Building Strong Leadership Brands: Hewitt's Insights and Services

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2. Today’s Agenda • About Hewitt • Top 20 Companies for Leaders Study • Hewitt‘s Points of Views - Leadership Strategy • Case Studies • Hewitt‘s Leadership Consulting - Our Approach & Service • Questions & Answers

3. Hewitt AssociatesGreater China

4. ThinkExperience • More than 2400 clients globally • Two-thirds of the Fortune 500 • One-third of the Global 500 • Hewitt has the experience required to meet complex global challenges • More than 60 years’ experience • More than 13,000 associates working in 38 countries • Depth and breadth of talent

5. ThinkGreaterChina • Hewitt has a strong presence in Greater China and is firmly committed to helping our clients in this critical global market. • Depth of experience – First to establish a WOFE China business in 1994, based in Shanghai • Local support – Over 100 associates spread across Beijing, Guangzhou, Hong Kong, and Shanghai offices • Partnership – Hewitt has worked with over 1,500 clients in Greater China; organizations that represent the best FIE and Chinese companies • Hewitt named “China HR Consulting Firm • of the Year” in 1999, 2000, and 2001 • China Staff Magazine

6. ThinkFullSpectrum • Our China services encompass the entire spectrum of HR consulting and outsourcing Process Strategy Implementation Talent and Organizational Consulting HRe Retirement & Financial Management Corporate Restructuring & Change HR & Benefits Outsourcing Compensation Measurement Employee Communication

7. Why Developing Leaders Matters • The baby bust generation is coming of age, meaning a smaller pool of 35 - 44 year olds (key developing leader age) in the workforce 15% decline from peak to trough over 15 years Source: United Nations

8. Why Developing Leaders Matters • Women will not continue to make up for men leaving the workforce, increasing the leader shortage Men Women

9. Why Developing Leaders Matters • While competition for the best leadership talent will increase . . . "Our company plans to upgrade the quality of our external leadership hires over the next few years" • Only 23% of 6,000 executives surveyed believe that their companies attract highly talented people (McKinsey & Co., 2001) • 89% of those surveyed found it more difficult to attract talented people than it was three years ago. (McKinsey & Co., 2001) • At Fortune 500 Companies, women leaders are leaving the organization at twice the rate of men (Women in Leadership and Learning, 1999) Source: Hewitt Survey, 2002

10. Leadership Brand Power • Leadership Brand is the measure of your reputation as a place for leaders to work. A strong leadership brand would mean that a firm, among other things: • Provides great developmental opportunities • Aggressively differentiates pay based on performance • Structures leadership roles so a leader can impact a business or industry • Has a strong corporate brand in the business community Leadership Brand will separate the winners from the losers in the battle for Leadership Talent

11. Leadership Brand Power • You are able to attract the best leadership talent, without paying a premium, because they recognize the developmental benefits of being with your company • You retain your best talent, because they receive great opportunities to develop, see a performance-based environment with performance-based rewards and respect the top leadership team • Retention of leaders lower in the organization improves, as they increasingly see your company as the leadership employer of choice • Your business results improve as leaders become more engaged by their jobs and the opportunities A strong Leadership Brand means . . .

12. Leadership Brand Power The Top 20 Companies for Leaders are those with the strongest Leadership Brands 1. IBM 11. BP 2. Microsoft 12. Honeywell 3. General Electric 13. SYSCO 4. The Home Depot 14. Centex 5. Dell Computer 15. Intel 6. FedEx 16. Citigroup 7. Pfizer 17. Target 8. Colgate-Palmolive 18. Southwest Airlines 9. Philip Morris USA 19. Verizon Communications 10. Johnson Controls 20. Sun Microsystems

13. Our Research • Hewitt's extensive research on building effective leaders and leadership brand, The 20 Best Companies for Leaders, was the cover story of June's Chief Executive magazine. • We surveyed 240 companies (HR and CEO invited); one-third of the Fortune 100; • Interviewed 50+ companies; • Received Input from 25 top leadership and HR gurus; and gave the information to • Chief Executive magazine selected the final list of the Top 20 Companies for Leaders and found . . .

14. The Top 20 • Three key differences emerged betweenTop 20 Companies and other survey participants • CEO and Board involvement • High-potential management • The right programs, done right

15. CEO Involvement—Beyond the Obvious • Top firms see both involvement and sponsorship…

16. CEO Involvement • …and the financial benefits from that Companies Where the CEO Is Actively Involved in Talent Management Strongly Outperform Those Where There Is No Involvement 3 Year Total Return to Shareholders

17. Board Involvement • Unique to Top 20 firms, the Board takes an active role in reviewing top talent

18. Quick Audit • How involved is your CEO in actively reviewing your best talent? • Is there a succession plan for the CEO? • How well does your Board know your high-potential leaders?

19. What You Can Do Today Share the results with the CEO Get a senior talent review on the next Board agenda Create a leadership talent agenda for the Board Long-Term Actions Board visits location and gets to know key leaders Develop CEO and firm-wide succession plan CEO increases communication about Leadership issues CEO actively participates in talent review process CEO Involvement Short-Term and Long-Term Opportunities

20. Invest in Your Best:High Potentials Grow at Top 20 • Top 20 firms more consistently provide high potentials: • Experiential development, including cross-functional and regional assignments • Knowledge about their high-potential status • Significantly differentiated compensation

21. High-Potential Investment— Compensation • Meaningful differences between compensation for average and high-potential leaders

22. High-Potential Management • Development at Top 20 firms is much more experientially based

23. Why Companies Tell Increase retention Include in special programs “Easy” way to recognize Why They Don’t Afraid of “special status” No consequences tied to status Ensure correctly identified High-Potential Management To Tell or Not to Tell

24. Quick Audit • Do you know who your best talent is? Do they know? • Is there a significant difference between their total compensation and the average performers in their position? Is it at least the 75th percentile? • What developmental opportunities do high potential leaders get compared to other leaders?

25. What You Can Do Today Have your CEO call your best talent and thank them for being a part of the company Do an audit of your best talent’s total compensation to see who’s at 75th percentile or above Long-Term Actions Develop high-potential development programs Create assignment-based development programs Develop "on-boarding" programs to ensure success in new roles Link high-potential status to total compensation review Track high-potential growth to identify best growth paths High-Potential Management Short-Term and Long-Term Opportunities

26. The Right Practices, Done Right • Sound design of leadership practices is undermined by inconsistent implementation

27. The Right Practices, Done Right • Most firms in the survey have some leadership practices in place

28. The Right Practices, Done Right • …but they aren’t used to the greatest benefit

29. Quick Audit • Are your leadership competencies integrated into your hiring, development, assessment, and reward processes? • How much time do you spend on program design versus implementation? What’s the average life of your leadership programs? • Do you regularly survey line managers for their assessment of your programs?

30. What You Can Do Today Assess -- Ask your senior team for feedback on current processes for developing leaders Prioritize -- Identify the 3 things that your company absolutely must do this year to build leadership depth and quality Compare -- Understand how your programs compare to those of the Top 20 Audit -- Determine the total dollars spent at your firm on developing leaders; assess return Long-Term Actions Leadership Strategy -- Develop a holistic leadership strategy outlining how you want to source, align, develop and reward your leaders Implementation Audit -- Assess your capabilities to effectively implement leadership programs Create the Practices -- Create and implement those practices with the greatest leverage at your firm for building leaders The Right Programs, Done Right Short-Term and Long-Term Opportunities

31. Points of Views from Hewitt • Strategy Driven Leadership - • Creating the Leaders YouNeed to Dominate Your Industry

32. Hewitt’s Points of View • The success or failure of today’s organization relies more than ever on Leadership • Corporate winners and losers will be increasingly distinguished by the quality of their leaders • Leaders must fit with the strategy of the business to be effective • The investment made in growing leaders at organizations around the globe is dangerously inadequate

33. Best Approach Create a leadership strategy aligned with business strategy Understand how leadership practices fit with your strategy and culture Provide the bulk of resources to those with highest potential for success Focus on developmental experiences with defined learning goals and coaching Common Practice Seize on latest leadership trends and fads Utilize “best practices” without regard to appropriateness Distribute development resources equally among all leaders Use mix of classroom lectures and unstructured developmental assignments Common Practices Don’t Provide Sustainable Advantage

34. A Process for Building Leadership Quality and Depth Align E n a b l e r s Business Strategy LeadershipStrategy Develop Engage Clarify business strategy and short- and long-term objectives Identify capabilities needed in leaders and current leadership depth Develop processes to maximize each lever

35. Return Growth Leadership Strategy: A Point of View • Strategic Direction • An organization’s strategy can be found somewhere on the spectrum from pursuing revenue growth to pursuing increased earnings • Facts • An organization tends not to pursue growth and return strategies with equal emphasis; one strategy usually dominates • Unique leadership skill sets and competencies support the achievement of each strategy • The more dominant the strategy, the stronger the competencies must be in senior leaders

36. Transactional Transformational Leadership Strategy: A Point of View • Change Intensity • Change will be continual in all organizations and will vary in intensity from transactional to transformational • Facts • All companies experience continuous change at an intensity ranging from transactional to transformational • Unique leadership competencies are associated with both successful transformational change and transactional change • The more transformational the changes, the greater the emphasis on the related competencies

37. The Hewitt Leadership Strategy Matrix • These two factors combined provide strong direction for the type of leadership behaviors required. Transformational Change Leadership behaviors related to: Vision, Decision-making, Financial Acumen, Managing Change, Risk Management, Cost Control Leadership behaviors related to: Vision, Speed, Aggressiveness, Risk-taking, Managing Change, Driving Sales Return Growth Leadership behaviors related to: Risk Management, Process Management, Financial Acumen, Cost Control, Rule Orientation, Task Focus Leadership behaviors related to: Speed, Aggressiveness, Process Management, Risk-taking, Planning, Task Focus Transactional Change

38. Leadership Strategy: Mapping the Gaps = Desired State • How Does Your Current Leadership Compare to What Your Strategy Demands? Transformational Change CEO COO COO CIO CEO Return Growth CIO CFO CFO Transactional Change

39. Leadership Strategy • Leadership Strategy Must Flow Directly From the Strategic Needs of the Business Business Strategy Initial Leadership Strategy Considerations Focused Leadership Strategy Considerations Sourcing Finding these leaders Do we have these competencies now? Assessing Setting goals and evaluating performance Grow Sales in Asia-Pacific If not, build or buy talent? Developing Building competencies Who would benefit from this assignment? Compensating Paying and rewarding

40. Leadership Strategy: Actions • How well do you understand the impact of your strategy on your leadership needs? • Some Specific Questions: • What capabilities will you need from your leaders to effectively execute your strategy? Will this differ across the Company? • What are the values and culture that leaders must drive? How capable are they of leading this change? • How do your current leaders compare to the leaders you’ll need to succeed?

41. Leadership Strategy: Actions • Action Steps Can Include: • Create Leadership Strategy • Map skills, background, and leader types needed to realize strategy • Match best current leaders against best opportunities • Make “build or buy” decision on filling key leadership gaps • Create Leadership Competency Model and Assess Incumbents • Define leadership competencies based on your strategy --growth vs. return, transformational vs. transactional • Assess current leaders against these competencies; identify gaps

42. Client Stories: Northrop Grumman • The Situation • An $8 billion, 39,000 employee aerospace organization based on the west coast, Northrop is currently number 190 on Fortune’s list of companies. • What We Did • Conducted an engagement study to assess motivation and retention issues and led executive interviews to understand business strategy and people implications across the organization • Developed a leadership competency model to drive the new business direction and provide clarity to 240 leaders on being a leader • Designed a high-potential mentoring program for potential successors to current and future executives • Built a communication strategy which increased communication flow, increased understanding of the business, and fostered better two-way leadership communication • Led a market analysis and adjusted pay for hot-skilled and high-potential employees • Value Delivered • Hewitt’s work at Northrop Grumman is believed to be the main contributor to a significant drop in turnover and an annual savings of $1M • The CIO has praised us for our work in improving his leadership team and helping them to achieve better business results

43. Client Stories: R.R. Donnelley & Sons • The Situation • A $30 billion multi-national corporation with approximately 36,000 employees, R.R. Donnelley & Sons approached Hewitt for assistance in developing a broad leadership strategy and building a leadership development framework that would touch the top 1,000 leaders in the organization. • What We Did • We collected data on the core HR/leadership programs currently in existence today, reviewing them for completeness, applicability to the company’s strategic direction, and integration with one another. • We spoke with key HR professionals and interviewed business leaders across the organization to gather their input on current processes and future needs. • We worked with the CEO and his direct reports to develop a “strategic roadmap” for the future leaders of the company, based on the need for growth and the plausibility of gaining increased market share. • Value Delivered • We delivered a thorough leadership strategy to the executive team in August, 2002. Our recommendations in that phase are being reviewed, and we expect that many of them will be adopted for use throughout the organization over the next 12-18 months. • We are in the process of building a leadership development framework that will serve as the primary vehicle for the development of approximately 1,000 leaders.

44. Client Stories: Leading Global Supplier in US with Asian operations • The Situation • A leading global supplier in chemical industry headquartered in US. It grew through acquisition in a diverse, and fragmented, businesses and approaches. It needed to make ‘sum greater than the parts’. The client wanted to develop a bench strength of talent across the region who live the company values and to improve retention. Specifically, the client looked for a local solution for approximately 30 managers across Asia. • .What We Did • We helped the client shape the vision of Leadership by conducting a series of executive interviews with key leaders across Asia-Pacific and HQ; conducted focus groups among identified participants in different locations • We conducted an interactive approach 360 degree on-line feedback based on their leadership competency coupled with a personality profile assessment. There were individual feedback sessions to help the participants understand the results and build on own development action plan • We developed an Asia-specific Leadership Development process, using Asian case studies with increased focus on cross cultural management aspects. We designed two 5-day modular program with Action learning projects in between. We partnered with an academic to work on some modules • Value Delivered • Actionable, sponsored development plans to grow and retain top talent • Tailored development strategies and tools for Asian region. HQ is considering to revamp the global development program along this line

45. Where do you see the greatest areas for improvement in your approach to building leadership depth and quality? What barriers exist to your implementing new leadership practices or processes? What one thing will you do today to begin improving your leadership brand? Wrapping Up Based on our conversation today . . .

46. STRATEGIC HEWITT CONNECTS YOUR LEADERSHIP STRATEGY TO YOUR BUSINESS STRATEGY, ENSURING LEADERSHIP PRACTICES SUPPORT ACHIEVEMENT OF YOUR COMPANY GOALS INNOVATIVE WE BRING YOU ORIGINAL RESEARCH ON HOW THE WORLD'S BEST COMPANIES DEVELOP LEADERS AND THE LATEST METHODS FOR INCREASING LEADER EFFECTIVENESS PRACTICAL OUR LEADERSHIP SOLUTIONS REFLECT A PASSION FOR SIMPLICITY IN DESIGN, EFFECTIVE IMPLEMENTATION AND SUSTAINABLE RESULTS Hewitt Leadership Consulting— Our Approach

47. Create Leadership Depth • Succession Management • Executive Selection Processes • Executive Assessment in Mergers and Acquisitions Build Leadership Quality • Leadership Assessment & Feedback • Executive Education Design & Delivery • Leadership Competency Design Engage Leaders • Executive Engagement Process • Executive Coaching • Top Companies for Leaders Benchmarking Develop Effective Senior Teams • Senior Team Assessment & Coaching • Executive Performance Management • Leadership Strategy Development Hewitt Leadership Consulting— Our Services

48. Hewitt Leadership Consulting Your local Hewitt contact: • Vincent Gauthier, General Manager, Hong Kong • Irene Fok, Consultant • Hewitt Associates2601-03 Shell Tower, Times Square, Hong Kong • (852) 2877 - 8600