How American Standard is ‘Raising the Standard’: HR Strategy and the Impact on Bottom Line

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

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 Vehicle Control Systems Bath and Kitchen Implementing our Separation Plan

3. What We Are Today Air Conditioning Systems and Services Bath and Kitchen $1 Billion in Revenue (US) Separate from American Standard International (Europe & Asia) 7,500 employees world wide Brand Recognition Market Leader Implementing our Separation Plan

4. Our Mission In the Eyes of: Customers “Best Place to Buy” Employees “Best Place to Work” Shareowners “Best Place to Invest” From good to best

5. Our Values Our mission Our 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 Our underlying belief is that People Make it Happen

6. Centers of Excellence 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. Executive Development Center Compensation Benefits Staffing Safety/ Security Strategy Pay/Reward Performance Contemporize Benefits Talent Development Strategic Placement Global Accountability It’s all about talent!

7. Executive Development Center Compensation Benefits Staffing Safety/ Security • Contemporize Benefits • PeopleSoft • Standardize plan design • On-line enrollment • eMall • Wealth accumulation • Talent • Development • KnowledgePool • HRP • PDP • 360o • Coaching • Leadership development • Strategic • Placement • PeopleSoft • Organizational restructuring • Upgrade Leadership • On-line Job Posting • Global Accountability • PeopleSoft • Leadership training • Six Sigma • Code of Ethics • Pay/Reward Performance • eCompPlanner • Perf Mgt • Leadership incentive • Stock Option • Expatriate Strategy Web Enabled Technology Program Development Talent Brings Results - Results Bring Success - Success Brings Talent Business Impact HR Strategic Framework It’s all about talent!

8. HR Strategic Framework Focused on Talent HR Strategic Framework Business Unit Implication/ Support On-going Measurement “Metric” Program/Process Improvement Strategic Initiative 2001 2002 2003 2004 Talent Management HRP Top 250 Executive Succession PDP PMP 360o Top 4500 Personal Development LMS Leader Dev Coaching All Salaried Increased Capability Premier Customer Service Best Place to Work Operational Efficiency Performance Results Integrated by a global HRIS platform

9. Growing Create new programs processes, capabilities and competencies Strategic Strategic Tactical Transac- tional Tactical Transactional How are we Transforming HR? Improving Process improvements, new technologies, best practices, improved execution Moving Shared services, employee and manager self-service, consolidation and reengineering Today Tomorrow Driving change through process improvements

10. Overview End-Game Scenario People Solutions Business Challenges Creating a competitive advantage thru people Business Challenges People Solutions“Strategic Platforms” • 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 • Talent • Environment • Value * Foundation of Operational Excellence Aligning Strategy with the Business

11. Business Challenges People Solutions Creating a competitive advantage through people - TALENT - - ENVIRONMENT - - VALUE - Recognize and sustain exceptional performance tied to meaningful value and rewards Foster a culture of employee productivity, well-being, and engagement Ensure that we have the right people, at the right time, doing the right work • 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 Operational Excellence Platforms are built on a foundation of operational excellence for employees, business leaders, and shareholders • Technology • Data Management • HR Strap/HRP/AOP • Metrics • HR Services • Policies & Practices

12. Overall HR Operating Model HR Operating Model HR Business Partners (Generalists) Define humancapital 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 Business Partners HR Services Call/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 Excellence (COE) • Understand human capital • requirements to meet business • needs, as defined by our BUs. • Designprograms, processes, • policies and tools to meet these needs. Provide governance for business activities within their specific area(s) of subject matter of expertise. Centers of Excellence HR Services ).

13. Organizational Effectiveness Project Vision/Strategic Platforms COE/BU Operating Model (Org Charts, Role Descriptions, Profiles, RASCI) Benefits Payroll Workforce Admin Recruiting Policies & Practices (Standard & Consolidated Processes) Strategic Business Partner Business Acumen Change Management Six Sigma (HR Curriculum) Integrated approach among COE/BU’s (Strap, HRP, AOP) Standardize & Consolidate HR processes, minimizing “Transactional Work”, refocusing HR resources on “Business Solutions” 2008 Future State 2006 Today Providing Governance, PM Discipline, and Communications • SharedVision • Creating 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 PMO Steering Committee Design End State Shared Services HR Services Redesign HR Processes • Strategic Platforms Build Capability in HR Function OperatingModel BU Align Global HR COE HRS 13 • HR Scorecard

14. It’s all about TALENT! Talent Brings RESULTS Results Bring SUCCESS Success Brings TALENT Talent Drives Business Performance

15. People Make it Happen • 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 • 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 • 3 Key Business Processes: • Strategic Planning • Human Resource Planning • Annual Operating Plan Talent Management is Marbled into ASD

16. 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 Investments

17. 2003 Human Capital Capability Scores 8,000 surveyed North America 59% Responded English 130 Reporting Units 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 2003 HCCS Provides a Deep Dive into 130 Locations

18. 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 Talent drives Results

19. Linking Talent to the Bottom Line • 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 Turnaround linked to Talent Development

20. Recent Learning & Development Roundtable Research Study found that those employees whose managers are the most effective at employee development perform up to 25 % higher.

21. 2003 Human Capital Capability Scores 8,000 surveyed North America 59% Responded English 130 Reporting Units 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 2003 HCCS Provides a Deep Dive into 130 Locations

22. 2005 Human Capital Capability Scores 20,000 surveyed Global 72% Responded 13 Languages 300 Reporting Units Includes new Safety & Communications Indices • Areas of Strengths • Leadership Practices - • - Managers’ Inclusiveness • Workforce Optimization – • -Have the materials/technology needed to do their jobs well • Learning Capacity – • Environment open to new ideas/innovation • Safety • Areas of Opportunities • Employee Engagement - • - Commitment to EE’s, provided opportunities for advancement • Sufficient time to balance competing priorities • Knowledge Accessibility - • - Systems for sharing knowledge and best practices • Learning Capacity – • Personal Development Plans that build job skills • Investment in EE training 2005 Real Progress is Realized

23. 2007 Human Capital Capability Scores 15,000 Surveyed Global 83% Responded 13 Languages 250 Reporting Units Includes new Safety & Communications Indices • Areas of Strengths • Leadership Practices - • - Managers’ Inclusiveness • Workforce Optimization – • - Have the technology needed to do their jobs well • Employee Engagement • Job is interesting and meaningful • Employee determines how to do job best • Safety • Areas of Opportunities • Leadership Practices - • - Executives eliminate barriers to effective work • Knowledge Accessibility - • Systems for sharing knowledge & best practices • Tips & best practices are shared across departments • Learning Capacity – • - Investment in EE training 2007 Reveals Impressive Results

24. Cascade of Results Employees surveyed March 19-30, 2007 Results to Sr Leaders Beginning June/July 2007 Results to Mid- level Leaders Communicationtemplates Results Shared Locally Action planning templates and other guidance will be made available by your HR team Action Plans Implemented Action Plan Follow up Tie into 2008 AOP process Management Owns the Results

25. 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

26. HCCS Key Learning’s Our highest scores In AS America were in the following areas: Strengths we can build on

27. HCCS Key Learning's Our Lowest scores In AS America are in the following areas: Areas for improvement

28. Strategy Into Action 2006 mid-year summary

29. What’s The Bottom Line? 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 Results

30. Talent Brings RESULTS Results Bring SUCCESS Success Brings TALENT Human Capital Capability Scorecard • 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 Tracking the Journey

31. Peer Stock Price Comparisons October, 1999 through October 2, 2007 P/E 1999 P/E 2007 ActualConsensus ASD 10 X 16 X ITT 13 20 Danaher 26 22 UTX 17 19 Ingersoll 18 16 Emerson 18 20 Dover 21 16 S&P 500 34 16 GE 39 19 ITT ASD + 337% + 323% DHR + 246% UTX + 198% IR EMR + 135% + 119% DOV S&P GE + 34% + 13% + 10% ASD – A Top Performer Over the Long Term

32. 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

33. YESTERDAY TODAY New Day, New Challenge, New Journey, Same Course. We Must be Stewards of the Human Capital Dynamic!