Sales Force Productivity

Transcription

1 Mary Kay Kaufmann Vice President, NBT Team Leader I&IS Division Mark Stoll Vice President, Field Operations I&IS Division Investor Day /29/2006 9:43 AM metis\roadshow Presentation\07 Roadshow Secondary Follow On 1

2 Forward-Looking Statements and Regulation G This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of These forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information and, in particular, appear under the headings Pro Forma Capitalization, Growing Profitability, Strong and Growing Free Cash Flow Generation, Strong Free Cash Flow and Work Process Redesign Drives Cost Savings, Reinvestment. When used in this presentation, the words estimates, expects, anticipates, projects, plans, intends, believes, forecasts, or future or conditional verbs, such as will, should, could or may, and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management s examination of historical operating trends and data are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management s expectations, beliefs and projections will be achieved. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this presentation. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this presentation. Such risks, uncertainties and other important factors include, among others: our substantial leverage; limitations on flexibility in operating our business contained in our debt agreements; increases in interest rates as a result of our variable rate indebtedness; pricing pressure from our customers; technological change and innovation; risks associated with our non-u.s. operations; fluctuations in currency exchange rates; high competition in the markets in which we operate; adverse changes to environmental, health and safety regulations; operating hazards in our production facilities; inability to achieve expected cost savings; difficulties in securing the raw materials we use; our significant pension benefit obligations and the current underfunding of our pension plans; our ability to realize the full value of our intangible assets; our ability to attract and retain skilled employees, particularly research scientists, technical sales professionals and engineers; our ability to protect our intellectual property rights; and the possibility that our owners interests will conflict with ours. There may be other factors that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this presentation and are expressly qualified in their entirety by the cautionary statements included in this presentation. We undertake no obligation to update or revise forward-looking statements which may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Non-GAAP measures may be discussed in today s presentation. Management believes that discussion of these measures provides investors with additional insight into the ongoing operations of Nalco Holding Company. Non-GAAP measures are reconciled to the closest GAAP measure in schedules attached to our earnings releases, which may be found at Adjusted EBITDA is a non-gaap measure used to determine compliance with the Company s debt covenants. Free Cash Flow is defined as Cash from Operations less Capital Expenditures and Minority Interest charges. In addition, Nalco discusses sales growth in terms of nominal (actual), organic (nominal less foreign currency and acquisition/divestiture/merger/joint venture impacts), and real (organic growth less that portion of the growth which consists of price increases that simply pass along higher raw and purchased material costs). The non-gaap measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies. 2

3 Agenda Productivity Metrics and Drivers New Productivity Projects (Nalco Business Transformation) 3

4 Sales force productivity is measured as the ratio of Direct Contribution to the Operating Expenses at the business unit level. Direct Contribution Selling & Service + Marketing + Research + Service Costs in COGS 4

5 When you break Direct Contribution into the component parts, three variables drive sales force productivity in our model - Sales, COGS and. Sales - COGS - 5

6 The ratio increases (better productivity) when sales increases and COGS & decrease. Sales - COGS - 6

7 While all three variables have increased in the last two years, our sales increase has made up for the substantial increase in COGS and modest increase in, increasing sales productivity. Sales - COGS - 7

8 Our productivity gains yielded substantial savings in 2004 and Direct Contribution 13% Increase % Increase DC/ Ratio Incremental Annual Savings 8

9 We have minimized our increase over the last two years by reducing our indirect spend at the business unit level and implementing the Freedom to Sell initiative. Indirect Spending Initiatives Freedom to Sell primarily in I&IS North America Sales - COGS - 9

10 Starting in 2003, we instituted several new programs and policies that lowered our indirect spending at the business unit level. Indirect Spending Expense Reporting Process Tighter control on Travel and Entertainment expenses New company car policy in Europe Change in cell phone policy Using preferred air carriers Sales - COGS - 10

11 The Freedom to Sell initiative was specifically designed to improve sales force productivity. Purpose To transfer routine service performed at customer locations from the degreed sales engineer to specially trained technical service representatives who are part of a separate service organization that can serve all Divisions. Goal 1. Increase sales engineer s selling time 2. Reduce our cost to serve 3. Improve customer satisfaction 4. Improve employee morale/reduce sales engineer turnover Sales - COGS - 11

12 The I&IS Division created a discreet service organization in 2003 to accelerate Freedom to Sell, and we are seeing great results as we increase deployment across North America. Ratio of sales:service personnel has dropped from 2.83 to 2.1 since the beginning of 2004 The fully burdened cost of a TSR is 40% less than a sales engineer Sales Attrition at accounts serviced by TSRs is significantly lower than accounts serviced only by a sales engineer, particularly at small accounts Next steps I&IS continue to expand FTS model in NA and Europe Expand the model to Paper and Energy Services as appropriate Create a discreet service organization in Europe Sales - COGS - 12

13 Agenda Productivity Metrics and Drivers New Productivity Projects (Nalco Business Transformation) 13

14 We ve initiated a number of projects under the NBT (Nalco Business Transformation) banner to improve sales force productivity. NalcoDIRECT Web portal for order placement and tracking Quote Builder prospect set-up tool and auto approval process Supply Chain demand planning New Sales Engineer On-Boarding Sales - COGS - 14

15 NalcoDirect is a web portal to SAP allowing on-line ordering. NalcoDIRECT Overview Current Situation: Nalco receives orders directly (from customers) and indirectly through the sales force via phone, fax, , etc. Costs and accuracy vary significantly by order channel. Manual order tracking process results in multiple call backs, hand-offs, errors, etc. All during normal selling hours! After NBT Project: Sales Engineers and customers will place orders 24 x 7, real time into SAP CRM with immediate order confirmation. This minimizes hand-offs, errors and cost. The Web portal provides improved sales order history and order-tracking capability. Value Capture: Leverage Customer Service and administrative costs Reduce time spent by sales on administrative tasks Expand available sales time Sales - COGS - 15

16 Current Situation: Quote Builder Overview The Quote Builder is an on-line tool to capture prospect data, generate and store new business quotes, and automate our approval process. We have multiple types of billing arrangements, and lack standard definitions, rules and processes. Field-based pricing decisions are inconsistent. Long approval processes result in profit leakage and errors. Errors in order entry, customer set-up, contracts and pricing result in rework and higher DSO. After NBT Project: Develop industry-based, standard, pre-approved offerings and pricing. Simplify and speed up approval process to assure correct front-end information is in system before ordering using web portal. Use an automated approval process for contract and pricing renewals. Value Capture: Reduce revenue and profit leakage. Win more opportunities/improve analytics. Save time and enhance compliance to guidelines. Improve DSO. Sales - COGS - 16

17 Supply Chain Demand Planning Demand planning applies new tools to our production and delivery systems. Current Situation: Nalco production reacts to orders received No automated demand-planning tools Sub-optimized freight, raw material and workforce utilization Difficulty maintaining balance between inventory control and on-time delivery After Nalco Business Transformation (NBT): New Operations Planning group plans production and deliveries proactively, using multiple SAP modules to help meet agreed-upon service levels. Value Capture: More efficient use of production personnel and raw materials Reductions in inventory and freight expense(inbound and outbound) Improved on-time delivery and customer satisfaction Sales - COGS - 17

18 New Sales Engineer On-Boarding The new process assures consistent on-boarding of new employees. Current Situation: Currently, new field employees receive informal, local training on our order-to-cash process, resulting in inconsistent delivery and effectiveness. After NBT: Bring new field people to central location first week on the job for standardized training on policy, processes, tools and safety. Value Capture: Accelerate new hire assimilation and productivity. Improve workplace morale and efficiency. Build process discipline within organization. Sales - COGS - 18

19 NBT projects include many areas outside of sales force productivity. Other NBT Projects: Improve global procurement processes Service Organization/Management - Support Freedom to Sell Nalco Business Transformation is one program to operationalize our WPR (Work Process Redesign) strategy as a continuous process with technology enablement 19

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