The Performance Excellence Process (PEP) is an

2. Performance Excellence Process • The Performance Excellence Process (PEP) is an • integral part of our Xerox Lean Six Sigma strategy. The • Performance Excellence Process is how we align strategies • and performance objectives across the entire corporation. • It also is how we manage performance to ensure we • deliver value to our customers. The result is that we • deliver improved and profitable business results that • increase shareholder value. This allows us to reinvest • in the growth of our company. • PEP is based on sound quality principles and effective • performance management. The process consists of three • phases, as shown in the PEP diagram below: • Setting direction • Deploying direction • Delivering and inspecting results • (daily work processes) • Individual Objectives • (Performance Excellence Plans) In 2001, the Performance Excellence Process replaced the Managing for Results process and local-level performance management processes and integrated them into a single, global process for the corporation. PEP is applicable to all performance levels (Operating Unit, Organization/ Function, Department, Team/ Workgroup, Individual). The Performance Excellence Plan helps us document our objectives, measures and targets. A management process is implemented at every level of Xerox and provides structured opportunities for setting direction, communicating direction, and delivering and inspecting results.

3. Five Principles to Live Our Core Value ACore Value Five principles were defined to represent the enactment of the Xerox Quality Value: • Customer-focused employees, accountable for business results, are fundamental to our success. • Our work environment enables participation, speed and teamwork based on trust, learning and recognition. • Everyone at Xerox has business objectives aligned to the Xerox direction. A disciplined process is used to assess progress toward delivery of results. • Customer-focused work processes, supported by disciplined use of Lean Six Sigma tools, enable rapid changes and yield predictable business results. • Everyone takes responsibility to communicate and act on benchmarks and knowledge that enable rapid change in the best interest of customers and shareholders. We deliver quality and excellence in all we do. Quality means leading the market with innovative products, services and solutions that are highly valued by our customers and result in superior business performance. Xerox Lean Six Sigma will be the way we achieve superior business performance and customer value. Our Xerox Lean Six Sigma methods and tools enable our people to continually focus on the customer, create higher levels of customer value and improve business results.

4. Performance Excellence Process Principles • Setting Direction • Direction setting is completed by the Corporation and Business Groups by November. Deploying Direction – Employee and Manager Role • The first step in deploying direction is for individuals to understand the direction set by the corporation. • In December or early January, everyone receives the following information (hard-copy or Web-based): • The Corporate Direction and Performance Excellence Plan • Organization Direction and Performance Excellence Plan with specific measures and targets, as appropriate • Appropriate Unit/ Team Level PEP Document • The manager and employee/team agree on critical performance objectives, measures and targets that are specific and challenging and that support the delivery of the organization objectives. • The manager and employee agree on a Personal Developmental Plan. • Everyone at Xerox will have a written Performance Excellence Plan and Personal Developmental Plan by the end of January or early February 2005. • Delivering and Inspecting Results – Employee and • Manager Role • Each organization’s management process provides structured opportunities for performance management. • The manager and employee/team are jointly responsible for managing both job performance and development. • The manager provides coaching and feedback to employees/ teams on an ongoing basis. It is recommended that every Xerox employee receive, at a minimum, two (2) performance reviews annually: • Interim (mid-year) coaching and feedback session • Annual (year-end) performance review • When assessing performance, the focus is on results delivered against the measures and targets. • Additional information can be found at: • http://xww.docushare.world.xerox.com/dsweb/View/ • Collection-138359

5. Performance Excellence Process Principles Vision Our vision is “helping people find better ways to do great work…” by constantly leading in document technologies, products and services that improve our customers’ work processes and business results. Mission Therefore, our mission is to become change agents / innovators – using Xerox Lean Six Sigma to constantly search for a better way to meet our customers’ challenges… and to create new technologies, products and services that enable better results for our customers. Enduring Values • We succeed through satisfied customers. • We value and empower our employees. • We deliver quality and excellence in all we do. • We require premium return on assets. • We use technology to develop market leadership. • We behave responsibly as a corporate citizen. 2005 Goals • Improve customer experience • Grow revenue • Improve profitability and cash flow • Create a great employee experience • Live our values

8. We have discussed and agreed upon the above performance objectives and measures / targets. We have completed the interim review. We have completed the year-end review. Employee Signature Date Employee Signature Date Employee Signature Date Manager Signature Date Manager Signature Date Manager Signature Date 2nd Level Manager Signature (if required by your organization) Date 2nd Level Manager Signature (if required by your organization) Date Year-End Overall Summary (for year-end review) Summarize the employee's/team's overall performance for the full year. Include the impact of situational factors or constraints. Interim Overall Summary (for Interim Review) Summarize the employee's/team's overall performance for the interim. Include the impact of situational factors or constraints. NOTE: As part of the interim review session, please complete a Personal Development Plan (52164)

11. Role of Management Team: Shared accountability for the performance and development of the European business Develop and maintain: A clearly stated and focused European strategy A common high performance culture Flawless operational execution Clear and simple structures Demonstrate and develop collective leadership: Values and behaviour Business ethics Talent Leadership Strategy Execution Culture Structure

12. Respect others Helpful Seek to understand each other, and guests Accurately restate the opinion of others outside meeting Act the same inside and outside meetings No mail, SMS, PC during meeting Decision: behaviours to support the role of Management Team • Focus • Helpful • Concern for the good of the whole business • Demonstrate sensitivity to local markets • ‘closed loop’ focus – discussion, decision, implementation • Champion customer and employee • Make Decisions • Helpful • Come prepared, with the data and a view • Everyone can state the decision made • Take Action • Helpful • Do what we say we will do • Measure what we set out to do • Finish what we started • Full Contribution • Helpful • Clarify nature of contribution required • Take steps to get everyone’s view on the table • Acknowledge when we don’t know • Work Together • Helpful • Invite input from others • Settle bilateral differences outside meeting • Share ideas and experience • Share ownership • Unhelpful • Excessive focus on the past • Lack of attention to practical priorities • Unhelpful • Take decisions that others can make • Cannot articulate the nature of the decision • Jump to a decision before everyone has had the opportunity to input • Unhelpful • Procrastination • Responsibility for action unclear • Unhelpful • Sit back and let others do the talking • Lose sight of the outcome • Unhelpful • Stay within boundaries • Get bogged down in the detail of others’ work • Provide insight when not adding value • Unhelpful • Spend time on other business during meetings • Engage in side conversations