ALIGNING CORPORATE GOALS AND INDIVIDUAL PERFORMANCE

Performance Alignment Review

Contents

Why Change Now? . . . . . . . . . . . . . . . . . . . . . . . . .

What is PAR? . . . . . . . . . . . . . . . . . . . . . . . . . . .

What is the Evaluation Criteria? . . . . . . . . . . . . . . . . . .

What are One Solectron Behaviors? . . . . . . . . . . . . . . . .

What is the Rating System? . . . . . . . . . . . . . . . . . . .

How does PAR Work? . . . . . . . . . . . . . . . . . . .

Who Benefits? . . . . . . . . . . . . . . . . . . . . . . . . . .

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“At Solectron, we are undergoing a major transformationdesigned to help us better serve our customers, simplifyhow we do business and improve our financial per-formance. Instituting new standards for aligning andmeasuring individual performance is a key part of thelarger transformation underway.”

Mike CannonPresident and Chief Executive Officer

Why Change Now?In large ways and small. In groups andacross operating units. In North America.In Europe. In Asia and beyond. We arestreamlining and fine tuning every facet ofour global operation–and moving collec-tively to a One Solectron corporate culture.

To drive greater performance and strengthenour competitive standing, it is imperativethat we do a better job of setting andarticulating corporate goals. And of ensuringthat all Solectron employees–regardless oftitle, expertise or discipline–understand howthese goals translate into specific day-to-dayactions and behaviors upon which they canfocus their attention and performance.

Ultimately, the success of Solectron isabout the alignment of these goals andactions, among every discipline, acrossevery team, all the way to each individual.

What is PAR?Beginning in fiscal 2004, we are institutinga new Performance Alignment Review(PAR) process. It is designed specifically toensure that each year we articulate ourhigh-level corporate vision and goals, andtranslate these into specific actions andbehaviors for every Solectron employee.1

Using one common rating system, eachof us will be evaluated annually on bothhow well we achieve our objectives andhow well we model corporate behaviors.

The new performance evaluation processensures that every employee receivesongoing feedback regarding their objectivesand performance, as well as a semi-annual

and annual performance review. Thisallows us to make sure we are continuouslyaligned with our strategic objectives.

PAR provides common standards forreviewing performance across the company.This simplifies the evaluation process,gives managers a consistent means ofmanaging team and individual performanceand eliminates the inconsistencies thatpreviously existed across operating regions.And, most importantly, it aligns individualobjectives and behaviors with annual corporate goals. This is an extremelyimportant part of our drive to create aOne Solectron culture and a companythat is collectively focused on achievingsuccess for Solectron and our customers.

Introducing the Solectron Performance Alignment Review Process

PAR will ultimately affect every Solectron employee worldwide. It is initially being rolled out to exempt employees (executive, managementand individual contributors) globally. A program for non-exempt employees is under development.

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PAR Advantages

• Creates a common performance culture

• Enhances individual, team and organiza-

tional effectiveness

• Aligns individual performance with

business goals

• Creates a culture of ongoing feedback

and development

• Creates a consistent methodology to

assess employee contribution

• Provides information to help determine:

– Compensation decisions

– Promotions

– Rewards and recognition

– Developmental opportunities

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What is the Evaluation Criteria?One of the key changes with PAR focuseson how performance is evaluated.Employees will now be reviewed in twoareas: How well they meet the objectivesthat they and their managers agree to andmonitor throughout the year; and howwell they display specific behaviors while performing their jobs. It is not justabout getting results. It is about gettingresults while supporting behaviors thatreinforce the One Solectron corporateculture and vision.

What are One Solectron Behaviors?The One Solectron behaviors describe a corporate code of conduct. They aredesigned to enhance how we interact with each other and with our customers,partners, suppliers, peers and other keyconstituents. To create a truly high-performance organization, we all muststrive to create a balance between reachingour business objectives and conductingourselves in a manner that supports theOne Solectron culture.

These behaviors should influence all ofour actions and objectives:

IntegrityInteract with others in a way that givesthem confidence in you and in Solectron.Establish open, candid, trusting relationships.And, behave in accordance with yourexpressed beliefs and commitments.

For an Individual Contributor, this meansshowing consistency between words andactions; living up to your commitments;interacting with others openly and directly;providing transparent and open access todata within Solectron; and willingly sharinginformation and data with others.

For a Manager of Others, this meansshowing consistency between words andactions; living up to your commitments;managing for ethical work practices amongemployees, customers and/or suppliers;creating an environment for honest andopen discussion of all issues; encouragingemployees to share information; and providing transparent and open access todata within Solectron.

For an Executive, this means showingconsistency between words and actions;living up to your commitments; regularlyreviewing, maintaining and improvingupon ethical work practices with employees,customers, suppliers, financial institutions,and government agencies; creating anenvironment for honest and open discussionof all issues; encouraging employees toshare information; and providing transparentand open access to data within Solectron.

Evaluation Criteria

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Evaluation Criteria

Team PlayerWork effectively and cooperatively withothers. Establish and maintain goodworking relationships. Cultivate an activenetwork of relationships. And, identifyopportunities and take action to buildstrategic relationships.

For an Individual Contributor, this meanscoordinating planning efforts with otherwork groups as needed; offering assistanceoutside of your own area of responsibilitywhen needed; placing a higher priority onteam or organization goals than on yourown goals; sharing best practices acrossorganizational boundaries; and treatingothers with dignity and respect.

For a Manager of Others, this means settingexpectations for cross-functional/cross-business cooperation; promoting the use ofyour and others’ capabilities to other func-tions; proactively sharing informationacross organizational boundaries; promotinga team culture; recognizing the contribu-tions of all team members; sharing bestpractices across organizational boundaries;and treating others with dignity and respect.

For an Executive, this means addressingbehavior in others that may damage constructive relationships; removingorganizational barriers to collaborationand teamwork; sharing best practicesacross organizational boundaries; achievingbusiness results through collaborationwith others; placing a higher priority onSolectron goals than on your personalgoals; offering resources, even when ithurts, when it will help others achievecompany goals; treating others with dignityand respect; and actively engaging withcommunity and/or charitable organizations.

Champion ChangeChallenge the status quo and champion newinitiatives. Support change opportunities.Stimulate others to change. And, getbehind change implementation plans.

For an Individual Contributor, this meansrecommending alternative solutions forprocess improvements; being open toideas offered by others; using ideas fromothers to solve problems; encouragingothers to question established workprocesses; and responding positively tonew demands, priorities and challenges or obstacles.

For a Manager of Others, this means creating an environment that encouragesrisk-taking and innovation; supportingnew ideas and initiatives offered by others; driving key change initiatives tocompletion; and demonstrating confidencein ambiguous and changing situations.

For an Executive, this means challengingthe status quo and encouraging new ideas;creating an environment that encouragesrisk-taking and innovation; supportingnew ideas and initiatives; eliminating barriers to change initiatives; demonstratingconfidence in ambiguous and changingsituations; and adapting to the politicalrealities and constraints of the organization.

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Evaluation Criteria

Coach OthersProvide timely guidance and feedback tohelp others strengthen specific knowledgeor skills needed to accomplish a task orsolve a problem.

For an Individual Contributor, this meansproviding instruction and positive modelsto help others develop skills; providingconstructive, actionable feedback to others; and establishing good interpersonalrelationships by helping others feel valuedand appreciated.

For a Manager of Others, this means setting clear and challenging performanceexpectations; providing constructive,actionable feedback and guidance; designing work assignments to promotethe development of others; attracting andhiring people with the skills needed bythe organization; and developing talent forkey positions.

For an Executive, this means setting clearand challenging performance expectations;leading open discussions about talentstrengths and development needs; providingconstructive, actionable feedback andguidance; attracting and hiring peoplewith the skills needed by the organization;and developing talent for key positions.

Continuously LearnDemonstrate and encourage new knowledge,experiences and challenges. Create andcapitalize on learning opportunities. And,demonstrate an awareness of your ownstrengths and development needs, as well asthe impact of your own behavior on others.

For an Individual Contributor, this meanspursuing challenging assignments thatstretch and build capabilities; settingrealistic goals based on your values,interests and capabilities; seeking feedbackfrom others on how to be more effective;recovering quickly from personal or professional failures; and modelingSolectron behaviors.

For a Manager of Others, this meansallowing others to learn from success andfailure; setting realistic career goals basedon one’s values, interests and capabilities;seeking feedback from others on how tobe more effective; recovering quickly frompersonal or professional failures; demon-strating an ability and willingness to teachothers; and modeling Solectron behaviors.

For an Executive, this means allowingothers to learn from success and failure;pursuing challenging assignments thatstretch and build capabilities; settingrealistic career goals based on one’s values,interests and capabilities; seeking feedbackfrom others on how to be more effective;recovering quickly from personal or professional failures; demonstrating anability and willingness to teach others;and modeling Solectron behaviors.

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Rating System

What is the Rating System? Employees will be rated in one of the following categories. The ratings are based onachieving business results, as well as displaying and supporting the One Solectron behaviors.

Integrity

5: Exceptional

A rare level of performance that exceeds the expectations, objectives andrequirements of the position. Assumes additional responsibility anddemonstrates exceptional accomplishments. Clearly stands out from othersand takes initiative to perform beyond job responsibilities. Stands out as anextremely valuable contributor to the company. Demonstrates exceptionalbalance between business results and expected behaviors.

4: Commendable

Performance consistently exceeds the expectations, objectives and requirementsof the position. Assumes additional responsibility and demonstrates aboveaverage accomplishments. Considered by others as a strong contributor tothe company. Demonstrates a strong balance between business results andexpected behaviors.

3: Fully Effective

Performance consistently meets expectations, objectives and requirements ofthe position. Solid performance accomplished in a reliable and professionalmanner. Has the necessary abilities and motivation to effectively carry outthe responsibilities of the current position. May exceed expectations in someareas. Overall performance reflects expectations. Considered by others as avalued contributor to the company. Demonstrates a good balance betweenbusiness results and expected behaviors.

Champion Change

Team Player Coach OthersContinuously Learn

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Rating System

Exceptional

Commendable

Fully Effective

Needs Improvement

Unacceptable

Solectron’s Rating System

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2: Needs Improvement

Performance does not fully meet the expectations, objectives and requirementsof the position and requires improvement. May demonstrate the ability tocomplete most requirements, but performance lacks consistency. Requiresadditional feedback, coaching, training or guidance to achieve an effective levelof performance. Demonstrates inconsistency in balancing business resultsand expected behaviors. Requires the establishment of a written performanceimprovement plan producing immediate and sustained improvements.

1: Unacceptable

Performance clearly fails to meet performance expectations, objectives and requirements of the position. Must significantly improve and sustainperformance within a short period of time if the individual is to remain inthe position. Demonstrates a failure to balance business results and expectedbehaviors. Requires the establishment of a written performance improvementplan producing immediate and sustained improvements.

N: New to Position

Employee has been in position six months or less and requires additionaldevelopment and experience in the job to effectively evaluate.

Rating System

How does PAR Work? 1. At the beginning of each fiscal year,

the executive staff will set goals for the coming year through the annualoperating plan. The executive staff willthen translate these goals into actionableitems for their specific organization.

2. Mid-level management will furthertranslate these actions into goals fortheir teams and individual contributors.Throughout the chain, the process isdesigned to be collaborative, allowingindividuals to fully participate inobjective and goal setting. Ultimately,each Solectron employee will haveindividual objectives that map to organizational goals.

3. Throughout the year, there will be a cycleof ongoing performance, monitoringand feedback to ensure objectives andgoals are aligned.

4. Employees will receive a formal mid-year review.

5. An important addition to this process isthe ratings calibration meeting. Beforemanagers provide employees with theirfinal review, they will take part in asession with their peers and a humanresource representative to discuss theirreviews. This ensures managers areinterpreting and applying the criteriaconsistently, and provides a forum forcontinuous improvement of the process.

6. Every employee will receive an annual,end-of-year review. They will be reviewedboth on achieving objectives and sup-porting corporate behaviors. Employeereviews will be used to help determinecompensation decisions, promotions,rewards and recognition, and to identifydevelopment opportunities.

To support managers in effectively leveraging PAR, a variety of trainingresources are available. These include aManager’s Guidebook and training session,additional resource materials, and onlinemodules focused on setting objectivesand monitoring performance.

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Performance Cycle Throughout the Fiscal Year

ORGANIZATIONGOALS, PRIORITIES,

IMPERATIVES, BEHAVIORS

Corporate GoalSetting & Alignment

Mid-YearReview

IndividualObjectives

DevelopmentProcess

GoalsFlow Down

CompensationDecisions

Perform,Monitor, Feedback

Perform,Monitor, Feedback

Final ReviewNext Level Manager

Manager HR

Manager Manager

Ratings Calibration Meeting

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Who Benefits?

EmployeesPAR not only ensures every Solectronemployee receives regular and ongoingfeedback on their performance, but alsogives them an opportunity to participatein setting goals and expectations. PARwill help each of us understand how ouractions, behaviors and goals directly impactcorporate performance. It also introducesa consistent and systematic approach toperformance review that delivers meaningfulfeedback and appropriate recognition.

ManagersManagers now have a well defined andconsistent means of managing performanceand ensuring their teams are headed inthe right direction to meet business objectives. PAR will be a cooperative andongoing process that allows managers towork collaboratively with both theirdirect reports on goal setting and theirpeers on ratings consistency. Managersand executives will receive ongoing trainingdesigned to help fully leverage the newreview process to benefit both employeesand the company.

SolectronOne of Solectron’s goals is to develop acommon performance culture. PAR is animportant element of the One Solectronculture. It simplifies the performancereview process and delivers a much greaterlevel of consistency throughout our globalorganization. It also is designed tostrengthen relationships between managersand employees, and promote consistenttreatment and development of employees.Most importantly, it aligns employeeobjectives and behaviors with strategiccorporate goals.

CustomersOur goal is to delight our customers atevery opportunity. By modeling the OneSolectron behaviors and working collabo-ratively to strengthen the company, webecome an increasingly attractive andpowerful ally for our customers, partners,suppliers, vendors, investors and otherkey constituents.

If you have questions about PAR or would like additional information, contact yourlocal HR representative.

“Ultimately, our success can be traced back to howwe answer two fundamental questions: Do we as acompany have the right goals and vision to moveforward? And, just as importantly, do each of us –personally and through our teams–understand whatwe must accomplish and which behaviors we mustmodel to make Solectron’s vision a reality? It is aboutindividual performance and collective progress. It is about building a One Solectron culture that outperforms the competition.”

Kevin O’ConnorSenior Vice President, Worldwide Human Resources

One Solectron

847 Gibraltar Drive • Milpitas, California 95035 USA • 408.957.8500Solectron is an equal opportunity employer. All contents copyright ©2003 Solectron Corporation. All rights reserved.