HR trends and historical perspective

• HR trends and historical perspective • HR Transformation - the future HR Operating Model for XXX 1

Research has demonstrated that 30 -50% of shareholder value is driven by intangibles and not earnings Intangibles Tangibles Creating shareholder value 30 -50% 50 -70% ££ ££ Talent Non financial measures constitute 35% of the investor’s decision Speed Accountability Collaboration Shared mindset Learning Leadership Organisation capabilities have intangible shareholder value Source: Dave Ulrich & Norm Sallwood 2

Furthermore, HRM practices are viewed as the most important factor for predicting change in company performance 18 17% HRM 16 Strategy 14 Quality 12 Technology R&D 10 8% 8 6% 6 4 2 2% 3% 1% 1% Percentage of variation in change in company performance accounted for by managerial practices 0 PROFITABILITY PRODUCTIVITY Source: Impact of People Management Practices on Business Performance 1998 3

This has led to the realisation that HR functions need to adopt a fundamentally different approach to how they it operate FROM 10% 30% 60% TO HR Business Partner HR Expert HR Administrator 60% 30% 10% To achieve this HR needs to streamline the time and effort spent on transactional tasks to provide space to focus on adding shareholder value.

In some industries the role of HR has evolved to meet these business requirements • HR policy & procedures to ensure right people practices • Record-keeping and personnel transactions Personnel management • Optimising people and organisation efficiency • Initiating actions to improve organisation capability and Measurable Value performance To The Business Human Capital management Human Resource management Personnel administration Changing Focus & Business Value Added Total £’s spent on HR Source: CGE&Y 5

HR faces a number of challenges around how it delivers its products and services • Do more with less - Deliver maximum benefit at lowest cost • Generate value for the organization - Demonstrate tangible value to the business or be outsourced • Improve service to HR customers - Satisfy workforce employment, development & career aspirations • Become a business partner - Equip workforce to operate effectively and be self-reliant • Optimize costs - Create and optimise performance /productivity capability Measurable Value To The Business. . . Total £’s spent on HR. . . 6

• HR trends and historical perspective • HR Transformation - the future HR Operating Model for XXX 7

The XXX HR Vision „Maximising business performance through people excellence and organisation capability“ Benefits are: • Improved performance of the HR function by increasing quality and increased customer focus • Improved efficiency of the HR function by reducing operating cost and increasing operating speed • Enabling innovation through improved Leadership and the creation of a high performance environment • Aligned XXX HR strategies, practices and processes with the business strategy

A paradigm shift from now to the future is required to bring the HR vision to life Paradigm Shift HR needs to 1. move from a mainly supportive role to real business partnership 2. deliver operational excellence Current State (2002) • Focus on administration • Heterogeneous & inefficient processes Future State (2004) „Maximizing business performance through people excellence and organizational capabilities“ • Reactive approach • Lack of alignment to business needs • Sub-optimal implementation of change initiatives • Low differentiation as employer 1. Business partnering to execute the business strategy and ensure organizational effectiveness 2. Operational excellence („Getting all the basics right“) 9

To prepare for this paradigm shift the “HR Transformation Programme” was established Goal Deliverables for design phase (Oct 01 – March 02) • 2004 HR Operating Model that – delivers HR Strategy – delivers flawless HR administration – provides specialist HR expertise To transform the HR function to lead the creation of the organizational capability needed to deliver the business strategy, underpinning it with flawless administration – builds organizational capability – promotes business partnering • HR Measurement System • HR Transformation Plan • Business Case • Quick Wins Portfolio Logical Scope Organizational / Geographic Scope • All Human Resource processes • Interfaces with: – Financial processes (Payroll Accounting, GL, etc) – XXX Performance Management (PM&PI) – Information Systems • Corporate HR • Regional/ Functional HR based in EAME, NAFTA, LATAM and Asia Pac for all different entities of XXX (e. g. R&T, GS, CP, SE, FI)

The future HR Operating Model

The attributes of the HR Operating Model Attributes of the Model • HR strategy aligned with Business strategy • Effective HR Leadership and Governance to provide focus and direction • HR operations deliver flawless administration • Consistent approach through common HR processes • Maximises the benefits of technology (ESS/MSS) • Utilises shared services where appropriate • HR expertise strengthened through Networks of Excellence • Strong local presence • Effective measurement of HR performance and contribution

The HR Operating Model - HR Leadership and Governance • Defines the management mechanisms for ensuring that HR activity is co-ordinated and effectively targeted. Governance Structures & Roles Governance Committees & Bodies HR Governance Processes HR Management Information HR Performance Measures

The HR Operating Model - Common HR processes HR Processes • Primary mechanisms for turning HR strategy into practice • Cover the management of employees through from ‘hire to retire’ Key Characteristics • 80% of HR processes will be common across XXX • Transactional HR processes will be streamlined and technology enabled • Each process will have clear governance and measurement • HR processes will be enabled through the introduction a new role framework

Consistency of delivery will be achieved through a set of common, global processes Develop Org Effectiveness • Develop HR Strategy & Business Plan • Define HR Policy • HR Metrics and Reporting HR Processes Establish HR Strategy • Shape Organizational Capability • Role Definition • Drive Reorganisation Projects • Facilitate Organization Change • Manage HR Programs • HR Change Communications • (Manage ‚Voice of XXX‘) • (Manage Labour Relations) Manage Talent • Assess and Forecast Manpower Planning • Define Sourcing Approach • Ensure Diversity and Equal Opportunity • Recruit • Plan individual career development • Project Resourcing • Individual Performance Management (SIPM) • Manage succession plans • Manage International Assignments • Manage absences • Manage leavers • Grievance & Discipline Develop People • Define individual development strategy • Assess individual capability • Training Needs Assessment • Plan Individual Learning and Development • Define Macro Training Plan • Maintain and Develop Training Portfolio • Training Execution • Evaluate Training Effectiveness • Induction – Organization Entry Manage Employee Data • Change Personal Data • Support HR Queries • Maintain Org Architecture • Maintain HR Reference Data Reward & Recognise • Define & Evaluate Pay & Reward Strategy • Benefits Approval & Review • Manage Annual. Salary Round • SMG • Staff • Manage STI • Manage LTI • (Payroll) Legend • TO BE COVERED BY HRT PROJECT • (NOT BEING COVERED BY HRT PROJECT) • Processes already developed through CRASH ACTION work

The HR Operating Model - HR Roles • Define how the HR processes will be ‘operationalised’ through HR staff and their internal customers • Each role has a defined set of key accountabilities and knowledge and skills requirements HR Expert Focuses on providing deep technical expertise Strategic Business Partner Focuses on ensuring that HR strategy is aligned with Business strategy HR Operations Expert Focuses on delivery of transactional/ operation processes Local Business Partner Focuses on face-toface contact with employees and managers

The HR Operating Model is underpinned by a new Role Framework Strategic Business Focus Strategic Business Partner Provide specialist HR expertise • Delivery of specialist HR expertise • Design HR policy based on contracted customer needs • Share expertise, to leverage best practise • Benchmark externally and assess market trends • Provide a competitively priced service • Provide transformational services • Improve client HR processes HR is a major contributor to business strategy and a partner in leading business change • Contribute to business strategy & building organizational capability (key business decisionmaker) • Formulate strategic HR policy, deliver strategic HR advice and guidance • Lead in the development of a high performance culture • Assist XXX in leading and facilitating change • Undertake organisation design and development Operations Expert Day-to-Day/ HR Operations Focus HR Expert Local Business Partner HR maintains the efficiency of the administrative elements of HR processes • Improving HR processes via streamlining, automation and improving efficiency • Review processes in terms of value creation • Deliver HR processes • Measure HR results in terms of efficiency(cost) and effectiveness (quality) • Decision support to HR experts and HR Business Partners HR promotes employee relations, facilitates process delivery and improves the quality of management • Promote employee relations and organization/ employee relationship management • Facilitate Human Resource Management process delivery • Capability development • Management coaching • Communication with employees • Change implementation/acceleration HR Process & Operations People & Organization 17

The HR Operating Model - Information and Technology • Enables the delivery of processes and supports HR roles Future state characteristics • A global layer where key global processes are on one system and managed by global process owners • HRIS systems will be optimised to remove redundancy, conform with global standards and designed to meet local, regional and global needs • Employee and Manager self-service tools to enable the completion of HR related transactions and sharing of HR data • An employee portal designed to accelerate communication through personalisation and a single point of entry

The HR Operating Model - Delivery Infrastructure Networks of Excellence (No. Es) • Virtual networks at global and regional level (where appropriate) providing deep expertise in specific disciplines • Focus on developing workforce solutions or HR activities that help implement strategy • Four No. Es are proposed: - Compensation and Benefits - Organisation Capability Development and Change - Talent Management and Sourcing - HRIS Shared Services • Consolidation of the delivery of transactional and operational HR services in areas of large employee populations

At the end of the journey managers, employees and members of the HR community will get the following. . . Manager Employee HR Community Member • An operational service that is efficient • Clear, transparent and accessible HR and cost effective policies and processes • An HR function aligned with the needs of your business • Trained and equiped HR support which will be your trusted advisor • XXX HR processes and procedures to enhance the service to your customer • Excellent customer service on HR queries • HR processes, practises and practical • Information to assist in managing support to develop your staff and the quality of working life capabilty of your business • Easy access to development tools • Information at your finger tips via a online via the portal to assist you in managing your • Access to and ability to update your staff and making informed decisions personal data • Training and capability development for the new role • Technology to enable operational excellence and clear governance and decision making processes • The ability to leverage HR expertise and access information globally So how will I feel ? . . . • Confident that HR is there to support you in achieving your business goals • Coaching is available for handling people and organisational issues • Ownership of your data through simple, accessible technology • Able to focus on key business issues • Treated in a way which recognises your needs and contribution • Enabled to make a contribution to the business • Empowered to influence your quality of work life • Equipped to deal with the XXX business environment • A sense of belonging and experience the • Confident that you and HR will be XXX way successful • Able to take individual responsibility • Proud of being a member of the HR commuity 20