Driving Global Sales Performance

Watson Wyatt Worldwide—As Global Director 2007
Global Work Attitudes Report—cover and spread
4 | 2007 Global WorkAttitudes Report
Employee Engagement —
A Global Perspective
Financial Impact of Engagement
Watson Wyatt’s WorkAttitudes studies confirm
that employee engagement continues to be a
key driver of organizational success. By linking
employee attitudes to year-over-year financial
and productivity data, the research shows
that organizations that focus on increasing
engagement can expect to reap the benefit of
a more productive workforce and see higher
financial returns (Figure 1).
Regional Differences: Engagement Driven
by Variations in Line of Sight
While the impact of an engaged workforce is
evident, levels of engagement differ around the
world. All regions have levels of engagement
above 60% favorable. European countries
show the strongest level of engagement — with
an average favorable response of 73%. In fact,
employees in each of the 11 countries that
comprise the WorkEurope report have more
favorable responses to engagement items than
employees in the Asia-Pacific, Canada or U.S.
regions.
Commitment levels are fairly consistent around
the world; therefore, variations in engagement
levels are being driven by differences in line of
sight (Figure 2).
Figure 1 | Engagement is strongly related to financial success
$1,751$875$350234High
Productivity
Market
Premium
5-Year
TRS
Engagement
Level
$1,517$758$303170Low
In this and subsequent figures, high represents the top 25% and low
represents the bottom 25% in terms of employee engagement.
Figure 2 | Overall Engagement Levels Vary — Largely Due to Differences In Line of Sight
USA
Commitment
Line of sight
Engagement
58%
65%
56%
57%
68%
80%
64%
75%
62%
73%
60%
66%
Europe Canada Asia-Pacific
*Engagement is the average percentage favorable on responses to the items within the engagement score for that region.
2007-US-02298_GWA Survey Report v1.indd 4 12/10/07 5:33:50 PM
watsonwyatt.com | 5
The Value of International Benchmarks
International benchmarks on employee attitudes show variations and consistencies across countries and around the
world. They put company-specific survey data into the appropriate context for taking action.
Country-specific and international norms offer valuable insights for developing programs that drive employee
engagement. Such benchmarks provide a useful framework for interpreting an organization’s employee opinion survey.
Around the World, Engagement Drivers Are Similar …
Although the WorkAttitudes studies found differences in levels of engagement around the world, the top
drivers of engagement in the Asia-Pacific, Canadian, European and U.S. regions are very similar. These
common drivers of engagement are: Communication, Compensation and Benefits, Customer Focus and
Strategic Direction and Leadership.This provides some guidance to organizations that manage a global
workforce. (See sidebar on Watson Wyatt’s Global WorkAttitudes for the comprehensive list of areas of
engagement studied.)
… but Employee Perceptions of Those Drivers Vary
There is, however, a lot of room for improvement on these drivers of engagement. While across all four
regions Customer Focus is generally perceived favorably, Communication as well as Compensation and
Benefits are not. Perceptions of Strategic Direction and Leadership are highest in Europe, followed by
Canada and the United States, and lowest in the Asia-Pacific region. Figure 4 details where there are
opportunities for companies to improve these engagement drivers.
Figure 3 | Globally, engagement drivers are similar
Asia-Pacific Canada Europe USA
#1 Driver of Engagement Customer Focus Strategic Direction Strategic Direction Customer Focus
and Leadership and Leadership
#2 Driver of Engagement Compensation Compensation Communication Strategic Direction
and Benefits and Benefits and Leadership
#3 Driver of Engagement Communication Communication Customer Focus Compensation
and Benefits
Figure 4 | There is Room For Improvement
Asia-Pacific Canada Europe USA
#1 Driver of Engagement Customer Focus Strategic Direction Strategic Direction Customer Focus
and Leadership and Leadership
#2 Driver of Engagement Compensation Compensation Communication Strategic Direction
and Benefits and Benefits and Leadership
#3 Driver of Engagement Communication Communication Customer Focus Compensation
and Benefits
55% and below favorable 55% to 65% favorable 65% and higher favorable
watsonwyatt.comwatsonwyatt.com
Driving Employee
Engagement in a
Global Workforce
2007
Global WorkAttitudes Report

Global Report Study—cover and spread
| Publication name | Publication name
Conclusion
In David Mamet’s 1992 film Glengarry Glen
Ross, one of the characters describes the
current sales contest at a small, bleak,
underperforming sales office. “First prize is
a Cadillac Eldorado, second prize is a set
of steak knives, third prize is … you’re
fired.” Although life at real companies tends
n Encourage salespeople to think strategically
about how they spend their time. Sales
professionals must close the deal, in either
the short or the long term, rather than
invest time in pure relationship building.
n Build territories based on deliberate
allocation of accounts and/or recognition
of territory potential. Geographic focus
alone is not enough.
Figure 1 | Asian life distribution by banks, 2005 (estimated)
n Offer competitive levels of variable pay. Sales
professionals need upside opportunity.
n Get the sales force excited about the
quality and innovation of its products and
services. If salespeople are passionate
about the product, they will more
effectively convey this to their customers.
n Help individual salespeople understand
the contribution they can make to
company success. Link their activities to
sales success and subsequent rewards.
n Manage sales professionals in ways that
are appropriate to their roles. Hunters
and farmers, for example, require
different approaches.
Managing a sales force is about creating a
win-win-win proposition—for the customer,
to be less dramatic, managing sales
professionals can take on an extreme air of
“make-it or break-it” just like that contest.
Organizations that do it right drive off in the
proverbial new car. Other companies get
smaller, less inspiring prizes. Companies
that do poorly limp along until they go out
of business or are acquired by others.
The most well-respected and successful
organizations find ways to maximize the
performance of their sales teams. We find
that these companies:
n Convince people to spend less time on
administrative activities. Two or three
more hours each week in front of high-
potential customers can make a real
difference in revenues and profitability.
watsonwyatt.com |
the company and the sales professional.
Companies that enable their salespeople
to succeed will be able to take the proverbial
drive in the Eldorado… straight to the bank.
Those that do not will be left with the
steak knives.
The most well-respected and successful
organizations find ways to maximize the
performance of their sales teams. We find
that these companies:
n Convince people to spend less time on
administrative activities. Two or three
more hours each week in front of high-
potential customers can make a real
difference in revenues and profitability.
n Encourage salespeople to think
strategically about how they spend their
time. Sales professionals must close the
deal, in either the short or the long term,
rather than invest time in pure relationship
building.
n Build territories based on deliberate
allocation of accounts and/or recognition
of territory potential. Geographic focus
alone is not enough.
n Offer competitive levels of variable pay. Sales
professionals need upside opportunity.
n Get the sales force excited about the
quality and innovation of its products and
services. If salespeople are passionate
about the product, they will more
effectively convey this to their customers.
n Help individual salespeople understand
the contribution they can make to
company success. Link their activities to
sales success and subsequent rewards.
n Manage sales professionals in ways that
are appropriate to their roles. Hunters and
farmers, for example, require different
approaches. Hunters and farmers, for
example, require different.
Managing a sales force is about creating a
win-win-win proposition—for the customer,
the company and the sales professional.
Companies that enable their salespeople
to succeed will be able to take the proverbial
drive in the Eldorado… straight to the bank.
Those that do not will be left with the steak
knives. Em velendio corem ipit nit ulputpat
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faci esenibh et la feuisit lore tin ullaor iril.
watsonwyatt.com
Europe|May2006
Driving profitable
sales growth
2006–2007
Report on sales effectiveness

Global White Paper—cover and spread
2 | Best Practice Investment Governance
Previously published research has
demonstrated that good governance is
required to be effective in the com-
petitive and complex environment of
institutional fund management. Some
prior research references include:
■ Fortune and Folly3
written in 1992
by two anthropologists (O’Barr and
Conley) who suggested that funds
were not managed for financial
efficiency, but more for convenience
or relationships with outside
managers and the avoidance of risks
from these relationships
■ Pension Revolution: A Solution
to the Pensions Crisis,4
in which
Keith Ambachtsheer demonstrated
a “governance shortfall” (the return
foregone due to internal governance
and management problems)
between good and bad governance
of 100 to 200 basis points per year
in his database of funds
Governance Challenges
While governance is typically thought
of as a constraint, the Clark/Urwin
research suggests it can be developed
to meet higher performance ambitions.
The best-practice research carried out
by Clark and Urwin (see note2
) cherry-
picked 10 funds from around the world
that had built excellent reputations for
governance and had delivered strong
performance. The research drew from
highly detailed qualitative discussions
on how these funds operated, what
they considered as “success” and what
had made them successful.
The funds required that certain
confidentialities be observed to achieve
the candor the research required. They
were comprised of six pension funds,
two endowments and two sovereign
funds located in North America (five
funds), Europe (three funds) and Asia-
Pacific (two funds). They ranged in size
from around $5 billion to $100 billion.
Their success was built on their
strengths in dealing with five big
challenges, as described below.
(1) Risk management
Decisions on how much risk to take
in a fund and the management of
that risk is critical to long-term value
creation in a pension fund.
Taking risk effectively requires
good governance to set strategy
and monitor and control progress.
Given that the investment world
is dynamic and competitive, those
governance resources need to be
able to adapt to change in order to
secure a competitive advantage.
(2) Focus on appropriate
time horizon
The differences between short-
term and long-term investing are
significant.5
Most institutional funds
have a long-term investment mission.
The governance challenge is generally
to manage to the long-term plan but
be resilient to the short-term pressures
that build up from time to time.
Best-practice funds had built up a
balance around these issues.
The governance challenge is
generally to manage to the
long-term plan but be resilient
to the short-term pressures that
build up from time to time.
watsonwyatt.com | 3
(3) Innovation capability
The concept of “early mover advantage”
is well-known in the corporate world.
In the context of investment markets,
it relates to successfully identifying and
accessing markets and asset classes
early in the cycle, ahead of the crowd.
Funds investing in newer, less popular
asset classes, newer strategies or
newer managers face many challenges.
This places significant demands on
governance, notably in part from the
challenge of peer pressure.
(4) Alignment with a clear mission
Institutional funds have difficulty with
their mission. A particular complication
for pension funds is their shared
purpose. The role of a pension fund is
to produce value propositions for both
members and sponsors, but sometimes
it is difficult to satisfy both needs.
A clear statement of goals is an
important step to building alignment
between the parties, so that the
appropriate investment risk profile
and strategy can be identified.
Best-practice funds tend to have
not only a clear primary objective, but
also a number of defined secondary
objectives that enable all parties
to match operational goals with
the mission.
(5) Managing agents
In general, pension funds are not
resourced to manage all of their activities
in-house, and consequently employ
agents in both advice and delegated
roles. This exposes them to the risk that
the goals of the agents do not align with
those of the pension fund.6
Governance is critical to monitor
and control these misalignments,
particularly with a large line-up of
managers. Best-practice funds are
experts in managing these agents and
building good alignment.
Core Attributes of
Best Practice
The Clark/Urwin study identified 12
governance-related factors common
among leading-edge funds. Six of
these could be regarded as being
within the reach of most funds, and are
shown in Figure 1.
A clear mission
As noted above, well-governed
funds have a clearly defined set
of goals, to which stakeholders are
committed. The board and their staff
understand what they are trying to
achieve and how their strategy fits with
these goals.
Effective focusing of time
In most circumstances, funds work
within a constrained governance
budget. Given these limitations,
well-governed funds focus their
resources to maximize the cost/
benefit trade-off. Generally, less time
could be spent on the lower impact
area of monitoring managers, leaving
more time to devote to asset allocation
decisions where the impact is greater.
Core Best-Practice Factors
Coherence Mission Clarity Clarity of the mission and the commitment of stakeholders to
the mission statement
Effective
Focusing of
Time
Resourcing each element in the investment process
with an appropriate budget considering impact and
required capabilities
People Leadership Leadership, being evident at the board/Investment
Committee (IC) level, with the key role being the IC
chairperson
Process Strong Beliefs Strong investment beliefs commanding fund-wide support
that align with the goals and inform all investment
decision making
Risk Budget
Framework
Frame the investment process by reference to a risk budget
aligned to goals and incorporate an accurate view of alpha
and beta
Fit-for-Purpose
Manager
Line-Up
The effective use of external managers, governed by clear
mandates, aligned to goals, selected on fit-for-purpose criteria
Figure 1 | Global Best Practice – Core Attributes
watsonwyatt.comWatsonWyatt|NorthAmerica
Best Practice
Investment
Governance
Going from good to great
No matter how much you have
achieved, you will always be merely
good relative to what you can become.
Greatness is an inherent dynamic
process, not an end point.
Jim Collins
In Short…
The links between good governance
and good performance seem reasonably
obvious (see Building Blocks1
). What
is less obvious is what describes “good
governance” or even “great governance.”
In this paper, we consider the key
attributes of global best practice in
governance, summarizing the findings
from a recent academic paper2
written
by Gordon L. Clark of Oxford University
and Roger Urwin of Watson Wyatt.
Governance –
A Quick Reminder
In institutional investment, “governance”
describes the system of decision
making and oversight used to invest
the assets of a fund. The responsibility
for this role lies with trustees or other
types of fiduciaries who are faced with
high-level issues (where they will
typically take responsibility) and more
detailed implementation actions
(where they are more likely to delegate
to others, and the fiduciaries’ role
becomes monitoring those actions).
Investment governance, therefore,
employs skills, resources and
processes to create value for
institutional funds.

Global Survey Report—cover and spread
| Multinational Pension Governance Survey Report
Designing Programs to Increase Sales Growth and Overall Firm Performance
The majority of multinationals see pension
programs as a primary tool for recruiting and
retaining key talent. Yet along with the wish to
vary pension benefits across jurisdictions is a
desire for an efficient common gover-
nance framework. More than three-
quarters of our survey respondents
consider this crucial — despite the
difficulties associated with different
managements, cultures and regula-
tions. This movement toward greater
global governance has been driven
in large part by a greater focus on
the risks within defined benefit plans.
Nevertheless, while the trend toward
global pension governance is more
marked among companies with DB plans, it is
by no means limited to them; the perception
that governance is critically important remains
high even at organizations with only DC plans.
The recent heightened focus on risk and
governance has led many multinationals to
review and change their global governance
procedures:
n 53 percent have reviewed their global gover-
nance procedures in the last three years.
n The vast majority of these (83 percent) sub-
sequently changed their procedures.
n 65 percent of respondents say the changes
have largely met expectations, yet those
with only DB plans were more satisfied (80
percent) than those with a mixture of DB and
DC plans (68 percent) or those with only DC
plans (38 percent).
The greater satisfaction among DB plan spon-
sors is partially explained by the fact that, in
these data, global governance reviews of DC
plans have been a more recent phenomenon,
so there has been less time for any advan-
tages to become apparent. Second, DC plans
are typically smaller and less mature than DB
plans; therefore, the gains from governance
may be less pronounced. Third, since the
investment risk remains with the plan sponsor
in DB plans, there is a greater potential benefit
from governance in this case.
What is driving these changes to pension gov-
ernance? The main driver is concern about risk
— more than two-thirds of respondents say this
influenced their decision to change (Figure 1).
The next most important factors are a focus on
best practices and regulatory pressures. Cost
pressures are not typically a leading factor,
though they have led to changes in governance
by about one-quarter of the corporations. Even
though the forces were found to be similar
across the globe, risk is a more prominent
driver for DB firms, and an evaluation of best
practices is more important among DC firms.
Global Pension Governance
watsonwyatt.com |
Figure 1 | Influences Behind Recent Global Governance Reviews
Concern over risks from governance issues
An evaluation of best practice
Regulatory pressures (e.g., Sarbanes-Oxley, Myners, etc.)
Changes in broader corporate philosophy/policy
Cost/competitive pressures
Changes in company structure
Changes in accounting standards
Other
23.6%
21.8%
10.9%
0 20 40 60 80
27.3%
30.9%
38.2%
43.6%
69.1%
Note – More than one response allowed. Percentages sum to more than 100%.
What influenced your decision to change your global pension governance procedures?
What changes are resulting from this move toward global pension
governance?
n Global committees for managing pension plans are now either
established (39 percent) or planned (15 percent).
n The prevalence of global committees has increased significantly
from 2002, when less than 15 percent of the companies sur-
veyed had them.
n 78 percent of respondents say they have a good understanding
of their pension costs around the world, and 67 percent say they
have a good understanding of the risks associated with their pen-
sion plan.
n Multinationals that recently reviewed their global pension gov-
ernance are more likely to report higher understanding, and this
tendency is greater where employers have had more time to make
the changes in their pension plans.
watsonwyatt.com
Multinational
Pension
Governance
2007
Survey Report

Global Journal—cover and spread
What is private
equity?
Investing in private equity, once a
minority pursuit for institutional
investors, is becoming mainstream.
The newspapers are full of bid
rumours, countless conferences
debate its influence, and investors
are allocating more and more
capital. This article is written as a
gentle introduction to a world where
the inhabitants often seem to speak
a different language.
Some definitions
Private equity embraces a broad range of disciplines
and strategies. Media coverage tends to fixate on the
activities of the ‘mega buyout’ firms, generally because
they are buying/selling companies familiar to journalists.
But there are a multitude of private equity activities out
there – Figure 1 highlights the main areas.
We should emphasise, though, that private equity is not
an area where tight definitions are helpful. Different firms
will have hugely differentiated strategies that may not fit
neatly into the boxes below. Some private equity firms will
focus on just one sector within the buyout arena, others
will focus on firms in financial distress. In venture capital,
many firms will have an IT focus, others a healthcare bias.
In the interests of keeping things simple, we will attempt
loose definitions of the two main areas
n Venture capital – providing finance to companies
that are forming or were recently formed, often
with a new technology to exploit, but with little or
no revenue/profits.
n Buyout – the purchase of an established business
with mature cashflows.
| Private equity explained
Figure 1 | Main areas of private equity activities
Seed Early stage
Company size increases... risk reduces
Late stage Growth buyout Mid-market Large buyout Mega buyout
Venture capital Buyout
Figure 2 gives an indication of the
amount of capital that has been
allocated to buyout and venture over
the past decade. What is clear is
that the total capital employed has
experienced fast growth over the
past three years and that buyout
activity has been driving the majority
of the growth.
Why invest in
private equity?
Private equity is not straightforward
and some of the challenges are
highlighted below. So why have
investors allocated more and more
money to this activity? It is
conventional to offer two
primary motives
watsonwyatt.com |
Return potential
There are common arguments
advanced as to why private-equity
owned businesses might outperform
their public counterparts
n leverage – private equity firms
usually have more debt and
as such, are ‘riskier’ than
public companies
n long-term strategies – it is said
that private companies do not
‘suffer’ quarterly shareholder
scrutiny and are therefore free to
pursue long-term strategic
investments even if it temporarily
reduces operating income
n alignment of interests – most
private-equity owned businesses
are run by management who are
highly incentivised to maximise
shareholder returns – the level
of incentives is not always available
to management of public companies
n activism – private equity owners are
able to influence company strategy
and management teams more easily
than the generally disparate groups
of public equity owners.
There are valid points to each of these
arguments and we would contend
that private equity companies are likely
to deliver better gross shareholder
returns than public companies –
leverage alone could lead to this
conclusion. However, the evidence for
whether investors in aggregate can
benefit from these higher returns is
very mixed. It seems safest to say that,
after deducting private equity
managers’ fees, the return to the
average investor in private equity is
likely to be similar to the return they
would otherwise receive in public
markets. So why get involved? The
answer lies in Figure 3 overleaf.
Figure 2 | Capital allocated to buyout and venture over past decade
Source: Goldman Sachs, Thomson Financial, Somerset Capital Limited, Prequin
Venture Buyouts
$17
$28
$43
$80
$158
$64
$12
$17
$31 $33
$43$42
$63
$91
$78
$106
$81
$62 $58
$65
$145
$204
0
50
100
150
200
250
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
$billion
n diversification – the stampede
into ‘alternatives’, as institutional
investors have sought to diversify
their public (quoted) equity risk, has
included increased allocations to
private equity
n return potential – private equity,
it is hoped, will outperform
public markets.
Diversification?
The diversification argument is, in
our view, quite weak. Private equity
is certainly equity and therefore a
high correlation to public markets
is a reasonable expectation. The
accounting protocols in private equity
may give some ‘smoothing’ (no-one
is valuing your companies every day)
but the true economic values of
privately held firms are driven largely
by the same factors that influence
quoted equity. So in our opinion, the
main reason for investing in this area
is return.

Global Report—cover and spread
10 | 2007/2008 Report on Sales Effectiveness and Compensation
Account Managers
An extra hour spent on the right activities
drives increased sales
What is an hour of selling worth? Unlike NBDs
for whom the value of an hour is determined
both by what they do and with whom they
spend it, AMs do not control with whom they
spend time selling. As such the value of their
time is driven by their activities.
In Figure 9, we see the value of an hour spent
by an AM on certain key activities. Figure 10
shows that:
n Top performers spend 35 percent more time
identifying needs and developing solutions
than other AMs. The AM typically has the
most direct customer contact for all actively
managed accounts. As a result, top perform-
ers spend time identifying and developing
solutions to meet the needs of customers to
generate additional sales opportunities.
developing proposals. Once needs have
been identified and a solution formulated, the
AM develops a proposal identifying specific
products, services and associated costs.
on routine business planning. Top-performing
AMs partner with the customer to forecast
business requirements and plan the best ap-
proach to tackle the required investment(s).
This joint planning increases the AM’s ability
to provide services to the customer, which
enables the best resources to be assigned
to an account to deepen the relationship and
grow the account over time.
Maximizing the value of selling time
increases quota attainment
The difference in selling time between top-
performing and other AMs is relatively small —
less than an hour a week. However, successful
AMs spend more of their selling time identifying
needs and developing solutions, converting
those solutions into proposals and then closing
the sale. They spend notably less time main-
taining accounts, demonstrating products and
entertaining customers (Figure 10).
Successful account managers spend more
selling time identifying needs and developing
solutions, converting those solutions into proposals
and then closing the sale.
2007-US-0217 Sales Effectiveness v5.indd 10 11/7/07 12:53:13 PM
watsonwyatt.com | 11
Figure 9 | High-Value Activities for AMs Drive Increased Sales
Value of an hour by quota size
$3,501$1,751$875$350234Sales administration
$10M$5M$2.5M$1MHours/yearActivities
$3,034$1,517$758$303170Needs identification solution development
$2,776$1,388$694$27888Developing proposals
$5,139$2,570$1,285$514107Routine business planning
$2,474$1,237$619$24789Travel
Sales and Nonsales Activities
Figure 10 | Top-Performing AMs Maximize Selling Time Through Specific High-Value Activities
Other AMs
(hours/year)
229 170 35%Needs identification and solution development
Sales and nonsales activities
201 151 34%Prospecting — creating and pursuing leads
87 75 16%Lead qualification
93 83 12%Proposal development
156 176 -11%Product demonstration
232 215 8%Closing — winning, negotiating and contracting
271 333 -19%Account maintenance — ongoing postsale service and activities
68 89 -24%Customer entertainment
1,338 1,292 4%Total selling time
114 104 9%Routine business planning
153 162 -5%Professional development
190 206 -8%Sales administration
86 91 -6%Travel
119 145 -18%Nonsales administration
662Total nonselling time 708 -6%
Top performers
(hours/year)
Difference
watsonwyatt.comwatsonwyatt.com
Maximizing
Sales Growth
and Performance
2007/2008
Report on Sales Effectiveness
and Compensation

Global Annual Survey Report—cover and spread
| 12th
Annual National Business Group on Health/Watson Wyatt Survey Report 2007
In general, employers are establishing and
maintaining a consistent cost-sharing relation-
ship with employees. Although the number of
employers that plan to absorb health plan cost
increases decreased slightly, to 35 percent in
2007, the number of employers planning to
significantly increase premium contributions,
co-pays and deductibles held steady (Figure 2).
Use of CDHPs Growing
The number of companies offering a CDHP
to their employees grew to 38 percent,
up from 33 percent last year. Although
employer adoption of CDHPs slowed in
2007 (Figure 3), the use of HSAs remains
strong. Forty percent of employers either
offer or plan to offer an HSA, and 26 percent
offer or plan to offer health reimbursement
accounts (HRAs) (Figure 4).
Figure 2 | Employers maintain existing cost-sharing relationship with employees
Absorb cost increases
Increase co-pays and coinsurance
Increase premium contributions
Increase deductibles
n 2005 n 2006 n 2007
42%
35%
41%
24%
25%
32%
21%
20%
34%
28%
22%
22%
Year of adoption
PercentageofemployersofferingCDHPs
2%
5%
11%
21%
33%
38%
0%
10%
20%
30%
40%
50%
200720062005200420032002
Figure 3 | More employers adopt CDHPs
watsonwyatt.com |
Participation in health
management programs
Smoker status
Management of risk levels
Participation in weight
management programs
n 2006 n 2007
Figure 4 | CDHPs with account-based options growing in use
CDHP with HSA
CDHP with HRA
Contribute funds to an HSA
HDHP with no account
Total replacement CDHP
n In place now n Planned for 2008
6%20%
11%15%
5% 4%
2%9%
25% 15% (40%)
(26%)
(26%)
(11%)
(9%)
PREMIUM DIFFERENTIALS. The percentage of employers offering premium differentials
based on employee participation in health management programs has risen to 28 percent,
up significantly from 2006. In addition, some employers are now offering these differentials
based on participation in weight management programs.
16%
28%
n/a
24%
8%
12%
n/a
9%
watsonwyatt.com
2007
Dashboard for Success:
How Best Performers Do It
watsonwyatt.com
12th
Annual
National Business
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system designed to push the boundaries of financial modeling
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415/733-4100 or our Santa Clara office at 408/919-1120.
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Book cover design with
accompanying promotional pieces
Above, the shipping label for the book,
which was sent out in a silver poly-bag.
At left, a comp of the invitation to the book
signing event.
Myths and Realities
of Executive Pay
The executive pay model used widely in the United
States is essential to both the continued success
of companies and to the U.S. economy itself. The
successful application of this model, which is built
onthefoundationofpayforperformance,hashelped
createaneconomicjuggernaut,resultingintrillions
ofdollarsofwealthforshareholdersandsubstantial
income and net worth for millions of corporate
employees and their families. High executive pay
simplyreflectsthestrongdemandforthetoptalent
andcanbeevaluatedonlywithconsiderationofthe
performance that leads to high pay.Yet, myths of a
failedmodelstillabound,perpetuatedbyoccasional
excesses,recentcorporatescandalsandcontroversy
over the use of stock options.
Thisbookdocumentstherealitiesofexecutivecom-
pensation by investigating the extent to which the
pay-for-performancemodelgovernsexecutivepaylev-
els.Italsoassessestherelativesuccessofthismodelin
creatingvalueforshareholdersandrobustjobgrowth
forU.S.employeesandprovidesdetailed,real-world
guidancefordesigningandexecutingeffectiveexecu-
tivecompensationplans.Basedonextensiveempirical
researchanddecadesofdirectexperienceinthefield,
MythsandRealitiesofExecutivePaysettlesthedebate
aboutexecutivecompensationandtheroleitplaysin
the broader U.S. economy.
M Y T H S
R E A L I T I E S
E X E C U T I V E P A Y
MYTHSREALITIESEXECUTIVEPAY
a n d
o f
I R A T . K AY , P H . D . ST EVEN V AN PU T T EN
KAYVANPUTTENandof
M Y T H S
R E A L I T I E S
a n d
o f
I R A T . K AY , P H . D . ST EVEN VAN PU T T EN
KAYVANPUTTENandof
M Y T H S
R E A L I T I E S
a n d
o f
I R A T . K AY , P H . D . ST EVEN V AN PU T T EN
KAYVANPUTTENandof
ay
ortunately, the
mpensationand
andinaccurate.
enewrealities.
bers of public
ation committee
tioncommitteeat
ion committee
lycriticizedfor
esenttheother
tes encourage
asesratherthan
others.”
hip and
onsindevising
ryexperienced
dsomeunique,
emembersand
Katz
tants,thisbook
ay’sdefenseof
assesswhether
Cambridge
About the Authors
Ira T. Kay, Ph.D., global practice director of
executivecompensationconsultingatWatsonWyatt
Worldwide, headquartered in Washington, D.C., is a
nationallyrecognizedexpertonexecutivecompensa-
tion. He has helped U.S. public, private, and interna-
tionalcompaniesdevelopannualandlong-termincen-
tive plans to increase shareholder value. Dr. Kay has
writtenandspokenextensivelyonexecutivecompen-
sationissuesandconductedresearchonexecutivepay,
stockownership,andstockoptions.Heiscoauthorof
the bookThe Human Capital Edge and is the author
of CEO Pay and Shareholder Value: Helping the U.S.
Win the Global Economic War and Value at the Top:
SolutionstotheExecutiveCompensationCrisis.Dr.Kay
haspublishedarticlesintheHarvardBusinessReview,
McKinseyQuarterly,JournalofDeferredCompensation
andAcrosstheBoard.Hehasalsopresentedanalysis
ofexecutivecompensationissuesbeforetheFederal
ReserveBoard,theSecuritiesandExchangeCommis-
sion,theFinancialAccountingStandardsBoard,and
aU.S.Senatesubcommittee.Heisfrequentlyquoted
in the major business press and speaks globally on
executive compensation issues.
Steven Van Putten is the east division practice
leader of Watson Wyatt’s executive compensation
consultingpractice.Hefocusesprimarilyonadvising
compensationcommitteesandseniormanagement
on executive and director compensation matters.
Mr.VanPuttenhaswrittenandspokenonexecutive
and incentive compensation, and specializes in the
design and development of annual and long-term
incentive programs that drive business strategy
and support organizational objectives. He is also
an expert on FAS 123(R) and its implications for
stock-based incentives.
Printed in the United States of America
Myths and Realities
of Executive Pay
The executive pay model used widely in the United
States is essential to both the continued success
of companies and to the U.S. economy itself. The
successful application of this model, which is built
onthefoundationofpayforperformance,hashelped
createaneconomicjuggernaut,resultingintrillions
ofdollarsofwealthforshareholdersandsubstantial
income and net worth for millions of corporate
employees and their families. High executive pay
simplyreflectsthestrongdemandforthetoptalent
andcanbeevaluatedonlywithconsiderationofthe
performance that leads to high pay.Yet, myths of a
failedmodelstillabound,perpetuatedbyoccasional
excesses,recentcorporatescandalsandcontroversy
over the use of stock options.
Thisbookdocumentstherealitiesofexecutivecom-
pensation by investigating the extent to which the
pay-for-performancemodelgovernsexecutivepaylev-
els.Italsoassessestherelativesuccessofthismodelin
creatingvalueforshareholdersandrobustjobgrowth
forU.S.employeesandprovidesdetailed,real-world
guidancefordesigningandexecutingeffectiveexecu-
tivecompensationplans.Basedonextensiveempirical
researchanddecadesofdirectexperienceinthefield,
MythsandRealitiesofExecutivePaysettlesthedebate
aboutexecutivecompensationandtheroleitplaysin
the broader U.S. economy.
M Y T H S
R E A L I T I E S
a n d
o f
I R A T . K AY , P H . D . ST EV EN V AN PU T T EN
KAYVANPUTTENandof
M Y T H S
R E A L I T I E S
a n d
o f
I R A T . K AY , P H . D . ST EV EN V AN P U T T EN
KAYVANPUTTENandof
M Y T H S
R E A L I T I E S
a n d
o f
I R A T . K AY , P H . D . ST EV EN V AN P U T T EN
KAYVANPUTTENandof
Praise for Myths and Realities of Executive Pay
“Kay and Van Putten have aptly titled their new book. Unfortunately, the
publicingeneralhaslittleunderstandingaboutexecutivecompensationand
inmanycasestheinformationinthepublicpressisconfusingandinaccurate.
MythsandRealitiesofExecutivePayisaclearroadmaptothenewrealities.
It is must reading for CEOs, HR executives and board members of public
companies.”
— Former Senator Warren Rudman, chairman of the compensation committee
atBostonScientificCorp.,formerchairmanofthecompensationcommitteeat
Raytheon Company, and former member of the compensation committee
at The Chubb Corp.
“InanenvironmentinwhichU.S.CEOsandboardsareheavilycriticizedfor
governanceandexecutivepaypractices,KayandVanPuttenpresenttheother
side of the story. Many of those practices in the United States encourage
andleadtoshareholdervaluecreationandproductivityincreasesratherthan
executive enrichment at the expense of shareholders and others.”
— Steven Kaplan, Neubauer family professor of entrepreneurship and
finance, University of Chicago
“Averytimelyreviewofthekeyissuesconfrontingcorporationsindevising
andimplementingexecutivecompensationprograms.Theveryexperienced
andhighlyregardedauthorsofferverywellthoughtout,andsomeunique,
solutions.Thisismustreadingforcompensationcommitteemembersand
HR executives.”
— Martin Lipton, founding partner of Wachtell, Lipton, Rosen Katz
“Writtenbyoneofthecountry’sleadingcompensationconsultants,thisbook
isasignificantadditiontothedebateonexecutivepay.IraKay’sdefenseof
currentpaypracticesshouldbereadbyanyoneseekingtoassesswhether
these practices are well designed to serve the
interests of investors.”
— Lucian Bebchuk, Friedman Professor of Law,
Economics, and Finance at Harvard Law
School, and coauthor of Pay without
Performance: The Unfulfilled Promise of
Executive Compensation
Cambridge
Lorem ipsum dolor sit amet,
Consectetuer adipiscing elit. Pellentesque
libero. Cras sed enim. Quisque sed mauris
ac eros interdum vehicula.
Month, 00, 200X
00:00am – 00:00pm
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pretium ullamcorper, nisi sapien imperdiet
felis, semper hendrerit ipsum orci at lacus.
Nullam risus dui, blandit nec, semper nec,
elementum non, dolor.
Etiam tristique quam non turpis. Maecenas
dignissim.
10% 20% 30% 10% 20% 30%
Corporate logo colors
(PMS 340 to be used on logo only)
Approved
Watson Wyatt
color palette
in Pantone®
System
Colors
Accent color should be used only
at 100% PMS 187.Do not screen!
Myths and Realities
of Executive Pay
A complete guide to understanding
the governance of executive
compensation and pay practices.
Above, full cover spread to include flaps, spine, with front and back covers

Trade show booth exhibit design
36”
Footprint of existing trade show poster.
Prior to designing this display,Wyatson Wyatt Worldwide
only used a color poster which was mounted onto an easel.
I wanted to expand the brand identity into a display
that was more visible and purposeful than a color poster.
Option 1 Option 2 Option 3
92.5”
72”
watsonwyatt.com
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Loss and expense accruals
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Program review
Vendor performance
Merger and acquisition support
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Me
Cap
Litig
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a
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a
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