NACO Briefing 13 th September 2011

1. NACO Briefing 13th September 2011

2. Cheryl Marshall Programme Director

3. Group Board Objectives All businesses have the same customer facing strategy • Leveraging the benefits of the rejuvenated brand • Generating improvements through organic growth • Increasing synergies and cross-selling opportunities between businesses

4. and what the objectives mean for Unity Who we are One executive team to engage with the Group Board One culture and one language Share knowledge across the Group Consistently Co-operative values A common brand which members want to use whenever they can What we do Put the Customer first Hungry for growth at pace Efficient - increasing profits and reducing costs We must remove unnecessary layers of management and duplication of back office functions to allow us to focus on delivery to our members and customers

5. Guiding Principles • One Business within two years • Maximise benefits • Adopt best practise wherever we find it • Fair and transparent H.R processes throughout • Communicate openly and honestly at all stages • Minimise disruption in the Group • Minimise risk by being robust on process

6. The journey so far - Phase One: Jan – March • Programme office set up & high level milestone plan • Customer Leadership Team established • Target Operating Model developed • High level business case • HR and communications processes defined • Engaged Trade Unions

7. Customer Leadership Team

8. Customer Leadership Team Sean Toal Commercial Director, Food Rod Bulmer Retail Director Financial Services John Nuttall Managing Director, Healthcare Mike Austin Managing Director, Specialist Commercial Businesses Gill Barr, Group Marketing Director Ian Dyson Director of Trading Group IS Mike Greenacre Managing Director Travel Group Russell Gill Head of Membership Maria Sloan Head of Membership Marketing George Tinning, Managing Director, Funeralcare Ian Mackie, Managing Director, Life Planning

9. Revenue Workstreams

10. The Customer Leadership Team will live beyond Unity • Multi channel expansion • Proposition development • Messaging planning • Membership expansion • Capability building • Support and challenge

11. Target Operating Model

12. The Target Operating Model • Operating strategy • Operating vision and strategy; design principles • Operating structures • Where should activities, decisions and assets sit? • Interactions • Business flows/handoffs, commercial value, funding • Infrastructure • Organisation design and performance management • Capability and behaviour • Property and locations; • Tax and legal structure; • IT

13. and how it is being developed The Group executive identified where the Group can add value, the roles of the Group Executive, Business Units & Business Shared Service Centre to meet Unity objectives Defined the design principles for the new operating model and specified the changes this will mean Output = a revised organisation design, processes and technology locations

14. … the benefits this could bring for Unity Property Revenue Generation Consolidation of functions, systems & processes Procurement

15. Phase Two: April – June • Sponsors engaged, steering groups established, workstreams mobilised, programme office leads nominated • Business partners allocated to workstreams from HR, Finance, IS Comms • HR toolkit deployed to HRBP’s • Costs & Benefits tracking framework defined • Union consultations ongoing

16. Functional Workstreams

17. Target Operating Model – Workstreams’ role Workstream PDD’s define the people, processes and technology required to deliver the Target Operating Model

18. The Target Operating Model • Operating strategy • Operating vision and strategy; design principles • Operating structures • Where should activities, decisions and assets sit? • Interactions • Business flows/handoffs, commercial value, funding • Infrastructure • Organisation design and performance management • Capability and behaviour • Property and locations; • Tax and legal structure; • IT

19. Unity current activity • Two further workstreams launch • Delivering Our Customer Promise • Culture • Revenue & functional workstreams have commence delivery • HR business cases progress with HRBPs • Consultations with Trade Unions continue throughout • HR support processes mobilise • Opportunities Centre • Outplacement support • Recruitment website • Programme Office Change Implementation Management

20. Wayne Lee Director of Employee Relations & Reward

21. Unity - People Principles Whilst achieving reductions in staffing levels is not the focus of the Unity programme, the removal of silos and duplication of activities, together with the restructuring of Corporate functions and teams will result in job reductions. Voluntary redundancy will be offered wherever possible, but it is inevitable that some compulsory redundancies will be necessary though the Group remains committed to keeping them to a minimum. The Group will always seek to identify redeployment opportunities and to this end recruitment activity in the Corporate and Head Office functions has been tightly managed for most of this year . Where employees are redundant the Group has put in place generous redundancy terms and will provide significant outplacement support including assistance with CV writing and interview skills training. The Group will always work with it's recognised Trade Unions to make sure that the processes we follow are as fair and transparent as possible throughout the Unity programme.

22. Unity - Aligning Terms & Conditions • Objectives • A market aligned package that is fair, consistent and cost effective to administer; • Full consultation with the Trade Unions; • Minimise disruption to colleagues and the business ; • Balance the above requirements with affordability for now and the future.

23. Unity - Aligning Terms & Conditions Design Common set of T&C’s for all colleagues in the new Corporate Centre & Shared Services. Group Customer Operations will be considered at a later date after assessing the operational requirements of a single customer operations infrastructure. CFS will review the T&Cs of CFS employees who do not transfer under Unity and seek to align them as far as possible The employer will be Co-operative Group Limited. The majority are being harmonised upwards harmonised .

24. Aligning Terms & Conditions Pay & Grading In the new Corporate Centre, the Co-operative Group’s descriptions of grades will be adopted (Role Bands 1 to 8). Employees who accept a lower graded role / lesser paid role within a restructuring process under Unity shall receive compensation for the losses they incur. Bonus There will be no change to bonus arrangements for 2011, payable in 2012.  Future bonus arrangements remain under discussion with the trades unions. Holidays Overall holiday entitlement between respective grades will be ‘matched up’. Sick pay Overall sick pay entitlement between respective grades will be ‘matched up’.

25. Aligning Terms & Conditions Working hours The standard working week in the new Corporate Centre will be 37.5 hours. Colleagues from CFS who transfer under Unity to the new Corporate Centre will have the option as whether or not to change their present contractual working hours from 35 to 37.5 hours per week. Colleagues from CFS in Role Bands 4 to 8, i.e. CFS grade G, who are matched into roles into the corporate centre will receive a corresponding pay increment (7%) to cover their increase in standard working hours, subject to their pay remaining within the parameters applied in CFS. Colleagues from CFS in Role Band 3, i.e. CFS grades E1&2, will be offered a one off lump sum payment (7%), but no pay increment, to encourage adoption of the 37.5 hour working week. Colleagues from CFS in Role Band 2 are, in CFS, employed on all inclusive salaries and will not be offered any incentive to move to a 37.5 hour working week.