1. © 2008 Eaton Corporation. All rights reserved. This is a photographic template – your photograph should fit precisely within this rectangle. Best Practices – Senior Management Diversity Stu Otts, Director of Employee Relations

2. 2 2 Eaton Corporation Founded in 1911 Chairman and CEO – Alexander M. Cutler World Headquarters in Cleveland, OH Regional Headquarters in Shanghai, China, Morges, Switzerland, Mexico City, MX Customers in more than 150 countries 70,000+ employees worldwide Sales: $11.87 Billion 55% of sales outside the U.S.

3. 3 3 A leading diversified power management company A global leader in: Electrical systems and components for power quality, distribution and control Fluid power systems and services for industrial, mobile and aircraft equipment Intelligent truck drivetrain systems for safety and fuel economy Automotive engine air management systems, powertrain solutions and specialty controls for performance, fuel economy and safety Our Industries HydraulicsAutomotiveTruckElectrical Aerospace

4. © 2008 Eaton Corporation. All rights reserved. This is a photographic template – your photograph should fit precisely within this rectangle. Best Practice Insights

5. 5 5 Insight #1 Success is linked to how tightly diversity and inclusion is integrated into a company’s “way of doing business” Diversity & Inclusion at Eaton is positioned as an organizational core value that is integral to the business strategy Diversity & Inclusion within Eaton is driven from the top of the organization Eaton’s need for a more global and integrated approach emerged over time, evolving from an “HR program” to a critical business activity built into our infrastructure and owned by all Eaton leaders

6. 6 6 Diversity & Inclusion as an Eaton Value We value individual differences Our success depends on our ability to draw the very best people from the global, cross-cultural talent pool reflecting the diversity of our customers, communities and markets. We foster an inclusive environment that respects individual differences and values the unique perspectives that lead to innovative ideas and better decisions. “Diversity” – relates to workforce demographics that define the diverse makeup of the employee population “Inclusion” – relates to the culture/environment that values and respects all unique individual differences

7. 7 7 Diversity & Inclusion Driven From the Top Eaton does not have a diversity leadership position Eaton’s Chairman & CEO holds his senior leadership team accountable Each senior business leader must measure progress in diversity and inclusion in their respective organizations and report annually to Eaton’s Board of Directors Cascade accountability and responsibility to all leaders in their respective organizations Visibly model, support and recognize No different than other “business” initiatives important to the bottom line – diversity results are weighed equally with all other business practices

8. 8 8 Diversity & Inclusion as a Leadership Expectation Talent management, including diversity & inclusion, is “built into” the expectations of every Eaton leader and reinforced through Eaton leadership competencies, performance management, scorecards, compensation, etc...

9. 9 9 Insight #2 Diversity, integrated into the succession planning process, enhances Eaton’s ability to identify, develop, and retain future leaders who represent a variety of backgrounds, experiences, and capabilities suited for a changing global workforce and marketplace

10. 10 Organizational Capability Assessment (OCA) OCA is Eaton’s annual succession management process. Objectives: Align our long-term talent needs to the organization’s strategic goals Review and assess our leadership capability and talent bench strength Provide an enterprise-wide view of our talent capabilities and requirements Early identification of potential future leaders

11. 11 Insight #3 Human Resources is responsible for the tools and processes associated with successful succession planning Senior business and functional leaders own, and are responsible for, the "deliverables" - i.e., they use the OCA process to manage their own talent needs Reinforces Insight #1

12. 12 Insight #4 The leadership pipeline does not fill with diverse talent overnight. Incorporating diversity into succession planning requires linkage of a talent strategy to the overall business strategy and priorities – i.e., anticipate business needs, talent gaps, and emerging demographic trends This link gives succession planning the opportunity to affect and support the corporation's long-term goals and objectives as well as achieve diversity goals

13. 13 Talent Implications of Strategic Plan Purpose To provide an overview of the macro talent opportunities and issues facing the function in the coming year. Note: This overview should be the result of your knowledge of the business strategies & growth opportunities and your assessment of the talent in the function Provide action plans to address opportunities and issues in the coming year Process 1.Review the your strategic plan and identify your key strategic issues as they relate to talent – limit to three to five issues 2.Identify the talent implications of each Strategic Issue – provide input as to whether the implication relates to structure, staffing needs, retention issues, leadership, or talent 3.Identify the actions you will take in the coming year to address the talent implications 4.Consider the attached questions to help identify your key talent opportunities & issues – those that, if left unaddressed, will have a significant impact in your ability to meet your goals Required form Strategic Issues / Talent Implications Form

14. 14 Talent Implications of Strategic Plan What are the critical skills & capabilities that are required to help your function or business achieve it’s strategies? What skill sets do you need for the future? What are your current talent gaps? What is causing them (restructuring, expected openings, expansion, performance issues)? What are your pending talent gaps? What is occurring that is making them happen? Where does your strategy require that our talent be better than our competition? What are your obstacles to growth as it pertains to talent? Where are you having issues with Retention / turnover? Diversity? Availability of talent with strategic skills Mobility – willingness of talent to move Population demographics – age, retirement, geography In what jobs would turnover be a significant problem to achieving this year’s plan? Given your strategy, how will your leaders need to be different than your competitors?

15. 15 Strategic Issue #1 Increase sales growth in higher growth market segments, regions and customers, by customizing value propositions of products and services and developing strategic relationships with target customers. Talent Implications Structure Staffing Requires deep understanding of target market segments and relationships with industry thought leaders. Gaps in Alternative Energy, Machinery OEM and Infrastructure. Retention Many key sales and marketing personnel are approaching retirement age; 22% of organization able to retire in next three year period; opportunity to improve the diversity of the function through turnover and new appointments Leadership Talent Need to develop skill sets of existing sales organization; improve business acumen and ability to connect with top level decision makers in customer’s organization Actions to address in coming year (indicate completion target – Q4, Q1, Q2, Q3) Hire four new segment directors in key market segments. Partner with Talent Acquisition Center to identify targeted diversity recruitment strategies – Q1 On-board new team and engage them to develop creative value propositions and a plan to take them to new customers in their respective segments – Q3 Develop sales improvement programs with Eaton University; deploy in Q2 Talent Implications of Strategic Plan - SAMPLE

16. 16 Insight #5 Ongoing talent reviews supplement annual succession planning by: Facilitating the continuous identification of future leaders Providing more opportunities to conduct deep-dive discussions and calibrations of talent Promoting leadership discussions of top talent, their development, and their career progression opportunities Ensuring that OCA talent strategies and actions are being implemented effectively Surfacing high potential candidates for key development opportunities Providing leadership exposure to diverse early talent

17. 17 Talent Review Calendar TALENT DISCUSSIONDHRM MEETINGSVGLT MEETINGS Operations Bench Review (Plant Managers & Potential Plant Managers)11/18/0912/09 Tier 1 Talent Review12/091/10 Tier 2 Talent Review RN & R11/102/10 Engineering Top Talent & Health of Function2/103/10 GM & VP/GM Talent Review3/104/10 Finance & HR Talent Review & Health of Function4/105/10 Tier 1 & Tier 2 Calibration5/106/10 SCM Talent Review & Health of Function7/108/10 Week of July 5 th OCA Business & Functional Meetings Operations Bench Review (Plant Managers & Potential Plant Managers)8/109/10 Zone Candidates & VG OCA Feedback9/1010/10 OPEX/Quality/EHS Talent Review & Health of Function10/1011/10 Women & Diversity in Leadership Positions11/1012/10

18. 18 Talent Review Dialogue Key Strengths, Development Needs & Ultimate Potential What experiences are they missing that we need to provide them? When are they ready and available for their next move? What developmental feedback do we need to make sure they receive?

19. 19 Talent Reviews - Benefits Increases senior leadership accountability for talent development and diversity Promotes open and honest discussion of talent on a continuous basis – process allows debate of perceptions, which is important to diversity Enhances the talent development skills of senior leadership teams

20. 20 Summary Insight #1: Success is linked to how tightly diversity and inclusion is integrated into a company’s “way of doing business” Insight #2: Diversity must be integrated into a company’s succession planning process Insight #3: Business and functional leaders own succession planning, not HR Insight #4 Incorporating diversity into succession planning requires linkage of a talent strategy to the overall business strategy and priorities Insight #5 Ongoing talent reviews should supplement annual succession planning

21. © 2008 Eaton Corporation. All rights reserved. This is a photographic template – your photograph should fit precisely within this rectangle. Questions?