Performance-Driven Culture

72%

Percentage of U.S. salaried employees who say they have a good understanding of company goals (2008)

87%

Percentage of U.S. salaried employees who say they understand how their job contributes to the company achieving its goals (2008)

Critical to building a culture of personal growth and engaging talented people is a disciplined performance management system. We are committed to cultivating a performance-driven culture that rewards results. That's why we have a rigorous performance management process, as well as a goal-setting process at all levels of the company.

From our CEO to our business segments and across the corporate functions, we display our performance on critical measures through dashboards. Using a three-point scale of exceeds, achieves or below, we rate our performance in key areas. This goal-setting activity aligns team, department and individual goals to company goals. Progress is formally evaluated at mid-year and year-end.

On a personal level, employees develop and review their goals annually with their managers, defining expectations that meet and exceed the objectives. During performance reviews, the results of how well goals were or were not met are discussed and evaluated, which feeds into salary actions. This criteria-driven system is all about improving performance and developing people. As part of the process, employees create individual development plans. Salaried employees use the performance management system, while hourly employees use a goal-setting process. Although the systems differ in some ways, the end objective is the same—to align each employee's work to company and unit business goals.

North American nonexempt production and maintenance employees generally set team-based goals that are reflected in their sites' objectives. How this is accomplished varies by business segment. In one organization, 30 percent of employees may have team-based goals, while in another nearly 80 percent might participate in gain-sharing plans.

We also measure the clarity of goals through our employee climate survey, held on a two-year cycle. Our most recent survey results (from 2007) show that of those surveyed:

• 90 percent said they understand what's expected of them on the job.
• 65 percent said people are held accountable to achieve their goals.
• 66 percent said they receive regular feedback on their performance.

In 2008 we conducted a separate survey that, in part, assessed how well employees understand business goals and their contribution to the success of the company. All U.S. salaried and non-union hourly employees received the survey and 66 percent responded. The results show that:

• 72 percent have a good understanding of Weyerhaeuser’s business goals
• 87 percent understand how their job contributes to the company achieving its goals

Employee Compensation Tied to Performance

Weyerhaeuser’s compensation program for salaried employees, including executive officers, ties each employee's interests to the interests of shareholders and stakeholders. Our compensation program is designed to:

• Focus decision-making and behavior on goals—including goals relating to environmental, safety, diversity and other social performance measures—consistent with overall business strategy
• Reinforce a pay-for-performance culture through a balance of fixed and incentive pay opportunities
• Allow the company to attract and retain employees with the skills critical to its long-term success

Employee compensation consists of base salary, annual cash incentives and long-term equity incentives, plus retirement, medical and other benefits.

Employees complete an annual performance management plan as described above, including specific goals relating to economic, social and environmental performance as appropriate. Similar goals are established for each business unit and for the company as a whole. Employee compensation is tied to the performance of the company, the business unit and the individual employee against these goals.