1. Towers Watson Webcast Why an Employee Value Proposition (EVP) Matters: Creating Alignment, Engagement and Stronger Business Resultsby Kathy Kibbe, Laura Sejen, Kathryn Yates October 13, 2010 2010 Towers Watson. All rights reserved.

2. Top performing companies build loyaltyto an employee the same way aconsumer brand builds loyalty to a product. (Towers Watson 2009/2010Communication ROI Study Report) towerswatson.com 2 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 3. Towers Watson LocationsNorth America Kathryn Yates Laura Sejen Kathy Kibbe towerswatson.com3 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 4. While the recession is over in many countries, its impact has been profoundFollowing the global financial crisisand recession that occurred in manycountries, we may be at a point ofinflectionChina, India and Brazil areexperiencing strong economic growthSpain and Ireland continue to sufferthrough economic contraction anddouble digit unemploymentU.S., most of Europe, Canada andJapan are somewhere in betweenMost regions took cost-cutting andcost management actions as areaction to the recessionReal wages have been flat ordecliningtowerswatson.com 4 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 5. Recession forced companies out of business as usual mode and changed the employee mindset Companies:Employees areReduced labor costs through hiring andThankful to have a job in lightsalary freezes, reduced bonuses and of past layoffslayoffs Recovering from no pay increase,Over 44% of companies globally took four or no/smaller bonus, reduced benefits andmore cost cutting actions furloughsResulted in reduced rate of increase in theLess likely to have promotionreal value of total rewardsopportunitiesRe-evaluating business strategies toprotect bottom line and drive productivitySurvivors who have made it through ingains one piecebarelyTheme of RenewalTheme of SecurityLooking forward, organizations mustEmployees are looking for job security,rethink the way they design and managestability and opportunities to earn highertheir reward and talent programs levels of pay (which may be unavailable in current organization) towerswatson.com5 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 6. Companies recognize the impact of cost cutting measures on employee engagement Impact of Cost-cutting Actions TakenEmployers recognize some of theadverse impacts cost cutting has hadon employee well-being andengagementThe more cost-cutting actionsemployers have taken, the more likelythey are to recognize the impactTW research has shown thatdeclines in employee engagementoften have an adverse businessimpactEmployers are less likely to identifyimpact on quality, customer service oremployee productivity towerswatson.com 6 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 7. Create a sustainable Employee Value Proposition to attract, reward and retain talentWhat is sustainability?Effective in any economic environment; supports robust growth but isscalable in a downturn Flexible in terms of company investment in rewards and talent managementprogramsAddresses the broad range of elements of the deal that are important toemployeesAllows for flexibility to target key employee groups such as high performers,critical-skill employees and high potentials The need to refocus gives you a chance to renew and communicate your EVP to both current and prospective employees towerswatson.com 7 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 8. What is an Employee Value Proposition (EVP)?An employee value proposition is the experience offered by an employer in exchange for the productivity and performance of an employee.Employee Perspective Employer Perspective Employees connection with the EVPA strategically designed EVP attracts, determines their level of discretionary effort retains, engages and motivates in bringing the company mission, vision and employees to drive business success. values to life.Ultimately it comes down to the give and the get towerswatson.com 8 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 9. Defining key terms EVPAn employee value proposition (EVP) is what is offered by an employer in exchange for the productivity andperformance of an employee. It includes the entire employee experience from their rewards and benefits, to theopportunity for career development and also the more intrinsic elements of management style, work environment andculture. Branding the EVP means how you interpret all these elements into an identity that links your employment brandto the corporate brand. Employment BrandThis is how you present yourself to prospective employees. In order to keep the people you recruit, it must be alignedwith the EVP (or employment brand) as well as your corporate brand. While its OK for brands to be aspirational, theymust be grounded in authenticity, and your communication strategy should clarify how you intend to move from aspirationto reality. Corporate Brand This is who you are to your customers. Like any brand, it needs to be rooted in reality yet it can have someaspirational attributes. It has both practical and emotional elements: If a corporate brand and EVP are misaligned, theresult can be employee cynicism which directly impacts productivity. Total RewardsTotal Rewards is a key element of your EVP. It represents the more tangible aspects of the EVP: compensationand benefits.towerswatson.com9 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 10. Opportunity exists to formalize the EVP While all organizations have an informal value proposition, only one-third globally have formalized their EVPThe other two-thirds indicate their EVP is implicit and has evolved over timeThere is significant regional variation regarding formalization of EVPThis presents a great opportunity to review components of the deal,formalize and communicate to employees (and prospective employees)High-performing organizations are more likely to have a formal EVP towerswatson.com 10 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 11. Employees want to see the total deal as they seek to find organization purpose, as well as value How (and why) does the business deliver value?Purpose How is the business viewed by the world?and ValuesWhat do the mission, visions and values represent, and am Icommitted to them?What behaviors are rewarded and recognized, and do theyadvance the promise to the market?Rewards Do I know how my job and actions contribute to success?recognitionWhat learning and career opportunities are available?and opportunityHow does the organization support me and my family throughbenefits and programs?What are the culture and environment like?The work, the Will the management structure and philosophy support mypeople and theability to do good work?environment Do I have access to people, processes, tools and technologyto do my job effectively?towerswatson.com11 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 12. Attraction drivers are shifting due to the current environmentEmployers recognize the importance of base pay, challenging work and careeradvancement opportunities in attracting employees to their firmEmployers have not made the connection between employee well-being (e.g.,flexible scheduling, time off) and an employees decision to join an organization towerswatson.com12 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 13. Attraction and retention challenges are confined to pivotal employee groupsEmployers are having difficulty attracting and retaining top talent, but not employees ingeneralHigh unemployment rates feed labor poolCritical Skill and Top Performers are reluctant to leave current employer due to uncertaintySeverity of difficulty varies across regions, as economic recovery is uneven Attraction and Retention Difficulties Vary Significantly by RegionPercentage of respondents reporting great or very great difficulty attracting or retaining employees. towerswatson.com 13 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 14. Objectives for formalizing the EVP vary by region The majority of organizations indicate they have formalized their EVP toimprove alignment of HR process with business objectives, brand and eachotherBetter alignment of EVP and the brand can lead to improved line of sight,encouraging employees to adapt behaviors that will deliver the brand promise(for example, superior customer service)Objectives for Formalizing the EVP towerswatson.com14 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 15. Brand alignment: Why its important (and why its often nonexistent) People Reputation(employee experience)(customer experience)Human Resources doesnt control:Marketing doesnt control: Company reputation Employees understanding of the brand External perceptions and image Employees living of the brand Value of the external brandEmployees delivering on the brand promiseYet Brand and company reputation arePeople are the key factor in delivering thekey factors in attracting and retaining talentbrands promise to customersEffective brand alignment requires Human Resources and Marketing to work together to develop a fully integrated and aligned employee and customer experience towerswatson.com 15 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 16. Companies with formal EVPs are more likely to say their EVP is aligned with their marketplace reputationThe EVP is a powerful management tool when it is communicated effectivelyWhen an organization formalizes its EVP, the EVP is more likely to become astable, unifying experienceThis sets a foundation for modifying the EVP by location and/or employee segment Characteristics of EVP towerswatson.com16 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 17. Alignment of Internal and External Experience Good Typical Performer 39%12% Customer ExperienceBrand promise deliveredConsistent communicationExcellent customer experience LaggardMyopic 18%31%PoorGood Employee Experience Employment deal is aligned with what company Towers Watson Brand Alignment Study, 2008.stands for towerswatson.com17 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 18. This is why it mattersMarket Premium*30%Performer 20%+15% 10%Percentage of Difference inTypical Market Value Company-10%Myopic-20% -5%Laggard-30% -18%*Market Premium is the percent difference we found in market value based on brand alignment performance.Market value is the stock price times the number of shares outstanding measured at the end of the fiscal year. Towers Watson Brand Alignment Study, 2008.towerswatson.com 18 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 19. Talent and Rewards: Complete solutions through a linked framework towerswatson.com19 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 20. Getting started Project roadmapPlanBuildImplement ImproveEVP andEVPGapInsightsSegment Deal CreativeBrandDefinition AnalysisManagement Workforce strategyGaps and Final frameworkEVP and brand Key recommendations management Focus Research Implementation Areas Framework andplan Ongoing roles Competitor scan straw modelCreative Metrics Segmentation Priorities articulation andapproach (Brand) Socialization and approvals towerswatson.com20 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 21. Nestl RealPossibilities. RealPeople.towerswatson.com21 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 22. A case study in the retail industryThe CompanyThis organization is its countrys top retailer, with nearly 50,000 employees in more than 1,000 storesThe organization has approximately $9 billion in annual revenue, with almost 50% of revenue comingfrom a specific segment for which aggressive organic growth is plannedAdditional growth is planned through a new line, as wellEach store is owned by an individual The Business ChallengeThe organization developed an EVP to communicate the deal in a compelling way so that new andprospective professional employees could quickly see and understand the value of working in itsstoresRapid growth and expansion of stores create a challenge because legally, a store cannot openwithout a licensed professional on staffStore/Associate owners must be licensed professionals intensifying the challenges associated withfinding, attracting and retaining suitable licensed professionals with business acumenA global shortage of this type of professional has increased the competitiveness of the market, so theorganization needed to differentiate itself by developing a compelling attraction and retention strategyThe organization engaged Towers Watson to create differentiated employee value propositions forcritical staff positionsAttracting and retaining top talent was critical to deliver business resultstowerswatson.com22 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 23. A case study in the retail industryThe Solution A five-step methodology was followed to synthesize company and industry research to develop segmented value propositions 1. A series of interviews and focus groups with internal and external licensed professionals providedkey insights into what employees need and want from an employer in exchange for their skills andtime 2. EVP straw models were shared and vetted in focus groups across different geographical regionsto ensure that the EVP resonated with employees in the stakeholder groups 3. Once the value propositions were validated, focus turned to preparing and delivering acommunication plan and implementation road map 4. EVPs were made foundational to the overall people strategy, with gaps, recommendations andquick wins identified for action 5. Branded leadership tools and manager toolkits were used to cascade the messageMeasuring Results in Year One: The implementation of the organizations value propositions improved: Customer satisfaction Vacancy rates Professional turnover rates Online applications for employmenttowerswatson.com23 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 24. Summing up Best practices for best results What is needed to be successfulA well articulated plan outlining objectives, deliverables, timing and the ROI Ensure quantitative and qualitative data is collected and sharedSpend time with stakeholders up front to build awareness of employmentbranding and EVPsA multi-skilled, multi-generational project team: HR, finance, IT,communication, business unit, students, new hires, tenured employeeEarly adoption by leadership to change behaviors and model EVPexpectations Targeted leadership training recommendedA rigorous change management approach Actively involve and engage stakeholders throughout the processMeasure and test throughout the process demonstrate ROIMaintain momentum once stakeholders are engaged. Avoid lengthy delaysbetween milestones towerswatson.com 24 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 25. Questions? kathy.kibbe@towerswatson.comlaura.sejen@towerswatson.comkathryn.yates@towerswatson.com towerswatson.com 25 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.