1. BMW Group 30.11.2010 Page 1 Human Resource Management in Times of Change. Dr. Schmidt-Reintjes, BMW Group.

2. BMW Group 30.11.2010 Page 2 Agenda. BMW Group – A history of change and challenges How is change managed at BMW Group? Discussion / Q&A

3. BMW Group 30.11.2010 Page 3 BMW Group. Overview. BMW Group Cars BMW, MINI, Rolls-Royce Motorcycles Financial Services

4. BMW Group 30.11.2010 Page 4 BMW Group. Global Vendor of Premium Vehicles. BMW Group 2009 Car sales1.286.310 Motorcycle sales87.306 Employees96.230 Locations in Germany Production Plants CKD Plants R&D Joint Ventures

5. BMW Group 30.11.2010 Page 5 BMW Group. Annual Comparison 2005 to 2009. 3rd Quarter 2010 Profit before tax 3.166m EUR

6. BMW Group 30.11.2010 Page 6 1923: Developed within just a few weeks, the R 32 motorcycle hails the advent of BMW‘s great tradition in the two-wheeler market. BMW Group. A short history of change (1/2). 1917: Foundation of BMW GmbH as a limited company. Registration of the white-and- Blue logo as the Company‘s official trademark. Production of the first aircraft engine. 1928: Taking over Fahrzeugfabrik Eisenach, BMW enters the car business (Dixi). 1945: Following destruction and dismantling of its facilities, BMW starts to re-built in a very hard process. 1952-1955: Large saloons, coupés, convertibles and roadsters in the 501 – 507 model range continue BMW car production after the war, now for the first time at the Munich Plant. The BMW Isetta, BMW 600 and BMW 700 meet customer demand in the post- war years 1959: At the Annual General Meeting on 9 December 1959, small shareholders and Dealers prevent the company from being sold off. With BMW thus making a new Start as an independent mobility enterprise, Dr Herbert Quandt becomes the Major shareholder. 1962: BMW successfully makes its way out of the crisis with the sporting and compact midsize New Class Saloons.

7. BMW Group 30.11.2010 Page 7 BMW Group. A short history of change (2/2). 1972: The new Headquarter designed by Professor Karl Schwanzer is completed For the 1972 Olympic Games. To this day the Four-Cylinder Building characterizes the Munich skyline. 1986: The new Research and Innovation Centre (Forschungs- und Innovationszentrum, or FIZ) is built near the Group Headquarters and the Munich Plant. The FIZ is the hub of the Group‘s global research and development network. 1992: BMW AG took the decision to built a car production plant in the USA: the Spartanburg Plant. 1994: Purchasing Rover Group Ltd with its main brand ROVER, LAND ROVER, MG and MINI, BMW AG enters new market segments. 2000-2007: “Rover Demerger” and concentration on premium segments with the BMW, MINI and Rolls-Royce brands. 2007: “Strategy Number ONE” and new mission towards a sustainable economic management. 2008/2009: Mastering world financial and economic crisis. 2010: Strong growth in BRIC markets, record performance on operating level. 2011ff. More to come…

8. BMW Group 30.11.2010 Page 8 BMW Group. Strategy Number One has raised the necessity for continuing change. Annual Report 2007

9. BMW Group 30.11.2010 Page 9 BMW Group. New challenges and needs for change are under way… Market, customers und competitors Innovations and targeted business model design Internal challenges External challenges Shortage of raw materials Tighter legislation Changing values Mega-cities Demographic effect Sustainability Economic developments Capital market Efficiency and profitability Demographic effects Growth in premium segment Opening up new customer segments Differentiation and individual mobility Product differentiation Downsizing/Downgrading Discernible customer benefits Partner management Changes to sales channels Service and after-sales business Challenges and trends

10. BMW Group 30.11.2010 Page 10 Changes in emissions legislation. CO 2 regulations becoming much stricter worldwide. -10% -30% -20% USA EU 27China as of 2013 under discussion Japan Group fleet 2008 CO 2 -10% -25% to -30% -25% by 2016 by 2015 as of 2020 -5% to -20% 2010 as of 2015 > -20%

11. BMW Group 30.11.2010 Page 11 Customer requirements. Understanding future customer requirements will demand a more international approach.

12. BMW Group 30.11.2010 Page 12 Agenda. BMW Group – A history of change and challenges How is change managed at BMW Group? Discussion / Q&A

13. CM Charts PZ-32 Seite 13 Leading Change – Situation Analysis. Factors of success in the change process. Analysis Unfreeze Implementation Sustain- ability Know Want May Can Change Objective Strategy Content Basic Principles Challenges Communication Dialogue Mobilisation Reward / Sanctioning Alignment of managers Enabling Resources Outward Orientiation Leader- ship Structures Processes Guidelines BMW‘s Change Model is based upon -Concrete experience in BMW change projects -Kotter (1997) Leading Change -Results of empiric research to Change Management by Cap Gemini (2005) / TU München (2006)

14. CM Charts PZ-32 Seite 14 6. Personal wish for change: Ambition and readiness for personal change 7. Personal match of values perception that personal and company values are matched 8. Personal transformation plan: Knowledge of an target oriented plan for personal change 9. Personal efficiency: Trust in the individual ability and energy to change 10. Integration and participation: Perception that one is part of the company’s change activities Leading Change – Situation Analysis. “Ability to change and implement.”* Source: Harvard Business Review, Cracking the code of Change, May (2000) Change of company Change of individual 1. Company’s Change requirements: Conviction that company must change. 2. Company’s Vision: Support for the company’s future vision of itself 3. Company’s transformation plan: Knowledge of an adequate plan for conducting the change 4. Company’s performance: Trust in the company’s ability to change 5. Leading and Advice: Conviction that practical change support will be given Binding Processes Push Factors Pull Factors Path Factors Energy Factors Engagement Factors *for self-study

15. CM Charts PZ-32 Seite 15 Leading Change – Change progress and implementation. Change direction is determined by the change concept followed. Securing survival Crisis Management/ organizational restructuring Mobilizing Adaptability and developmental capacity Renewal Growth potentials Learning organization Market responsiveness Radical repositioning Strategic turnaround/organizational redesign Change Map low high Change capability/readiness Current necessity for change high Source: Doujak, Corporate Development

16. CM Charts PZ-32 Seite 16 Leading Change – Change progress and implementation. Leaders in the role of Change manager. COMMUNICATIONQUALIFICATIONCOACHING INFORMATION MONITORING Personally perceived competence for change 7. INTEGRATION …of successful processes and behaviours in ones own active repertoire 6. RECOGNITION …why certain processes and behaviours are successful, and others not 5. TRIAL AND ERROR Trying new processes and behaviours: Successes – Failures – Confusions - Frustrations 1. SHOCK Major discrepancy between own and others‘ expectations, and actual reality 4. EMOTIONAL ACCEPTANCE 2. DENIAL …of reality; letting go of old processes and behaviour Time 3. RATIONAL INSIGHT …that new processes and behaviour are necessary Source: Change Works 5 False sense of security; exaggerated view of own process and behavioural competence

17. BMW Group 30.11.2010 Page 17 Change Competences – HR perspective. Changed competence needs on a corporate level are broken down to the level of individual employees and realized. Competence On a corporate level, competence means necessary abilities of the enterprise which ensure current and future success in business. On the individual level, competence means usable abilities, skills and knowledge which employees are able to use to contribute to the achievement of corporate requirements and targets in the degree expected. ? The more change is necessary, the more HR processes need to work hand in hand and in a larger context to deliver expected results. Strategic and operating Competence Management

18. BMW Group 30.11.2010 Page 18 How can competence be structured? One proposal among many. Top Level Job Families Detailed Job Families Functions, Technologies, Services, Products, Markets, … Overall Competence Level Functional Skills Personal Skills Skill level General Job Profile Specific Job Description

19. BMW Group 30.11.2010 Page 19 Required Competence Skills relevant for specific job profiles / for specific positions Multi-year competence requirements on a departmental level Consistent competence catalogue Targets for change in competence Adequate qualification budget HR processes All relevant HR processes need to be aligned to pursue targeted changes in competence Employee Competence covered / potentials for coverage Individual skills in relation to existing / new position Competence Management ? ? Change Competences – HR perspective. A process to propagate change from corporate down to employee level was successfully piloted in a division of BMW. Strategy Critical tasks Challenges Resource allocation Direction of inhouse vs. external service provision Financial and employee headcount planning Consistent development targets and general framework Strategy and Long Range Planning Development/ business plans Target state, measures General framework Competence increase / decrease / change Detailed plans Decomposition to departmental level Business division development

20. BMW Group 30.11.2010 Page 20 Change Competences – HR perspective. Complementary to this top-down approach, possibilities are currently investigated to strengthen employee self-organization and responsibility. Daily needs of employees and supervisors Synergy potentials of an internal Social Network Easy search of expert knowledge and transfer, identification of candidates for new areas / shifting employment focus. Future contact point for structured competence management. Strengthening of networks / self-organization / change in habits. Spread of knowledge to groups instead of focusing on few experts. Efficient co-work, savings in time spent, increased quality. Reproducible exchange on parallel topics as part of daily work. Transparency across countries and time zones. Find or found by myself professional topic groups Find experts / co-workers or be identified as an expert or as a contributor myself. Work on professional topics together, deliver individual contributions. Stay informed on any topic of interest / adapt my interests as needed.

21. BMW Group 30.11.2010 Page 21 It is People who will make the Change work. Thank you for your attention.

22. BMW Group 30.11.2010 Page 22 Agenda. BMW Group – A history of change and challenges How is change managed at BMW Group? Discussion / Q&A