Retaining the Knowledge Worker

1. Retaining the Knowledge Worker Presented by Ron Miller Vice President and Director Global Rewards Team Motorola, Inc. Global Benchmarking Council HR 2001: The 3 R’s of HR, May 2001

2. Discussion Outline • Real brief overview of Motorola • The Flight of Talent from “corporate” America • Understanding corporate Free Agents • Tools of retention • Motorola’s retention strategy • Suggest informal discussion and Q&A throughout session

3. Motorola Inc. • Founded in 1928 • $37.6 billion in sales in 2000 • 14 month stock price range: $62-$11 • 143,000 employees • Quickly going to 120,000 • Employees in 62 countries • 50% in U.S., 50% outside U.S. • Primary business focus: • Wireless communications • Handsets, pagers, radios, infrastructure • Semiconductors • Broadband cable TV equipment

4. End-to-EndNetworkedSolutions Broadband IntegratedEmbeddedSystems Wireless Internet Solutions on aChip Motorola’s Strategic Focus WorkTeam Value-Added Layers Person Home Auto

5. He who has the best talent wins! We win

6. War for Talent – McKinsey & Co. study • Conclusion after study of 77 companies and 6000 managers: • The most important resource over the next 20 years will be talent: smart, sophisticated businesspeople who are technologically literate, globally astute, and operationally agile. • The search for the best and brightest will become a constant, costly battle, a fight with no final victory. Not only will companies have to devise more imaginative hiring practices; they will have to work harder to keep the best people. • Demographic considerations • In 15 years, 15% fewer Americans age 35-45. Economy to grow 3-4% per year. Demand to increase 25%, supply down 15%. Go figure!!

7. Flight of Talent – Corporate Leadership Council study • “First draft pick” status in labor markets for highest quality employees is shifting to the “entrepreneurial economy” -- small businesses, professional firms, self-employment -- and away from large corporations • Lures of the “entrepreneurial economy” -- high visibility for individual contribution, chance of real wealth creation, immediate risk and responsibility -- not yet a believable part of the employment “offer” at most corporations • Impending talent crisis could not come at a worse time for corporations

8. Flight of Talent • Crisis of “rare talent” accompanied by growing shortages of “sufficient talent” in rank-and-file employee categories; rising standards creating shortages • Highly doubtful that restoring yesterday’s employment offers of employment stability, predictable career paths, incremental salary gains will stem the tide of migration to the entrepreneurial economy

9. Flight of Talent • Must isolate “key value creators” associated with corporation’s core competencies: • develop financial and “psychic income” structures capable of locking them in • offer “professional tracks” closely aligned with traditional managerial track up to highest level of the company • greatest challenge will be to design new employment “offers” that can compete with the appeal of the entrepreneurial economy through new organizational structures, new compensation schemes and new visibility for individual contributors

10. Understanding the free agent • Free Agents’ sense of common purpose with a company strongly influences their decision to commit or disengage from it. They want to feel that they are contributing members of a larger team that is making a difference. • Increasingly, they offer their first, deepest loyalty to their professions and communities of practice rather than to their employer. They think of themselves as being linebackers or shortstops, rather than being Bears or Cubs. • They stay committed to particular firms as long as those firms provide them with the needed resources for working on interesting projects... if it isn’t forthcoming, they will swiftly trade up to bigger sandboxes. • To be effective, they must bond with their employing company

11. Understanding the free agent • Free agent code: • I am part of the team. I will do anything for the team and our project. My commitment to my work has never been stronger. I believe that is what makes me valuable in the marketplace. • Free agents see themselves as: • providing value • being adaptable and flexible • responding rapidly to market and customer needs • taking initiative and risks • being self-reliant • working collaboratively on a team • respecting others • identifying and building community and networks • identifying and studying new markets for their skills • expanding their skill sets • searching for challenging and rewarding work

12. How to ID Free Agents • Go through a ranking process. • Are they easily replaceable? • How much training would be required for their replacement? • What would happen if they left? Who would notice and why? What would the customer impact be? • Are they creating the value customers are paying for?

13. Employee Retention Model External Forces External Forces Success of Other Companies “Free Agent” Culture/Society The “Job” Office Tools Communication Satisfying Relationships Challenging Culturally Sensitive Work Environment Preferred Shifts/Location Perception of Career Confidence in leadership/strategy Fun Meaningful and aligned with company strategy Family Friendly Recognition Employee Satisfaction Global and successful company Benefits #1 Choice of Engrg. grads A winning strategy Intrinsic Rewards Total Compensation Base Pay A “most admired” company “more than a semi- conductor company” Bonuses Options 6th largest exporter Fortune 28 # Opportunities in Market Place Keeps them here RTMiller 3/97

14. Tools of Retention • Education • Job assignment • Work environment • Quality of management • Rewards: • Career • Promotion • Stock options • Vesting, life, claw-back, spin-out • Restricted stock • Line of sight incentives • Public recognition and credit

15. Motorola’s Retention Strategy • Talent identification and calibration • Establishment of Office of Leadership Supply • Focus on upper-middle and senior management • Talent profiling • Evaluated based on results and behaviors • Energize, envision, edge, execution, + ethics • Differentiated rewards (differentiated investment) • Career planning • Have and communicate a winning business strategy • Open and continuous communication

16. All that matters is talent. Talent wins.