Human Resources Strategy

Bob Hetzel

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Human Resources Six Sigma Structure Human Resources Six Sigma Structure

Executive Steering Committee Daniel Casteel

Division HR Champion Tonya Miller

ADT HR Champion Mike Esposito

SimplexGrinnell HR Champion Anne Liming

Tyco Safety Products HR Champion Bob Hetzel

TFS – Communication & Training Lisa Turner

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Black Belt Life CycleBlack Belt Life Cycle

Selection

Training

Assigned Projects

Application

Appraisal/Exam

Certification

Ongoing Projects

New Assignment

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Human Resources Support Human Resources Support

Key areas of focus include:

•Recruiting, Screening and Selection

•Certification

•Career development and succession planning

•Early Exit Strategy

•Six Sigma Project Team Support

•Compensation

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• Develop and post Black Belt and Project Champion position descriptions

• Identify high potential BB and PC talent through Leadership Planning Process (LPP)

• Employ behavioral interviewing techniques to screen candidates

• Phase I – Safety Products Training Position Allocation•Wave I – Transactional (5 BBs)•Wave II - Safety Products Mfg. – (30 BBs)•Wave I - Design For Six Sigma – (30 BBs)

Recruiting, Screening & SelectionRecruiting, Screening & Selection

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Black Belt certification is defined as:• Completion training coursework• Completion of required number of projects• Delivery of required financial savings• Passing black belt certification exam

Black Belt CertificationBlack Belt Certification

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• Assess Project Champion/Black Belt needs • Create career development plans• Provide career development coaching, mentoring

and training as necessary• Integrate assignments into Succession Planning

process

• Ensure transition back into a business unit at the end of full time Black Belt and Project Champion assignments

Career Development and Career Development and Succession PlanningSuccession Planning

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Identify appropriate way to handle Black Belts

and Project Champions who:• Self-Select out of program• Fail to satisfy classroom evaluation• Do Not Complete Training• Do not close projects• Do not meet financial hurdles

Early Exit StrategyEarly Exit Strategy

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• Provide HR data, metrics and analysis • Address HR implications of business

process improvements

Support Six Sigma Project TeamsSupport Six Sigma Project Teams

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• Attract and retain high potential talent

• Reward and recognize specific six sigma achievements

Compensation ObjectivesCompensation Objectives

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• Provide BB’s & PC’s an increase in total cash compensation compared to existing business role• Delivered through an increased incentive opportunity

• Candidates will be selected from a wide range of roles and therefore, may have a wide range of base salary and target incentive opportunity• Variation in pay is acceptable; no attempt to align

compensation• Higher compensated Black Belts should demonstrate

higher competencies, and should generally focus on larger, more impactful projects

Compensation StrategyCompensation Strategy

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• Most BB’s & PC’s will retain current annual base salary- Eligible for future salary increases in accordance with the

company’s merit increase guidelines- Annual performance review for BB’s conducted by

Project Champion- Annual performance review for PC’s conducted by BU

Executives and Deployment Champion- HR Champion will ensure performance management

consistency

Annual Base SalaryAnnual Base Salary

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• If a BB equity adjustment is necessary, it should occur following Black Belt Certification - Increase is based on successful completion of the

training program

• Tyco Safety Products HR Champion and BU Executive Steering Committee, will be responsible for approving all BB and PC base salary increases

- Provides equitable and consistent decision process across all business units

Annual Base SalaryAnnual Base Salary

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Full-Time Black Belt• Assigned Six Sigma Black Belt title

Part-Time Black Belt• Retain current position title• May use Six Sigma Black Belt designation

Title AssignmentTitle Assignment

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CertificationCertification Award

• Provide a compensation award upon Black Belt Certification- Amount of award is consistent for all TFS Black Belts; reinforces

team relationship- Fulfillment of Certification requirements determined by Steering

Committee

• Award provides recognition- of their personal achievement and development

- the value of the certification to the company

- the results of projects completed as part of the certification process

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• Cash Award - $2,500 immediately upon certification - Applies to FT and PT Black Belts

- Immediate recognition- Greater alignment to individual results

• Stock Options - Applies to FT and PT Black Belts

- One time special option grant at the time of Black Belt certification (number of shares TBD)

- Immediate recognition- Long-term time commitment to recognize value- Greater alignment to Tyco International results

BB Certification Award

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• Target incentive opportunity increased 10 percentage points compared to FY03 incentive target for current position upon completion of Black Belt Certification

- Applies to FT Black Belts only- Supports importance of role within the company and the impact of

their contributions to overall business performance - Full time Project Champions eligible for 10% increase as well

• Black Belt candidates not currently on an annual incentive plan in FY03 will receive an incentive opportunity equal to 10% of their current base salary - Applies to FT Black Belts only

Incentive Compensation

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• 80% - EBIT and FCF of business unit aligned to Six Sigma projects- Provides a strong association to deployment projects as

individuals in BB & PC roles will most likely focus on projects closely aligned to their business unit

- Six Sigma savings and/or profit improvement are reflected in business unit financial measurements

• 20% - EBIT and FCF of next level up business unit- Supports teamwork across the Safety Products organization

Incentive Measurements

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• Individual Modifier

- Applies to Black Belts and Project Champions

- Adjustment for individual performance goals not captured in the financial measurements

- Recognizes both superior performance (positive modifier) and underperformance (negative modifier)

- Amount of Modifier is discretionary, but reasonable, i.e. +/- 25%

- Used to account for direct results of Six Sigma projects

Incentive Compensation

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• Incentives will be paid on an annual basis - No quarterly payments; not consistent with timing of BB and PC

contributions

• Proration of Target BB and PC Incentive Percentage- 10 percentage point increase in BB incentive opportunity will

prorated to the time of Black Belt Certification…not acceptance to the program

- Full Time Project Champions 10% prorated for time on project

• BB’s and PC’s that self-select out or do not close projects- Revert back to original incentive percentage opportunity upon

exit from the program- No incentive premium will be paid for the period of time that an

employee was in the program

Incentive Compensation

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• Guarantee FY03 incentive target equal to the amount Black Belt and Project Champion would have earned had he/she remained in former role

Incentive Compensation Balance of FY03 Year

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Incentive Payout Example

Region Business Unit

ResultEBIT

40%

FCF

40%

EBIT

10%

FCF

10%

Total Incentive Payment

Ind. Modifier

Final Incentive

Incentive payout % of Base Salary

PIII 18,000 18,000 4,500 4,500 45,000 20% 54,000 54.0%

PII 12,000 12,000 3,000 3,000 30,000 10% 33,000 33.0%

PI 6,000 6,000 1,500 1,500 15,000 -5% 14,250 14.25%

Assumptions: Base salary = $100,000 Original Target Incentive (PII) = 20% of base salary or $20,000 Black Belt Premium = 20% + additional 10% = 30% or 30,000

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Deployment Timeline

Six Sigma Mfg Posting/Selection March 27, 2003

Identify/Select Mfg BB Candidates April 8, 2003

Project Champion Training April 22, 2003

Mfg. BB FAStart Program April 29, 2003

Mfg. BB Training May 5, 2003

DFSS BB Training May 12, 2003

Human Resources Support Human Resources Support