September 14, 2006

1. September 14, 2006 Aligning Compensation with Career Paths & Development Mary Alice Riccobono Esperanza Martinez Neu

2. Welcome and Introductions “Speed Dating”

3. Agenda • Career Path and Development • A generalist’s perspective • Challenges / Opportunities / Approaches • Assessment and development tools • Compensation • Compensation practices and career paths • Contrast / compare models • Incentives • Brief Break • Case Study / Roundtable • Debrief

4. Generalist as “Navigator” • In a well-established Organizational Development function or process, the generalist is “navigator”, coach, and guide • Charting the course of the learning journey

5. Generalist Role:Career Paths & Development The role of the generalist… • Look and listen for the messages • Be proactive • Identify needs and facilitate solutions • Be strategic for the organization Where do the messages come from?

6. Career Development • It starts with the hiring process • Valuable information is gained in the interview and selection process • It should be captured as foundational information in the goal setting and development process with the hiring manager

7. Development Tools • Orientation Plans • 90 Day Reviews • Performance Reviews • Development Plans • Action Plans – Performance Improvement • Development – Career Development • PDI360 Feedback Assessments

8. Turnover / Exit Interviews / Morale • Turnover Reports / Metrics • High volume; rapid impact • Candidate marketplace for talent has turned • Could also be management or department issues • Exit Interviews • Direct commentary • Satisfaction with compensation • Level of compensation improvement in new position • Satisfaction with benefits and time off • Morale • More likely a sign of something else – but is a data point regarding “position worth”

9. Recruiting / Marketplace data • Degree of difficulty • Time to fill • Number of candidate interviews per opening • Offers rejected • Candidate reaction … to the comp • Need to modify “requirements and qualifications” in order to meet price range • Candidate declines opportunity to interview • Or from a different perspective: • Requirements and qualifications are higher based on company strategy or need

10. Environmental Challenges / Industry Needs • Industry/Environmental/Organizational Challenges • Succession/Progression Planning • Is the “bench” ready? • Specific Functional needs, i.e., Sarbanes-Oxley • Deeper and broader business skills / global skills • Marketplace: Shifts in need for functional expertise • i.e., Information technology, Finance, Audit – and others (based on a particular industry) RECRUITING PLUG FOR ABC… Immediate opening for...highly talented, experienced compensation analyst, who can walk on water and who is fun to work with! Do you know of anyone; are you THE ONE? Please email eneu@amerisourcebergen.com

11. The perfect and not-so perfect worlds… • In a “perfect” world, development work is • Proactive • Steady • Deliberate • Strategic • But sometimes…

12. Here’s the story • Small department of larger functional area • Challenging management team • Difficult to fill roles • Demanding travel requirement • Complex and high-volume work • High visibility positions; not high acknowledgement • History of recruiting difficulty • Recent department expansion

13. And the story continues… • High turnover • Exit Interview – Data Trends • Compensation and career limitations • Recruiting difficulty – long time to fill • Organizational / Industry Need • Retention focus is greater • Succession Planning Initiative • Bench needs to be strengthened • Organizational will to develop is greater

14. Collaboration • An unexpected visit from the VP! • Great News for me! • WE’VE GOT A PARTNERSHIP!

15. The Strategy/Assessment • Evaluate turnover trends and exit interview feedback • Identify sources / costs associated with last few years of hiring • Meet with incumbents to conduct a comprehensive analysis: • Short term goals • Long term goals • Education needed / desired • Training needed / desired • Is the work rewarding? • Future job opportunities desired • Developmental activities available / desired in present position • Self development needs / desires • Mobility

16. Strategy, continued • Partner with Compensation • Salary analysis • Industry trends • Review of the job hierarchy • Incentive potential • Other motivating factors (non monetary) • Evaluate Retention and Recruiting Strategy“Filling the Pipeline” • Rotation opportunities – enterprise-wide, as appropriate • RE: 2 year lifecycle (this may be less) • Develop strategy to bring in entry level talent and develop and groom them – sponsoring education and certifications • Promote MBA education to prepare associates to take on more business related roles in the organization

17. Strategy / Immediate Impacts DEVELOPMENT • Foundational Development • ABCs of ABC • The business of our business • CARE (Customer Focused); ABC’s Operating Philosophy • Team Building and Relationship Development • Introduction to DiSC Behavioral Styles and Workplace Effectiveness • Management and Leadership Development • Foundations of Leadership • Strategic Leadership Program • Outside workshops / training – evaluate ROI COMPENSATION • Evaluate Need for additional levels/grades within positions • Lead roles • Progressive responsibility

18. Some Next Steps • Individual Development Plans • Consider Project or Rotational Opportunities • Succession Planning SO MUCH MORE “TO DO”… Questions?

19. Role of Compensation System • Attract • Retain • Motivate

20. Compensation Principle If compensation program is to contribute effectively to overall associate relations program, associates must perceive that their level of total pay is fair and competitiveand provides for career growth and development

21. Motivate Reward employees for actions and outcomes required to achieve business goals Be Competitive Match compensation to job requirements, market pay, business results and individual performance AmerisourceBergen’s Philosophy Ensure Equity • Ensure employees are paid fairly and in a non-discriminatory manner Promote Growth • Provide employees with meaningful opportunities for professional development and advancement within the organization

22. Role of the Compensation Professional • Ensure alignment between the organization’s compensation philosophy and competitive pay practices • Up-to-date resources (robust reference library) • Ensure alignment between pay and performance • Stay abreast of changes in the market, business conditions, and government regulations • Ensure understanding and alignment between compensation and career development needs

23. Job Evaluation • We reviewed department structure and job hierarchy • Identified gaps • Created additional levels, complementing existing structure • Natural career progression opportunities created • Consider current pay levels • Ensure managers have the data they need to pay their employees competitively • What are publications saying?

24. Market Pricing / Sources • Identify your sources in addition to purchased surveys: • Compensation consultants • Search consultants • Bureau of Labor Statistics • Professional associations • Networking • Miscellaneous

25. Pay Structure:Review Position In Range $ $ A B C Grades A B C $ A B C

26. Thinking outside the “structure” • Is there a need for more than one structure? • General / IT / Sales • How are you addressing “Hot Jobs”? • Your structure and practices need to have enough flexibility built in to support managers in their attempt to inspire and motivate employees to: • Learn new skills • Take on additional responsibilities • Retain top talent

27. How flexible is your structure? Although your compensation structure and program must be clearly defined, documented and defensible, it must also be FLEXIBLE!

28. Pay Determination Distinguish extraordinary performance from ordinary performance: • Identify your stars • Reinforcement and recognition is good for employee morale and helps managers shape the behaviors of future leaders • Create higher standards • Give your stars the opportunity to shine!

29. Performance Appraisal • Establishes standards of performance • Measures individual contributions • Enables management to tie pay to performance • Documents career path and acts as input for individual development plans

30. Incentive Plans • Must be designed to reward the right behaviors • Considerations • Purpose / Eligibility / Performance Measures • Allowing room for exceptions • Other Opportunities? • Project Completion Bonuses • Spot bonuses • How about non-monetary opportunities? • Highly-visible projects

31. In summary… • Consider the impact your compensation plan has on other areas within your organization, specifically career development • The importance of continual assessment and evaluation • Improve employee morale by aligning compensation and career development • Ensure employee engagement • How much more effective can your organization be by investing in your internal talent? How about: • Reduced turnover costs • Increased employee satisfaction • Increased productivity

32. Compensation and Development ALIGNMENT Compensation Development

33. Questions?

34. 15 Minute Break

35. Group Participation • Case Study • Team Exercise • 15 - 20 minutes • Scenario: • Call Center environment; work through “Here’s the Story” • Goal: • Establish possible ways to address current situation • 20 minutes – debrief & discussion

36. A Gift to “Remember”