“Preparing for Tomorrow” Making change work to your advantage

1. “Preparing for Tomorrow”Making change work to your advantage Mercuri Urval Global Client Services June 2010/ GCS Research Team

2. Research • This paper is based on extensive research by Mercuri Urval and our research partner S4K in over 500 organisations around the world • Conducted from 2006-2010 in leading European organisations • Participants were selected from among high-performing senior HR executives and business leaders

3. First, the context

4. The mid-term challenges Public sector debt Slow economic recovery Euro-zone instability

5. Uncertainty rules The “new normal” • Recovery is evident, but at low levels • Growth in Asia, South America • Will weak Euro-zone countries lead to a “double dip”? United States • Surprisingly strong consumption, but high unemployment and still low levels of personal savings • The housing market remains volatile, commercial real estate also a concern Asia Pacific • China, India and others continue to experience strong growth • Japan shows unexpected export strength Europe • Europe is growing again, but the recovery is slow and at some risk • Large differences between countries and great uncertainty in the Euro-zone Nordics • Signs of recovery, but still no significant growth in production • Stable state finances, less-than-expected unemployment and strong consumption (so far) Source: Blue Institute Growth Barometer May 2010

6. And three macro trends Demographics Technology Globalisation

7. DemographicsLack of labour threatens future growth, issue is ‘hidden’ by recession No of Employees Retirements Capability Break-even Capability Gap Entrants • 2010 2020 2030 Source: AMS EUROPEAN UNION (EU-15)

8. TechnologySpeed of innovation and reduced ‘time to market’ demands accelerated responses • Reduced barriers to entry for competition • A more level playing field • Accelerated change cycles • Improved productivity & reduced reaction times

9. GlobalisationNew opportunities, innovation drivers and competitors emerge continuously • Customers without borders • The global knowledge share • Economies connected like never before • Best practice and innovation travels at speed • Emerging markets

10. The Tension • Increased cost and importance of talent in the long-term Vs • Need to control costs and uncertainty around investment in the mid-term The Risk: • By the time increased certainty, confidence and growth is well established, the talent needed to capitalise on opportunities will not be available

11. How do our leading companies plan to respond?- Strategic challenges - Organisational challenges - Leadership Challenges

12. Executive Summary: Top Challenges 2006 2007 2008 2009 2010 2015: A prediction for tomorrow 0 The concepts of Talent, Performance, Change Management and ‘one company’ are merged, with successful organisations placing the future customer at the heart of the ‘whole company’ What was famously described as ‘The War for Talent’ in the 1990s now looks like an opening skirmish - ‘talent’ with business skills is almost impossible to find A new challenge emerges - Knowledge Transfer, utilising experienced employees after they would have retired in previous eras. 2 4 6 8 10 12 14 16 18 Customer focus and understanding Performance Management 20 Leading change 22 Communication 24 Talent Management Becoming one company 26 Operational excellence 28 Product & service innovation 30 Coaching Execution 32 34 Responses indicate executive key focus for the coming year(s) Top 10 Focus areas ranked from top to bottom Source: S4K and Mercuri Urval GCS research unit

13. Strategic Challenges 2015: A prediction for tomorrow Customer focus and understanding becomes dominant and is the overriding driver for business Increasingly, companies can only win if they are totally aligned around their customer – meaning operations are organised and products are developed in a truly ‘customer connected’ way that typically has not been seen before Whilst costs will be important, it is top-line growth from a fast-changing set of customers that gives CEOs sleepless nights and profit drivers 2006 2007 2008 2009 2010 0 1 2 3 4 5 6 7 Customer focus and understanding 8 Operational excellence 9 Product/Service innovation 10 Profitable growth Cost focus 11 12 Responses indicate executive key focus for the coming year(s) Top 5 Focus areas ranked from top to bottom Source: S4K and Mercuri Urval GCS research unit

14. Organisational Challenges 2015: A prediction for tomorrow Customer insight becomes the driver behind Talent, Performance, Change Management and ‘one company’ thinking, with successful organisations placing the voice of the customer at the heart of their ‘whole company’ New talent is very hard to attract, so employee branding and retention strategies come to the fore, as companies fight to keep hold of the expertise and knowledge they have –those with knowledge are a scarce resource Talent management with customers at its heart is seen as the top value-creating process within successful companies. As technology costs crash, people become the source of differentiation and competitive advantage inmost industries 2006 2007 2008 2009 2010 0 1 2 3 4 5 6 7 Talent Management 8 Corporate culture 9 Becoming One Company 10 Creating a learning organisation Knowledge management 11 12 Responses indicate executive key focus for the coming year(s) Top 5 Focus areas ranked from top to bottom Source: S4K and Mercuri Urval GCS research unit

15. Leadership Challenges 2015: A prediction for tomorrow Leadership is changing fast: old-fashioned notions of task management and control have been left behind - much greater systemic and entrepreneurial competence is required As organisations develop closer partnerships with customers and suppliers, tomorrow's leader manages organisational performance in a new way - shared innovation, resources and costs. The end-customer becomes the number 1 stakeholder for all executives Management and functional competence is pushed down the hierarchy, as top leaders are customer-connected and ‘one company’ people – their reward relates only to the company, no longer to their own silo Change is the new norm; it remains critical, but is seen in a different way – as accelerated evolution, and not a discrete activity or project 2006 2007 2008 2009 2010 0 1 2 3 4 5 6 Performance management 7 Leading change 8 Communication Execution 9 Coaching 10 11 12 Responses indicate executive key focus for the coming year(s) Top 5 Focus areas ranked from top to bottom Source: S4K and Mercuri Urval GCS research unit

16. Customers and Talent Further research conducted by Mercuri Urval between 2009-2010 in over 500 leading European companies showed the same picture: • Short- and mid-term: improved customer retention, more customer loyalty and a high quality of service were seen as key tasks for the future • acquiring new customers 85% • increasing profitability 79% • improving the quality of service 79% • strengthening customer retention/loyalty 73% • increasing innovation frequency 71% • Longer-term: sustainable growth also showed a clear trend, focusing on talent: • strengthening human capital 79% • development of service quality 73% • improving ability to listen to the client 72%

17. The research suggests • Get closer to your customers and their customers as a whole organisation, or you will fail • Your people are your primary source of sustainable, competitive advantage • Talent, especially with experience, is going to get extremely hard to find • Leaders must make sure they build people capability now that will create value from their customers tomorrow