1Hewitt Associates

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2Hewitt Associates

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

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Hewitt Associates

Greater China

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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

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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

ThinkGreaterChina

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Retirement & Retirement & Financial ManagementFinancial Management

Retirement & Retirement & Financial ManagementFinancial Management

CompensationCompensationMeasurementMeasurementCompensationCompensationMeasurementMeasurement

Corporate Corporate Restructuring Restructuring

& Change& Change

Corporate Corporate Restructuring Restructuring

& Change& Change

Talent and Talent and OrganizationalOrganizational

ConsultingConsulting

Talent and Talent and OrganizationalOrganizational

ConsultingConsulting

Employee Employee CommunicationCommunication

Employee Employee CommunicationCommunication

HRHReeHRHRee

HR & BenefitsHR & BenefitsOutsourcingOutsourcing

HR & BenefitsHR & BenefitsOutsourcingOutsourcing

Strategy Implementation

Process

ThinkFullSpectrum

Our China services encompass the entire spectrum of HR consulting and outsourcing

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The baby bust generation is coming of age, meaning a smaller pool of 35 - 44 year olds (key developing leader age) in the workforce

Why Developing Leaders Matters

Source: United Nations

35 - 44 year olds in the United States (1970 = 100)

80

100

120

140

160

180

200

1970 1980 1990 2000 2010 2020

15% decline from peak to trough over 15 years

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Employment to Population Ratio

0%

20%

40%

60%

80%

100%

1960 1970 1980 1990 2000 2010(proj.)

Wo

rkin

g a

s %

of

po

pu

lati

on

Why Developing Leaders Matters

Women will not continue to make up for men leaving the workforce, increasing the leader shortage

MenMen

WomenWomen

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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"

0%

5%

10%

15%

20%

25%

30%

35%

StronglyAgree

Agree Neutral Disagree StronglyDisagree

Source: Hewitt Survey, 2002

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)

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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 Power

Leadership Brand will separate the winners from the losers in the battle for Leadership Talent

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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

Leadership Brand Power

A strong Leadership Brand means . . .

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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

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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 . . .

Our Research

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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

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0%

20%

40%

60%

80%

100%

StronglyAgree

Agree NeitherAgree orDisagree

Disagree StronglyDisagree

The Chief Executive Officer Actively Reviews the Organization's Top Talent

Not Top 20 Top 20

39%

27%23%

37%

0%

10%

20%

30%

40%

50%

Human Resources Sr. Mgmt.

Who Is Primarily Responsible for Developing Leaders In Your Organization?

Not Top 20 Top 20

CEO Involvement—Beyond the Obvious

Top firms see both involvement and sponsorship…

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Companies Where the CEO Is Actively Involved in Talent Management Strongly Outperform Those Where There Is No Involvement

22%

-4%

-10%

-5%

0%

5%

10%

15%

20%

25%

CEO Reviews Top Talent

CEO Doesn’t Review Top Talent

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ea

r T

ota

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etu

rn t

o S

ha

reh

old

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CEO Involvement

…and the financial benefits from that

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0%

20%

40%

60%

StronglyAgree

Agree Neither Agreeor Disagree

Disagree StronglyDisagree

The Board of Directors Actively Reviewsthe Organization's Top Talent

Not Top 20 Top 20

Board Involvement

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

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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?

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Short-Term and Long-Term Opportunities

CEO Involvement

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

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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

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0%

10%

20%

30%

40%

50%

Does notDiffer

SlightlyDiffers

ModeratelyDiffers

NoticeablyDiffers

SignificantlyDiffers

To What Extent Does Total Compensation Differ Between High Performers & Average Performers

in the Same Role?

Not Top 20 Top 20

High-Potential Investment— Compensation

Meaningful differences between compensation for average and high-potential leaders

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0%

10%

20%

30%

40%

50%

60%

70%

80%

Cross-FunctionalExperiences

Job Rotations Global/RegionalAssignments

InternalTraining External Training FormalEducation

In What Ways Does Your Organization Develop High-Potential Employees?

Not Top 20 Top 20

High-Potential Management

Development at Top 20 firms is much more experientially based

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To Tell or Not to Tell

High-Potential Management

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

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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?

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Short-Term and Long-Term Opportunities

High-Potential Management

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

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The Right Practices, Done Right

Sound design of leadership practices is undermined by inconsistent implementation

51%

90%

49%

80%

0%

20%

40%

60%

80%

100%

Selecting Leaders forPositions Within the

Company

Performance Managementat Any Level in the

Organization

Are These Competencies Used in:

Not Top 20 Top 20

68%

91%

0%

20%

40%

60%

80%

100%

Yes

Does Your Organization HaveDefined Leadership Competencies?

Not Top 20 Top 20

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Practice Not Top 20 %

Formal Development Processes 76

Leadership Competencies 67

Succession Planning 71

Compensation Linked toPerformance

86

Diversity Is Part of LeadershipStrategy

64

Practice Not Top 20 %

Formal Development Processes 76

Leadership Competencies 67

Succession Planning 71

Compensation Linked toPerformance

86

Diversity Is Part of LeadershipStrategy

64

The Right Practices, Done Right

Most firms in the survey have some leadership practices in place

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Practice Not Top 20 % Top 20%

Assess Competencies Using 360° 57 91

Communicate High-Potential Status 43 73

Always Use Succession PlanningProcess to Pick Candidates

11 37

Clearly Identify High Potentials 41 55

Significantly DifferentiateCompensation

13 40

Have Specific Leadership Strategy 53 81

Culture Reinforces LeadershipStrategy

47 83

Practice Not Top 20 % Top 20%

Assess Competencies Using 360° 57 91

Communicate High-Potential Status 43 73

Always Use Succession PlanningProcess to Pick Candidates

11 37

Clearly Identify High Potentials 41 55

Significantly DifferentiateCompensation

13 40

Have Specific Leadership Strategy 53 81

Culture Reinforces LeadershipStrategy

47 83

The Right Practices, Done Right

…but they aren’t used to the greatest benefit

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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?

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Short-Term and Long-Term Opportunities

The Right Programs, Done Right

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

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Points of Views from Hewitt

Strategy Driven Leadership -

Creating the Leaders YouNeed to Dominate Your Industry

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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

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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 ProvideSustainable Advantage

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Business Business StrategyStrategy

LeadershipLeadershipStrategyStrategy

Clarify business strategy and short- and long-term objectives

Identify capabilities needed in leaders and

current leadership depth

Develop processes to maximize each lever

AlignAlign

DevelopDevelop

EngageEngage

EEnnaabblleerrss

A Process for Building Leadership Quality and Depth

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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

Return Growth

Leadership Strategy: A Point of View

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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

Transactional Transformational

Leadership Strategy: A Point of View

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These two factors combined provide strong direction for the type of leadership behaviors required.

GrowthReturn

Transformational Change

Leadership behaviors related to:Vision, Speed, Aggressiveness, Risk-taking, Managing Change, Driving Sales

Leadership behaviors related to:Speed, Aggressiveness, Process Management, Risk-taking, Planning, Task Focus

Leadership behaviors related to:Vision, Decision-making, Financial Acumen, Managing Change, Risk Management, Cost Control

Leadership behaviors related to:Risk Management, Process Management, Financial Acumen, Cost Control, Rule Orientation, Task Focus

Transactional Change

The Hewitt Leadership Strategy Matrix

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How Does Your Current Leadership Compare to What Your Strategy Demands?

GrowthReturn

Transformational Change

Transactional Change

CEO

CEOCOO

CIO

CIO

CFO CFO

COO

= Desired State

Leadership Strategy: Mapping the Gaps

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Leadership Strategy Must Flow Directly From the Strategic Needs of the Business

Business Strategy

Initial Leadership Strategy Considerations

Focused Leadership Strategy Considerations

Grow Sales in Asia-Pacific

Grow Sales in Asia-Pacific

SourcingFinding these leaders

SourcingFinding these leaders

AssessingSetting goals and

evaluating performance

AssessingSetting goals and

evaluating performance

DevelopingBuilding competencies

DevelopingBuilding competencies

CompensatingPaying and rewarding

CompensatingPaying and rewarding

Do we have these competencies now?

Do we have these competencies now?

If not, build or buy talent?If not, build or buy talent?

Who would benefit from this assignment?

Who would benefit from this assignment?

Leadership Strategy

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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?

Leadership Strategy: Actions

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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

Leadership Strategy: Actions

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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

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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.

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The SituationA 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

Client Stories: Leading Global Supplier in US with Asian operations

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Wrapping Up

Based on our conversation today . . .

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?

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STRATEGICHEWITT CONNECTS YOUR LEADERSHIP STRATEGY TO YOUR BUSINESS

STRATEGY, ENSURING LEADERSHIP PRACTICES SUPPORT ACHIEVEMENT OF

YOUR COMPANY GOALS

INNOVATIVEWE BRING YOU ORIGINAL RESEARCH ON HOW THE WORLD'S BEST COMPANIES

DEVELOP LEADERS AND THE LATEST METHODS FOR INCREASING LEADER

EFFECTIVENESS

PRACTICALOUR LEADERSHIP SOLUTIONS REFLECT A PASSION FOR SIMPLICITY IN DESIGN,

EFFECTIVE IMPLEMENTATION AND SUSTAINABLE RESULTS

Hewitt Leadership Consulting— Our Approach

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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

Develop Effective Senior Teams Senior Team Assessment & Coaching

Executive Performance Management

Leadership Strategy Development

Engage Leaders Executive Engagement Process

Executive Coaching

Top Companies for Leaders Benchmarking

Hewitt Leadership Consulting— Our Services

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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