Raising the Standard 1 How American Standard is ‘Raising the Standard’: HR Strategy and the Impact on Bottom Line Mickey Blanks Senior VP Human Resources

Raising the

Standard

1

How American Standard is ‘Raising the Standard’:

HR Strategy and the Impact on Bottom Line

Mickey BlanksSenior VP Human Resources

Raising the

Standard

2

What We Were

• A global manufacturer with 60,000+ people and manufacturing operations in 100+ plants in 29 countries

• Market-leading positions in three businesses:

– Air conditioning systems and services, sold under the Trane® and American Standard® brands for commercial, institutional and residential buildings

– Bath and kitchen products, sold under such brands as American Standard® and Ideal Standard®

– Vehicle control systems, including electronic braking and air suspension systems, sold under the WABCO® name

Air Conditioning Systems and Services

Bath and Kitchen

Vehicle Control Systems

Implementing our Separation PlanImplementing our Separation Plan

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What We Are Today

Air Conditioning Systems and ServicesBath and Kitchen

Implementing our Separation PlanImplementing our Separation Plan

$1 Billion in Revenue (US)

Separate from American Standard

International (Europe & Asia)

7,500 employees world wide

Brand Recognition

Market Leader

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““Best Place to Invest”Best Place to Invest”““Best Place to Invest”Best Place to Invest”

In the Eyes of: In the Eyes of:

CustomersCustomers

EmployeesEmployees

Shareowners Shareowners

““Best Place to Buy”Best Place to Buy”““Best Place to Buy”Best Place to Buy”

““Best Place to Work”Best Place to Work”““Best Place to Work”Best Place to Work”

From good to bestFrom good to best

Our MissionOur Mission

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Our missionOur mission

Our valuesOur values

We are driven by customers

Our underlying belief is that People Make it HappenOur underlying belief is that People Make it Happen

We recognize the importance of our people

We operate with integrity

We strive for excellence

We deliver on our promises

Our ValuesOur Values

Raising the

Standard

6It’s all about talent!It’s all about talent!

In order to transform HR to accommodate a more efficient HR delivery we began with the centers of competency to develop strategy, process and programs.

Strategy Global Accountability

Contemporize Benefits

TalentDevelopment

StrategicPlacement

Pay/Reward Performance

Center Compensation BenefitsExecutive

Development Staffing Safety/ Security

Centers of ExcellenceCenters of Excellence

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HR Strategic FrameworkHR Strategic Framework

It’s all about talent!It’s all about talent!

Strategy

Program Development

Business Impact

Web EnabledTechnology

Center Compensation BenefitsExecutive

Development Staffing Safety/ Security

Global Accountability

PeopleSoft

• Leadership training

• Six Sigma• Code of Ethics

Contemporize Benefits

PeopleSoft

• Standardize plan design

• On-line enrollment

• eMall• Wealth accumulation

Pay/Reward Performance

eCompPlanner

• Perf Mgt•Leadership incentive

• Stock Option• Expatriate

Talent Brings Results - Results Bring Success - Success Brings Talent

TalentDevelopment

KnowledgePool

• HRP• PDP• 360o

• Coaching• Leadership development

StrategicPlacement

PeopleSoft

• Organizational restructuring

• Upgrade Leadership

• On-line Job Posting

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HR Strategic

Framework

2001

2002

2003

2004

StrategicInitiative

Program/Process Improvement

Business Unit Implication/

Support

On-going Measurement

“Metric”

Best Place to Work

OperationalEfficiency

PremierCustomer

Service

PerformanceResults

TalentManagement

Integrated by a global HRIS platformIntegrated by a global HRIS platform

HRPTop250

ExecutiveSuccession

PDPPMP360o

Top4500

PersonalDevelopment

LMSLeader DevCoaching

AllSalaried

IncreasedCapability

HR Strategic Framework Focused on TalentHR Strategic Framework Focused on Talent

Raising the

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9Driving change through process improvementsDriving change through process improvements

StrategicStrategic

TacticalTactical

TransactionalTransactional

How are we Transforming HR?How are we Transforming HR?

TodayToday

Shared services, employee and Shared services, employee and manager self-service, consolidation and manager self-service, consolidation and

reengineeringreengineering

Process improvements, new Process improvements, new technologies, best practices, technologies, best practices,

improved executionimproved execution

Create new programs processes, Create new programs processes, capabilities and competenciescapabilities and competencies

GrowingGrowing

ImprovingImproving

MovingMoving

StrategicStrategic

TacticalTactical

Transac-Transac-

tionaltional

TomorrowTomorrow

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Overview

– Grow sales by 6-7% per year

– Improve Operating Margins by 0.5% per year

– Grow EPS by 15-20% per year

– Increase cash flow by 12% per year

Business Challenges

People Solutions

– Talent

– Environment

– Value

* Foundation of Operational Excellence

Creating a competitive advantage thru people

Business Challenges

People Solutions“Strategic Platforms”

End-Game Scenario

Aligning Strategy with the BusinessAligning Strategy with the Business

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Platforms are built on a foundation of operational excellence for employees, business leaders, and shareholders

Foster a culture of employeeFoster a culture of employeeproductivity, well-being, andproductivity, well-being, andengagementengagement

People People

SolutionsSolutions

Creating a competitive advantage through peopleCreating a competitive advantage through people

Business Business ChallengesChallenges

- ENVIRONMENT - - ENVIRONMENT -

Ensure that we have the Ensure that we have the right people, at the right time, right people, at the right time, doing the right workdoing the right work

- TALENT -- TALENT - Recognize and sustain Recognize and sustain exceptional performance exceptional performance tied to meaningful value tied to meaningful value and rewardsand rewards

- VALUE - - VALUE -

Operational Excellence Operational Excellence

• Talent Acquisition• Employee Transitions• Performance Management• Leadership & Professional

Development• Career Development• Succession Management• Talent Portfolio Management• Diversity

• Safety• Security• Wellness• Financial Well Being • Employee/Labor Relations• Internal Communications / • Change Management

• Salary Management• Incentive Compensation• Executive Compensation• Retirement Programs• Expatriates• Board Committee Support• Health & Welfare• Recognition Program

• HR Services• Policies & Practices

• Technology• Data Management

• HR Strap/HRP/AOP• Metrics

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Overall HR Operating Model

HR Business Partners (Generalists)Define human capital requirements to meet business needs and provide these requirements to COEs. Execute and apply programs, processes, policies and tools created by our COEs to meet these needs. Provide consultative services to our Business Leaders

).

HR ServicesCall/service center: Responds to routine employee inquiries and processes hr transactions (e.g. benefits, payroll, data maintenance)ESS/MSS: Allows employees and managers to process basic transactions without involving a service center.

Centers of ExcellenceCenters of Excellence

HR Business Partners

HR Business Partners

HR Services

HR Services

Centers of Excellence (COE)Understand human capital requirements to meet business needs, as defined by our BUs. Design programs, processes, policies and tools to meet these needs. Provide governance for business activities within their specific area(s) of subject matter of expertise.

HR OperatingModel

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Organizational Effectiveness Project

2006TodayToday

PMOPMO

2008Future Future StateState

Shared VisionCreating a

Competitive Advantage thru People

• Right people, at the right time, doing the right work• EE productivity, well being & engagement• Recognize and sustain exceptional performance tied to meaningful value and rewards• Foundation of Operational

Excellence

Strategic Platforms

TalentTalent EnvironmentEnvironment ValueValue

Operational ExcellenceOperational Excellence

Operating Model

HR Scorecard

Standardize & Consolidate HR processes,

minimizing “Transactional Work”, refocusing HR resources on “Business Solutions”

BU

COE HRS

Providing Governance, PM Discipline, and Communications

Build CapabilityBuild Capabilityin HR Functionin HR Function

Integrated approach among COE/BU’s(Strap, HRP, AOP)

Align Global HRAlign Global HR

Steering Committee

13

Redesign Redesign

HR ProcessesHR Processes

DesignDesign

End StateEnd State Shared Services

COE/BU Operating Model

Vision/Strategic Platforms

(Org Charts, Role Descriptions, Profiles, RASCI)

Benefits

RecruitingWorkforce Admin

Policies & Practices(Standard & Consolidated Processes)

Payroll

Strategic Business Partner

Six Sigma

Business Acumen

(HR Curriculum)

Change Management

HR Services

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It’s all about TALENT!It’s all about TALENT!

Talent Brings RESULTS Results Bring

SUCCESS

Success Brings TALENT

Talent Drives Business PerformanceTalent Drives Business Performance

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People Make it Happen

Talent Management is Marbled into ASDTalent Management is Marbled into ASD

Mission – to be the Best in the Eyes of our:– Customers, Shareowners, and Employees

Values:– We are driven by customers– We recognize the importance of our people– We operate with integrity– We strive for excellence– We deliver on our promises

3 Key Business Processes:– Strategic Planning– Human Resource Planning– Annual Operating Plan

BU and Individual Annual Performance Goal Setting (PMP):

– Achieve Premier Customer Service– Drive Operational Excellence– Deliver Business Plan Results– People Make it Happen

Corporate & BU Performance Scorecard:– Financial– Strategic Initiatives– Leadership Capability– People Development

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Next we needed a Metric System

• We have been on a Journey at ASD (HR Transformation)

• We have a very clear Strategic Platform model with Value Propositions

• Our Mission is to “Create a Competitive Advantage thru People” that drives “Business Performance”

• Next we needed a metric system that would:– Measure the effectiveness of implementing our HR Strategies– Provide a baseline and metrics to track our progress– Provide detailed insight into over 300 sites globally– Measure business impact of HC investments

(Sales/Profit/Productivity/Safety)– Serve as a diagnostic tool to predict performance and leadership

effectiveness– Produce reports with specific actionable activities (focuses investments)– Speak to the business leader community

Measuring the Impact of HC InvestmentsMeasuring the Impact of HC Investments

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2003 Human Capital Capability Scores

Areas of Strengths

Employee Engagement -

- Jobs are interesting and meaningful

- Understand how job contributes to Org success

- Trust coworkers to get the job done

- Can freely communicate with managers

Workforce Optimization –

-Have the materials/technology needed to do their jobs well

Areas of Opportunities

Knowledge Accessibility -

- Effective Teamwork

-Time, Tools and Processes for Sharing Knowledge

Learning Capacity –

- Org values learning and development

- Can take training they need when needed

- Personal Development Plans that build job skills

8,000 surveyed

North America

59% Responded

English

130 Reporting Units

2003 HCCS Provides a Deep Dive into 130 Locations2003 HCCS Provides a Deep Dive into 130 Locations

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18Talent drives ResultsTalent drives Results

The HCCS in Action

• In early 2004 we conducted a correlation analysis on the 48 U.S. Commercial Sales Offices in TCS. We compared:– 5 HCCS Indices– Financial performance (Pacesetter)

• We found strong correlations, statistically significant at the 95% confidence level or better

• Those offices that did a better job of Managing and Developing talent delivered better Financial Results!

• Proved to be a great Predictor of District Manager Performance (Top 5 / Bottom 5)

• We found similar results comparing HCCS Indices and the Safety Metrics for the Plants surveyed

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• During our analysis we noticed one office that had experienced dramatic financial improvement starting about 18 months earlier; it also had one of the highest HCCS scores recorded

– A closer look revealed a new District Manager whose leadership philosophy was based on developing talent at every level

– It’s interesting to note the speed at which the turnaround occurred; and that other than the DM position there had been little turnover in personnel

Linking Talent to the Bottom LineLinking Talent to the Bottom Line

Turnaround linked to Talent DevelopmentTurnaround linked to Talent Development

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Study found that those employees whose managers are the most effective at employee development perform up to

25 % higher.

Recent Learning & Development Roundtable Research

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Areas of Strengths


- Jobs are interesting and meaningful

- Understand how job contributes to Org success

- Trust coworkers to get the job done

- Can freely communicate with managers





- Effective Teamwork

-Time, Tools and Processes for Sharing Knowledge


- Org values learning and development

- Can take training they need when needed


8,000 surveyed

North America

59% Responded

English

130 Reporting Units

2003 HCCS Provides a Deep Dive into 130 Locations2003 HCCS Provides a Deep Dive into 130 Locations

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Areas of Strengths

Leadership Practices -

- Managers’ Inclusiveness




-Environment open to new ideas/innovation

Safety



- Commitment to EE’s, provided opportunities for advancement

- Sufficient time to balance competing priorities


- Systems for sharing knowledge and best practices



- Investment in EE training

2005 Real Progress is Realized 2005 Real Progress is Realized

20,000 surveyed

Global

72% Responded

13 Languages

300 Reporting Units

Includes new Safety & Communications Indices

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232007 Reveals Impressive Results 2007 Reveals Impressive Results


15,000 Surveyed

Global

83% Responded

13 Languages

250 Reporting Units

Includes new Safety & Communications Indices

Areas of Strengths


- Managers’ Inclusiveness


- Have the technology needed to do their jobs well

Employee Engagement

- Job is interesting and meaningful

- Employee determines how to do job best

Safety



- Executives eliminate barriers to effective work


- Systems for sharing knowledge & best practices

- Tips & best practices are shared across departments


- Investment in EE training

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Employees surveyed

March 19-30, 2007

Results to Mid- level Leaders

Results to Sr Leaders

Beginning June/July 2007

Results Shared Locally

Action Plans Implemented

Action planning templates and other guidance will be made available by your HR team

Action Plan Follow up

Tie into 2008 AOP process

Cascade of Results

Communicationtemplates

Management Owns the ResultsManagement Owns the Results

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How real is this HCCS stuff?

• John Conover, Business Leader of TCS Distribution

– “OK you have my attention, how do I move these numbers?”

– Keeps a copy in his briefcase at all times and reviews results with site leaders when he is on the road

– HCCS is a key Leadership metric in Talent Reviews

• Results are reported to CEO and Board of Directors

• Significant time and effort put into reviewing results with site business leaders, creating targeted action plans, and input into Annual Operating Plans

• Business Community actually values metrics as much as the HR Community

HCCS is not some soft Satisfaction Survey

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26Strengths we can build on

Our highest scores In AS America were in the following areas:

EMPLOYEE ENGAGEMENT – Job Design OPS SC

Job is meaningful to employee.Employee has responsibility to determine how to do job best. Job makes good use of employee’s skills and talents. Work is well organized and enables a quality job.

86806865

75726762

SAFETY – Culture

Employee feels responsible for own safety as well as the safety of others. Employees and supervisors are held accountable for working safely. Employee believes organization places high importance on employee safety. Supervisor places high importance on safety; not sacrificed for production goals.Employee has the opportunity to participate in safety activities.

9084827675

8177756957

INDIVIDUAL OUTCOMES

Employee is willing to contribute effort over and beyond what is required.Overall, employee is satisfied with his/her job.How long employee expects to work for organization.

887772

767071

HCCS Key Learning’s

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27Areas for improvement

Our Lowest scores In AS America are in the following areas:

LEADERSHIP PRACTICES – Supervisory Skills OPS SC

Managers eliminate barriers to effective workEmployee has one-on-one discussions with supervisor to review progress Quarterly performance reviews offer direct feedback for improving work

57

5955

60

5453

LEARNING CAPACITY – Development

Employee has opportunity to gain or extend development.Training/development is used to help achieve career goals.Employee has formal development plan for skills needed for job.

605958

565049

WORKFORCE OPTIMIZATION – Hiring Decisions

Employees provide input on hiring decisionsNew hires receive adequate orientation and inductionNew hires receive description of skills to be used.

505258

425655

HCCS Key Learning's

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LOCATION TOTAL PROJECTS

STARTED COMPLETE HIGHLIGHTS

Salem 4 1 1 Complete Communication training, Work brain key focus of Q2.

Tiffin 4 1 1

Canada 4 3 3 Recognition & Reward program in place Monthly communications, and new Safety Manager = training

Paintsville 2 2 1 Supervisory training in Q3, Started skip Level meetings for hrly & salaried. ASD comm in Q2

Aguascalientes 3 2 2 Comm meetings 1 per week with employees. Monthly goal review Supervisor training – 30.

Santa Clara 5 3 3 Comm Training with Mgmt, Redesigned the new hire orientation trainng, Supervisor training – 33 to date.

Tlaxcala 12 9 5 Conversion of 25 hourly supervisors to Salaried, Supervisor Training on track - 23

Monterrey 3 3 3 Comm training. 5 minute tool box discussions, Monthly management/union meetings, monthly skills review with the supervisors – 22 trained to date.

Brazil 4 3 3 Communication skip level meetings, Roll-out of SMART teams, english training for employees

Chandler 2 2 1 • Monthly communication meetings with entire workforce, skip level meetings, board updates.

TOTAL 43 39 23 On Track to deliver against survey.

2006 mid-year summary

Strategy Into Action

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Communication Dimension Improvement-Driven EstimatedChange in Market Value

Drive supervisory/managerial behavior 7.3%Follow a formal process 5%Create employee line of sight 4.8%Facilitate change 2.8%Focus on continuous improvement 2.8%Connect to the business strategy 2.1%Use employee feedback 1.4%Integrate total rewards 1.3%Leverage technology 0.5%

Source: Connecting Organizational Communication to Financial Performance -- 2003/2004 Communication ROI Study, Watson Wyatt

Note: Highlighted items relate to questions in the 2005 ASD Human Capital Capability Scorecard survey

Direct Correlation to Survey ResultsDirect Correlation to Survey Results

What’s The Bottom Line?

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Human Capital Capability Scorecard

Tracking the JourneyTracking the Journey

Talent Brings RESULTS

Results Bring SUCCESS

Success Brings TALENT

HCCS:• Measures core HCM drivers

- Managing and Developing Talent• Serves as:

- Diagnostic Tool - Predictor of Performance

• Voice of the Employee• Provides fact based recommendations• Enables correlation analysis

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Peer Stock Price ComparisonsPeer Stock Price Comparisons

GEGEGEGES&PS&PS&PS&PDOVDOVDOVDOV

EMREMREMREMRIRIRIRIR

DHRDHRDHRDHR

ITTITTITTITTASDASDASDASD

October, 1999 through October 2, 2007October, 1999 through October 2, 2007October, 1999 through October 2, 2007October, 1999 through October 2, 2007

+ 34%+ 34%+ 34%+ 34%+ 13%+ 13%+ 13%+ 13% + 10%+ 10%+ 10%+ 10%

+ 119%+ 119%+ 119%+ 119%+ 135%+ 135%+ 135%+ 135%

+ 246%+ 246%+ 246%+ 246%

+ 337%+ 337% + 337%+ 337%+ 323%+ 323%+ 323%+ 323%

+ 198%+ 198%+ 198%+ 198%

UTXUTXUTXUTX

P/E 1999P/E 1999 P/E 2007P/E 2007ActualActual ConsensusConsensus

ASDASD 10 X 10 X 16 X16 X

ITT ITT 1313 2020

DanaherDanaher 2626 2222

UTXUTX 1717 1919

IngersollIngersoll 1818 1616

EmersonEmerson 1818 2020

DoverDover 2121 1616

S&P 500S&P 500 3434 1616

GEGE 3939 1919

ASD – A Top Performer Over the Long TermASD – A Top Performer Over the Long TermASD – A Top Performer Over the Long TermASD – A Top Performer Over the Long Term

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Where we are going next with HCCS?

• Map our Strategic Platform components (Talent/ Environment/Value) to HCCS questions and indices

• Add questions for any gaps

• Build a survey for Hourly Workers

• Productivity Partnership – Hourly Employee Engagement process

Meaningful Diagnostic Metrics

New Day, New Challenge, New New Day, New Challenge, New Journey, Journey, Same Course. Same Course.

We Must be Stewards of the Human We Must be Stewards of the Human Capital Dynamic!Capital Dynamic!

YESTERDAY TODAY

Documents

Raising the Standard 1 How American Standard is ‘Raising the Standard’: HR Strategy and the Impact on Bottom Line Mickey Blanks Senior VP Human Resources