1. Recruiting & Retaining Utility CEO’s Winston L. Tan Principal, Human Capital and Rewards Practice Cooperative Benefits & Financial Services, LLC (678) 355-3610 winston.tan@cobbenergy.comwww.TeamCBFS.com 2007 APPA National Conference

2. The Employment Value Equation Time/experience Time/experience Competencies Competencies Skill Skill Network Network Compensation Compensation Benefits Benefits Work Environment Work Environment Organizational culture Organizational culture Work/life balance Work/life balance

3. Set Your Compensation Strategy What are you willing to pay for experience and talent? What are you willing to pay for experience and talent? Quality is generally expensive.Quality is generally expensive. With whom do you need to compete for talent? With whom do you need to compete for talent? (Bargain hunting can work but there is a risk…)(Bargain hunting can work but there is a risk…) Geographical considerations Geographical considerations Evaluate your retention drivers. Evaluate your retention drivers.

4. Surveys Tell Only Part of Story Reported data aggregated into a statistical array Reported data aggregated into a statistical array Company success relative to peers Company success relative to peers Incumbent experience skill or migration Incumbent experience skill or migration Participant relevance Participant relevance Participant retention drivers Participant retention drivers Work environment Work environment Geographic Considerations Geographic Considerations Recreational opportunities Access to medical, higher education, arts, etc.

5. Monitoring the Value Scale Recruitment The “Honeymoon Window” The “Honeymoon Window” Newness= happinessNewness= happiness Fear of failureFear of failure Challenge of the unknownChallenge of the unknown Honeymoon dance with the Board/CouncilHoneymoon dance with the Board/Council “It’ll get better” optimism“It’ll get better” optimismRetention Seen some warts Seen some warts Job changes Job changes Networking requirements Non-core business focus Monitor work/life issues Monitor work/life issues History says that it is not going to change History says that it is not going to change

6. Tools in Addition to Base Pay Incentive Plans Incentive Plans Among cooperatives about 20% offer bonus programsAmong cooperatives about 20% offer bonus programs Among “for profit” companies about 70% offer bonus programsAmong “for profit” companies about 70% offer bonus programs Retention mechanisms (golden handcuffs) Retention mechanisms (golden handcuffs) Executive benefits Executive benefits Employment/severance agreements Employment/severance agreements

7. Sample Rolling Incentive/Retention Plan Payout

8. Core Utility Benefit Offering Health (medical, dental, vision)Health (medical, dental, vision) Group term lifeGroup term life Short and Long term disability insuranceShort and Long term disability insurance Defined benefit pension planDefined benefit pension plan Defined contribution pension planDefined contribution pension plan Dependent coverage Employee Assistance Program Holidays Vacation, sick leave and other time off Retiree benefits

9. Executive Benefits Vehicle Vehicle Financial planning (estate, retirement, etc.) Financial planning (estate, retirement, etc.) Voluntary deferred compensation Voluntary deferred compensation Supplemental disability insurance Supplemental disability insurance Supplemental executive retirement plan (SERP) Supplemental executive retirement plan (SERP) Supplemental life insurance (Key man, Split dollar, etc.) Supplemental life insurance (Key man, Split dollar, etc.)

10. Executive Perks Country club membership Country club membership Tax planning Tax planning Flexible perquisite accounts (cash value) Flexible perquisite accounts (cash value) Signing bonus Signing bonus Extra time off Extra time off Airline VIP lounge membership Airline VIP lounge membership Corporate jet Corporate jet First class air travel (if you don’t have a corporate jet!) First class air travel (if you don’t have a corporate jet!) Spousal travel Spousal travel

11. Performance Feedback Generally missing at the CEO level Generally missing at the CEO level Essential to provide a clear communication link between governing board and CEO regarding performance expectations Essential to provide a clear communication link between governing board and CEO regarding performance expectations Clarifies executive focus and organizational resources Clarifies executive focus and organizational resources Establishes a baseline for incentive achievement Establishes a baseline for incentive achievement Supports “reasonable” compensation decisions Supports “reasonable” compensation decisions

12. Performance Process Directly survey key stakeholders (Board, council, etc.) to identify key CEO skills and competencies Directly survey key stakeholders (Board, council, etc.) to identify key CEO skills and competencies Evaluate consistency of responses. Evaluate consistency of responses. Define performance criteria (financial, operational, customer satisfaction, etc.) Define performance criteria (financial, operational, customer satisfaction, etc.) Obtain CEO input for each criteria Obtain CEO input for each criteria Poll each evaluator and obtain individual ratings Poll each evaluator and obtain individual ratings Compile results (numerical and narrative) into a collective response Compile results (numerical and narrative) into a collective response Ensure that responses are indicative of the entire group Ensure that responses are indicative of the entire group

13. In Summary Articulate your compensation strategy Articulate your compensation strategy Balances cost with valueBalances cost with value Rewards performance resultsRewards performance results Supports sound governance practicesSupports sound governance practices Monitor your competitive target market Monitor your competitive target market Connect rewards to your business Connect rewards to your business What are your key business imperatives?What are your key business imperatives? What does the company need to be successful?What does the company need to be successful? Celebrate success Celebrate success

14. Winston L. Tan Winston Tan is the Principal of the Human Capital & Rewards Practice for Cooperative Benefits & Financial Services, LLC (CBFS). He has worked in a variety of public and private industries providing management consulting and assistance in the United States and overseas. He specializes in total compensation solutions (including base pay, variable pay, and benefits analysis), strategic planning, organizational design, and human resource performance development. Prior to joining CBFS, Winston was the Principal of Human Resources for the National Consulting Group, a management consulting organization within the National Rural Electric Cooperative Association (NRECA). For over 15 years he has provided compensation, organizational development, and other consulting services to the electric cooperative members of NRECA. Winston and his wife Julie just relocated to the Pacific Northwest and spend leisure time creating memories with their children Michael, 12 and Madison, 10.