Background Previous Plans PD royalties paid on sales

Background - Previous Plans PD • royalties paid on sales of games Non-PD • annual bonus - 50% company financial performance, 50% individual performance

Issues with previous PD plan • Staff not rewarded for on-time delivery • No clearly communicated milestones • Counter-productive - teams incentified to spend longer on a game in attempts to make it a best-seller • Expensive - many employees earned 100% of salary in royalties • Long-term focus (2 year projects) meant difficult for staff to make correlation between day-to-day work and results • Sales information not shared with employees, resulting in loss of trust in Company when royalties were low

Issues with previous non-PD plan • Most employees not aware of company’s financial targets so could not measure success • Lack of knowledge of financial goals resulted in loss of trust in company when bonuses were not paid • Long-term focus ineffective in driving performance of non-executive employees

Change in focus for FY ‘ 01 New Product Development bonus designed to: • assist in reduction of high staff turnover which had resulted from layoffs/financial difficulties • Focus employees on achievement of milestones • Regain employee trust in Company by setting measurable goals and paying on time • incentify quality by further rewarding staff who worked on best-selling games

Change in focus for FY ‘ 01 New non-PD bonus designed to: • assist in reduction of high staff turnover which had resulted from layoffs/financial difficulties • Focus employees on achievement of objectives tied into company goals • Regain employee trust in Company by setting measurable goals and paying on time • Move from long-term to short-term focus in order to drive performance of non-executive employees

Results • 60% reduction in employee turnover ( January - May 2001 as compared to August to December 2000. )

Results • The previous high staff turnover rate caused significant damage to the company - damage which is still being felt as titles slip past their TO dates. • Current low turnover rates, if maintained for the next year, will ensure that milestones can be met and products can ship on time. • This is supported by analysis of individual objectives - employees are meeting their individual milestones between 90 -100% of the time. At adequate staffing levels, this will result in on-time releases.

Issues with current plans PD • Plan is weighted heavily towards achievement of individual objectives. Therefore, if 30 out of 40 people achieve their individual milestones, they receive bonuses. If 10 people do not, the game may still be behind schedule, yet the company pays out high bonuses • This can be addressed by changing weighting to place more emphasis on team milestones

Issues with current plans Non-PD • Does not tie Directors and VPs into company financial performance. • Covers Brand employees who should be part of PD plan