Implementing a Lean/Six Sigma Culture to Transform Your Organization … and Drive Sustainability

1. Implementing a Lean/Six Sigma Cultureto Transform Your Organization … and Drive Sustainability Wendy A. Kouba Vice President, Operations Management Bio Innovation Leader’s Summit London February 23, 2010 1

2. Leading the Way to a Healthier World

3. 48 Billion Doses in 2008…> 7 Doses for Every Human on Earth Wyeth • $22 Billion; 145+ Countries • Pharmaceuticals and Biopharmaceuticals • Vaccines • Consumer and Animal Health • Nutritionals • 50,000 employees • Technical Operations & Product Supply (TO&PS) • More Than 4,800 SKUs • 18,000 Employees • 28 Plants / 13 Countries and Puerto Rico

4. Our Story Begins in 2007 • Changing regulatory environment – stricter requirements for new drugs • Decreasing R&D productivity • Significant generic penetration • Large product litigations Changing industry environment Delayed new products • Product approvals and contributions from new products delayed relative to expectations • ~$6B revenue exposed due to upcoming patent expirations Challenges to product exclusivity • December 2007: accelerated at-risk launchof generic

5. TO&PS • Network optimization • COEs and right-sizing • Organizational design • Lean out above-site • Standardize site structure • Operational Excellence • Transform the way we work and whatwe deliver • Create capabilities and culture thatensure sustainability and continuous improvement trajectory • Reduce cost: 25% aspirational target • Corporate • Initiation of Project Impact • Company-wide initiative • All functions, divisions and geographies • Target: $~1.5 billionin 4 years While maintaining & improving quality, compliance and customer service Our Response

6. Our Approach: Three Key Levers Aspire high; blend technical & organizational change;build capability and let your line leaders own and drive it “ The formal structures, processes, and systems through which the operating system is managed to deliver the business objectives” Management Infrastructure “ The way physical assets and resources are configured and optimized to create value and minimize losses” Operating System Engagement/Mindsets&Behaviors “ The way people think, feel, and conduct themselves in the workplace, both individually and collectively” 6

7. Process starts with a comprehensive site diagnostic… What Differentiated Our Approach? • Combines deep technical changes with cultural change • How people think and act: key to sustainability • “Bias for action / tolerance for ambiguity” • Led by local senior management engaging the people who do the work • They own it • Learning drives continuous improvement • Requires personal transformation and objective review to revitalizethe organization • “Go and See” transforms our understanding of current state • Requires major upgrade in capabilities • Makes the changes sustainable • Changes the “daily work” of the majority of the workforce

8. PriorAnalyses Structured Observations Data Analysis Workstream Analysis Diagnostics Cover Multiple Work Streams and Data Sources Quantitative Diagnosis Qualitative Diagnosis • Review of total budget and headcount • Cover most major workstreams • Numerous analyses to support insights from qualitative sources (OEE, NVA, etc) Focus groups, future state workshops, mirror workshops Workshops Analyses Interviews with a representative sample of key stakeholders (management, exempt/ non-exempt employees, temps/contractors) Plant-wide survey Surveys Interviews Savings opportunity ranges from 15 - 40% per site

9. Examples • Changes the daily work, thinking and behavior of everyone in a focused area • Production line: simplify processes; eliminate NVA • QC lab: standard roles; leveled work; performance boards Mini-trans- formations Cross-cutting initiatives • Solve technical and organizational problems that affect the entire site • Change story engagement • Systems implementations • Quick wins and “just do its” that don’t require changing mindsets and behaviors • Implementing custom lab reports • Removing NVA project approvals Other site initiatives Implementation at a Site Includes Three Types of Initiatives

10. We Changed the Way We Think & Work • Data-driven decision making and acting on fact • Improvements in OEE • Elimination of non-value added meetings • Increased capacity from significant reduction in changeover time • Dedicated production trains and rhythm wheels • Tailored to velocity of product and value-streams • Lean Labs • Improvements in yield from technical changes • Awareness of cost and implications of waste • “Hot-seat” swapping and shift huddles • Visual management through performance boards • “Get out and Gemba” • Building capability • Forum and field

11. ~ $250 M savings commitment against a stretch target of $150 M for 2009 budget ~1200+ headcount reduction in 2008 Additional headcount reductions in 2009 ~60 site mini-T teams coached in early stages of the transformation Frontline is engaged in change and new leaders have emerged from the floor TO&PS has led the change for Wyeth and is now looked upon as a role model for implementing change 300 Cost Savings$ M 2009 (Committed) 2010 (Expected) Significant Savings Already Achieved Program has exceeded expectations

12. Management Infrastructure Operating System MindsetsandBehaviors How? Management Infrastructure Facilitatesthe Results “ The formal structures, processes, and systems through which the operating system is managed to deliver the business objectives” 12

13. Re-thinking the Meaning of Management Changing the fundamentals of every manager’s job… 13

14. 35 Administrative Performance Management Continuous Improvement Develop Talent Lean Leadership:Requires a Radical Change in Focus Current State % Future State % Get out and Gemba 14 14

15. Management Infrastructure Operating System Mindsets&Behaviors “ The way people think, feel, and conduct themselves in the workplace, both individually and collectively” How? Mindsets & Behaviors Ensure Resultsare Sustainable 15

16. Mindset & Behavior Changes Evidentat All Levels To From Leadership Team - Corporate & Site • Directive, command and control approach • One-way communication • High engagement; two-way communications • Gemba walks; hands-on problem-solving “My personal behavior change? I now ask much more than I direct” – OpU Lead • Project approach, not focused on sustainability • Frustrated by not being able to influence changes • Coaches who support transformation led by the line leaders; focused on sustainability “Our future leaders will develop in these key roles” – HR Leader OE / Change Leaders • “Checker of work” • Limited coaching; majority of time spent in office • Proactive leader • Most of time spent on the floor coaching “We used to focus solely on not making mistakes; now we focus on where and how we can improve” -- Supervisor Frontline Leadership • Task-oriented, lack of ownership – finish work and go home • Do not feel accountability, often lack clarity on expectations • “Cannot change anything” mentality and fear of discussing improvement • Improvement focused • Accountability and pride in exceeding goals • Feel they can change “bad processes” “Now I’m always looking for improvements everywhere; at home I’m even optimizing my kitchen.” – Technician Frontline

17. Behaviors Thinking and feeling Values and beliefs Identity, needs (met and unmet), and fears Let’s Hear from the People Who are Shaping Our Future… … and transforming our organization

18. Transitioning to Sustainability: Transition Performance Time Step change via mini-Ts Sustained gains via continuous improvement 5 Requirements • Continuously assessing against: • Original and new challenges • Desired future state • Aligned team of local leaders: • Setting targets for continuous improvement • Staying highly visible • Engaging line leaders • Incorporating targets into key systems: • Performance • Succession • Planning & budgeting • Strategically communicating achievements & instilling pride • Driving engagement & behavior change 18

19. Site Example: Progress & Challenges After Implementation Gains To Date Focus Going Forward Vision • Site leadership alignment around change story and transformation plan • Developing strategy tied to performance indicators • Cascading vision and KPIs to the front line • Allocating sufficient resources to support the transformation plan • Continual prioritization Operating System • Early traction in mini-Ts to deliver significant change • Willingness to adopt lean practices in multiple areas • Continue to apply lean principles • Removal of excess capacity to keep pressure on lean gains • Timely completion of change controls Management Infrastructure • Early traction in line-side performance boards • Consistent SLT focus through routine meetings on progress • Improving target setting • Solidifying the practice of routine performance dialogues • Identifying more change leaders Engagement/Mindsets & Behaviors • Demonstrated commitment from the SLT to being involved in the transformation efforts • Early traction in performance dialogues within mini-T areas • Increased presence of lean leaders (at all levels) in front line problem solving • Increased real time problem solving at the front line level 19

20. Making Sustainability Happen: Key Questions to Ask • Look back: • What have we learned? • What did and didn’t work • Why? • What should we do differently? • How can future mini-Ts learn from this? • What can we share across the network? • Have we communicated this success? • Evaluate the present: • Are we complete with implementation? • Are tasks complete? • Have the objectivesbeen met? • Are things stable? • Is the performance management process strong? • Have we responded to feedback on the boards, KPIs, etc.? • What opportunities remain? • Have we builtcapabilities? • Plan for the future: • Have we set the next level of aspiration? • Short-term? • Long-term? • Have we incorporated the lessons learned? • Have we established routine review cycles? • Are the right leaders in place? 20

21. Sustainability: Key Success Factors 1 2 3 4 Mechanisms forSustaining & Improving Benefits of Transformation • The transformation offers the opportunity to significantly upgrade leadership capacity • Mini-transformations develop leadership down to the front line • Be even more aggressive in placing top performers in pivotal jobs throughout the organization • Explicitly develop functional excellence and leadership capabilities Real change leaders • Reinforces performance management processes • Helps create a focus on the few things that matter through a clear vision of the organizational and operational end states • Ensure a regular and rich process to • Take stock of progress against transformation goals • Assess new requirements, potential and change capacity Focus on performance • Operating system and management infrastructure changes create a new reality in core systems/processes • Mindsets and behavior shifts signal that change is becoming the norm • Institutionalize common CI processes and language (e.g. idea generation, problem solving, knowledge/best practice sharing) • Explicitly cultivate a CI culture to capture the hearts and minds of all employees A learning organization and CI culture • Creates energy to generate new improvement ideas by engaging the organization • Builds renewal capabilities to adapt more quickly to future needs/ opportunities • Deliberately develop senior management capabilities to capture, channel and specify new opportunities • Actively capture and share learnings about managing transformations so that the capability becomes embedded Sensing and adapting forthe future 21

22. Our Sustainability Plan:Simple and Straightforward Continue to execute balanced approach Network-wide On-going mini-diagnostics & mini-transformations Fully integrate with performance/reward systems; succession Decrease operating costs year over year Instill healthy competition Sibling rivalry vs. burning platform Strengthen OE team Central: leadership, trust, partnership and advocacy Global network: sites and regions The place for high-potentials Coveted skills Influential and persuasive Business leaders vs. “techies” Long-term • Complete & execute “Wyeth Way of Working” • Strategic framing and vision • Fully integrated and highly visible • Active support/commitment from senior leaders • Accountability: what gets measured gets done • Above-site; “If you build it…” • Enterprise-wide implementation • Drive it bottom-up & top-down • AlliedSignal • Wyeth • Enhance critical partnerships • Strategic communicators • HR and Learning experts • R&D and Commercial • Become an active learning organization • Learning valued; required at all levels • “Go and see” DuPont, Toyota, others • Bring the outside in Transitioning to higher impact, sustainability and CI Short-term 22 22

23. Diagnostic methodology Capability deployment SLT, FLS and Mini-T Key Tools and Processes 23

24. Building Capabilities At All Levels 24

25. Diagnostic methodology Capability deployment SLT, FLS and Mini-T Roadmaps Transformation and Future State Site needs analysis and self-assessment Consulting tools Waste walks, FL meetings, Performance Boards, 5 Whys?, and more Structured knowledge management Communities of Practice Strategic communications Global Recognition Site Best Practices Network Excellence Award Replication Process Key Tools and Processes 25

26. Set stretch aspirations In context with future state Get the right leaders in place Aligned and energized Site and above-site Engage all employees Beyond front line Develop compelling change story Integrated with strategic communications Make the change personal Significant emotional events Modify mindsets and behaviors Drive focus and pace Get it 80% right & recalibrate accordingly Keys to Our Success • Invest heavily in capability building • Address both “performance” and “health” • Foster data-driven decision making • “Act on fact” • Focus on three types of losses • Waste, variability and inflexibility • Carefully scope Mini-T’s • Narrow but deep • Achieve ingrained and sustainable change • Resource for success • Sites and central • Drive early visible change • Celebrate wins & recognize success • Build confidence & have fun Leadership, Learning and Listening 26

27. Transformations Fail When These Practices Aren’t Followed… How does your organization rate? High aspirations grounded in context High performing senior team Balanced and complete approach Driven by the “line” leaders Designed for scalability from the beginning • Have aspirations been set, and communicated to the organization? • How were the aspirations for transformation developed? • Are the goals optimized between business requirements, overall market potential and existing capabilities? • Are the aspirations clear? Do these create energy on the front line? • Are the cost savings goals incorporated into local budgets? Is local leadership held accountable for targets? • What in the company’s past will enable or hinder this? • Thinking about the objectives, what are short term versus long term and how would you prioritize? • How are people adhering to these goals and objectives? • How personally are you and the senior team excited? • How aligned are the senior leaders? • How important is the transformation to the senior team (e.g., career defining)? • Does the senior team have any zealots who are willing to lead the transformation? • How have past operations improvements been led?? How successful were these and what were the lessons learned? • How holistic have your performance improvement initiatives been? • What role have other functions (e.g., HR) played in transformation? • Have the technical systems translated into daily, standard operations? • How integrated are the technical changes into people processes? • Does the culture embrace changes? Are mindsets ready for large scale, continuous improvement? • Have any pivotal roles needed to lead the change been identified? How important is the transformation to this group? • How ready are your line leaders (VP to front line supervisor) to drive change? • Are line leaders capable of driving change across all dimensions? • How are line leaders skill sets developed? • Is there a system in place to support line leaders to initiate and lead change? • How are you making change scalable? • Has the need for change been established? Has it been defined so that change can be replicated within local contexts? • What are the cross-cutting initiatives that create a foundation for change? • Are you leveraging a common approach and toolset? • What existing initiatives could be harnessed? • Is there enough capacity in the organization to drive initiatives? • Is there an existing continuous improvement organization? Is it capable of enabling the transformation? 27

28. “The culture of a company is thebehavior of its leaders. Leaders get the behavior they exhibit and tolerate. You change the culture of a company by changing the behavior of its leaders.” -- Larry Bossidy & Ram Charan Execution: The Discipline of Getting Things Done

29. Back up starts here….

30. Specific Behaviors Drive Continuous Improvement • Senior managers are personally and visibly involved at all levels of or the organization • Managers spend time working on front line teams • Middle management provides daily role modeling on the shop floor • High-performing managers take on roles that exceed their current competence • Training to open management’s eyes • Regular, direct communication from senior management • Front line teams hold short problem-solving sessions at the end of every shift • Individual front line staff suggest specific ideas for improvement • Front line staff participate in target setting • Front line teams use visible indicators to track performance • Clear road maps ChangeLeadership andRole Modeling FosteringUnderstandingand Conviction ContinuousImprovement • Having the right people in pivotal jobs based on clear criteria • Managers seek the input of specialists for difficult problems/opportunities • People regularly engage in skill-building, most frequently on-the-job • Permanent tasks embedded in the line • People occasionally do other jobs across the same business process • Use of multiple methods (workshops, individual coaching, action learning) • Teams with clear roles • Strong functional support • CI steering group and infrastructure • Performance management with target/path setting, visual tools, and an ongoing performance cycle • Talent management system with pivotal jobs assessment, talent management reviews, performance assessments • Formalized planning processes • Standardized problem solving approach • Knowledge building/sharing tools and processes DevelopingTalentand Skills Formal CIMechanisms 30

31. Performance Management System:Focus On What Matters Tons per Tons/hour hour Through - - Through X put put Availability Availability Recovery Recovery Processing X revenue revenue Grade Electricity Grade Electricity Processing Roaster Processing Roaster - + contribution contribution contribution contribution Consum - 2 Consumables Price ables Price Open pit Open pit Gas Gas costs costs handling Variable handling Variable + costs ($/t) costs ($/t) – Wetmill /AC Wetmill /AC Mine EP Mine EP Other Other contribution contribution + Cash cost U/G costs U/G costs Cash cost Labor Labour Other costs Fixed Fixed + Other costs costs costs Mtce parts Mtce parts Waste walks Shift huddles Site needs assessments Performance boards Capital Capital charge charge “ Other Value 1% Improvement Perf.Today Tech.Limit Target 90 80 95 $3 million Tons/hour Through 80 75 98 $1 million CEO Availability – – – – Mine EP – – – – Review performance – – – – Identify counter-measures SVP – – – – Daily/ weekly/ monthly Coach and reward Group Frontline problem solving – “Minds of the many” Update plans Monitor performance Plant/unit Expert problem solving – “Minds of the few” Set overall top-down targets Track & adapt Identify the few key drivers of value & mobilize CEO and top team set aspirations and aggressive targets… Cascade key drivers of value down to the front line… Continuously track performance against action plans… …provide production tools… …set razor sharp front-line goals vs. technical limits… …which then cascade down to the individual business groups and units through an iterative process …and engage in rigorous perfor-mance dialogue process at all levels …and mobilize 31 31

32. Change Leadership: Right People in Right Place Driving Change 1 Performance Summary Rigorously plans and executes Stays focused on what counts Provides solutions, not excuses Makes tough decisions Really executes A. Personal Information Name: Current Position: Supervisor: Relishes change Drives change Thinks outside the box _______ good ideas Date: Completed by: B. Historical Background Experience at Barrick Work experience in other companies Rallies the troops Inspires others Earns trust Develops leaders Communicates effectively Dates Site Position Dates Company Position Skills Grid Education Dates Institution Degree/Diploma Represents the best of Barrick Recognizes excellence Acts with integrity Promotes safety, protects environment Contributes to community Focuses on shareholder value C. Results Very Good Results against KPIs and other goals Category Poor Good KPI or goal Target Result Comments 1. 2. 3. 4. 5. 4 – Towering strength, role model to others 3 – Solid, usually demonstrates Problem solving X Other contributions during the course of this year “A” Player X Leadership “B” Player D. Leadership attributes – Barrick’s 5R’s “C” Player Rating 1-4 X Stretch Shine Succeed Search Communication V Vacant X E. Individual career aspirations Execution Are there any changes in responsibility or development opportunities you would like in the next year or two? Are you willing to relocate to another site? Yes No Maybe B A A+ C B A Potential Hiring profile C- C B Role: Bonus $ C Performance Skills: A Performance Understand who your best people are Put the right people in the right numbers in the right jobs Develop , incent and reward people Assess individuals in the organization… Identify pivotal jobs… Create individual development plans… B Rating Individual development plan Train on Engagement Assign to retention project Rotate in 6 months …assess the critical gaps… …support people, both formally and informally… Training Coaching …and rank them on their performance and potential …and visibly reward strong performance and systematically deal with under-performers …and put the right people in the right jobs 32 32

33. Learning Organizations:Enhanced By Problem-solving, Tools & Expertise 1 Define problem and set goals 7 Standardize and control 2 Evaluate solution A Analyze current situation C 6 P D 3 Implement solution Generate potential solutions Select and plan solution 5 4 3 Apply a rigorous, structured problem-solving approach Use technical experts when needed Deploy a robust, “best of breeds” toolkit relevant to basic materials industries Distinctive, general problem-solving approach (e.g., McKinsey’s 7-step problem solving, Lean, orSix Sigma – DMAIC) systematically used to: Fix problems Proactively drive continuous improvement “Academy” training center providingin-house training on best approach Analytical tools selected based on their relevance and adapted to the specific manufacturing process Selection, development and deployment of pivotal processes necessary to deliver value Capability maps are useful for broad systematic improvement in all areas, not just those targeted for improvement Mile wide vs. mile deep impact Develops a common languageacross network Unique expertise to solve highly technical problems Highly skilled trades people and engineers who provide subject matter expertise and can be leveraged for general problem-solving acumen and change leadership know-how Similar approach to address functional performance issues 33 33

34. Capability-Building System:Provides Coaching & Supporting Infrastructure Change leader Site Mgr 1 Site Mgr 2 Change coach Change coach Area 1 Area 2 Area 1 Area 2 3 Create a dedicated center of excellence to coach line operations Define training approaches to up-skill and ensure continuous learning Deploy knowledge management processes/ systems High-potential, specially trained problem-solving leaders/ coaches outside the line Lives longer than the program implementation; becomes the catalyst for change within the organization over time Clearly defined facilitation/ coaching roles vs. line management Company-led programs to train leading practitioners within the organization, adopting a mix of techniques including Learn by doing Shadowing/coaching Developmental assignments Selective technical and analytical classroom sessions Codification of successful operational frameworks and problem-solving approaches Networks of people within and external to the line to support best practice sharing Knowledge management and systems to capture and share learnings 34 34

35. Systematically Re-assess Status:Draw Implications by Sensing & Adapting 4 Sensing A blend of organizational structures, processes and capabilities to identify and interpret internal and external opportunities Adapting Intervening decisively to change the organization so that it can move in new directions while preserving existing and letting go of old ones Capture Ability to capture important information, ideas, perspectives, and opportunities from a variety of internal and external sources Modify The ability to act on new opportunities while preserving and enhancing existing activities and building competitive advantage Channel Ability to ensure that the captured opportunities are fully developed and then tested/evaluated against formal criteria Let go The ability to stop old activities/ behaviors/ mindsets while having the appropriate systems/ processes to protect people and reduce fear Specify Ability to assess, prioritize and select available opportunities for value creation Capitalize The ability to extract increasing value over time by complementing expansion/growth with operational improvements 35