An Introduction to Management by Olympic System (MBOS)

SHARKS Team
Training Manual June 20-21, 2006

Contents
Why MBOS What is MBOS Four Pillars of MBOS
1. Index Competition 2. Skill Development Activity (SDA) 3. Personal Performance Objective (PPO) 4. Monthly Incentive

Why MBOS ?
Winning Competition in the World Adopt effective management system and methodology Establish and cultivate corporate culture Develop human resource

Why MBOS ? World Competition !!! Internal Company Competition Management by Olympic System (MBOS)

World Class Company

Kimberly Clark
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APP
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will Continuously be STRATEGY the worlds premier fully-integrated forestry, pulp and paper, green-cycle enterprise
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Set Up Olympic Overall Target

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EBITDA 25% Customer 1st choice Super Efficiency Company All Perfect People

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Why MBOS?
EBITDA already 25% ? Are we already no.1 Customer Choice ? Are we already The Most Efficient company ? Are we have the best and perfect people, employee and management ?

Vision Explanation
APP will continuously be the worlds premier fully-integrated forestry, pulp and paper, green-cycle enterprise
Integrated: increase the overall benefit to the business by operating throughout the industry chain from forestry, pulp and paper to converted paper products and related industries Premier: The Strongest: manufacture high-quality products through the most effective management team and the strongest R&D The Most profitable: the healthiest financial and the most profitable enterprise The Largest: be the leader in the industry and number one in the world, equipped with the largest production capacity, the most state-of-the-art technology and the most thorough customer service network Green cycle: take care of the large cycle from afforest ration to pulp & paper making, as well as the small cycle of using recycling paper for production.

Vision = What do we want become?

APP Mission
1. Sensitivity to the Environment: promote afforest ration to naturally increase forests back into the environment, minimize erosion, alleviate greenhouse effects and benefit everyone. 2. Advocate paper-making culture: promote the sustained manufacturing of pulp and paper. 3. Improve lifestyles: perfect mankinds needs in printing, packaging, writing, sanitation, etc.

Mission = What is our business ?

APP Value & Philosophy

Share Value Philosophy

PILOT RICH

Our Value (PILOT)

1.

Pursuing Excellence
Keep challenging ourselves and our perceived limitations Improve continuously and endeavor at all times Select the excellent among the best, and keep pursuing the highest efficiency and effectiveness

2.

Integrity
Promote a down-to-earth philosophy and devote our heart and soul to what we are doing Modest, objectivity and sincerity: Practice what you preach Respect for privacy, independent thought and intellectual property

Our Value (PILOT)

3.

Leadership
Be a model to your subordinate through your own behavior Be proactive, aggressive, and innovative to create the greatest value Encourage subordinates to develop their teams collectives potential

4.

Ownership
Exert the spirit of Take-it-as-my-own-business Be responsible for our company sustainability Actively display your wisdom and capability

5.

Teamwork
Benchmark the best and encourage each other Communicate frequently and help each other Respect each other and achieve progress altogether

Philosophy (RICH)
1. Respect the Individual - Employees are the most precious resource of our company - Provide learning and self-developing opportunities to enhance employee capabilities 2. Innovation and Development - Adopt state-of-the-art technology and advocate innovation to realize breakthroughs - Manufacture high value-added products to meet market needs 3. Customer Satisfaction - Customer satisfaction is the ultimate target. Through reversethinking and a market-oriented mindset, develop products and services that create extra value for our customers.

Philosophy (RICH)
4. Highest Performance
- Our group always requires employee to do the right thing using a proven scientific approach - Benchmark the highest performance of world class enterprises to measure our employees and their teams performance, achieve the worlds number one business performance.

We will be very RICH by adhering to our business philosophy

Why MBOS ?
Winning Competition in the World Adopt effective management system and methodology Establish and cultivate corporate culture Develop human resource

How to Survive ?
Company characteristics to survive in the globalization era are: 1. Market Position. 2. Management System... 3. Resource Mobilization.... 4. Environmental Scanning....
Set Olympic Target (ROI, EBITDA) Key Levers

MBOS

KPI
Source: Warren Keegan Associates, Inc., USA, 1998

Why MBOS ?
Winning Competition in the World Adopt effective management system and methodology Establish and cultivate corporate culture Develop human resource

Corporate Culture
Have the spirit of Challenge the limit, pursue the perfection Have the ambition of Embrace high aspiration, Create high performance Have the consciousness of Not being No.1 or No. 2 Market leader, we can be out from the market. Have the mentality of Never give up. ..

Why MBOS ?
Winning Competition in the World Adopt effective management system and methodology Establish and cultivate corporate culture Develop human resource

For employee.
MBOS provides an effective platform for employee to get together to resolve most critical business issues MBOS acts as the vehicle for employees to contribute breakthrough problem solving solutions and innovative improvement ideas MBOS functions as the system for recognizing employee effort and achievements

Contents
Why MBOS What is MBOS Four Pillars of MBOS
1. Index Competition 2. Skill Development Activity (SDA) 3. Personal Performance Objective (PPO) 4. Monthly Incentive

Introduction
Welcome to the Olympics! Management by Olympic System (MBOS) - the management system used to drive performance at Asia Pulp and Paper. MBOS was first conceived in 1997 and is constantly being further developed and updated. The system is grounded on high aspiration targets (based on ROI or EBITDA) and uses a combination of team and individual competitions to drive performance towards the targets. Further manuals detail the Olympic target setting process and each of the four pillars which MBOS is built upon

Olympic Principles
Olympic spirit triggers people to challenge current situation, set high aspiration and create breakthrough way of thinking. This will accelerate improvement which lead to the Olympic Target achievement.
EBITDA
$

ic p ym l O

it r i p

Breakthrough Thinking and Continuous Improvement High Aspiration

Olympic Target

Take Challenge

Current

Time

MBOS with Olympic Principles

Olympic Principles
Fair rules of the game To be the best in every competition Always benchmark to the highest record Fair-play and open evaluation Healthy competition Winners are recognized, losers are given a second chance - therefore they have to practice harder

MBOS
Identification using Key Performance Index (KPI) Setting high aspirations with Olympic Targets Identify and benchmark with world class target Reliable data to support objective evaluation Provide healthy competition mechanism to create conducive environment Provide reward/ incentive for winners. Create learning situation to improve performance

Evolution of MBOS
Implemented SGA in 1994 In 1996, the Chairman announced Reaching the Sky vision. Learn Skill Olympic Activity (SDA) from LG Group, Korea Integrated all kinds of improvement activities in APP to be MBOS in May 1997 Introduced CTR and 6 Sigma approaches in 2000 and deployed in all APP mills/HQ functions from 2002 Formally re-launched MBOS to strengthen management innovative activities in 2003

MBOS MAIN CONCEPT

EBITDA TARGET
VISION/MISSION
Olympic Target KPI Benchmarking

Change Target
No

MBOS should become a WAY of life at APP

Target > Actual?

Yes

Strategic Planning Cross Sharing Performance Improvement Action

Review Training

SDA/SGA/6/Project

PPO

Index Competition

Incentive & Reward

MBOS: Major Activities

KPI Target
PPO*/BSC
Individual evaluation & achievement of reward based on individual performance target

Monthly Incentives
Incentive bonus provided to all staff based on overall monthly performance operational

Index Competitions
Competition on specific indices to ensure apple to apple comparison

SDA/6/SGA
As team base management tools for continuous improvement activities motivated by Olympic competition and recognition

We will introduce KPI, Index Competition & SDA only PPO and Monthly Incentive will deliver by request