The document discusses the importance of engagement across various stakeholders in the value chain, emphasizing that engagement is key to enhancing shareholder equity. It highlights metrics for measuring engagement in employees, customers, suppliers, and the community, while providing evidence of the financial benefits of high engagement levels. The document advocates for a strategic approach to engagement, recommending the implementation of metrics to track engagement throughout the entire value chain.

1. Engagement of the Value ChainA Strategic Scorecard ApproachEnterprise Engagement Alliance Networking ExpoWilliam SchiemannJune 4, 2010

2. Topics Engagement and Strategy—Perfect Together!Engagement Beyond EmployeesUsing Scorecards to ManagePotential Actions

3. What do we usually measure?Financial—revenue, profitCustomer—retention, share of walletOperations—cost, qualitySustainability—often neglectedSupplier/partner—costEmployees—performance

4. Engagement is the Key Driver of Shareholder EquityShareholderEquityCustomerEngagementEmployee EngagementCommunity & EnvironmentEngagementInternal ServiceEngagementSupplier/Partner EngagementEngagement Drivers

5. Defining EngagementGoes beyond:Positive attitudes toward the organization PrideSatisfactionJob Commitment Intellectual and Emotional commitment leading to…

6. Engagement as AdvocacyWillingness to:Put in additional discretionary effort (time, energy, thinking)?Perform prescribed tasks, provide more voluntary actions, and exhibit fewer proscribed behaviorsEncourage people they value to:Work with this organizationSupport this organization and its products or servicesInvest in this organization (publicly traded)

7. Customer EngagementEngaged customers:Remain loyal, even…Increase share of walletTell their friendsDisgruntled customers:LeaveTell 10 other people Stay and …

8. BrandProduct/ServiceRelationshipMajor Drivers of Customer Engagement

9. AdvocacyCommitmentSatisfiersMajor Drivers of Employee Engagement

10. Engagement Requires Two PartnersPEOPLE EQUITY

11. Internal Service and BusinessPerformance - 2010 Metrus Institute/ASQ ResearchMetrus has tracked internal service since 1993, including through the recession.Percentage in Top BusinessPerformance Group

12. High vs. Low ACE Companies –Internal ServiceOver 50% Difference in Most Functions

13. Partner/Supplier EngagementOutsourcing and globalization have made partners a critical part of the value chain—it’s no longer just about the lowest costHow important was:Brake pedal supplier CTS to Toyota in 2010?Morton Thiokol to NASA?Transocean To BPFew corporations measure Supplier Engagement— a Best Practice differentiator

14. Community and EnvironmentCommunity:Good neighbors make good employees, good customers, good investorsHealthy Weight Commitment Foundation: remove more than 1 trillion calories by 2010, to reduce childhood obesity: why are Coke, Pepsi, Kraft and over 70 others participating?Environment:Engagement with the ecosystem has become recognized as a critical part of doing business, and a key aspect of many customer brands:BP claimed to be the ‘green’ energy company?Ortho Clinical Diagnostics committed 6 acres to solar panels as part of J&J’s 7% reduced carbon footprint commitment

15. Shareholder EngagementInvestors are primarily focused on total return; engagement is not an issueReally?Why has Philip Morris changed its name to Altria?Why did Coke do an about-face on diversity and environmental issues?Why could Bolthouse attract investors to launch a more environmentally responsible beverage company?Why did many stock indices emerge that excluded South Africa during apartheid?Why are there stock indices that focus only on triple bottom line performers?

16. The Evidence for EngagementTowers Perrin: Most engagedHigher retention of best employees19% increase in operating income (vs. 33% decline)28% increase in EPS (vs. 11% decline)Caterpillar: Engagement initiatives$9M in savings due to turnover, absence, and overtime80% fewer grievancesHigher customer satisfaction Intuit: Engaged employees1.3x more productive5x less likely to leaveMolson: Highly engaged5x less likely: safety incident or lost time accident ($1.7M)Higher sales performanceVance, Robert J. Ph.D., Employee Engagement and Commitment, SHRM Foundation’s Effective Practice Guidelines, 2006

17. Impact of Low EngagementLow external or internal customer satisfactionLow productivity due to mediocre energyTop talent loss when market conditions permitUnmarketable employees retire in placeLow referrals of new talentWeak customer retention and share of walletQuality suffersMargins and revenue weaker

18. Sample Strategy Map: Financial Organization FINANCIALOUTCOMESCUSTOMERDRIVERSCUSTOMEROUTCOMESCOMMUNITY/SUPPLIERDRIVERSPEOPLE/OPERATIONSOUTCOMES Image- Stability- ReputationEmployee EngagementAlignment- Performance Mgmt.- Rewards New BusinessInternal Customer ValueProduct Value- Speed- AccuracyClient Engagement Growth in RevenueCommunity Engagement- Environment ScansGrowth inNet Income Knowledge- Service Skills- Analytical- ProductClient Retention Relationship Mgmt - Responsiveness - FlexibilityProductivitySupplier Engagement- Database Uptime- Supplier Engagement IndexCycle Time- Bids- Credit Information- Reports- Collections- Cash ApplicationsMap Key:SupplierPeopleOperationsCustomerFinancialCommunityCopyright © 2005 Metrus Group, Inc

19. Engagement Must Be Viewed in ContextA - Alignment C - Capabilities E - EngagementRed = Trouble Yellow = OK Green = Strength

20. What can you do NOW?!Clearly define the full value chain, and look at the impact of engagement on each linkAsk first: how will the stakeholder benefit; the benefit to you will followImplement metrics that detect engagement across the full value chain—look for strategic leading and lagging indicatorsTrack regularly; coordinate with financial cycles

21. Thank You!William Schiemannwschiemann@metrus.com908 231-1900, x101www.metrus.com