, Measurable, Achievable, Relevant and Time-bound). One or two of these objectives should be for personal development, refl ecting the areas in which employees intend to take specifi c action steps to develop their skills, knowledge or experience. Th ose who manage people should also have one or two “people development” objectives. During the year, employees are responsible for meeting the objectives and are encouraged to document their achievements. Managers are responsible for providing feedback, coaching and support to their employees throughout the year.

Figure 4: Establishing the Individual Performance PlanFigure 4: Establishing the Individual Performance Plan

Source: McDonald’s, 2007.

Manager and Employee Roles

When Managers Employees Managers and Employees

December–January

Communicate thefollowing information to employees: current year objectives, measures and targets for the workgroup.

Develop individual performance plans, including performance objectives, measures and targets.

Meet to review,modify and approve individual performance plans.

“Cascading goals” is the

process of adopting goals

at different levels within

a company to ensure

alignment between the

organization’s objectives

to individuals’ activities

and goals.

K E Y P O I N T



Figure 5: McDonald’s Individual Performance Plan and Year-End Assessment

Individual Development Plan

Th e Individual Development Plan (IDP) focuses on core and leadership competencies, and job-specifi c or functional competencies that employees need in order to be successful in their current or future positions. Th e IDP should identify the plan for an employee’s career aspirations. Th e goal is to have employees thinking about the skills they want to acquire and how to continuously improve.

Mid-Year Review

Mid-year reviews take place by the end of July of each year. During this review, an employee and his / her manager review year-to-date

Figure 5: McDonald’s Individual Performance Plan and Year-End Assessment

Individual Performance Plan and Year-End AssessmentIndividual Performance Plan

Page 1 of 62.20.03

In 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.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 thepolicies 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 McDonaldsand 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.

Information about you (Employee completes)Name eltiT

Region/Division/Department -----tceleS-----dnaB

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 unsatisfactory 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 measureachievement of your objectives. For the mid-year review and year-end review, enter accomplishments for each of your objectives.Objectives that support your teams businessstrategies (List 3 to 5)

Date tocomplete

tnemhsilpmoccAtnemerusaeM

Objectives that support your individual development(List 1 or 2 based on performance drivers or functionalcompetencies)

Rating Exceptional Results Significant Results Some Improvement Required Unacceptable

Team Objectives and Individual

Objectives

Rating Scale Descriptions



Figure 6: Examples of Individual Performance Plan Objectives

performance progress on objectives and his / her demonstration of the performance drivers. Th is is the time to revise annual goals based on shift ing business priorities.

Year-End Review

At the end of the year, employees submit their accomplishments to their managers. Each employee and his / her manager have a face-to -face meeting to ensure the manager understands the accomplishments and can present them at the calibration roundtable. Th ese accomplishments are rated and, along with employee’s performance drivers ratings, are used in the year-end performance review and to assess advancement potential.

In January of the following year, employees are evaluated on their overall contribution for the year. Two major areas are considered:

• Results achieved on performance objectives or the “What” (75 percent weight); and,

• Th e display of McDonald’s performance drivers or the “How” (25 percent weight).

McDonald’s performance drivers include:

Figure 6: Examples of Individual Performance Plan Objectives


Lower product costs by directly identifying and contributing a project cost savings.

December 31 Realize a product cost savings of $350 per store.

Find ways to improve administrativeprocesses and reduce the amount of the manager’s time devoted to administration.

End of 4th quarter Redesign process flow for expensevouchers to reduce cycle time from 8 days to 5 days.

Obtain a lower cost on one officesupply item each month.

Monthly during the 2003 fiscal year

Total office supplies expense not toexceed $10,000 for the 2003 fiscal year.

Objective Date to Complete Measurement



Figure 7: Overall Performance Ratings

• Sets clear objectives with results accountability;

• Coaches and values people;

• Acts in the best interests of the system;

• Communicates eff ectively;

• Embraces change, creativity and innovation; and,

• Has strategic focus.

Th ese ratings are combined to determine an overall performance rating. Figure 7 shows the rating levels, along with the distribution guidelines.

Managers review the year-end IPP and assign a preliminary rating on results achieved, performance drivers and overall performance for each employee.

In late January, managers attend a performance calibration roundtable and talent review roundtable during which they meet with their peers and common supervisor. Th ey discuss and share input on employees’ performance for the previous year in order to arrive at a fi nal performance rating for each employee. Performance calibration roundtables and talent review roundtables may be combined.

Performance Calibration Roundtable

Th e purpose of the performance calibration roundtable meeting is to improve the overall quality and fairness of the ratings by ensuring

Figure 7: Overall Performance Ratings


NumericRating

Label Distribution

4 Exceptional Performance 20 percent

3 Significant Performance 70 percent

2 Some Improvement Required 10 percent (divided between Some Improvement Required and Unacceptable Performance)1 Unacceptable Performance

To create and sustain a

high-performance culture,

an organization must have

meaningful differentiation

among employees.

Many use the “20-70-

10” distribution to rank

employee performance

– to identify top talent,

give promotions, decide

on merit increases, offer

specifi c development

interventions or for

downsizing.

A N A LY S I S



Figure 8: Four Classifi cations of the Readiness for Advancement Process

that a common standard is being applied. Performance calibration roundtables off er the following advantages.

• Rating infl ation will be minimized by having the roundtable members discuss what the various rating scales mean.

• A diverse group in the roundtable brings diff erent perspectives about each employee's performance over the past year.

• Th rough group discussions, the members will ensure that all employees are considered on results achieved and on each performance driver.

Figure 8: Four Classifications of the Readiness for Advancement Process


RN RF NP CL

Ready Now Ready Future New to Position Current Level

Describes employees who are capable of immediateconsideration for a promotion to aposition of significantly greater responsibility in the specific functionwithin the business towhich their development is beingdirected.

Describes employeeswho, assuming development continues,are expected to be capable within 2 years or less ofconsideration for a promotion to a position of significantly greater responsibility in the specific functions within the business to which their development is being directed.

Describes employeeswho have been promoted or hired intothe organization within the last 12 months for whom itis too early to assess their potential for the next level of responsibility.

Describes employees who, at the time of the assessment, are not viewed as being readyfor a promotion toa position ofsignificantly greater responsibility within 2 years or less. Thiscategory includes many outstanding performers (“aces in their places”) as well as individuals with no interest in advancement at this time.

For companies using a

standard distribution

for performance ratings,

performance is evaluated

as both absolute and

relative. Performance

calibration roundtables

are an essential

practice to determine

an employee’s relative

distribution placement.

BEST PRACT ICE



Talent Review Roundtable

At the same time a manager assesses overall performance, he / she determines an employee’s readiness for advancement. At a talent review roundtable, managers identify and discuss employees who are ready for advancement, agree on specifi c action plans for those employees and fi nalize ratings. To enable comprehensive discussions during the talent review roundtables, managers should also collect information about each employee’s strengths, development needs, development action plan, career aspirations, mobility, recommended moves and turnover risk.

Approximately 25 percent of employees will fall in the “Ready Now” and “Ready Future” categories.

Some additional talent review roundtable meetings are conducted by the lead functional executives at the home offi ce in order to assess readiness for advancement of senior directors or offi cers in their functions.

Compensation Decisions

When ratings are fi nalized aft er the calibration roundtables, managers use a web-based tool to make their compensation decisions and allocations. Each manager is given a sum or pool of available funds to allocate among his / her reports. Managers submit their recommendations for bonus and merit increases, along with the performance ratings. Th is information is bubbled up to higher levels in the organization to ensure there are enough funds available. By March 1, increases and bonuses are granted.

Plan to Win and Performance Development System

Now in its fourth year, Plan to Win continues to keep McDonald’s eff orts focused on the right things. PDS incorporates corporate goals that ultimately cascade from Plan to Win for performance planning and objective-setting. Th is ensures company alignment and helps to drive individual accountability for Plan to Win.

Many companies (due

to their size or timetable

constraints) combine the

performance calibration

and talent review sessions

into one event – although

a common theme we

hear is the desire to

separate the events.

A N A LY S I S



Global Versus Local Perspectives

In order to sustain success in global performance management, global eff orts must be balanced with local perspectives. Given that each market and organization within McDonald’s is unique, the company applied the “Freedom within a Framework” philosophy to PDS that is used by other key systems. Th e framework identifi es what is negotiable and what it is not negotiable. For example, the revised four-point rating scale and performance drivers (including their defi nitions) are non-negotiables. Conducting a performance calibration roundtable to fi nalize ratings is a strong recommendation, but in some cultures it may not work. HR business partners help to translate PDS to be in-line with the operating environment, while abiding by local laws, regulations and procedures.

Governing PDS

Beginning with the initial redesign effort, the global HR design group has worked hard to ensure executive support, to collaborate on strategy and design with HR business partners from the major markets, and to seek input from line managers and employees on PDS.

• McDonald’s Human Resource Leadership Council (HRLC) provides the overall strategic direction and ensures investment for PDS.

• The Talent Management Department is the primary team accountable for PDS strategy and design.

• Global HR Business Partners support and localize execution of PDS within the major markets.

Additionally, the global leader for PDS initiated an advisory team of line managers that meets once a month to incorporate diff erent perspectives. Th is advisory team represents the line managers who use PDS everyday – and who see fi rst-hand what is and what is not working. (Offi cers sometimes do not hear or interpret the feedback the same way the line managers would interpret it directly from employees.) To assemble this

In complex, global

corporations, the

“Freedom within a

Framework” philosophy

is essential to successfully

deploying and managing

enterprisewide programs.

BEST PRACT ICE

Leverage key

competencies across all

talent-related programs

to reinforce your

organization’s desired

culture.

BEST PRACT ICE



team, HR generalists around the world were asked to identify managers and directors who would have a passion for giving feedback and who would be excited to be part of the team. In terms of giving input for future changes, this team is just as critical as the HRLC.

Global governance of the execution of PDS is a challenge without a web-based performance management system. Ultimately, it is up to the HR business partners in the various countries to monitor compliance and report outcomes. Th ey look at the 20-70-10 distribution and how the organizations are doing in terms of meeting expectations. At the home offi ce and in U.S., HR business partners are able to use the compensation system to analyze a wide range of information. Th ey look at data about diversity in terms of the distribution of ratings and compensation. Additionally, they look at whether people are truly using the full range for compensation. But this type of data is not captured on a global basis since compensation practices and systems vary from country to country.

Employees provide direct input to PDS through the annual employee opinion survey – which is reviewed by the talent management group to continuously improve PDS.

Technology

PDS is currently administered through a combination of Microsoft Word and Excel templates, email, and several regional compensation management systems. When asked about the lack of a web-based system, 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 PDS and related initiatives, such as the talent review process and merit pay. Th e global lead for PDS hopes to achieve many benefi ts with technology, including:



• Realizing greater effi ciencies in the process;

• Providing the ability to monitor compliance and ensure the eff ective use of the system and global consistency; and,

• Enhancing the experience for managers and employees.

In 2007, foundational activities are being conducted to prepare for the implementation of an integrated system supporting critical talent management functions, including performance evaluations, development planning, talent readiness / succession management and merit-pay allocation.

Lessons Learned and Best Practices

Th rough several years of global experience with PDS, McDonald’s has learned many lessons and off ers some wisdom (whether you are looking to redesign your company’s performance management approach or you are 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 signifi cant 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 and



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. Th e 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). Th e “What” helps you evaluate if the behavior is consistent with your culture and company values.

• Implement performance calibration roundtables. Th ese 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 offi ce or how hard he / she works – it is the results he / she achieves.

• Start with the offi cers of the company. In year one, McDonald’s only rolled out PDS to the company’s offi cers. 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. Offi cers 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. Defi ne 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. Aft er the initial launch, all new managers and employees are introduced to PDS during the new employee orientation program. Within the fi rst month of employment, new employees are invited to attend brown-bag



sessions on PDS. In addition to PDS documentation, McDonald’s off ers 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 profi cient and confi dent in the process.

Looking Forward

McDonald’s is committed to continuously improving its performance and talent management practices. Near-term plans include phasing out the current performance drivers and using the competencies from the core competency model to support the individual performance and development plans. To ensure eff ective change management, the global HR design group will work with the HRLC and the global HR business partners on the communications and deployment strategy. Additionally, the governance groups will continue supporting the global HR design group in development of a technology strategy, business case and deployment approach.

Conclusion

Th is case study provides a mature model of a business-driven talent management initiative. To transform into a high-performance culture, McDonald’s:

• Analyzed its performance management practices; and,

• Designed an integrated approach to support the organization to:

o Identify,

o Develop,



o Reward talent, and

o Devote signifi cant resources to global governance and change management.

Today, the company is delivering the strongest business results in the last 30 years. PDS is a critical enabler to this success by ensuring alignment of individual performance goals with the business strategy and continuously cultivating ready talent for the future.

“i’m lovin it™”



Appendix I: Table of Figures

Figure 1: At a Glance 4

Figure 2: At a Glance (cont’d) 5

Figure 3: Bersin & Associates Integrated Talent Management Process around Performance Management 9

Figure 4: Establishing the Individual Performance Plan 10

Figure 5: McDonald’s Individual Performance Plan and Year-End Assessment 11

Figure 6: Examples of Individual Performance Plan Objectives 12

Figure 7: Overall Performance Ratings 13

Figure 8: Four Classifi cations of the Readiness for Advancement Process 14



About UsBersin & Associates is the only research and advisory consulting fi rm 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 eff ectiveness 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, eff ective decisions. Member benefi ts include: in-depth advisory services, access to proprietary webcasts and industry user groups, strategic workshops, and strategic consulting to improve operational eff ectiveness and business alignment. More than 3,500 organizations in a wide range of industries benefi t from Bersin & Associates research and services.

Bersin & Associates can be reached at http://www.bersin.com or at (510) 654-8500.

About This ResearchCopyright© 2007 Bersin & Associates. All rights reserved. WhatWorks® and related names such as Rapid e-Learning: WhatWorks® and Th e 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. Th e information and forecasts contained in this report refl ect the research and studied opinions of Bersin & Associates analysts.