Rich Floersch & Don Crosby

April 4, 2008

University of Illinois – Institute Of Labor And Industrial Relations

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Agenda

Business Overview/History

Revitalization Program/Plan to Win

HR Plan to Win

Strategic Frameworks

Bringing Frameworks to Life

Q&A

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The History of McDonald’s

1955 1960 1970

Late 1950s -1960s•Ray Kroc buys McDonald’s business• Franchising Opportunities Abound & HU

Introduced• IPO 1965 – 13 Stock Splits Since 1966

1970s Standardized Business Model

•U.S. Focus

•Common Operating Platform and Menu

•Leverage Franchisee Ideas

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The History of McDonald’s

1980 1990 2000

2002 & 2003 Sweeping Organizational Changes

1990s Business Environment ChangedMcDonald’s Stalled

• Took Our Eyes Off Our Fries

•Opened Too Many Restaurants

•Distracted By Other Brands

1980s & 1990s Explosive Growth• International Expansion/ 118 markets•Darling of Wall Street•Creation of Ronald McDonald House

• Cover of BusinessWeek “Hamburger Hell”

• Staff Reductions

• Stock Price Drops to $11 (high $49)

• CEO Change

• Call to Action Plan to Win

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Revitalization of McDonald’s

Better, not bigger

More relevant to consumers

Singular focus on customers’ experience and core business – our restaurants

Global business plan to improve alignment and focus …

McDonald’s Plan to Win

5 Ps (People, Product, Place, Promotion and Price)

People and customer experience is central to new strategy

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McDonald’s Today

2003 2008

2003-2008 McDonald’s Revitalization•58 months consecutive comp sales increases•Stock price reaches all-time high of $63•CEO tragedies•2007 Marketwatch CEO of the Year•Food and beverage focus

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People Challenges: 2003

Relationship-driven = High-performance culture

Rewards programs confusing with little pay for performance

Lack of transparency in performance/development discussions

Little or no formalized leadership development focus or succession planning protocols

McJob label driven by loss in employment value proposition and not “Telling Our Story”

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Our Roadmap

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Restaurants

Restaurant people strategy

Strengthened selection system

Unique people programs

Metrics tie people practices to store success

Focus on HU training

Employment value proposition

U.S. People Migration Strategy

Respectful workplace training

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Total Rewards

Compensation

Pay for performance

Tied to business results - Plan to Win measures

Benefits

High value to employees

Lead industry

Development

Hamburger University

Succession planning

Accelerated development programs

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Total Compensation

New approach to Compensation

Packaged so employees understand the value of their total compensation

Total Compensation = Pay + Incentives + Retirement Savings + Health and Insurance Benefits + More

Provide benefits, resources and tools to help employees and families lead healthier lives

Creating programs that differentiate us in the industry

Branding total compensation programs

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Talent Management Culture

One of CEOs top three priorities

Accelerated development programs

Directors (Americas, Europe, Asia Pacific)

VPs and higher (Global)

Succession Planning Template

Formalized reviews

Premium on conversation, not forms

Fortune/Hewitt Recognition: Top Company for Leaders

#14 Globally

#11 North America

#6 China

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Accelerated Development Programs

Job Transitions

On-boarding & Assimilation Support

Ops Fast Track Information and Templates

Job transition support

Career Tools

Complete your internal Profile

Prepare for an interview

Leadership Position Profiles

DevelopmentPlanning

360 Feedback

IDP Support

IDP Templates

Development resources aligned w/ competencies

DevelopmentResources

Internal development curriculum

University programs

Self-study books, articles

Exec. coaching

Talent Management Culture

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McDonald’s Means Opportunity

67,000 managers worldwide started as crew

1,200 U.S. Owner/Operators started as crew

40% of our Top 50 executives started in the restaurants

Life skills training

First Job for Carl Lewis, Jay Leno, Sharon Stone and more!

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Employment Image

Voice of McDonald’s

Global restaurant employee singing contest

3,600 entries from 53 countries

Public online voting

Finalists perform at ’08 Worldwide convention

Grand Prize of $25,000!

Beijing Olympic Champion Crew

More than 100 crew

The best of the best

30 countries represented

Once-in-a-lifetime experience

Crew work in our restaurants and experience the Olympic games

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Employment Value Proposition: Telling Our Story

29 countries received great place to work recognition

2006/2007 winners include

Russia France

Singapore Belgium

India Latin America

Puerto Rico Canada

U.K. Hong Kong

Effectively telling our opportunity story

Extensive media coverage

— Leadership development

— Opportunity

— Minority investing

— Training

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Bringing the Frameworks to Life

Rich Floersch CHRO

Global Talent ManagementTotal Compensation

Labor RelationsGlobal Diversity

Don CrosbySVP International HR

Steve RussellSVP U.S. HR

Shaun RumingVP HR APMEA

AustralianBased in Singapore

33 Markets

Cecile StanerVP HR Europe

Belgian Based in London

41 Markets

Cesar MartinezVP HR LA

MexicanBased in Oak Brook

22 Markets

Len JillardVP HR Canada

CanadianBased in Toronto

3 Regions

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Bringing the Frameworks to Life

Communication Strategies

HR Leadership Team

Major Market Meeting

Global HR Meeting

Webcasts/Best Practice Sharing

Global HR Website

Market visits

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Bringing the Frameworks to Life

Performance management

Global PDS system

Distribution guideline (20/70/10)

Talent management

Talent Plan Frameworks

Global Leadership Staffing Process

Leadership Development Programs

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Bringing the Frameworks to Life

Global People Metrics

90-day Crew Turnover

Management Stability

Reputation Index

HU Certified Managers

Global Commitment Survey

Consistent across 118 markets

At least 1x per year

Restaurant and staff

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Bringing the Frameworks to Life

Employment Experience

Australia - MeTime

U.K. - Our Lounge

Latin America - McLand

U.S. - Hiring to Win

France - Recruitment Centers

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Bringing the Frameworks to Life

Rewards

Global Annual Incentive Program design

Competitive positioning policy

Singular executive compensation program (top 200)

Strong recognition programs

—President’s Award

—Restaurant Manager Award

—Circle of Excellence

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Bringing the Frameworks to Life

McDonald’s Formula

Strategic frameworks developed with AOW input led by centers of expertise ie. talent, rewards, metrics and performance management

Decentralized, empowered environment - scale big ideas

Common unifying values

Partnership with franchisees

Passion for the brand

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Questions and Answers