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KEY CHALLENGES FACED AT MAERSK IN CLOSING Growth has posed a daunting challenge to Maersk's talent management infrastructure. Their shifts in strategies have revealed their strengths and weaknesses as a global conglomerate but they were still faced with the question, Is this strategy Working? Brief History
The A.P. Møller-Maersk Group was founded in 1904 by Arnold Peter Møller and his father, Captain Peter Maersk Møller.
Headquartered in Copenhagen, Denmark, by 2012, Maersk was the largest company in Denmark, and operated in 130 countries with nearly 110,000 employees.
As of December 31, 2011, Maersk’s total market capitalization was $28 billion
Maersk comprised over 1,00 companies, and operated one of the largest container shipping businesses globally as well as oil and gas exploration and container terminals operations
Container business (40% of revenues) – operated 2.5 million twenty foot equivalent units (TEU )
A company that transitioned from a family business to a global conglomerate Employee Turnover Training and Development Programs Should Maersk continue to hire experienced individuals from outside the firm? Rehiring former Maersk employees (“boomerangs”) Building an Inclusive Culture Through 2008, Maersk had experienced several years of rapid growth and strong profitability. The global recession in 2008 had negatively impacted both Maersk’s top line and its returns; however, operating results had since improved, and Maersk earned record profits in 2010. In recent years, Maersk had seen a rise in its unusually low historic employee turnover rate. And, Maersk had experienced a notable change in its corporate culture as it transitioned from a family-owned Danish shipping company into a global, publicly-traded conglomerate. In particular, Maersk was experiencing five notable talent challenges. Maersk had traditionally relied heavily on employees who started with the Group as trainees and then spent the entirety of their career there. It was estimated that, of the approximately  trainees that Maersk brought on-board each year, only 20% of them remained after five years. Hiring Talent Management in the Pre-2003 Era As Maersk transitioned from a family owned Danish company to a publicly-traded global conglomerate, its work force changed, as did its talent needs and practices. Many of these changes also reflected trends in the broader market—as talent became increasingly mobile.
Jesper Madsen, a vice president in HR at Maersk Drilling, argued that while Maersk was good at filling the firm’s needs, it was less good at focusing on the needs of its individual employees. He explained, “But where we’re not doing well enough is on leveraging the talent of each individual. I think we have a number of employees in our organization that are not the best version of themselves
Maersk had historically focused on hiring and training young, inexperienced individuals SHIFT IN RECRUITMENT PRACTICES - However, as Maersk expanded, that growth impacted both Maersk’s talent management practices and processes and its culture. To support its growth, the Group needed an increased number of experienced personnel and managers—to fill these needs, they focused on both hiring experienced professionals and accelerating the career progression of trainees.
Hiring and training became business line rather than Group functions; and rotational training programs focused on rotations within rather than across Maersk’s business lines
Maersk also implemented more performance measurement standards, and letting go of underperforming employees became more commonplace. TALENT MANAGEMENT SINCE 2003 As Maersk expanded, that growth impacted both Maersk’s talent management practices and processes and its culture.
Increased number of experienced personnel and managers
Hired both experienced professionals and accelerated the career progression of trainees.
Hiring and training became business line rather than Group functions;
Rotational training programs focused on rotations within rather than across Maersk’s business lines.
Together, these changes impacted the employee culture.
More performance measurement standards
Let go of underperforming employees and having difficult conversations became more commonplace.
Became increasingly global, in its business and its employee base.
Driver: In 2003, then chairman met with the top 50 managers for a discussion about what they key company values were. This led to a company-wide roll-out, which was in many ways interactive and collaborative, of Maersk’s key corporate values. Talent Management Since 2008 Key Comments from Staff Group HR implemented a new talent management process.
Identification / Review / Action Plan
Scenario Planning Objective: Transition the HR function from administrative to strategic and position the company for the 21st century.
Delegated operational responsibilities to the business unit levels.
Headcount in Group HR was reduced from 87 people to 24 (and all but one were new hires)
Revamped group had three key priorities:
Getting the right people in the right jobs at the right time for our top 1,000 employees.
Leadership development [because it] drives business results.
Differentiation in terms of rewards and pay for performance. “Performance Management.” Attraction - The process of bringing the right people into the Group.
Identification - The start of the talent management year was the People Strategy Sessions (PSS) which began in January.
The PSS comprised of six members Maersk’s executive board, and the head of HR to discuss the top 120 positions in the company.
Considered the firm’s major needs and, as a result, required capabilities.
In the context of the Group’s five year business plan, and how that might result in any changes to these requirements.
Top 120 positions: Mission Critical (30%), Impactful (60%), Less Impactful (10%).
Careful comparisons made across business units.
Review - The individuals in top 120 positions were reviewed:
Who are the people who have performed outstandingly?
How have they done it?
Is that performance sustainable?
Employees: High Performers (30%), Successful (60%), Less Successful (10%).
Side by side comparison to evaluate whether or not the Group’s best people were in the most important positions. Action Plan - The PSS facilitated identification and prioritization of talent gaps in the organization and the development of a basic action plan.
What needed to be done? Was it a training need? Did an employee need to be moved? Should they bring someone in from the outside?
The PSS was introduced in January 2009 and became increasingly more productive as managers prepared more thoroughly and became more familiar with the key positions and the people in them.
Adapted and conducted in each of the major business units—with the management team of each unit reviewing their top 75-100 positions.
Integrated into the Global compensation system for senior leaders, with an individual’s PSS rating functioning as a cap on what that person could earn as an annual bonus.
“High performers” were entitled to the maximum bonus. “Successful” employees were entitled to a payout of up to 50% of the maximum and “Less effective” employees could earn only 25% of this maximum number.
After three cycles of the PSS, there was a visible link between the PSS rating and the annual short term incentive strongly reinforcing the Company’s commitment to reward performance and drive the talent management strategy. Development - stemmed from the action plans of the PSS.
Deployment - The firm had traditionally focused on meeting talent needs internally. This was replaced by a more balanced strategy.
Scenario Planning - Historically, HR had regularly updated a detailed succession plan for key positions. However, Scenario Planning involved looking at a five year plan for each unit, and assessing the unit’s major people needs going forward. ...Increased emphasis on performance measurement and standardized benchmarks.
…Maersk Line is incredibly driven by objective settings and Key Performance Indicators (KPIs) and schemes that dictate behavior.
…Has become more performance focused
…More focused on accountability for the part of business you’re in– there is more transparency around who is responsible for what exactly.
…Benchmarking made it more difficult for underperforming employees to last at Maersk.
…..Very rigid KPI structures don’t really encourage cross-functional collaboration…it’s one of the downsides of objective setting like that, the upside is of course it makes people know exactly what they need to do, and there’s no doubt about what you’re being rewarded on, but …. it’s come to the point where we tend to forget the end-to-end picture, the holistic picture of our business, and we’ve become too focused on our own turf.” Culture Hiring / Integration Rehiring Development Talent Management Challenges
Talent became increasingly mobile
Managers were often slow to let go of underperforming employees
Not doing well enough is on leveraging the talent of each individual
Historically, very low employee turnover rate. Turnover was rising across business lines but was particularly worrying in some areas
Maersk’s energy businesses had seen a notable uptick in attrition – annual voluntary attrition rates in Maersk Drilling had recently risen from 1-2% to 5% Retention Hiring inexperienced individuals and providing them with training had historically been the hallmark of Maersk’s recruitment program.
In 2005-6, it launched a series of programs aimed at decreasing the time it took trainees to progress from a trainee to the executive band. At the time, it took 15-20 years on average, with the fastest movers taking 12 years
Goal of programme was increased retention ratio and support people’s careers accelerating at a faster pace
By 2008, Initial results showed above-average attrition rates for program participants as a result the program was closed down.
Post 2008, a shift in internal training to emphasize leadership development
Training—it was no longer viewed as a reward to be given to high-performing employees. Instead, “it should be given to people who need it to perform better in their jobs, instead of a bonus
The idea of individualized, need-based employee training this concept alongside pay-for-performance initiativesThe concept of “talent intimacy” that is some training was best done on an individualized basis, rather than in a broad training program Sentiment among many that bringing in outsiders was good for the organization
Maersk referred to this new, balanced talent development approach as “Build, buy or borrow”
Not enough done to support these hires, and that strong and cohesive culture made it difficult for experienced hires to succeed Historically, Maersk had an unwritten, but widely upheld, policy of not rehiring former employees under any circumstances. As one employee recalled, “In the old days, it was a bit like—they abandoned ship, and they could never return, because it was borderline treason that you did that before your retirement age.”
In the 2000s, HR began to question the wisdom of this policy. Hiring needs were increasing, and the decision was made to reverse the policy of not rehiring and to consider returning applicants on an opportunistic basis.
The thinking was “There are people that have been successful in the organization, they left for the right reasons—they didn’t leave us in a lurch, they didn’t disparage the company on their way out. And, they were truly high performers, than we ought to rehire them”
Before rehiring a former employee, HR, as a rule, checked with their old unit to ensure that the employee left on good terms With a Danish founding family, which continued to own a majority stake, and its position as Denmark’s largest company, Maersk had traditionally been very much a Danish company
In recent years, that had begun to change, and as Maersk grew larger and more globalized with respect to its business operations and its customer base, its employee base and its corporate culture began to reflect that
With expansion efforts focused largely on developing markets such as Asia and Africa, and with significant, and growing, hiring needs, it was realized that building a corporate culture which would allow them to attract and retain talent from all over the globe was of paramount importance Recommendations Retention & Development Hiring/Integration Rehiring Culture Retention should be synced with Development (pre 2003 era).
- Return to Development focused on entry based development
- Grooming staff in the organization's values
- Allow for staff to move around
Facilitate "Talent Intimacy" [individualized development] in alignment with the company's and the employees expectations.
Integrate actions out of the 5 talent management areas as part of the strategy to improve retention.
Leadership and development coaching to support upward movement. Establish external and boomerang hiring quotas with a criteria (background, experience, leadership qualities) to smooth intake and transition into the organization.
Improve the On boarding experience for external hires. (Look at the changes in communication styles, culture, processes)
Establish Bi - directional mentorship programmes to facilitate knowledge transfer and ease of integration
Initiate Orientation programme for new, external hires highlighting work processes, tacit knowledge inherent to the organization, deeper insights into organizational culture - norms, language, heros in the organization. Exit Interview – provide employers with the opportunity to gain candid feedback and provide employers with information as to how the organisation compares with other employers who recruit from the same talent pool. Provide an opportunity to effectively maintain relationships with departing employees and be able to better recruit them later and provide data on overall HR Strategy.
Develop a tracking system to keep touch with key employees that have left to further their development to ensure they return and can contribute positively to the firm. Training on a needs basis which is inline with the Performance –Replaceability Strategy Matrix by Martin and Bartol Develop informal mix of heavy/light task related programmes that will facilitate employee mixing to build relationships.
Conduct Culture Assessment to understand the explicit and tacit facets of the organization's culture to inform the Talent management Strategy.
Conduct cross functional and departmental training exercises to drive integration and greater sharing organizational values Increase bonuses or delink compensation for employees in Maersk Oil from the rest of the group (EBITDA of the Maersk Oil 9.5 times that of the next nearest, APM Terminals, in 2011) Thank You!!