1. Rewards Can Make a Difference! “High performing organizations with HR programs that are integrated and aligned with key business objectives provide a 3-year total shareholder return of 29.8% vs. 10.3% for all other companies!”* Communicating mission and values that build employee commitment and understanding. Hiring and developing key talent and capabilities. Building performance management systems that link employee behaviors to long-term business success. Providing motivating total reward programs that deliver high value to employees. 4 key HR programs identified as: * Watson Wyatt study of High Performing Companies.

2. T OTAL R EWARDS C OMPONENTS Base Salary Short-Term Incentives Sales Incentives Cash Awards Work Environment Employee Benefits Learning and Development Long-Term Incentives Non-Cash Recognition Awards

3. F undamental P ay P hilosophies Pay the Job / Cost of Labor Pay the Person / Cost of Doing Business What’s the difference to the company and employee?

4. P erson P ay P hilosophies Pay for Results Pay for Behaviors Pay for Knowledge Others ? Which is Best ?

5. D escriptions Attributes that are more associated with overall company success than specific skills. Generally applies to lower level jobs with defined skills that are tangible and measurable. Skill-Based Pay – Pay for Knowledge –Refers to more whole bodies of study or disciplines. Pay for Competencies –

6. Industry Robotics Machine Tool Company Jobs Machinists Objective Union Avoidance S kill- B ased P ay E xample

7. Design Phases Establish Design Team and Steering Committee Determine covered jobs Identify skill blocks Weight skill blocks based on complexity and importance Group skill blocks into levels Assign pay rates or ranges to levels. Provide training opportunities to obtain new skill block

8. Skill Block Mean Rating Skill Pay Level Market Value Master Machinist Sets up all automated machine production runs.4.71$18.25 - $23.75$21.37 Certified in use of 6 or more machine tools.4.32 Troubleshoots and repairs machine tool problems.4.15 Recommends procedural changes in production.4.03 Develops production schedules.3.98 Journey Machinist Runs full machine productions on existing setups.3.75$14.25 - $19.50$17.98 Certified in use of 3 or more machine tools.3.65 Maintains and calibrates machine gauges, fluids and readiness. 3.57 Uses precision tools, schematics, and ISO standards to complete work. 3.33 Apprentice Machinist Prepares parts for machine production.3.15$10.25 - $15.50$12.16 Reads work orders.2.87 Verifies tooling and equipment availability2.47 Follows Company safety procedures.2.06 Uses basic hand tools and math concepts.1.58 Skill-Based Pay Program for Machinists

9. A lternatives t o S kill B ased P ay Market Based Pay + Team Incentives for: Productivity Improvements Quality Improvements Safety Improvements Projects