1 Welcome to the Denison Certification Workshop Building and Sustaining High Performing Organizations and Leaders Denison Consulting | March 2015

2 Workshop Schedule March 11, 2015 NETWORKING BREAKFAST  Welcome and Introductions  Culture & leadership  Denison Model and Link to Performance  Path to High Performance  Overview of the change process framework  Discovery  Planning and overview of Denison tools  Diagnosis  Analysis  Honest Conversation  Action Planning  Sustainable Improvement  Case study  DOCS an DLDS results interpretation/analysis  Prioritization and action planning (Breaks and Lunch provided) GROUP DINNER March 12, 2015 NETWORKING BREAKFAST  Highlights and re-cap of Day 1  Transformation & Turnaround  Strategic Alignment  M&A  Leadership Development  Wrap-up and Q&A (Breaks and Lunch provided) CONCLUSION

3 Path to High Performance Why is culture important to the performance of your organization? How can we ensure effective and sustainable culture development? What is your current state? What is the impact? How do we translate results into thoughtful actions? What is data telling us? How do we create common understanding?

4 TRANSFORMATION & TURNAROUND

5 Private Equity Companies What is the link between culture and performance? 49 PE Portfolio Companies 103 separate lines-of-business (P&Ls) a)Completed a Denison Culture Survey prior to January 2014 b)Financial data was available for the same time period as the Denison Culture Survey Study sample includes...Inclusion criteria… Methodology

6 Growth Metric Growth metrics provide an apples-to-apples point of comparison within a diverse sample of companies representing various industries, sizes, etc. Rolling averages provide a stable estimate: a) EBITDA Growth* b) Sales Growth Focus on Growth *Two outliers were excluded from the EBITDA Growth analysis 3-year rolling averages (Average growth over a 3 year period) Methodology

7 Link to Growth: Top vs. Bottom Companies Avg. EBITDA Growth Avg. Sales Growth 7% -3% 17% 5% 2.5X +5X 2.5x EBITDA Growth +5x Sales Growth Bottom HalfTop Half

8 Link to Growth: Predictive Analysis Across P&Ls, the Involvement trait was most strongly and consistently correlated with EBITDA Growth & Sales Growth Where should we stick the crowbar?

9 Culture Change over Time + 13 pts. on average from 1 st to 2 nd culture survey 1 st Survey2 nd Survey

10 BUSINESS CASE STUDY: Earthlink

11 What would excite you most about integrating Company A? Company B?

12 What would concern you most about integrating Company A? Company B?

13 Fast Forward….Emphasizing Strategic Alignment

14 Culture Development remains a challenging journey as we work to unite and transform our business. The need to:Led to: Define the desired customer experience Customer segmentation and re-organization Design integrated processes and systems Corporate process improvement team and OSS efforts, training, and education Empower teams to drive change Now “teams” reported as the primary way work gets done In

15 Mission (Vision, Strategy & Goals) are becoming less clear or being viewed with skepticism. Impact in the market is suspect. Less confidence in our ability to work effectively across the organization to create the necessary change. Employees feeling less valued and skill deficits are a concern.

16 Strategic Clarity & Alignment

17 MERGERS & ACQUISITIONS

18 The M&A Landscape This looks great on paper! “I remember saying at a vital board meeting where we approved this, that life was going to be different going forward because they’re very different cultures, but I have to tell you, I underestimated how different” Richard Parsons, Time Warner

19 Worldwide M&A activity $3 trillion 70% of deals do not realize the originally stated goals “Buying is fun, merging is hell!”

20 Keeping Culture ‘front & center’ in the M&A conversation

21 Managing culture throughout the M&A Process TRANSITION Transition team to plan integration INTEGRATION Integration effort to create ‘one’ business CULTURAL DUE DILIGENCE Define the target & Reduce the risks DATA DESERT Deal

22 Growth Strategy Internal Integration STRATEGY CULTURE

23 What level of integration do we need? ABSORPTION Target company conforms to acquirer Cultural Assimilation TRANSFORMATION Both companies find new ways to operate Cultural Transformation PRESERVATION Target company retains independence Cultural Autonomy REVERSE MERGER Unusual case of target firm leading Cultural Assimilation BEST OF BOTH Additive from both sides Cultural Integration LOWHIGH LOW HIGH Degree of change in acquiring company Degree of change in target company Adapted from Marks and Mirvis (2010)

24 What is the Starting Point? Interviews to surface Leadership mindset/beliefs (planning, decision making, communication, etc.) Employee insights Archival Data

25 Identifying Potential Areas of leverage/synergy Areas of leverage/synergy: Practices, habits and behaviors that each organization seem to value and demonstrate Best practices: Practices, habits and behaviors that one organization has that are missing or underutilized by the other organization(s) – that can be captured and shared Blind spots: Practices, habits and behaviors where none of the organizations have clearly demonstrated capabilities - and that need development to maximize performance The more color we see in any given area – the more likely leaders and employees can articulate the beliefs and habits that have driven the high level of clarity and alignment indicated

26 Clarity & Alignment: A double-edged sword? Best Practices ? Wealth of Arrogance?

27 BUSINESS CASE STUDY: RJR

28 Consumer Products Co.  Merger of 2 consumer products companies  “We’re two old companies with rich histories”  Strong competitors with one another  “We are constantly fighting each other for shelf space and brand recognition”  Organization’s leaders see value in using the Denison Model  “We need help and using a model that neither organization has used is good”

29 Consumer Products Co (cont.)  Decided not to conduct Denison Culture survey just prior to - or immediately after the merger  “There will be a lot of turmoil in the first 120 days. We know there will be uncertainty and confusion”  New leadership team is a combination of execs from each legacy company  “We want this to be viewed as a ‘merger of equals’ – not an acquisition”  Seeking a ‘best of both’ approach to integration  “Together we can be much stronger than either of us on our own”  ±6,500 employees (post-merger)  “We have to get this right, our market is not growing and cost savings and research are what we need.”

30 The Goal: To create a Single, High Performing Organization

31 Consumer Products Merger How might you utilize the Denison Model without conducting the survey in the early stages of the merger*? *Early stages = first months of the integration effort

32 Habits & Routines 100 Most Powerful Women: Susan Ivey “For those history buffs among us, or for anyone who has ever played a sport or cheered for your favorite team…you know what it takes to win battles…you know what it takes to win championships. It is a camaraderie, an esprit de corps, a common interest. For us, its company culture – the way we think…the way we act…and the way we operate as an organization. Show me an army, a team or a company that has achieved greatness…that have been winners…and I’ll show you a group of individuals with a well-defined culture, brought together in a common interest, with clear goals and a passion for success.” Ivey has maintained the company's market share, and the company has consistently beat analysts' expectations. The stock has risen 33% since her post- merger takeover in 2004.

33 A Habit – using the culture model for framing activities New company – A Single High-Performance Culture Sales force integration Launched Core Values Immediate all-employee meetings 100 Day Focus Groups Formed High Performance Culture integration teams Defined Vision and Roadmap

34 9 Months Post-Merger

35 Did we mention… Integration of 1,200 new employees, equipment transfers, facility closings Continuous Productivity Improvement initiatives launched Replaced 70 systems with SAP New business/portfolio strategy  Stock price up SUBSTANTIALLY  Pre-merger stock price of $57.00  Immediately after merger $70.00  18 months after the merger: $104 -$115  Dividend up to $5 per share annually  Exceeded all key financial and market-share targets  Resulted in highest-ever performance bonus payout to employees

36 BUSINESS CASE STUDY: Cultural Due Diligence

37 Cultural Due Diligence External Stakeholders Social Media & Public Data HR DataOn-SiteDeal HighLowInvasiveness ExternalInternalData location

38 Understand your culture first Assess your own culture 1 Define strengths you are trying to build 2 Define the limitations you are trying to overcome 3 Define the ideal culture for your target acquisition 4 CDD FRAMEWORK

39 Clarity the end state ABSORPTION Target company conforms to acquirer Cultural Assimilation TRANSFORMATION Both companies find new ways to operate Cultural Transformation PRESERVATION Target company retains independence Cultural Autonomy REVERSE MERGER Unusual case of target firm leading Cultural Assimilation BEST OF BOTH Additive from both sides Cultural Integration LOWHIGH LOW HIGH Degree of change in acquiring company Degree of change in target company Adapted from Marks and Mirvis (2010) CDD FRAMEWORK

40 “We are acquiring a firm. How do we make sure there will be a good culture fit?” CULTURAL DUE DILIGENCE 1.Inform strategy of deal process 2.Highlight integration challenges

41 Social Media Analysis Employee Generated Social Media Data COMPETITOR Analysis Culture Profile Estimate Qualitative Comment THEMES Talent Teamwork/ Training CareerConflict Customer Focus Industry leadership Strategy GoalsSr. mgmt Alignment Marketing Values CDD FRAMEWORK

42 Social Media Analysis Talented and hard-working people Overall healthy culture Pay & benefits / Work-life balance Unclear future direction Talent management challenges Quality of products Employee discounts Silos Short-term focus Leadership challenges Acquiring FirmTarget Firm Culture profile Estimate Qualitative Comment Themes 80% recommend as an employer 40% recommend as an employer CDD FRAMEWORK

43 External Stakeholder Interviews ACQUIRER Former Executives Former Employees Suppliers Customers Channel partners TARGET Former Executives Former Employees Suppliers Customers Channel partners Semi-structured interviews with various stakeholders including previous employees to understand the target firm’s culture CDD FRAMEWORK

44 HR Data & Previous Survey    Survey (Data) Mapping  Comment Analysis  HR Data Review CDD FRAMEWORK

45 HR Data & Previous Survey Archival Employee Survey Mapping Qualitative Comment Analysis Acquiring FirmTarget Firm Autonomy/ Talent mgmt Teamwork/ Collaboration Culture Innovation Industry leadership StrategyLeadership Values FlexibilityTeamwork/ CustomerProducts CDD FRAMEWORK

46 Internal Stakeholder Interviews ACQUIRER Leadership Team Middle Managers Deal Team Sample of employees TARGET Leadership Team Middle Managers Deal Team Front Line Employees (sample) Interviews with current leaders, managers, and employees to identify the target firm’s cultural strengths and weaknesses CDD FRAMEWORK

47 Internal Stakeholder Interviews Semi-structured interviews with the transition Team and leadership ABSORPTION Target company conforms to acquirer Cultural Assimilation TRANSFORMATION Both companies find new ways to operate Cultural Transformation PRESERVATION Target company retains independence Cultural Autonomy REVERSE MERGER Unusual case of target firm leading Cultural Assimilation BEST OF BOTH Additive from both sides Cultural Integration LOWHIGH LOW HIGH Degree of change in acquiring company Degree of change in target company Adapted from Marks and Mirvis (2010) Target’s expectation  THE END STATE REVISITED This Acquisition CDD FRAMEWORK

48 Synthesis 1. The points of synergy Passion for the products and customer Strong relationships Deal in-character for the acquiring company 2. Cultural differences Speed of decision-making and operations Emphasis on values and people 3. Key integration challenges Different integration expectations Management and organization structure Branding of retail stores Talent management

49 LEADERSHIP DEVELOPMENT

50 BUSINESS CASE STUDY: Silicon Valley HR Executive

51 Background  Sr. Vice President of Human Resources entering a 12 week leadership development program  Program goal is to gain initial insights about their leadership capabilities  Program includes:  approximately 20 participants  a combination of on-site training  Action Learning team assignments  individual activity  Each leader receives their 360 feedback prior to the first on-site meeting Combined Other Raters 3 Peers 7 Direct Reports 1 Boss 3 Other

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55 Thought Questions  What are your initial impressions of this leader?  What might be some reasons or possible explanations for the feedback this leader is receiving?  What does the feedback from each sub-group (Peers, Direct Reports, Boss, Others) tell us about the leader?  What would you recommend to this leader to help him/her move forward with the feedback?

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62 BUSINESS CASE STUDY: Culture & Leadership Development At a large public institution

63 Background  Going through a lot of change, with more coming  Budget & resource constraints  Restructuring: Consolidating roles, functions, changing reporting structures  Utilizing both OCS & LDS

64 Unit X  Largely blue collar workforce in service and maintenance positions  Wide gaps between staff and leadership  Largely impacted by org restructure

65 Unit X

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70 Discussion Questions How would you help this organization summarize this data? What would you suggest they focus on?

71 Overall Summary & Recommendations  Customer Focus remains a clear cultural strength  Build involvement through a focus on Mission  Work to better define and track on Goals & Objectives and allow people to work autonomously  Build empowerment by engaging people to feel part of the process  Leverage strength in customer focus and change in structure to begin to drive greater clarity in mission  Parallel path approach for relentless communication  Continually connect initiatives to Mission – provide the “why”  Focus on creating an environment of “with” not “to”

72 This Unit’s Executive Vice President

73 This Unit’s Executive Vice President

74 This Unit’s Executive Vice President

75 Discussion Questions What do you see as this leader’s Strengths to build on? Where does this leader have areas of opportunity for improvement and development? How does the culture data help inform your interpretation of this leader’s data?

76 Patterns and Themes Strengths to build on:  Visionary, strategic, forward thinking  Leading strategic change rooted in customer  Integrity, do the right thing Comments:  Vision for the future, highly strategic  Change oriented, lead others to change  Honesty, respected, walks the talk

77 Patterns and Themes Potential opportunities in:  Managing downward  Empowerment and skill building of others  Facilitating agreement incorporating diverse perspective Comments:  Trust staff, delegate, ability to make decisions

78 Wrap-up

79 Your Pilot 25 person Denison Organizational Culture Survey 1 Person Leadership Development Survey OR Your pilot package includes the full survey of your choice, full report generation, and basic interpretation and feedback on results from a Senior Denison Consultant.

80 Solutions Essentials  Learning the Basics  Understanding Denison’s Solutions  Selling the Solutions  Sample Proposals  Preparing for the Survey  Interpreting the Results  Linking to Denison  And more……………..

81 Final Questions?

82 Thank You!