ABB HR HRT-TM October 2011

Identify. Assess. Review. TIP & PDA at a Glance Talent Identification Process & Performance & Development A better world begins with you Appraisal

At a glance The Talent Identification Process (TIP) & Performance & Development Appraisal (PDA)

All managers and employees need to understand the Talent Identification Process (TIP) and Performance & Development Appraisal (PDA). The PDA is our global standardized process to appraise all white collar ABB employees. The process begins with employees performing a self-evaluation, followed by managers entering their evaluations. Each management team meets for a People Review Session to compare and finalize evaluations before meeting with employees to deliver individual appraisals. During the meeting, managers also identify potential succession candidates for key positions within their groups. Please visit the PDA portal on Inside ABB for more details: http://inside.abb.com/pda

The Performance & Development Appraisal (PDA) accomplishes several key goals each year for both ABB and employees: It provides employees an opportunity to evaluate their own individual performance and establish professional aspirations for themselves. It helps ensure that their individual targets are aligned with ABB business goals. It allows managers to review their employees past performance and identify their future development needs and career potential at ABB. It allows ABB Managers to work out a Career Plan for candidates with identified potential from the Talent Identification Process (TIP). The performance rating links into the salary review process for some staff. The PDA has been standardized to ensure that company-wide uniform and equitableAppraisal methods are used to appraise ABB Discussion employees at every level. The standard PDA and TIP is applied for all white collar employees. Your country HR will kick-off the PDA process. Managers will receive a communication and notification that the appraisal form is available on the ABB intranet. The following graphic shows how the TIP and PDA process steps are linked together: The PDA process runs on the HR Group Tools and uses a single sign-on access. Please note there is no auto save function within SAP so it is important to save regularly the text being entered.

PDA

The PDA process

Step 1: Employee self-appraisal - Employees fill out their self-assessed pre-evaluation Employees begin the process by completing a standardized ABB appraisal form in the ABB Group Tools portal to create a self-assessment of their work and development over the past year and for the coming year in these areas: Review Business & Behavioral Targets Review Development Targets Overall review Suggest Business & Behavioral Targets for the next year Suggest Development Targets for the next year Professional aspirations and career discussion Global mobility Overall comments Step 2: Manager pre-evaluation - Managers fill out their pre-evaluations The Direct Manager of the employee uses the ABB Group Tools Portal to fill out corresponding management sections of the Appraisal form. Minimum required - For the Manager Preevaluation the minimum required is: Performance Potential Retention Risk Ratings Career Plan (Targeted Positions) for High Potentials and Potentials. Step 3: Review by HR: The HR Business Partner reviews all the pre-evaluations, analyzing their distribution and then produces a consolidation of the data in preparation for the People Review Session. Step 4: People Review Session: This is facilitated by the HR Business Partner, where the management teams in each business unit meet and discuss the outcome of the pre-evaluation. The objective of these sessions are to ensure fairness and objectivity of the managers evaluations, agree on concrete actions by: applying a common understanding of performance and potential to compare individual employees who report into the same management team; composing and reflecting on a people portfolio through the calibrated ratings that can help to perform succession planning; to identify talent management measurements both for individuals and organizational units; decide what actions need to be taken around retention risks. A standard set of templates are applied at the Country and Local Division levels. Step 5: Manager Completes the Preparation Managers prepare to meet their employees by completing and finalizing their preparation in the PDA form according to the outcomes of the People Review Session.

Further fields: Review Business & Behavioral Targets Review Development Targets Overall review Rate the Performance Business & Behavioral Targets for the next year Development Targets for the next year Professional aspirations and career discussion Global mobility Career planning (Targeted Positions). Country Specific box Discussed on date Feedback from additional manager Potential rating Potential type Retention risk

Step 6: Appraisal discussion The Managers then conduct the face-to-face meeting with their employees to discuss their performance and agree upon the results from the years work. They also discuss and agree both their performance and development plans for the coming year. They also discuss with all employees their professional and career aspirations including how they see their current potential. Overall the joint discussion should be constructive and open, reflecting the principles of the Leadership Challenge Program. Step 7: Manager Completes Appraisal After the appraisal discussion the manager finalizes the appraisal template based on the collective decisions made in the Appraisal Discussion and forwards the completed document to the employee. Step 8: Employee acknowledges: The employee reviews the final appraisal document The employee confirms that the manager has discussed and reviewed the appraisal together with them. If there is disagreement, a comment can be made on the template when the employee acknowledges the final electronic appraisal document. The most frequently asked questions are answered in the PDA FAQ

Performance Rating

When completing the PDA template as an employee, you will be required to complete the appropriate employee sections before your manager offers their input. The manager is then also required to complete the parts of the template that are for manager use only.

Overall Performance Rating The PDA requires the manager to conduct an overall performance rating, rating the employee from 1 4. The Results Behavior matrix below illustrates how this performance rating is decided taking into account two dimensions: Results: Employees performance during the previous year against the performance and development targets Behavior: The behaviors exhibited by the employee in delivering these results Rating Distribution The matrix and scale are designed to follow a recommended distribution. The required rating distribution range in ABB is indicated on the chart below. Additional information about the new rating scale and how to measure behaviour see The New 14 Performance Rating Scale and Behaviors

Setting Targets Results and Behavior

The purpose of this is to support a more consistent and balanced approach to performance ratings across the organization. This is borne out of the need to recognize that the majority of good performers should be rated as someone who has Performed successfully, a rating of a 3 which reflects a 100% performance. We wish to ensure that the rating distribution is not unduly inflated and that we are close to the recommended distribution of ratings across the range. The manager conducting the appraisal shall ensure that the performance rating is communicated to the employee concerned only after a calibration has been made and endorsed by the next level manager. Performance Plan The Performance Plan section enables both the employee and manager to input targets for the year ahead. It consists of both business targets and behavioral targets. Business targets should correspond to business results within the employees role and should be in line with the organizations goals. If the employee is not sure of the business targets set for the year the field may be left blank in the employee self-evaluation phase and later decided upon during the appraisal discussion. The manager can then give input as to the business targets for the year in order to align the employees targets with the overall business goals. When setting Business Targets, it is important to ensure they are SMART (Specific, Measurable, Achievable, Relevant and scheduled to be completed within a given Timeframe). Behavioral Targets allow the employee and manager to detail specific behavioral actions for the coming business year. The behavioral targets can relate to general behaviors expected of everyone working in ABB for example OHS, Compliance, core competencies or task related behaviors, for example, behavioral shortfalls from the previous year, or behaviors that need to be developed for future job roles. We have summarized the core behaviors that reflect the working culture in ABB and created a guide to help line managers and employees set behavioral targets. We call them Working Culture Based Behaviors. When setting Working Culture Based Behavior targets, it cannot always be phrased according to SMART criteries. However, they sould be specific, observable for other people, achievable and realistic, The employee will initially propose targets which will then be reviewed by the manager, forming part of the agenda for the appraisal discussion.

Setting Behavioral Targets

Working Culture Based Behaviors for all employees Integrity Maintains and promotes high ethical and professional standards at all times Complies with group directives, local legislation and instructions Challenges and acts on any unethical or unsafe decisions and behaviors Demonstrates an understanding and works towards a safe working culture Achievement Takes personal responsibility to ensure work is consistently completed on time Focuses energy on key tasks and responsibilities Persistent and ensures achievement of quality results in the face of unforeseen obstacles Takes initiative and acts with confidence Collaboration Works in a collaborative way for the good of ABB, supports others and puts ABBs interests first Contributes to the results of others Shares information and ideas outside own area Encourages open discussion, gives and receives constructive feedback Innovation Seeks opportunities to continuously improve required tasks Seeks out new and innovative ways of approaching situations and tasks Adopts positive approach towards change Continuously learns and develops professional expertise Inclusiveness Shows understanding of other perspectives Values alternative points of view Is able to work across different cultures Continuously seeks to learn about and develop self External Focus Considers the customer impact of actions Considers the needs of both internal and external customers and stakeholders Demonstrates knowledge of external benchmarks (customer, supplier, ) and best practices in own field Takes personal responsibility for customer issues and follows through to ensure they are resolved Leadership Competencies for all formal leaders

Leadership Competencies for those holding line management positions Results Orientation Drive to meet or exceed targets delivers on promises Achievement in the face of unforeseen obstacles Shows awareness of cost & risk management Strategic Orientation Develops strategic approach for own area of influence Linking of business objectives to the wider organizations strategy Contribution to strategy outside own area of influence Teamwork & Collaboration Demonstrates One ABB behaviors, puts ABB first Contribution to the results of others Sharing of information and ideas outside own area Actively works in teams and supports others People Development Contributes to the development of people within and/or outside own team Adopts coaching behaviors Personal Leadership Leads by example Walks the Talk Creates space for others to achieve and be recognized Empowers others to perform Includes others in making decisions Takes advantage of diverse inputs in decision making Change Leadership Makes change happen in own area Engages people in change initiatives Acts as a champion of change Intercultural Sensitivity & Effectiveness Demonstrates understanding of other perspectives Shows respect for alternative points of view Customer & Market Orientation Always considers the customer impact of actions Considers the needs of both internal and external customers Demonstrates external focus Here you will find further information on the ABB Working Culture Based Behaviors

Setting Development Targets

Development Plan This section of the template requires the employee to input personal development plans first, the manager adds his/her inputs and then these are discussed and agreed together. The development plan should encompass personal development as well as technical skills or knowledge enhancements. They should be linked to the employees behavioral and business targets set for the current year. The development plan should include a balance between different types of learning approaches following a 70/20/10 split. 70% - Learning by doing: stretch assignments, project work 20% - Self-reflection: assessment, mentoring, learning groups 10% - Off the job: Skill & competence training Professional Aspirations and Career Discussion This section allows both the employee and the manager to document professional aspirations for the future. Employees add their career expectations, functional expectations both short and long-term, and the manager then comments and documents the agreed actions. This is a good point at which the manager can discuss with the employee how they see their potential. Global Mobility The Global Mobility section captures whether the employee is willing to relocate, and whether there are any geographical restrictions or preferences on this movement.

Career Planning (Targeted Positions) All employees have some form of career plan in the Professional Aspirations section, however an additional section is required for these individuals with high performance/potential, which is linked to targeted positions in the standard ABB job catalogue. This section only appears in the template depending on the employees performance and potential rating (performance rating of 3 and 4 and classified as either Potential A or B). The career plan not only suggests jobs that may be suitable for the present time, but also targeted jobs that the employee will be ready for in less than two years and in less than five years. The details of the career plan will be disclosed to the employee during the appraisal discussion. For those employees who have a potential rating of A or B (see page 7) and a performance rating of 3-4, it is mandatory to outline first ideas for specific career steps against the ABB standardized job catalogue. For other employees with a performance of 3 or 4 it is optional to indicate lateral career moves. Overall Comments / Country Specific Box Employee and manager can add overall comments as free text in the last part of the PDA template. The Country Specific Box provides flexibility to the countries by allowing one predefined question. For ABB Switzerland the content remains the same as last year, continuous improvement as aspect of innovation is addressed. More information see Career planning and ABB job catalogue user guide

Additional tasks for the line manager

Potential Rating As well as rating the employees performance for the year the manager also assesses their employees potential, this rating is in one of five categories: Level Description Can assume greater responsibility two or more levels or grades* above current level within 5 years (grow in scope) Potential for ADVANCEMENT Can assume greater responsibility one level above current level or grade* within 2 years (grow in scope) Potential for ADVANCEMENT Can develop and assume great responsibility within current (grow in scale) Potential for DEVELOPMENT Limited potential to develop and/or assume further responsibility within current level Potential for MASTERY Not able to assess due to either short service in the organization, newly appointed position holder

The elements of potential are: Drive & Ambition Learning Agility Capacity for Thinking long-term and systemically Initiating and managing change and innovation Dealling with people Potential Type The manager needs to indicate whether he/she sees the employee has the following potential type: Managerial - Employee shows leadership potential and is a candidate for a first or a next level management role. This is a role primarily leading people Technical/specialist - Employee shows specialist/technical potential and is a candidate for an extended, more complex or other specialist function compared to the current position. Technical is well understood but Specialist could be in HR, Communications, Finance etc Managerial and technical/specialist - Employee shows both leadership and technical/specialist potential Find more information on Rating and communicating performance and potential Retention Risk When evaluating the Retention Risk two factors are considered by the manager Probability (the likelihood that the employee will leave ABB) Impact (the consequences to the organization if the individual leaves) The matrix below is used to assist in labeling retention risk for employees. The result is not disclosed to the employee. Medium retention risk Low retention risk Low retention risk Low High retention risk Medium retention risk Low retention risk Medium High retention risk High retention risk Medium retention risk High High

* Please note: Grades refers to the ABB Global Grading System GGS For the purposes of the TIP, potential takes a very specific situational focus. It looks at the potential to perform in an advanced role. This is referred to as potential to a position one or two levels or grade in the ABB Global Grading System (GGS) above the current role for that specific individual at that specific time. The example below is for a management career path but this equally applies to a specialist career path. The General rating is reviewed and updated each year. The managers view Managers on potential must be discussed with the employee but the disclosure of the rating itself should be in line with the local disclosure policy. Middle Managers EC & Senior Managers General First Line Managers Managers Development one level Middle IndividualManagers Contributors above current role First Line Managers Development two levels above current role

Medium

Color code Rating outcome

Impact

Low

Probability

Low

Medium

High

Individual Contributors

Follow Up

In ABB it is important that we dont only review performance and give feedback to employees once a year but we provide ongoing performance feedback throughout the year. Performance Management is an ongoing day-to-day participative process to: Ensure a common understanding of performance expectations Constantly improve employees competencies and raise employees enthusiasm to meet performance expectations Develop employees Recognize and reward employees who constantly perform at a superior level Once the appraisal is complete the managers role is to then Observe and document Performance Throughout the performance management cycle, observe employees performance and identify instances of both good and low performance Specific events and details are important for employees to clearly understand the impact, results, and consequences of their performance Thorough documentation will enable you to recognize good performance and help you to correct low performance Provide Feedback Provide frequent feedback and coaching to employees regarding performance throughout the year. This is especially important for the employee who is performing poorly To be effective, feedback needs to be immediate, specific, and expressed in relation to a particular outcome and expectation Informal feedback is ongoing, in-the-moment development advice given to employees by managers outside of the formal review. It is used to provide employees with a clear

idea of their ongoing performance throughout the year and provides opportunities to improve performance. It also decreases the chances that the formal review is a surprise to the employee Regular feedback helps build a relationship of trust and solidifies a consistent and fair performance management Mid Year Review In addition to the formal PDA end-year process, it is equally important that the line manager and the employee have a discussion after the first half of the year. This gives an opportunity to receive feedback and adjust priorities as necessary. The mid year review meeting should reflect the process established for the PDA and include both input from the employee and feedback from the manager. Good preparation before the meeting helps to ensure a constructive dialogue: employees are encouraged to review their targets; managers should have their feedback ready. During the meeting, manager and employee review and discuss the targets, decide if they have to be adjusted and outline actions for the rest of the year. The process will be initiated by your line manager.

Contact

ABB Ltd HR Talent Group Human Resources Affolternstrasse 44 8050 Zurich Switzerland Phone: +41-43-317-52 04 Fax: +41-43-317-52 06 www.abb.com