DENEL GROUP

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Presented by: Patience Mushungwa Group Executive: HR & Transformation

Date: 19 March 2010

DENEL PRESENTATION TO PARLIAMENT

DENEL GROUP

DENEL GROUP

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DENEL GROUP STRUCTURE

Personnel employed by Denel Group:

Denel: 5 117

Ass. Companies: 2 204

TOTAL: 7 321

DENEL GROUP

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REWARD STRATEGY

Denel’s remuneration strategy is aimed at the following:

– Align managers and employees behaviour with Denel strategic intent and objectives.

– Implementation of a remuneration strategy that will assist in turning Denel around.

– Enabling attraction and retention of competent, performance driven employees.

– Creating a performance driven culture and reward performance.

– Inculcating a commercial mindset and improve Human Capital returns.

– Implementing market related remuneration, incentive and reward principles.

DENEL GROUP

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PERFORMANCE MEASURES, AND HIGH LEVEL OBJECTIVES

OVERALL GROUP TARGETS 2009/10

100%

PEOPLE & TRANS- FORMATION – 20%

•B-BBEE – 12%• Improvement of Organisational

Climate – 5%•Performance Management – 3%

FINANCE - 60%• Net Profit/Loss – 25%

• Cash flow before Financing – 20%• Clean External Audit 9%

• Resolution of Internal Audit Findings – 6%

OTHER – 20%

•e.g. Strategy, Multi-year order book

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PERFORMANCE MANAGEMENT PROCESS & PROCEDURE

Pre-PlanningPre-Planning

Performance and

Development Plan

Performance and

Development Plan

Informal Interim Review

June

Informal Interim Review

June

Variable Pay Determination (if applicable)

Variable Pay Determination (if applicable) PlanningPlanning

1st Formal Review

Sept/ Oct

1st Formal Review

Sept/ Oct

CoachingCoaching

CoachingCoaching

Informal Interim Review

December

Informal Interim Review

December

Self Evaluation February

Self Evaluation February

ReviewReviewLast Formal

Review March

Last Formal Review March

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Talent Acquisition

TalentRetention

TalentDeployment

Talent Development

OrganisationCulture

Business StrategyBusiness Strategy

Available Skills Pools

Educational Health

War for Talent

Labour and EELegislation

Talent Management System, Process, Tools & MetricsTalent Management System, Process, Tools & Metrics

Strategic HR/Talent PlanStrategic HR/Talent Plan

HR Policy & Processes

• Performance Management • Remuneration• Promotion• Transformation• Diversity• Empowerment

HR Policy & Processes

• Performance Management • Remuneration• Promotion• Transformation• Diversity• Empowerment

Leadership Leadership

People Management People Managem

ent

TALENT MANAGEMENT MODEL

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Individuals complete Information on eTalent:• Biographics• Qualifications• Experience• Interests• Job Motivation• Retention Factors (22)

Information is analysed and reviewed in Talent Management workshop where Collective Retention Risks

are indentified and Corrective Actions decided on.

Individual dialogue sessions on personal retention risks and career development

Talent Management Workshop with Senior Management to review outcome of Individual Discussions and to agree and update Career Development and Deployment Actions

Line management Coaching on how to conduct Individual

Dialogue Sessions

Managers review individuals and capture assessment information on eTalent:• Performance• Potential• Next Career Moves• Competencies• Replaceability

IMPLEMENTATION PROCESS

DENEL GROUP

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• Leading Business• Group Visioning and Strategy• Global Trends• Growing the Enterprise• Corporate Diplomacy• Strategic Stakeholder Management and

Communication• Networking and lobbying • High Performing organisation

• Leading Change• Organisational Sustainability and

Resilience (Learning Organisation)• Leading Self• Personal Branding• Personal Modeling Leading People • Executive Succession and Coaching • Inspirational Leadership

• Leading Business• Strategic Alignment / Operationalsing

Strategy• Business Process Analysis,and Optimisation • Balanced Scorecard, Tracking Business

Performance• Communication (Internal and External)• Advanced Customer Relationship

Management/ Collaborative Strategies • Analytical skills/, Simulation and Business

Modelling• Advanced Negotiation • Entrapreneurial Skills and Deal Making

• Leading Change• Change Management Tools and

Techniques• Leading self

• Personal Mastery and Authenticity• Team Mastery

• Leading People• Talent Management• Capacity Building ,Skills transfer

and Empowering Teams • Team Dynamics, Team Mastery,

Collaboration and Resilience• Leadership Approaches• Cultural Mastery• Transformational Leadership

• Leading Business • Leadership Essentials (Planning, Organising

Leading and Control)• Understanding Business Objectives• Quality Management• Execution• Basic Diagnostic Skills• Customer Relationship

• Leading Change• Change Orientation

• Leading Self• Personal Leadership, Self awareness

& Personal Strengths • Stress Management• Creativity• Leading People• Human Resource Management• Coaching for Performance and

Development• Conflict Management• Interpersonal Communication• Relationship Building • Delegation

First Line

Senior Management

Executive Leadership

Operational Focus

Strategic Focus

LEADERSHIP COMPETENCY FRAMEWORK

DENEL GROUP

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DENEL LEADERSHIP DEVELOPMENT PROGRAMME

DENEL GROUP

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STATUS AND FILLING OF VACANCIES FOR EXCO & ENTITY CEO’s

Status on vacancies as at 15 March 2010 0

Filling of vacancies:

• Denel will follow its recruitment policy and process to fill the vacant positions, when they do arise.

DENEL GROUP

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DENEL REMUNERATION PRINCIPLES

Denel’s Remuneration and Reward model is in line with best practise. It comprises:

– An incentive element incorporating performance based Variable Pay, aimed at driving required behaviour in achieving overall financial and key strategic objectives.

– A performance management element aimed at recognising and addressing individual employee performance.

– A market related Fixed Pay element aimed at addressing current pay disparities in relation to market remuneration.

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REMUNERATION - EXECUTIVE TEAM#

Minimum Average Maximum

Hay Units 1262 1695 2812

Remuneration R1,320,000 R2,060,070 R3,570,800

# CEO’s excluded

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REMUNERATION - EXECUTIVE TEAM (cont)

Patterson

Classical Grades/ Broad bands

Sub grades

Hay Unit Range

Peromnes Grades

Castellion Task JE

Manager Points

Decision Level

E upper E2 1056-1260

1261-1800

3/2

2

15 22

23/24 200-225

Head of Major Functions

Programming Decisions

F lower

F upper

F1/F2

F3

F4/F5

1801-2550

2141-2550

2551-3580

1

1+

1++

16

17

25/26

26

27/28

230-245

250-275

Top Management

Board Level

Policy Making Decisions

• Remuneration of Exco members based on market and also DPE’s Guidelines on Remuneration of Executives (published August 2006).

• Personnel and Remuneration Committee recommends remuneration of Executives to the Board for approval.

• Denel aims to pay on the 50th percentile of the market but currently 80% of managers’ remuneration is below 25th percentile of the market.

DENEL GROUP

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REMUNERATION PHILOSOPHY – BOARD OF DIRECTORS

Remuneration philosophy is based on the DPE Publication, “State Owned Enterprises: Remuneration Guidelines – Part A (Chairpersons & Non-executive Directors)”; including market benchmarks used to determine the fees paid to the non-executive directors.

The Personnel and Remuneration Committee reviews the fees that the Group pays to the non-executive directors and the recommendations are presented at the annual general meeting for Shareholder approval.

Board members are remunerated according to the policy that govern Remuneration for Board Members:

On a retainer fee basis for the Chairman;

On a fixed fee per meeting for:–Non-Executive Board membership;–Committee membership; and–Subsidiary Board, or Committee membership.

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REMUNERATION TABLES FOR DENEL BOARD

CHAIRMAN RETAINER PER ANNUM R 715 000

Non-Executive directors:

Per meeting 2009/10 Remunerati

on

1. Denel Board meeting: Non-Executive member 17 910

2. Denel Audit & Risk Committee meeting: Chairman 31 958

3. Denel Audit & Risk Committee meeting: Non-Executive member

15 180

4. Denel P&R Committee meeting: Chairman 21 789

5. Denel P&R Committee meeting: Non-Executive member 14 236

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REMUNERATION TABLES FOR SUBSIDIARY BOARDS AND COMMITTEES

Business Entity per meeting:

1. Business Entity Board meeting: Chairman 10 746

2. Business Entity Board meeting: Non-Executive member

8 955

3. Business Entity Audit & Risk Committee meeting: Chairman

9 108

4. Business Entity Audit & Risk Committee meeting: Non-Executive member

7 590

5. Business Entity P&R Committee meeting: Chairman 8 541

6. Business Entity P&R Committee meeting: Non-Executive member

7 118

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DENEL EXCO & ENTITY CEOs TURNOVER (2007 – 2009)

2

1

2 2

1

2

1

3

1

33

1

2

3

4

White Male White Female African Male African Female Coloured Male Colouredfemale

Indian Male Indian Femal

Appointment Terminations

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DEMOGRAPHICS OF EXECUTIVE TEAM

White African Coloured IndianGRAND TOTAL

Male Female Male Female Male Female Male Female

31 Mar 2007

3 2 2 1 1 0 1 0 1030% 20% 20% 10% 10% 0% 10% 0% 100%

31 Mar 2008

3 2 1 1 0 0 1 0 837.5

%25% 12.5

%12.5

%0% 0% 12.5

%0% 100%

31 Mar 2009

2 0 2 1 0 0 1 0 633.3

%0% 33.3

%16.7

%0% 0% 16.7

%0% 100%

31 Mar 2010

2 0 2 1 0 0 1 0 633.3

%0% 33.3

%16.7

%0% 0% 16.7

%0% 100%