HBR Case Study On A.P. Moller — Maersk Group
Strategic Talent Management Initiatives
Maersk is a Danish family shipping company headquartered in Copenhagen that went public and operated globally. Maersk operated one of the largest container shipping services worldwide. As of 2012, they had a diversified global portfolio with business units in container service (40% of revenue), exploration and development (20% of revenue), container terminal operation (7% of revenue), drilling (7% of revenue), and other businesses such as supply service, logistics, towing and salvage operation, and more. Maersk was the largest company in Denmark comprised of 1,000 companies and they operated in 130 countries with approximately 110,000 employees. Maria Pejter, the senior director of Maersk Group’s HR departments, and Bill Allen, the head of HR, are reviewing Maersk’s talent management strategy. They are facing the following HR items: increase in retention rate, dynamic development needs, better target training resources, hiring and integrating experienced employees, the practice of re-hiring former employees, creating a diverse and inclusive corporate culture, and alignment of the culture with the business objective. They want to know which strategies are working, which strategies are a waste of HR resources, and which areas should HR be focusing on.
As Maersk rapidly grew, they delegated the operational responsibilities to their business units, but failed to delegate talent management programs that aligned to their business units’ organizational objectives. Maersk Group experienced many problems as they further grew globally, and their corporate HR department focused on the top position of the 1,000 companies, but there was an ineffective strategy for workforce planning programs. Increased competition in the labor market caused employees to leave for external opportunities. They had a burdensome performance management system that favored loyalty more than performance. The learning and development program were costly and not properly aligned with the business units’ organizational strategy. They spent a lot of time and money training entry-level employees which was not a good ROI and they were not able to properly retain external hires. They had a corporate culture that has not evolved with the company’s global growth with poor diversity and inclusion initiatives.
Maersk spent a lot of money investing in their employees, and many of these employees were so properly developed that they were able to find external opportunities. They could potentially re-hire some of their former employees by creating an alumni network to reconnect with their well-developed former employees. The corporate culture should positively reflect their workforce by increasing diversity and inclusion initiatives. They should conduct engagement surveys to create a strategy for international diversity and inclusion initiatives. A mentoring and sponsorship program can go a long way in developing and retaining employees.
Statement of Problem
The HR problems Maersk Group is facing are: lack of effective diversity and inclusion initiatives, a corporate culture which is not reflective of a dynamic workforce, learning and development programs unaligned with organizational strategies and objectives, ineffective on-boarding programs, invested a lot on training entry-level employees, inability to properly retain external hires, and a performance management system which benefits loyalty more than performance.
Application of Talent Management Concepts
The primary course concept is to analyze the objectives and benefits of strategic workforce planning and succession planning programs. The secondary course concepts include mentorship programs, aligning the staffing with the business strategies, and explaining the strategies for involving internal constituents in the decision-making process that are related to talent management. Other important course concepts are retention, managing performance, re-recruiting (boomerangs), and diversity and inclusion.
The talent management pre-2003 Era was well-organized and created a lot of employment opportunities, as the company focused on hiring and training young inexperienced employees. The workforce was predominately Danish and was a controlled culture of Danish heritage with a sense of a family culture. The ELC was efficient with low turnover rates. The company was doing the right things as they invested in their employees, as they provided new hires a two-year training program comprised of on-the-job training, formal courses, and job rotations. Employees who adjusted fast without direction succeeded.
In 2003–2008, Maersk experienced substantial growth due to China’s entrance in the WTO in 2001, expansion of outsourcing, and growth in emerging markets; from 2001 to 2008 was when the global economic playing field was leveled. To support the growth, the company needed more experienced employees and managers and they focused on hiring experienced employees and accelerated career progression of trainees. The hiring and training of employees went from a group functions to a business line; the rotational training programs did not focus on business lines which created a gap in training. The employee culture was conflict avoidant; Maersk implemented a performance measurement standard and terminated under-performing employees.
Talent Management in 2008–2012: in 2008 during the start of the global economic recession, HR functions went from administrative to strategic. The company delegated operational responsibility to the business unit levels. The strategy focused on three parts of performance measurement; getting the right people into the top 1,000 positions, leadership development, and differentiation in reward and pay for performance. The group HR implemented a new talent management process broken down into five components: attraction, identification, development, deployment, and scenario planning.
The attraction was the responsibility of the business units. Identification was represented as People Strategy Sessions (PPS), focusing on the top 120 positions in the company, and they looked at these needs in the context of a 5-year business plan. The development was to place a greater emphasis on training experienced employees; there was a shift from a board training to more individualized training and development, adding more focus on external employees. The deployment was focused on 70 percent of internal employees and 30 percent on external employees. The scenario planning stopped the 2-year training program, replaced the historically detailed employee’s succession planning for key employees, and in 2010 piloted the 5-year business plan. Post-2008, the company made a bigger emphasis on performance measurements. The company becomes more performance-focused and driven by key performance indicators (KPIs). Underperforming employees didn’t last in the company and KPIs didn’t encourage cross-functional collaboration.
The talent management challenges included retention, development, integrating experienced hires, the practice of re-hiring, and inclusion and diversity/corporate culture. The business lines experienced high turnover and the company was growing in business with high attrition (e.g. only 20 percent of 400 hires from 80 countries remained with the Maersk group after five years). The annual attrition rate increased from 1%-2% to 5% in the Maersk Drilling line. Damco (logistics) became more diverse and more dependent on people from other companies within the industry.
Damco synergized their PSS with their biggest client and the results were impressive. The PPS would include 35–40 people from around the world; these sessions were very high energy and engaging and business opportunities were being discussed. Damco, as a logistic company, can solve many of their clients’ supply-chain management needs through insourcing. For example, UPS solved many supply-chain issues for their clients; UPS manages Nike.com’s warehouse, the delivery drivers in the Papa John’s delivery trucks are UPS employees, and UPS employees repair Toshiba products at their HUB. This does not translate to the PSS efficiency and effectiveness for the Maersk group; the PSS can be very effective for a logistics company.
HR had created a “development shop” with online training and development resources from more than 250 business schools. The focus, however, was not placed on developing employees’ technical skills. Emphasis was placed on leadership development, and there was no emphasis on the career tracks for employees with technical skills, whose career path was not in management (i.e. dual-career ladder). The online courses were restricted to the top 2,000 employees and classroom courses to the top 300 employees. Other employees who didn’t meet the cut-off point could have benefited from the development shop.
The experienced external hires did not have a support system in place. There was no training for the experienced hires, and there was little coaching taking place for them. They could have benefited from a mentorship or sponsorship program. The corporate culture was difficult for experienced employees to succeed, as it took them longer to fit in. The external hires didn’t know many people in the organization which was a “prerequisite” for getting things done. A socialization program could have assisted the external hires to conform to the corporate culture. Maersk had originally a no-rehire policy which they could have benefited from since the former employees were already acquainted with the corporate culture and the people who work there.
Maersk should consider creating an alumni network that will help increase the relationship between former employees and their former employer, in an effort to recruit them back to the company. A Texas A&M study of 450 boomerangs (re-hiring) showed seven of ten re-hires returned to their previous employer within three years (Joyner, 2008). A study conducted by Cranfield School of Management showed 25 percent of private sector companies practiced re-recruiting (i.e. boomerangs) (Iziren, 2008). Hudson, a talent recruitment firm, conducted a survey of 1,046 employers and the survey showed that nine out of ten of the employers ranked boomerangs as “above average” performers (Maida, 2008). Re-hiring above-average former performers has “cultural, financial, and productivity advantage”. The main challenge here is how to track down the former employees. If the company maintained proper HR records, they can find the former employees’ email addresses and phone numbers. This is a good start to create a database for boomerangs.
The PSS only covers top position of 1,000 companies. Maersk Group should consider creating succession planning and workforce planning programs on the business line level. Maersk corporate HR should create the templates, outlines, and guidelines of these programs and delegate this responsibility to the HR departments in the business line levels. Every company is different; Maersk cannot standardize one system for 1,000 companies. Maersk HR should provide oversite from the top-down to ensure these programs are effective, and development and implementation from the HR business units, from the bottom-up. The challenge to this method is that the approach needs to be tested and piloted within a sample group of companies to validate efficiency and effectiveness. This process is time-consuming; if the program proves reliable, then these programs can be rolled out in stages.
Maersk should consider delegating mentoring and sponsorship programs initiatives to the business unit levels. Sponsorship programs will assist in workforce planning programs down at the business unit level. Mentoring programs will help develop and provide direction for high potential employees. The challenge here is finding and convincing managers to participate in these programs.
Maersk should consider conducting engagement surveys by a third party to gather information to be used to create a strategy for international diversity and inclusion initiatives. This should be done on the business unit levels and corporate levels. Diversity and inclusion initiatives will assist in shaping corporate culture to attract and retain employees. Diversity and inclusion programs will increase engagement and help create a corporate culture which reflects the companies’ dynamic workforce. Hiring a company to conduct third party surveys and implementing diversity and inclusion programs are costly and the business units’ HR budget might be constrained.
Maersk has restricted online learning programs to the top 2,000 employees and classroom learning programs for the top 300 employees, but what about the learning and development of the workforce of 110,000 employees worldwide? Maersk should consider creating similar programs for the workforce on the business unit level. Maersk Group has focused on two percent of their workforce’s learning and development, but the HR departments on the business unit level should also be responsible for learning programs with the collaboration from the corporate HR department. Learning systems are expensive and the challenge for learning programs on the business unit level is the constraint on the HR department’s budget.
Maersk Group is focused on talent management initiatives on the corporate level. As such, the corporate HR department should delegate more talent management initiatives down to the HR department business unit levels. There seems to be a disconnect between HR functions on the corporate level and the business unit level. The corporate HR office should delegate talent management initiatives down to the business units’ HR department, but with HR corporate guidance attached. This will allow the employees to align with the business units’ objectives and corporate objectives. The regular review of programs is essential to confirm if they are effective and to determine what adjustments are needed. If HR corporate properly delegates talent management initiatives down to the business units’ HR department, this will allow for a communication plan that flows both up and down. In order to get effective change in programs, the change should come from the top-down and the bottom-up.
Iziren, Adeline. (2005, December 12). Office Hours: Never say never again: If football managers can do it, why not you? Going back to your old job has lost its stigma — and chances are your former firm will be pleased to have you back. The Guardian. Retrieve via Factiva.
Joyner, Tammy. (2008, June 1). For some, old job is better than new: Call it career boomerang: Recession fears have made the rehiring of former employees advantageous for everyone involved. The Atlanta Journal. Retrieve via Factiva.
Maida, David. (2011, June 4). Bring ‘boomerangs’ back to the fold. The New Zealand Herald. Retrieve via Factiva.