It's easy to say that our people are very important to us, but at Pearson we know that we are only as good as the people who work here. We aim to hire the very best people, keep them motivated and inspired, reward them for what they do and give them opportunities to grow and learn. In doing this, we believe we can build a community of people who want to do their very best for Pearson and for the success of our businesses.

Our goal is to be the best company to work for and each year we get closer to achieving that. We provide benefits, incentive plans and opportunities that rival those offered by our competitors.

We maintain our policies to reflect a good work-life balance, and introduce new initiatives to reflect the changing expectations of our people, and we continue to provide training and management development opportunities around the world to help people progress. We believe that all this helps to build a strong culture and reinforces our values of being brave, imaginative and decent.

Our culture and the Code of Business Conduct

We believe that our culture stems from the way we treat one another and the way we treat people outside the company. Our Code of Business Conduct sets out what we think is acceptable.

We contact Pearson employees each year to ask them to verify that they have understood and complied with the Code of Business Conduct, and to invite them to report any concerns or breaches of the Code to our group internal audit team or via our confidential whistle-blowing helpline. The head of internal audit follows up any reported breaches. This process goes beyond the requirements of corporate governance rules, which tend to focus on financial matters. Our view is that there is no point in having the Code if it does not have the trust and confidence of our employees. If it does not inspire that confidence, then we need to know why so we can do something about it.

All breaches of the Code are reported to senior management and the audit committee and none of those reported in 2006 were considered to be serious. You can find the Code at www.pearson.com/community/codeofconduct.htm.

Internal communications

Communicating with our people is high on our list of priorities. We have an internal communications programme which enables us to reach people through e-mails, employee roadshows and visits from our senior managers. We try to listen as much as we talk so that we can act upon ideas, suggestions and views. We send out a regular electronic newsletter to all employees, with the latest news from across the company, and Marjorie Scardino continues to e-mail employees with important news. Employees are encouraged to e-mail Marjorie directly with their feedback.

Helping people to continue learning

Our goal is to provide the structure and environment which makes it easy for talented people to reach their potential. We do this by setting clear targets for what people need to achieve in their jobs and we offer training and support to help them get there.

• Performance reviews take place in every part of our business each year to ensure that people know what is expected of them, receive feedback on their performance and set targets for the following year. All our people take part in a performance review at least once every year.
• Career discussions may be part of the formal performance review process, or addressed separately. We don't believe it is our job to manage people's careers – we believe that people want to be in control of their own destiny – but we do what we can to help them reach their aspirations.
• Training is provided to reflect the needs of specific job functions, regions or markets. We still do a lot of face-to-face training as it enables people to meet one another and share ideas; and increasingly we use technology to give people all around the world access to our core curriculum. Each year we assess where our training priorities lie and we constantly consider new ways to introduce familiar topics. We believe that there's more to any job than simply delivering results, so we provide ways to help people see beyond their current responsibilities and understand more about Pearson.
• We have mentoring programmes across the business. Some programmes are more formal than others but we have found that mentoring is an excellent way to connect people in quite different parts of the business, to provide an insight into previously undiscovered parts of the organisation, and to grow people's skills and aspirations.
• We also help people move around Pearson. We have an internal website where people looking for a move can see all the available jobs across Pearson; additionally, senior managers identify people who would benefit from a move. Our talent management programme highlights where it may be beneficial to move people because of their job or their skills. Where a move involves relocating from one country to another, we have in-house expertise to help the transition go as smoothly as possible. Currently, we have around 200 people outside their home country on secondment or permanent transfer and around the same number who are about to go on secondment or have just returned. Of our senior management group, over 24% have experience in at least two Pearson businesses or regions.
  
  Moving people around the world can be a big step and for some positions where the job is focused on contacts or expertise in a particular market, it might not be appropriate. We have introduced a number of new ways for people to get a taste of a different country or operating company to encourage them to apply for longer term or permanent assignments. These have worked well and have given a range of people doing quite different jobs a new insight into a new market or country. As a result, we have created new business opportunities and transferred valuable skills and expertise from one part of the world to another.

Balancing life and work

For our people to be most effective at work they need flexibility, tools and resources to also manage their lives outside of work. We continue to provide programmes and introduce initiatives throughout the company to help people find the balance they seek. Each employee has unique needs and we offer a variety of programmes to enable individuals to be effective in all aspects of their life. Some examples include flexible work arrangements, employee assistance programmes, back-up care for children and adult dependants, sabbaticals, summer hours, and convenience services. In addition, Pearson Education US has been recognised for the seventh consecutive year by Working Mother magazine as one of the '100 Best Companies for Working Mothers'.

Building skills and expertise for the future

In addition to the training and development we provide in each part of the business, we have a number of cross-Pearson initiatives to help build the skills and knowledge of our people for the future. Last year, we refreshed our senior leadership programme, the Senior Leadership Masterclasses, to reflect our business priorities. These classes address leadership and commercial skills to help fuel the company's innovation and growth. In 2006, over 160 senior leaders attended a class with their senior leadership team and this included executives from UK, US, Australia, China, India, South Africa and South America.

Once a year, we bring together around 100 of our senior managers to think about the world inside and outside the company and to consider how we can make both a better place. As part of this year's meeting, most of our top 100 senior executives visited one of Pearson's developing markets which has led to a number of new business opportunities. We also hold a separate meeting with 100 of our more junior high potential managers to address similar themes. This is called Forum and now boasts an alumni group of around 600 managers. We bring together the alumni group on a regional basis throughout the year and many new ideas have been generated from this group.

Building the skills base of our company also includes knowing who our very best talent are and how they plan to make the most of their skills to reach their potential. Each year, as part of the annual talent review, Marjorie discusses with the head of each business and function across Pearson, people who may one day have a significant impact on the company. We aim to create a development plan for each person so that we can retain people and develop them for the future. The talent review is built around an objective set of criteria called the Leadership Profile, which describes what's important for our leaders.

Reward

We follow a set of global principles to guide the way we reward our people that goes beyond the issue of salary. These principles include providing locally competitive pay; using incentives to drive performance; recognising the contribution of all employees; encouraging share ownership irrespective of seniority; providing compelling benefits for all employees that engage them in making the right choices for themselves and their families, not only for today, but for tomorrow; and treating all employees fairly taking into account the balance of life and work. Individual packages are set with reference to the relevant recruitment market, business sector and geographic region but aim to include incentives, health, welfare and retirement plans and opportunities to acquire company stock.

We have worked hard to make these packages clear and easy to understand. We have internal websites where employees can check their personal details and see the value of their total package.

Employee ownership

We believe that the best way for people to profit from the success of the company is for them to become shareholders. Pearson operates worldwide share plans taking account of local country tax and securities regulations. With most of our people based in the US, we have taken special care to make it easy for them to acquire shares in Pearson. The listing of our shares on the New York Stock Exchange allows us to operate a US Employee Stock Purchase Plan that makes share ownership in Pearson accessible to the majority of our employees.

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