Global Compensation Practices at McDonald's

With more than 400,000 managers and senior staff employees in 118 countries
around the world, by the early 2000s McDonald's realized it had to develop a
consistent global compensation and performance appraisal strategy. After
months of consultation with managers all over the world, in 2004 the company
began to roll out its new global compensation program.

One important element of this program calls for the corporate head office to
provide local country managers with a menu of business principles to focus on
in the coming year. These principles include areas such as customer service,
marketing, and restaurant re-imaging. Each country manager then picks three to
five areas to focus on for success in the local market. For example, if France is
introducing a new menu item, it might create business targets around that for
the year. Human resource managers then submit their business cases and
targets to senior executives at headquarters for approval. At the end of the year,
the country's annual incentive pool is based on how the region met its targets,
as well as on the business unit's operating income. A portion of an individual
employee's annual bonus is based upon that mix.

The other portion of an employee's annual incentive is based on individual

performance. McDonald's has always had a performance rating system, but in
2004 the company introduced global guidelines that suggest 20 percent of
employees receive the highest rating, 70 percent the middle, and 10 percent the
bottom. By giving guidelines rather than forced ranking, McDonald's hopes to
encourage differentiation of performance while allowing for some local
flexibility nuances. By providing principles and guidance, and yet allowing
local managers to customize their compensation programs to meet local market
demands, McDonald's also claims it has seen a reduction in turnover. The
company's own internal surveys suggest more employees now believe that their
compensation is fair and reflects local market conditions.

Question

How does McDonald's approach help the company take local differences into
account when reviewing the performance of different country managers and
awarding bonus pay?