Leading through Unprecedented Times Managing the 2010 Workforce March 25, 2010

1 Mercer Market and economic forces continue to create unprecedented challenges and uncertainty  Decreased rates of globalization  Decreased consumerism, credit  Access/cost of capital  Shrinking markets  Imbalances resulting from downsizing  Short-term “bubbles” in labor supplies internally and externally  Our degrees of freedom and levels of corporate responsibility will be greatly impacted  Trust and connection to the company have changed  Attitudes toward success, rewards, work have shifted  The traditional “safety net” has been weakened DEMAND WILL RETURN but not like before GROWTH WILL BE TOUGHER many moving pieces MANAGING EMPLOYEE DEMOGRAPHICS more complex NEW SOCIAL POLICY AGENDAS strong impact THE EMPLOYMENT DEAL is being tested

2 Mercer Post-recession talent strategies will be placed under increasing scrutiny Answer critical questions  What markets and talent segments are critical to short-term return and longer-term growth?  What new types of deals will restore trust and engage employees?  With talent flows experiencing choke points and bubbles, how can career paths be redefined and managed?  With less reward dollars available, who will be rewarded and for what levels of performance?  How will the need for employee financial security and increased social responsibility be balanced with new economic realities?  How can leaders and communication strategies be better positioned to connect with and inspire employees?

3 Mercer 2010 requires a new way of planning Take action now in the face of uncertainty Key principles to keep in mind Use facts instead of perceptions Be ready to make real-time decisions andturn on a dime Segment and focus on key talent Strike a new deal – that works for both Be transparent and involve your employees Engage the business in the conversation

Context to help and

5 Mercer Talent Workforce reduction trends Workforce Reductions Plans for 2009 Workforce Levels Source: Mercer June2009 Unprecedented Times Survey

6 Mercer 2010 workforce planning Source: Mercer Human Capital Planning 2010 Survey 2010 human capital planning emphasis vs Workforce costs Focus on high-potential employees Focus on critical skills Development of workforce contingency plans Focus on employee engagement Use of internal analytics Worklife balance Use of external benchmarking Use of workforce segmentation Percent of organizations More emphasisAbout the sameLess emphasis

7 Mercer Market base pay increase trends In the past six months, 51% of organizations froze salaries at 2008 pay levels for at least part of their employee population; 30% of organizations overall 2009 actual2010 projected Employee category Average base pay increase budget (excluding 0’s) Salary freezes Average base pay increase budget (including 0’s) Average base pay increase budget (excluding 0’s) Salary freezes Average base pay increase budget (including 0’s) All employees3.2%30%2.1%2.9%11%2.6% Executive3.5%39%1.9%3.1%14%2.6% Management3.2%31%2.1%3.0%11%2.6% Professional (sales & non-sales) 3.2%28%2.2%2.9%10%2.6% Office / Clerical / Technician 3.1%25%2.2%2.9%10%2.6% Trades / Production / Service 3.0%24%2.2%2.9%10%2.6% Romania / All industries9.8%20%6.7%6.5%15%6%

8 Mercer Annual incentive trends Many companies have made adjustments to their annual incentive programs in 2009, and many are considering changes for 2010 Annual Incentive Program Changes (n = 229) Percent of organizations Source: Mercer July 2009 Weathering the Storm Survey

9 Mercer Long-term incentives in 2009 One-quarter of companies reduced LTI values, while the balance delivered a value consistent with 2008 grant levels; 11-30% reduction was most common 2009 Long-term Incentive Grant Levels Per Recipient (n = 233) 2009 Long-term Incentive Grant Level Reductions Grant Reductions Executives % of Orgs (N = 51) Non-executive Participants % of Orgs (N = 49) Less than 10%25%20% 11 – 30%51%49% 31 – 50%6%14% More than 50%18%16% Source: Mercer July 2009 Weathering the Storm Survey

Tactical approaches to get

11 Mercer Myths and realities about human capital in a recession MythsRealities Employee Retention We don’t have to worry about retention – no one is going anywhere Challenge of retention has given way to challenge of engagement. Transparency fosters engagement, which will ensure retention of high performers when times improve Talent Employees only care about pay increases Career development enhances the employment relationship Pay reductions We can cut across the board and worry about competitiveness later When the economy improves, pent up demand for high performers will prevail Performance We don’t have to be concerned about whether our pay programs work well because we’re not paying out that much anyway Given limited resources, it is crucial that any salary increases and incentives are allocated to critical segments Rewards: Market data We don’t need market data this year given inevitable pay increase cut- backs Falling too far behind increases the risk of losing key talent when the economy turns around

12 Mercer EMPLOYEE ENGAGEMENT Moving forward, action plans won’t wait TALENT REWARDS  Adapt workforce cost and capabilities to reflect uncertain business conditions and multiple planning scenarios  Create career development opportunities, particularly when monetary rewards may be limited  Manage performance, identify / differentiate top performers  Focus limited resources on engaging talent to drive performance and profits  Use communication effectively to quell fears, minimize distractions and increase productivity  Manage financial and brand risks of changing labor legislation and social policies  Redefine links between performance and pay  Utilize fact-based data to set compensation planning agendas and re-tool reward program design 2010 priorities must be established now