Our Talent Management Culture

Chairman Kumar Mangalam Birla has said that the broad philosophy of the company as an employer is to
empower and to enrich, and as part of that there are a couple of things. First, there is the trust. Our
people must trust the organisation that they work for without any doubt and in any situation.

In one of Aditya Vikram Birla's speeches, he said that the most important lesson in management that he
learned from his grandfather was that major investments should be made in the selection, training, and
building up of people. He said that his grandfather also taught him to have full trust and confidence in the
people; "Your men will be as loyal to you as you are to them."

The second important thing is that we practice meritocracy. Our people must understand that they will
have the opportunity to excel and grow in our company as long as they have merit. They must not be
afraid or feel lost in their quest or pursuit for excellence and career advancement.

Finally, our diversified business groups offer wide career opportunities for our people in various locations
around the world — whether they want to try our business process outsourcing in Canada, or to work in
Australia in the mines, or even to head our strategy function in the world's largest rolling company in
Atlanta. In short, our people can enjoy these opportunities within the same company without having to
move from one company to another. Where can you find such varied and diversified areas of business all
under the same roof?

Our legendary leader, Aditya Vikram Birla, had shared that his grandfather taught him that ordinary
people can give extraordinary results if they are given the right opportunity. We have to train people by
delegating authority to them. We must let our people make mistakes in the process. It is only through
making these mistakes that they learn bitter lessons the hard way. This is where the strongest leaders are
built.

His view is that we must have the forbearance, fortitude, patience, and a big heart to bear the losses in
training our people. He said that opportunities must be given to people for them to perform. We must not
hesitate to give away our authority to our people. We must be open to delegating authority, but we must
be responsible to ensure that our people are ready to accept delegation and empowerment.

He shared that when he came back from the United States, his father gave him an industrial mill to work
on his own without any help from the Group. He said that his father had the vision and the guts to
delegate that huge responsibility to him because his father had trust in him. But he made innumerable
mistakes in the process. So the training was worth all the mistakes he had made.

To stay focused on our people's career development and growth, we ensure that we stay closely engaged
with our employees by aligning employee needs and business interests. This undivided attention has
helped us tremendously in developing and implementing our best-in-class people practices. Across 25
countries, our human resource processes are replicated seamlessly with strong orientation in various
aspects such as continuous personal and professional growth, values-driven work culture, quality of life,
feeling of ownership, just to name a few.

Chairman Birla has said that the criticality of the human element is today more pronounced than ever
before. Undeniably, what sparks and sustains the success of an enterprise are its people. This is the
universal truth. It is no different in India. Leadership is all about the following beliefs:
:: Plugging into the minds and hearts of people
:: Rallying them around to a compelling and exciting vision of the future
:: Upping the quality of imagination of the organisation
:: Encouraging a spirit of intellectual ferment and constructive dissent so that people are not bound by
the status quo, and mavericks are given space and free play
:: Building the highest levels of empathy, without compromising on fairness and running a popularity
contest
This is the path we pursue to muster the emotional and intellectual equity of our 100,000 workforce,
spanning 25 countries, belonging to 25 nationalities across six continents.

We are a meritocracy where talent automatically bubbles to the top. We work to make space for new
ideas and encourage the spirit of experimentation. Champions of good ideas have every chance to try
them out. Our people systems are aligned to foster excellence, empower and enrich people, recognise
creativity and innovation, and reward performance. People with a good track record and people with a
passion to perform are steered onto a growth trajectory.

Maybe we could attribute our being voted the Best Employer in India and among the top 20 in Asia by
The Hewitt-Economic Times and The Wall Street Journal study to this ascendancy that we give to our
people. To get to the top has been tough. Staying at the top is going to be even tougher. We realise that
we have to work much harder to make our people process development-oriented and even more sensitive
to our people's career aspirations.

Hence we are personally involved with business leaders and other leaders within the organisation to use
this achievement to bring a sharper focus on our employees and employee engagement. Our guess is
that this is germane to leadership across geographies.

The key issue that leaders have to grapple with is implementing mergers and acquisitions successfully so
that they are seamless. A coming together of two companies is not about balance sheets coming
together, or distribution channels coming together. It is, at the end of the day, about people coming
together, their hearts and minds coming together, and their values and cultures coalescing.

The process is full of anxiety, uncertainty, and silent suffering. Often top management is oblivious to these
emotions. Unfortunately, many do not care or lose sleep over it. The softer aspects of mergers are
neglected. To sail successfully through the transition phase, leaders need to be sensitised to these
issues.

As we look ahead, we believe the War for Talent will intensify and that could become a major speed
breaker. There is acute competition rather than a scramble for inducing and retaining people with
competencies relevant for a globalising corporation.

When a company globalises, its internal demographics transform into a sociocultural potpourri. There is
inherent instability. Corporations that embark on this growth trajectory face churn and uncertainty amid
change. On such a journey success will come to those corporations where the leadership is unifying and
value-driven.

Our Talent Management Programs

As a hugely diversified and vast business group, we have the
capability to offer a wide variety of job opportunities including
challenges, circumstances, and different lifestyles from global and
regional perspectives spread across a few time zones. To sustain this
buffet of offerings to our employees, our company has built an
aggressive growth plan with structured processes that provide
sufficient flexibility for employees' individual creativity and innovation.

By this we mean that our company's strength has been built on the
high quality of our employee talent. This is the positive outcome of
allowing our employees the freedom to charter their own chosen
career path across the varied business groups in the wide spread of
countries all within the same company. We can safely say that we
really spoil our employees!

Touching on our structured processes, our focus has been on internal

recruitment scheme, global mobility policy, talent management, job
analysis and evaluation, and continuous learning opportunity. These areas of our focus have
demonstrated that we can now deliver the right quality of talent required of our intense diversified
business around the world. We streamline these processes regularly to ensure that they are kept updated
with the changing times and changing expectations of our employees, both new and old.

In addition to these areas, we are also serious about employee engagement. What we do is to monitor
this element closely at all levels across our business groups through our biennial organisation health
study (OHS), which is headed by our Chairman. He is personally involved in the OHS because any
actions that are recorded from the results of the OHS must be followed through promptly until closure.

Employees are aware of our management's serious commitment in the OHS, so they take this opportunity
anonymously to express their opinions and ideas and offer suggestions and comments freely and without
fear on a range of issues. As an illustration, almost 15,600 employees participated in our last OHS in
2006, which tells us that our employees are interested in sharing their feedback and views with our
management. In this study, our employees told us that they had a positive perception that our company is
serious about enhancing their competence levels and ensuring that they remain employable based on our
focus on learning.

Sixty-seven per cent of the respondents in this study said that they would recommend our company to
their friends who are looking for a meaningful career, whereas 69 per cent of them shared that they would
like to remain in the same business two years from time of the study. Further, 71 per cent confessed that
they had received sufficient training for them to perform well in their roles.

That is why it is so critical that we consider all our employees as Group resources in our continuous and
relentless effort to enhance our image as the employer of choice. This also helps our employees to have
a sense of belonging to our company besides having them create the bonding and closeness among
themselves. The positive results from our OHS validate that our employees are happy working in our
company, which helps to ensure that there is continuity of their services across the various business
groups.

On employee engagement efforts, we launched the Aditya Birla Awards for

Outstanding Achievement in 1996 to recognise outstanding performance and
excellence among employees from the various business groups across a wide
geographical span. The interesting thing about this recognition is that a number
of group-wide competitions are held in conjunction with recognition such as
Vision 2015, Oh! Not So Smart, and the Aditya Birla Group value leader poll.
They are open to all employees.

Another of our talent management efforts to keep employee engagement active

and interactive is through our common portal where every employee can
access information about our company. This portal also provides job
opportunities in our company at the various levels, business groups, and
locations. In this way, our employees have equal access and opportunity to
such information. This helps to encourage healthy internal communication
among employees across all business groups in our company.

We also enjoy putting little personal touches in some of our recognition events. For example, we
celebrated our recent recognition as the Best Employer in India and one of the top employers in 2007 in
Asia6 by sending a token of appreciation to the 20,000 management cadre employees — a
commemorative Cross pen with the Chairman's signature and an inscription that read "A Moment to
Cherish — 2007."
In all our locations we celebrated with a specially composed song titled "We are the best" together with an
audio-visual presentation. This is an excellent example where we ensure that every employee understood
that he or she had made significant contribution to the company's recent recognition in India and in Asia
— 2007 was a great year for us!
Over the last five years, we have built several categories of our talent management programs integrating
all these areas effectively:
:: Recruitment and staffing
:: Nurturing talent
:: Performance management
:: Opportunities for learning
:: Rewards and recognition
:: People processes across the company
:: Work life balance

In terms of recruitment and staffing, our approach is a multi-pronged one. At the Group level, we
determine and establish the policies and leave the execution of these policies to the locations and
business groups. To ensure that there is complete synchronisation and consistency in the policy
implementation at the ground level, our recruitment and staffing process requires for senior level potential
recruits to meet with the Chairman before formal employment offers are made to these individuals. This
also ensures that these potential recruits are a good fit to our company values.

Information on job openings and opportunities are open to all employees and communicated through our
intranet common portal; therefore, they compete with external applicants in our transparent recruitment
process where we stress meritocracy and competence. We believe that this is the right approach to drive
home the point to our employees and potential employees that we only hire the best and the brightest,
and that there is equal competition and equal opportunity in our recruitment process.

Our hiring process does not just stop after the candidates are hired. We make sure that our commitments
made during the hiring process are honoured and delivered as we said we would. Our HR partner,
immediate supervisors of these new recruits, department heads, and peers all have important roles to
play in the employee on-boarding process.

The key thing is to ensure that our new recruits feel welcome and are smoothly transitioned into our
corporate culture so that they become productive as soon as possible. We have also learned that
including the families of these new recruits helps to ease the assimilation and transition process.

However, we are also mindful of the new challenges ahead where it is now commonplace for our
company to be merging and acquiring other companies. This is where we need to create innovative ideas
as new job roles and performance metrics occur as a result of these mergers and acquisitions.

Our Focus on Learning

We have invested a lot of money in transforming our company into a
learning organisation. We are proud to offer numerous, varied learning
channels that we have built for our employees. For instance, we developed
Gyanodaya as our group varsity for management learning. Our vision is to
be at the core of an effective learning network that can contribute to our
company's vision of being a premium conglomerate.
So far we have trained 7,000 managers from the varied lines of businesses in these managerial and
strategy programs over the last five years. These programs are conducted by our leading Indian
academicians from the Indian Institute of Management, Kolkata and those from renowned business
schools such as London Business School and Harvard Business School.

In addition to classroom learning, we also have the Group virtual campus where our managers are given
the opportunity and flexibility to learn at their own pace and time. We call them e-learners interacting with
our e-facilitators of the various online modules and courses. Today we are proud to say that we have
more than 250 courses available for our managers, covering a host of learning topics on sales, marketing,
leadership, and engineering.

The Aditya Birla Group also has the learning channel to share best practices called the knowledge
integration program that fosters learning from within and across the company's various business groups.
In the last three years the company recorded participation from more than 400 managers in 20 such
programs covering various interesting topics on human resources, research and technology, information
technology, marketing, and manufacturing, just to name a few.

To include those in middle management, we also encourage our management teams to ensure that they
stay in school to ensure continued learning. For such mid-career education, we have engaged a
Singapore-based e-university called Universitas 21 that currently offers online MBA programs for our
management staff.

To help managers increase their self-awareness through a 360-degree feedback mechanism, an e-360
degree instrument was launched named as Pratibimb in April 1986. Using this tool, managers can receive
such feedback on their career competency level, their global leadership competency, and their group
values. So far, more than 80 senior managers have experienced using this tool.

Continuing with enhancing our managers' learning process, a knowledge portal was developed called
Gyandhara or knowledge@desktop where three services are offered:
:: E-books that provide managers with the continuous "stay in school" resources and materials on
cutting edge thought leadership skills.
:: Bimonthly e-newsletter that provides the latest updates on industry trends and management news.
:: The research assistance facility that guarantees a response time of less than 72 hours ensures that
managers receive prompt responses to their queries.

The Aditya Birla Group strongly believes that these three types of services that are offered in the
knowledge portal will continue to keep managers engaged and challenged in their pursuit for greater
knowledge in honing their skills and competency levels.

For every employee in the company, there is the group intranet that is affectionately known as
Adityadisha. As with a corporate intranet, this learning channel serves as the information gateway and
repository for corporate information and internal communication from the management. It contains various
features such as a career helpdesk, and management circulars including access to multiple learning sites
that cater to the various needs and requirements of the employees, managers, and non-managers alike.

The last learning channel is Anubhav, which is a knowledge repository that houses more than 600
organisation case studies on the company's success stories, learning experiences from real-life, and
practical problems and issues including solutions shared by practicing managers of the company. The
Aditya Birla Group captured these amazing life-time war stories and shared them with our employees with
the sole objective of sharing the lessons learned, and to appreciate the mistakes made for richer learning
experiences.

Focus on Incubating and Nurturing Talent

The Aditya Birla Group is passionate about keeping good talent intact. We have intensive focus on
incubating and nurturing such talent within the company through the talent management framework. In
essence, the framework comprises eight career stages and 17 specific behavioral competencies for each
of these career stages. To ensure that this framework stays intact, we have developed four key steps in
this process: development assessment, talent reviews, talent engagement, and career moves and
succession plans.

In the first of the four steps, development assessment centers (DAC) were created, which function to
provide support to managers to help them assess and develop their capabilities and competency levels.
Since its inception in 2003, the record shows that more than 1,200 managers from the various business
groups have participated in the DACs.

After these managers have gone through the assessments in the DAC, their next step is to work on their
developmental goals that focus on their priorities for learning and development experiences as they plan
their career growth, development, and road map in the company. All these information are captured and
tracked through the individual development plan (IDP).

Next, the annual talent review process comprises three tiers: at the unit level, the business level, and the
group level. This step focuses on implementing the respective IDPs based on review discussion inputs
into the career and succession planning process.

The third step of this process involves talent engagement where business heads take a personal
involvement in designing specific courses aimed at developing identified individual employee's leadership
potential. These business heads also lead certain programs that aim to achieve in-depth talent
engagement opportunities with identified high-potential employees. Essentially, this step is focused on
these targeted individuals.

When all three steps have been completed in accordance to the process, the last step entails finalisation
of the succession planning effort to ensure that there is appropriate and sufficient opportunity for critical
roles and positions for the company in the near future. This is a proactive approach to prepare the high
potential employees to take on senior and middle management positions when needed.

Based on these employees' individual development plans, this process ensures that employees attain
their career aspirations so that they are happy employees with the right career moves for them. At the
same time, the company ensures that business critical positions based on a well-planned succession plan
are filled. This is a proactive process with a win-win result.

The Aditya Birla Group's passion in incubating talent as future leaders has also been traditionally
practiced in the company since the days of our founder, Aditya Vikram Birla. To build on his legacy, the
Aditya Birla Scholarships scheme was instituted where the best and brightest employees are selected to
be groomed into future leaders of the company. The employees are sent to the Indian Institute of
Management, the Indian Institute of Technology, and the Birla Institute of Technology, Pilani, for the
nurturing and grooming efforts to take place. This encourages developing home-grown talent instead of
searching for the right talent in the marketplace where competition has become very stiff due to the acute
shortage of the right talent in Asia.

View on the Talent Shortage

In one of Aditya Vikram Birla's speeches, he mentioned that there is a shortage of excellent managerial
talent. They are not available in the numbers that is required. According to his experience, there have
been numerous occasions where enterprising Indians have built industries only to realise that there is a
lack of managerial talent. His recommendation is for us to create more professional managers and more
executive entrepreneurs, where the combined talent of an executive and an entrepreneur can be quite
effective.

He views the importance of having both as entrepreneurs who can continue to dream, but without any
manager or executive, those dreams will remain dreams because there will no one to work and turn these
dreams into reality. In short, the company needs the vision of entrepreneurs and the sound management
of executives and managers.

Today the Aditya Birla Group also faces the same talent shortage problems as everyone else. In its hiring
efforts, which transcend various locations and sectors, it faces a variety of local market realities such as
compliance with local labor laws and understanding of the local business practices, cultures, customs,
and social norms. It has not been easy to find the right talent in today's marketplace. The company plans
to end this perpetual total dependence on the outside marketplace for finding the right talent of high
potential employees.

In Asia there is lack of people with good experience in sectors such as retail, telecommunications,
manufacturing, and so on. A lot of these "sectional" skills have dissipated because there are other job
opportunities available for people with these kinds of skills. Either they lose interest along the way, or they
were not given the right training and job exposures. Instead of improving their skill sets to become
specialists, they eventually settle for job opportunities that require general skills. This is where the skill
shortage in these sectors has become more and more acute in recent times with the economic boom that
started in Asia some years back.

The Aditya Birla Group embarked on a long-term strategy to grow its own talent. What that means is that
the company invests the time and money to coach, mentor, and prepare these special selected cream of
the crop from its management cadre, or even from the high potential employees, based on recruitment
schemes and a well-planned succession plan.

The Aditya Birla Group then decided to test this specially designed model in the internal audit division.
The company proceeded to select the best students from a few reputable institutions of higher learning
and universities in the commerce, accounting, and Masters programs. These selected individuals are then
trained in the accounting firm and in the internal audit division based on a specially designed curriculum
that is customised to the business requirements and corporate culture.

To ensure that the selected individuals are fully exposed to the practical side of the business, a shadow
program exists for these individuals to be coached and mentored by selected superiors. At the end of this
12-month concentrated and customised skills development and training program, the company believes
about 80 per cent of these individuals would be a good fit into the company for the specific areas of skills
that they learned from the intensive training.

This innovative initiative for our internal Audit division has been extremely successful where the company
has absolute control in managing the supply side of quality talent required for the business groups in the
various locations. Based on this success, we are now replicating this successful model to other divisions
where there is a lack of good talent, such as information technology, manufacturing, legal, and HR.

The next stage of this model is to leverage such "home-grown" nurtured skills and talent with the other
business groups across all our locations, whether with existing externally acquired ones or with our
existing local or international ones. The wide span of industry mix in the conglomerate company enables
cross-breeding and cross-pollinating of these skills and talents for maximum positive outcome.
Coupled with the structured talent management framework with
career paths and behavioural leadership models, including the
personal involvement of the Chairman and senior management
teams in its talent incubation efforts, it is easy for the company to be
recognised as an employer of choice. In fact, in our local campuses,
we are ranked number seven in the top ten attractive employers.

Ninety per cent of the skills and talent are developed from homegrown ideas, whereas the actual delivery
and design to improve and to fine-tune these ideas are made successful in joint partnership with our
partners who have the unique capabilities and value-add. Without such complementary working
partnerships, we would never have attained the success in our own talent nurturing efforts.

Addressing the main root causes of the acute talent shortage problem in Asia, the Aditya Birla Group's
view is that the relatively poor command of the English language by employable graduates is far from
what is expected of the multinational companies operating in Asia. This is especially acute in most
countries in Asia where the English language is not the mother tongue, or is not the first language, or is
not a widely spoken language in people's daily lives, for example, in Thailand, Indonesia, Japan, China,
Taiwan, and Korea.

The second root cause is that Asians seem to find the Western countries more attractive. So the Aditya
Birla Group needs to make Asia more attractive to the Asians. Perhaps it is the tradition-bound thinking
that what is from the West is always the best and that Asia is somehow inferior to the West. Asians who
have gone abroad to the Western countries are reluctant to return to their home countries, for example,
China or India, to serve their own countries when the Asian economic boom happened.

That being said, the standards of living, infrastructure, housing, sanitation, education, and so on need to
improve to international standards and quality. When these standards and quality improve to international
benchmarks, the backflow of good Asian talent will rake place from the Western countries. This is a good
time as the United States and European economic slowdown will slowly drive good talent to return to
Asia. At the same time, with the push from the economic turmoil in the West, we need to ensure that there
is the pull from Asia. For example, the quality of education in countries like Japan and India can be
strengthened and modernised in an effort to adapt it to international standards.

Finally, the concept of branding also has an important part to play in the whole scheme of things. The
Aditya Birla Group's perspective of branding is interesting. It is what the company is — all the intangibles
— and it is the experience every employee gets to go through while in employment, so it is difficult to
describe it succinctly. People want to work for companies with great reputation and experience.

The Aditya Birla Group's view is that corporate branding or employer branding does not exist on its own.
This has to be supported and supplemented in part and in whole by the business resources and
community services. Through the years the company continues to build on this reputation, and that has a
direct impact on the Aditya Birla branding as the employer of choice.