Calculating ROI:

1. Calculating ROI: Ensuring OD/HR Initiatives Affect the Bottom Line & April 28th, 2005

2. Agenda

3. Panelists Anthony Chartrand Viejas Casino, VP of HR Wayne Darbeau Port of San Diego, VP of Administration Sue Stevenson Elan Pharmaceuticals, VP Global HR Ken Ruggiero Goal Financial, CFO

4. Commercial break… And now a brief message from one of our trusted partners: Paul Drolson Principal Wealth Advisors

5. Calculating What YourRetirement Plan Will Provide • Many factors may affect the amount of money available to you during retirement: • Current savings • Contribution level • Rate of inflation • Federal and state tax rate • Years until retirement • Rate of return on investments

6. Impact of ROI onRetirement Savings • Annual retirement income of $60,000 is needed in today’s dollars assuming a 3.1% inflation rate • $200,000 in savings • Saving $8,000 per year • Retiring in 20 years • Federal tax rate – 25% • State tax rate – 9.3%

7. The Problem with ROI… • MATH --- It is difficult to solve an equation with different units on each side of the equation… Thus 8th grade algebra was invented… • OD Initiatives --- Often the money you invest does not directly result in hard dollar savings, nor, revenues… Rather the OD/HR initiative impacts or influences some behavior, process, or structure, which in turn can be correlated with a hard dollar cost savings or revenue increase….

8. Traditional Approach to ROI Return on Investment ( Revenue & Costs) Inputs (Cost in Dollars) ≤ * When the units in A and B are expressed in dollars

9. Our Approach to ROI Influences/ Impact Variables (Quality, Time, & Cost) Return on Investment ( Revenue &  Costs) Inputs (Cost in Dollars)

10. Tony Chartrand Viejas Casino VP of Human Resource

11. Basic Elements of Measurement • Cost • Time • Quality • Satisfaction • Effects on business priority (i.e. Revenue) • TTP (Time-to-productivity) • Also used as an early warning system

12. Effects of Human Behavior on Business U.S. Companies Lose: • ½ their investors in 1 year • ½ their employees in 4 years • ½ their customers in 5 years A 5% swing in customer retention can result in a 25% swing in earnings * *Frederick Reichheld: The Loyalty Effect

13. Our Business – The Entertainment Experience Major Components of a Program: • Branded “Hospitality Extreme” • Leadership • Communication • Guest Service Academy • Performance Management • Reward & Recognition • Team Member Entertainment

15. Measurement - ROI • Secret Shopper • “Out of the Box” • Bus Surveys • Balanced Scorecard service measures • Supervisor-observed behaviors • Training Value • Retention • Orientation – TTP • Guest comment exits • Team Member Survey

16. Wayne Darbeau Port of San Diego VP of Administration

17. Board of Port Commissioners Vacant, Sylvia Rios, Stephen Cushman Jess E. Van Deventer William Hall Robert Spane Michael Bixler

18. Satisfaction vs. Cultural Is Driven by Leadership Achievement Teamwork Stakeholder Input Power & Ego LEADERS SHOULD DETERMINE IDEAL CORPORATE CULTURE TO SUPPORT HIGH PERFORMANCE AND STRATEGY

19. Assess Current State Future State Vision/Values Performance Align Systems to Vision/Strategy Align Leadership Build Cultural Consensus Reward Value Based Behavior OCES Leadership Impact Cultural Consensus Building LSI Feedback Vision & Values IMAGINE 21 7-HABITS OF HIGHLY EFFECTIVE PEOPLE & Other P.I.P.E Programs Cultural Survey: Culture Change Alignment

20. DefensiveCulture ConstructiveCulture Revenue 166% 682% Stock Prices 74% 901% Net Income 1% 756% Culture and Performance Kotter & Heskett: Study of 207 firms over an eleven year periodas reported in their book Corporate Culture and Performance

21. Creating a Values-Based Culture Constructive Culture at the Port of San Diego

22. Port Leadership Tools for Culture Change • Clear Vision • Where are we going? • Clear Strategy • How we going to get there? • Clear Expectations • What do you expect of me?

23. Employee Performance is Sustained by Culture • Accountability • Take responsibility to get the job done • Initiative • Self-motivated • Self-managed • Creativity/Innovation • Integrity • Teamwork

24. Targeted OD Programs Create Ideal Culture: P.I.P.E • MBTI, DISC, OCES, etc. • Customer Satisfaction Survey • Employee Satisfaction Survey • Organizational Culture Survey • 360º Feedback Instruments • Leadership Impact (LI) Survey • Executive Coaching Program Offerings Assessments/Surveys • 7 Habits of Highly Effective People • Imagine 21: Fast Track to Change • Project Management • Problem Solving & Decision Making • Focus • Ethics in the Workplace • Writing Advantage Plus • The 4 Roles of Leadership • Supervisory Training • Meeting Management • Presentation Skills-

25. Measure for Impacts in Key Performance Areas THE PORT'S "ROI" METHOD: • Organizational Assessment Program (OAP) 1999 • Conducted in conjunction with Port Staff, Employee Vision Committee, and Walsh & Associates • 76% Response Rate • Employee Satisfaction Survey 2001 • Conducted by: ViewPoint America • 67% Response Rate • Employee Satisfaction Survey 2002 • Conducted by: e-Perception • 87% Response Rate • Organizational Culture & Effectiveness Survey 2004 • Conducted by: The Pacific Institute and Human Synergistics with 87% Response Rate “What gets measured, gets done.”

26. Develop Findings Findings Use of Customer Satisfaction Data Recommend – Good Place To Work Job Satisfaction Feel Appreciated 2001 2002 2004 “What gets fed back, gets done well.”

27. What are our financial objectives with respect to achieving our vision? Financial At what internal processes must we excel in order to satisfy our customers? Vision & Strategy Internal Processes Learning & Growth What must we do to develop our internal resources in order to excel at these processes? Customer At what customer measures do we need to excel to produce the desired financial performance? Port’s COMPASS Balanced Scorecard Approach

28. The Business Analysis Process

29. Sue Stevenson Elan Pharmaceuticals VP of Human Resource

30. Research • HRPS Survey • UK DTI and CIPD • Royal Bank of Scotland • Sears ………….Conclusions………..

32. Measuring Efforts • HR Measurement • Operational Efficiency of HR • Human Capital Health • Financial Valuation methods • Cost-based approaches • Market-based approaches • Income-based approaches • And of course… ROI

33. Challenges – Calculating ROI Benefits-Cost/Expense = ROI • Identifying Costs √ • Quantifying Costs √ • Identifying Benefits √ • Quantifying Benefits ….!! Yet need to ensure that initiatives impact the Bottom Line

34. Return on Intuition? “Confidence – How Winning Streaks and Losing Streaks Begin and End” ~ Prof. Rosabeth Moss Kanter Defines confidence as an expectation of a positive outcome. It’s a belief that actions will result in success.

35. Ken Ruggiero Goal Financial Chief Financial Officer

36. Goal Financial, LLC - Quick Facts • Established in January 2001 • Privately held Company • 10th largest holder of Federal Student Loans • $5 billion of Federally guaranteed student loans to over 142,000 students • Experienced management team • 200 employees (>75% in call center) • 40,000 sf facility in San Diego & 5,000 sf facility in Alexandria, VA

37. Cumulative Loan Origination Volume and Borrowers

38. “Definition” of OD to Participants Organization Development

39. “Definition” of OD for Financial Executives

40. Goal’s Investment in Organizational Development • Team Building • Behavior Testing • Mission, Vision, and Values • Goal Setting Models • Coaching • “C” Level • VPs • Directors • Selection Methodology and Testing • Executives • Call Center Agents

41. ROI = Relies On Intuition

42. The ROI on any OD Initiative is Simply Calculated……

43. Return on Investment – the “MATH” Approach

44. Question & Answer