Developing a High Performance Anatomy

1. Developing a High Performance Anatomy Peter Cheese, Partner, Human Performance Bob Thomas, Director, Institute for High Performance Business

2. High Performance - Why it Matters • Only 120 of the global 500 companies of 1992 ranked in global 500 in 2002 • Average life span of S&P 500 company is less than 15 years • Less than 1 in 10 companies outperforms their peer group for more than 10 years • ….and the rate of change is accelerating!

3. Dell % Increase in Shareholder Return Microsoft Nasdaq Tech Index 1990 1995 2000 2004 High-performance businesses consistently outperform • Have unique industry insight that enables recognition of key drivers of business value • Create decision-making structures and processes that quickly transform insight to action • Achieve business function mastery through innovation in strategic core competencies • Excel in the management of people and change, and create a high performance culture • Obsessed with winning the battle for the customer Characteristics of a High-Performance Business High-Performance Businesses

4. Market Focus and Position The 3 building blocks of high performance business • Decisions made with acuity and agility • Mindsets that enhance the ability to envision and execute change High Performance Anatomy • Practices that lead to differentiation and competitiveness Distinctive Capabilities

5. High performance anatomy • A set of organizational mindsets that permeate an organization and are observable in actions and decisions • Companies have to create their futures • Quality of execution differentiates winners from losers • Strategic agility determines whether companies successfully “cross the chasm” from one set of game rules to the next • High performers are better at this than other companies What is it? Why does it matter?

6. Intangible assets continue to grow in significance Market to Book Value Over Time S&P 500 – (1980 – 2002)

7. Our research into what defines a high performance business has found… • High performance businesses manage all their assets • Tangible accounting assets: capital, equipment, real estate, intellectual property • Intangible assets: people, knowledge and know-how, brand, reputation, relationships • High performance businesses manage their future value • Cultivating capabilities that make will produce greater than expected growth • Increased share of the industry future growth value pool

8. What are some of the key challenges? • We don’t have consistent or agreed measures to understand value and outcomes vs. inputs • Lack of understanding and alignment around objectives • Fragmented approaches to increasing value of human and intellectual capital • Tendency to think one size fits all – easier to administer • Poor management of change at scale

9. Human capital is critical to driving high performance High Performance Framework Human CapitalCapabilities Market Focus and Position Workforce Adaptability High Performance Anatomy Leadership Capability Talent Management Employee Engagement Ability to Change Distinctive Capabilities Human Capital Efficiency Workforce Performance

10. Value measurement of human capital Accenture’s Human Capital Development Framework Business Results Tier 1 Human Performance Mastery Stakeholder outcomes Measurable attributes Capabilities Resources and processes Revenue Growth ROIC or ROE TRS Future Value Basic Progressive Pioneering Illustrative Business Measures Key Performance Drivers Tier 2 Productivity Quality Innovation Customers Human Capital Capabilities Tier 3 Leadership Capability Workforce Performance Employee Engagement Workforce Adaptability Ability to Change Talent Management Human Capital Efficiency Human Capital Processes Tier 4 Career Development Performance Appraisal Succession Planning Recruiting Workforce Planning Workplace Design Competency Management Rewards and Recognition Employee Relations Human Capital Strategy Learning Management Knowledge Management Change Management Human Capital Infrastructure

11. Primary human capital drivers of innovation Key Performance Drivers Key Performance Drivers Tier 2 Tier 2 Innovation Human Capital Capabilities Human Capital Capabilities Tier 3 Tier 3 Employee Engagement .698** Human Capital Processes Human Capital Processes Tier 4 Tier 4 Workplace Design .62* Design Learning Rewards and Employee Employee Management Recognition Relations Relations .61* .63* .72** Number in bubble represents the correlation (r) with the element at the next tier *r=.05 **r=.01

12. Primary human capital drivers of employee engagement

13. Enterprise KPI’s Performance Management Clear Performance Metrics – tied directly to strategic imperatives Recruit Exit 1. Attract Top Talent 4. Retain Top Performers 2. Build Core Skills Optimised workforce performing the right work at the right time Required skills and capabilities to achieve these metrics Workforce Management Performance Development 3. Continuously Improve Performance Driving workforce performance – need for an integrated approach

14. New technologies are enabling integration to the point of use Mass customisation – personalising the access and presentation of knowledge and learning together with systems and tools to the point of performance Collaboration Critical Job Tasks Performance Management Collaboration: Instant Messaging Integrated “Office” Productivity Tools: Mail & Calendar Learning

15. Proven business results • Learning Transformation • FastTrack” channel program increased CALA sales 35% and increased customer satisfaction • After two years, cost per equivalent hour of training is 25% below pre-outsourcing rates • Delivered 8% more training per employee with a 16% reduction in learning investment • Curriculum restructuring resulted in 60% reduction in time to proficiency • Contact Centre workspace solution • Improved customer satisfaction and a 23% increase in CSR confidence. • Improved call-handling efficiencies have led to a saving of £900k in the first year alone and have laid the building blocks for improved compliance and reduced content management costs. • Leadership Development, Organization Redesign, Culture Change • 15% reduction in overhead costs in first year, resulting in benefits of $5.1 million. • Manpower costs reduced by $4.5 million through new sourcing models. • Significant increase in customer satisfaction, staff morale, and staff satisfaction.

16. Proven business results • Learning Transformation • Saved an estimated $15 million by reducing the cost of training delivery • Realized an estimated $12 million in productivity gains • Reduced the time to competence of employees in these areas by 30% to 50%, resulted in an estimated value of nearly $13 million Field Force Transformation Productive time increased by 25% — an improvement that drove down the overall costs of field force operations. With a field service that is more flexible, responsive and consistent, Thames Water has also seen significant improvements in their customer service levels.

17. Summary points • High performers measure intangibles and understand how to enhance value • They are better aligned top to bottom • They focus more holistically on the drivers of workforce performance • They are embracing new technologies to drive both efficiency and effectiveness in business performance • They have a well developed ability to change and adapt successfully over time