Evidence Based Management in HR at Danske Bank 2006 Lars Mørch, Head of HR, Member of the Executive Committee, Danske Bank ”One platform – exceptional brands” - a common, exportable strategy Common infrastructure: • HR • IT • Communication • Finance • Credit • Call Centre • Shared Services Centre Same retail strategy: • Products and concepts • Product development • Retail structure and processes Geographical operations - cautious, value-adding expansion • Predominantly represented in Northern Europe within retail banking • Directly or indirectly represented in many financial centres FokusBank boughtin 1999 HelsinkiBranch estab. in 1997 OsloBranch estab. in 1997 StockholmBranch estab. in 1995 Northern Bank bought in 2004 National Irish Bank bought in 2004 Östgöta Enskilda bought in 1997 Danske Bank estab. in 1871 LondonBranch estab. in 1983 . . Danske Bank Intl Lux estab. in 1976 Hamburg Branch estab. in 1985 Danske BankPolska bought in 2000 Performance highlights - keeping up the momentum Net profit 5% to DKr 3.1bn • Strong activity in most business units and support from higher short-term interest rates • Income up 13% on volume growth and heavy customer-driven trading activity • Costs up 23% due to integration expenses and bonuses • Migration of NB and NIB completed DKr bn (end-period) - Corporate loans - Retail loans Bank loans ex repos Repo loans Mortgage loans Trading portfolio Deposits Shareholders' equity Total assets Risk-weighted assets Q1 2005 Q1 2006 338 393 204 251 542 643 197 217 531 567 468 357 569 618 65 70 2,271 2,392 884 972 Index 116 123 119 110 107 76 109 109 105 110 DKr m Income Expenses Profit bef. credit loss exp. Credit loss expenses Profit before tax Tax Net profit for the year Q1 2005 Q1 2006 8,039 9,123 3,958 4,871 4,081 4,252 -126 -129 4,207 4,381 1,223 1,250 2,984 3,131 Index 113 123 104 104 102 105 Breakdown of profit growth DKr m 4,500 3,250 3,131 2,984 2,000 Q1 2005 Income, ex Income, NB&NIB NB&NIB Expenses, Expenses, ex NB&NIB NB&NIB Credit losses Tax Q1 2006 Danske Bank – HR History - increased focus on development • ’Old school’ Personnel Department until 2002 • Strategic refocusing of HR • Corporate Centre of Excellence • Part of strategic Group platform Shared ambitions – sufficient flexibility - as local as possible HR vision The Danske Bank Group will attract and retain people with the best competencies and the highest performance. HR mission The management of the Danske Bank Group employs best-in-class HR solutions HR is a mutual responsibility … - among equal stakeholders Business units Execute HR and assure - committed employees - a high level of competencies - a high level of performance through HR tools HR Development Owns the HR strategy - responsibility for concepts, follow-up and support HR Services Delivers efficient, flawless administration …that leaders execute Group vision, mission and focus areas, Models/solutions Local adaptations and requirements Execution ExCo HR Dev. Business Unit HR and Management Top management Reporting/analysis Local management reporting Local Management and HR Employees Enters Own data HR Data and Surveys HR Policies - and report on Robust HR Leadership Practices - tools, assessment, support Centres of excellence A wide range of HR tools Leadership training Succession/ talent Performance management Recruitment and attraction Strategic Focus Areas Training/ competencies • Competency profiles • Learning methodology • e-Learning • Management foundation • Leadership programme Assessment Support Yearly circle • Projects • Coaching • Sparring Dec.-Jan.: Performanceagreements Dec.-Jan.:HR action plans 2 0 0 6 Dec. Nov. :Follow-upHR action plan 2 0 0 5 Nov.:Executiveconference Nov. :Recommendationsfor promotions Jan.-Feb.: Promotions/pay/ bonus distribution Jan. Nov. Feb. Feb.-M arch: Annualreview manager/ employee - Input from talent pools Sept.-Nov.:Employeesurvey and internalcustomersurvey Sept.-Oct.: Bonus pool/ model Okt. M ar. Sept. Apr. Aug. • Succession Management • Talent management • Incentive programme • Performance agreements • HR Key Figures • HR System • Recruitment/employer branding M aj Juli - Juni HR-vision HR-mission Danske Bank-koncernen vil tiltrække og engagere de mest Lederne i Danske Bank-koncernen kompetente og bedst præsterende medarbejdere, der med en praktiserer ’best in class’-løsninger høj grad af integritet giver vores kunder de bedste løsninger inden for HR Beginningof April: Recommendationsfor executiveeducation M ay: Succession management (Executive Committee) HR-handlingsplan 2 0 0 5 Fokusområde Indsatsområde Performance management M ål/ delmål – hvad skal vi opnå? M idler – hvordan gør vi? Deadlines Ansvar 1. Målet er en øget variabilitet i bonus til kontaktansatte. Under 50% af cheferne bør for 2005 falde inden for +/ - 20% af det tidligere års bonus. Ved gennemgang af bonus for kontraktansatte for år 2004 var det klart, at der i mange områder er for lille variabilitet i chefbonusserne, hvorved bonus mister sin betydning som incitament og overgår til at blive en mere fast lønkomponent. Start 1 . kvartal 2 0 0 5 – ultimo 2 0 0 5 HRAM / HKRI 2. Bonusfordeling optimeres til fordel for de højest præsterende med størst potentiale På baggrund af medarbejdersamtalens A-F oversigt opstilles bonusoversigt, der drøftes i HR-komiteen. Bonus til E- og F-performere burde ikke fremstå. Ultimo april 2 0 0 5 SRN/ HRkomite (målbart) HR Consultants • Coaching, sparring and support • Employee Engagement surveys • Projects All HR activities are monitored Process owned by HR • Conclusions owned by business units • R E S U L T S Prioritising targets and A activities C T I V I T Evaluation of I results and new target E setting S 1.Management Management 1. Comments The employee survey: - On level with the Group on Immediate superior and top manager – above the sector - Same level as in 2004 - A step back on immediate superior’s Managerial skills and correlation between personal goals and the goals of the unit - Very high satisfaction & motivation along with loyalty in the management (81and 91) 2006: Individually development of branch managers and FC managers Distribution of men and women among the managers Realised Group Men 74.2% 73.7% Women 25.8% 26.3% Source: Managers assessed in Employee Survey 2005 Overall management indices Index for immediate superior Index for top manager In general Your overall perception of immediate superior The managerial skills of immediate superior Strategic Leadership Immediate superior has the right professional focus on the unit's development potential People Leadership Immediate superior ensures correlation between my personal goals and the goals of the unit Immediate superior gives constructive feedback on my work Immediate superior delegates adequate responsibility and authority so I can solve my assignments Immediate superior is able to handle conflicts in the unit Immediate superior contributes actively to help me develop Professional Leadership Immediate superior has the right focus on the scope for developing Immediate superior shares knowledge through sparring and coaching Operations Management Immediate superior is efficient and goal-oriented Immediate superior makes it possible for the unit to deliver high quality on time Personal Ressources The ability of immediate superior to keep calm in difficult situations The profesional skills of immediate superior Immediate superior is open to constructive criticism What immediate superior says is consistent with what he/she does Benchmark BG Bank Areas Realised 2004 80 77 82 82 82 78 82 76 80 75 83 82 81 78 86 83 84 83 79 74 77 77 81 79 80 78 84 73 78 85 75 77 88 77 80 88 75 74 81 73 78 75 83 77 0 0 82 80 82 83 77 79 81 77 77 80 78 76 80 82 78 79 81 85 81 83 0 84 78 79 Realised 2005 Group 82 75 Source: Employee Survey 2005; 0 indicates new question Percentage distribution of managers' A-F perfomance ratings Total number of managers 497 Rating A+B C D 10% 42% 47% Percentage distribution E+F 1% Source: Managers assessed in Employee Survey 2005 in relation to reporting of staff resources 2005 Top manager: - Strengths: Ethics and respect - Improvement points: Information and communication in a strategic direction Immediate superior: - Strengths: Technical skill / receive constructive criticism / influence on work assignments - Improvement points: Development of superiors in the senior management group / feedback / sparring / appraisal interviews 2. Succession management 2. Succession management and talent development and talent development Update at appraisal interviews 2006 - Small group of talents – less than in 2004 (149 in branches and finance centres) - 8 talents developed to other areas (5.4%); 7 out of the group (4.8%) overall 10.2% of the talents - Relatively large part of senior aged management (12% above 55 year) Percentage distribution of A-F performers Realised 2005 A performers B performers C performers D performers E performers F performers Percentage of staff registered 1.5% 2.4% 33.5% 59.4% 0.6% 2.6% 85% Matrix of performance, potential and flexibility Benchmark NormalBG Bank distribution Areas 1.2% 2.0% 2.7% 8.0% 36.4% 40.0% 56.8% 40.0% 0.5% 8.0% 2.4% 2.0% 80% 4 Source: Reporting of staff resources 2005 as of 31/12-05 Above average 3 2 D C B A 77 82 5 38 D C B B 990 612 2 81 D C C C 1025 337 7 25 F E E E 79 27 1 0 F E E E 6 3 0 2 Very good 5 Performance Comments Good Below average A-F distribution of men and w omen 2006: 70% Develop talents/core employees 60% 67% 1 52% Not so good 50% Succession aimed at high superiors, region managers, parent branch managers, FC managers and others. 40% 30% Women Potential realised Further potential 1 2 20% 10% - Bring along succession slides Men 35% 27% 5% 3% 1% 2% 1% 1% 4% 3% B C Rating D E High potential flexible 4 Potential & Flexibility Source: Reporting of staff resources 2005 as of 31/12-05 0% A High potential not flexible 3 F Source: Reporting of staff resources 2005 as of 31/12-05 Portion of talents (A+B) broken down by job levels - total of 127 Management - age distribution 50% 42% 40% 28% 30% 10% 5% Danske Bank Regions 35% 27% 20% 20% 10% 32% 29% 28% 23% 6% Management labourforce 4% 7% 4% 0% <30 30-39 40-49 50-59 60++ Age Source: Managers assessed in ES 2006 in relation to age Management labour force and management sector are from Statistics Denmark 2005 Management Sector 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 39% 20% 20% 14% 12% 8% 8% 5% 0% 0% Contract 10 20% 11% 4% 3% 9 8 7 6 Job level Source: Reporting of staff resources 2005 as of 31/12-05 Notice that some talents can be below job level 5 5 Danske Bank Regions "Ideal distribution" 3.Engagement Commitment 3. Comments Employee survey: - Above level of group - Same level as in 2004 - Talents generally most satisfied – close to ”ideal” distribution Benchmark Realised BG Bank 2004 Areas Realised 2005 Group 78 84 75 84 80 85 77 85 89 0.93% 1.26% 2.19% 86 1.09% 1.21% 2.30% 86 87 Index of Satisfaction & Motivation Index of Loyalty I would like to be working for the Danske Bank Group in two year's time Absence due to illness 0-14 days Absence due to illness 15+ days Absence due to illness overall 2005 Source: Employee Survey 2005, absence due to illness via PLAS. ”Ideal” distribution 80 78 76 74 Indeks X Medarbejdernes vurdering Overall indices for A+B, C, D and E+F performers 78 77 75 81 80 79 78 78 78 77 75 75 82 82 81 78 79 78 78 76 74 74 73 77 77 74 A+B 75 C 71 D E+F Image Top Management Immediate superior Co-operation Your daily w ork Source: Employee Survey 2005 and reporting of staff resources 2005 as of 31/12-05 Remuneration Professional and personal development 4. Recruitment and 4. Recruitment I attraction I Comments Net inflow of employees (+60): 3 (NEITHER 5 DON'T Number 4 /NOR) (HIGH) KNOW of replies Welcome and introduction. How do you rate the introduction to... - your job assignments? 9% 0% 11% 51% 28% 0% 226 - the units in your department/branch? 1% 6% 12% 53% 27% 0% 226 - your new collegues? 0% 4% 4% 37% 54% 0% 226 Expectations for the job and your work Questions to new employees - Financial economist 2006: Hired 26 (budget 32-35 – Fyn, Sjælland Nord and Jylland Midt below budget) - Apprentices 2006: Adjusted budget from 42-46 to 60 – at present 41 hired – København, Storkøbenhavn, Sjælland Nord/Syd not at target) - Financial trainees 2006: Expected to hire 10-12 with BSC background - Growth in number of applications from 2004 until mid Nov. 2005: Increase of 19.2% 2006: Project with analysis and optimizing of the attraction of relevant profiles carried out Continued recruitment of younger employees – preferred with experience Level of education new hires Number Percentage Fundamental education Grammer school Vocational education Short higher education Undergraduate education Graduate education Other Overall 6 26 70 76 35 9 4 226 3% 12% 31% 34% 15% 4% 2% 100% Source: Questionnaire for new employees 1 month after start. 1/1-05 31/12-05 (Recruitment analysis). 1 (LOW) 2 1% 4% 6% 35% 54% 0% 226 1% 2% 10% 56% 25% 6% 226 3% 1% 3% 3% 5% 8% 45% 43% 44% 45% 0% 0% 226 226 Have your expectations been met so far? Do you think you add value at the present time? Overall, how would you rate the employment process you have been through? How do you rate working in the Group? Source: Questionnaire for new employees 1 month after start. 1/1-05 - 31/12-05 (Recruitment analysis). Titles - new hires Top 9 + other Apprentice (1. year bank) 67 (62) 16% Service advisor 53 (38) 13% Advisor without portfolio 43 (31) 10% Advisor (private) 33 (15) 8% Adviser 21 (10) 5% Finance trainee 18 (16) 4% Private advisor trainee 17 (8) 4% Business advisor 15 (4) 4% Advisor - branch Other Overall Age difference - age outflow – age inflow: 13 years Number Percentage 14 (3) 136 (33) 417 (263) 96% of new employees maintained during 2005 Age distribution - inflow, status, outflow Procent - Generally good introduction and job satisfaction among the new employees 100% 0% 10% 80% 19% 60% 21% 33% 100% 20% 10% 35% 19% 24% 21% 50% 0% Inflow (number=413) Status (number=3028) 50-59 30-39 < 30 17% 13% 60++ 40-49 30% 40% 3% 6% 26% Outflow (number=332) Source: New employees in the period 1/1-0531/12-05 (PLAS). In parenthesis are the Source: Inflow, status and outflow 1/1-05 - 31/12-05 (PLAS); Inflow = New numbers of new employees, who are externally employees and internal transfers to the area from other parts of the group. Outflow = recruited internal transfers, severance schemes and other external resignations 4. Recruitment and 4. Recruitment II attraction II Comments Reasons for resignation Outflow of employees: Satisfied with this job - resignation is due to practical reasons (distance, time of transportation etc.) Satisfied with this job, but has wants new challenges Not satisfied with work assignments Not enough challenges / career opportunities Not enough opportunities for personal / professional development Unfulfilled redeployment wishes Uncertainty in job Too much time- / work pressure Unsatisfied salary level / salary conditions Lack of cooperation / bad atmosphere in my department/unit Not satisfied with immediate superior Other Overall - Losing private advisors, business advisors and investment advisors. - Challenges, work pressure, career opportunities and work assignments are still primary reason of resignation - 43% resigned goes to competitors - 9% salary decrease – 66% salary increase - External resignation 2005: 6.6% (group: 7.0%) 2006: Continued focus on engagement and development of the most competent employees Primary Other reasons* Number Percentage Number Percentage 0 0% 0 0% 12 3 4 24% 6% 8% 14 11 9 19% 15% 12% 0 0 1 9 1 0% 0% 2% 18% 2% 6 1 0 6 0 8% 1% 0% 8% 0% 2 0 17 49 4% 0% 35% 100% 3 1 22 73 4% 1% 30% 100% Source: Resignation analysis 1/1-05 - 31/12-05 *Possible to give more than one answer Resignations 2005 External - excl. resignation agreements Resignation agreements Internal redeployments Overall know n resignations Number Percentage Number Percentage Number Percentage Number Percentage 185 5.2% 4 0.1% 131 3.7% 320 9.0% Source: Reporting of staff resources 2005 in relation to resigned employees from 1/1-05 to 31/12-05. The percentages state the part in relation to the areas’ overall number of employees. Resignations 2005 broken down by A-F performers Performers overall A-performers B-performers C-performers D-performers E-performers F-performers 28 64 734 1448 11 60 External excl. resign. agreements 1 6 66 101 1 10 Resignation agreements 0 0 1 2 0 0 Source: Reporting of staff 2005 in relation to resigned employees from 1/1-05 to 31/12-05 Internal redeployments 1 8 61 50 0 10 5. Performance 5. Performance management I management I Comments - Awardment of salary and bonus in high degree to high performing employees, still awardments to low performers I know what is required of me to qualify for bonus The Groups' bonus scheme motivates me to make an extra effort Realised 2005 Group 2005 Benchmark BG Bank Områder Realised 2004 71 56 68 55 73 53 73 0 Source: Employee survey 2005 2006: Danske Bank DK to participate in a review of incentive program with alignment to bank concept Monthly salary level 2004/2005 for A+B, C, D and E+F Number of employees aw arded bonus 2004/2005 for A+B, C, D and E+F Bonus level 2004/2005 for A+B, C, D and E+F 100% 40000 40000 8 35000 35000 7 30000 6 30000 25000 5 25000 60% 20000 4 20000 50% 15000 3 15000 10000 2 10000 5000 1 5000 0 00 90% 80% 70% 40% 30% 20% A+B C Per month Dec. 2004 D E+F Per month Dec. 2005 10% 0% A+B C D E+F Conditional shares aw arded in 2004 Conditional shares aw arded in 2005 Bonus earned in 2003, aw arded in 2004 Bonus earned in 2004, aw arded in 2005 A+B C D Bonus earned in 2003, awarded in 2004 Bonus earned in 2004, awarded in 2005 E+F 5. Performance 5. Performance management II management II Employees appointed on a contractual basis Comments - Greater variability in bonus awards in 2005, still room for improvement, so that bonus not becomes fixed part of the salary 2006: Bonus level 2004/2005 for employees appointed on contractual basis for A+B, C, D and E+F Monthly salary level 2004/2005 for employees appointed on contractual basis for A+B, C, D and E+F 70000 140000 60000 120000 50000 100000 40000 80000 30000 60000 20000 40000 10000 20000 Number of employees appointed on a contractual basis aw arded bonus 2004/2005 for A+B, C, D and E+F 100% 90% 80% 70% - For employees on a contractual basis as well as for other employees: Focus on bonus awards and salary development i relation to performance 60% 50% 40% 30% 20% 10% 0 0 A+B C Per month Dec. 2004 Salary distribution for employees appionted on a contractual basis 2005 7% 6% Salary Cash bonus Conditional shares 87% Source: Reporting of staff resources 2005 in relation to salary and bonus data for the employees appointed on a contractual basis as of 31/12-05 D E+F Per month Dec. 2005 E and F performers covers one person, who changed job and went one level down but has maintained a higher salary level than other employees with the same characteristics. 0% A+B C D E+F Conditional shares aw arded in 2004 Conditional shares aw arded in 2005 Bonus earned in 2003, aw arded in 2004 Bonus earned in 2004, aw arded in 2005 A+B C D E+F Bonus earned in 2003, awarded in 2004 Bonus earned in 2004, awarded in 2005 E and F performers covers one person with a bonus awarded. Variability in bonus for contract employed 2005 2004 38.8% 61.1% Source: Employees appointed on a contractual basis as of 1/4-05 (PLAS); The variability states the part, who received a bonus within +/- 20% of the bonus from the year before. 6. Competency 6. Competency development development Update at appraisal interviews 2006 Comments Employer Survey: - Above level of group - Fall in opportunities and attention on professional and personal development Your opportunities for professional and personal development The attention given to your professional and personal development My job assignments are challenging My appraisal interview supports my further development Realised 2005 82 76 77 75 Group Benchmark BG Bank Areas Realised 2004 76 71 79 71 81 79 80 80 81 77 80 75 Source: Employer Survey 2005 Competencies: - Competency evaluations in progress, 20% done/approved Competency evaluations - average 2006: - Personal competencies fills too much – increased professionalism wanted Competency evaluations - status Number of employees with a competency profile 2835 Not done 1321 During proces 130 Forwarded to approval 473 Approved 415 Rejected 496 Source: HR-system as of 16/2-06 46.60% 4.59% 16.68% 14.64% 17.50% Status on approved competency evaluations Below Above Area match Match match Overall Danske Bank Regions 17% 58% 25% 100% Source: HR-system as of 16/2-06 Kompetenc ies Competencies advisor (private) - DB- DB Priv ate Cons ultants Responsible Empathic Adaptable Business focus General product knowledge Holistic Involving Communicate directly Contact establishing Customer focus Planning skills Result-oriented Society Independent Use of system Source: HR-system as of 16/2-06 Competencies with the most employees below match - ”top 10” Competency Customer focus Contact establishing General product General produktknowledge knowledge Use of system Result-oriented Sparring and development of others Business focus Flexible Involving Adaptable Source: HR-system as of 16/2-06 Below match 210 22% 174 22% 148 18% 134 20% 96 11% 89 30% 70 10% 62 23% 59 24% 59 11% Match 525 472 506 413 543 191 474 162 183 299 55% 60% 63% 62% 62% 64% 68% 60% 73% 58% Above match 214 23% 138 18% 154 19% 123 18% 237 27% 19 6% 158 23% 46 17% 9 4% 157 30% Overall 949 784 808 670 876 299 Not advisors (private) 702 270 Not advisors (private) 251 515 Development in employee engagement outperforms peers and industry 86 Cultural activities and organisations Banking and insurance 84 Danske Bank Group 2004 Danske Bank Group 2005 82 Loyalty Danske Bank Group 2006 Danske Bank Group 2003 Social services Health care Post and telecom Education and research Building and construction Retail and services 80 Groceries and tobacco Danske Bank Group 2002 IT and consulting services Public authorities Primary industry Other industry 78 Transportation 76 Engineering, iron and metal working industry 74 64 66 68 70 72 Satisfaction & Motivation 74 76 78 The “case for HR” at the branch network Employee profit correlated with employee satisfaction and motivation in Danske Bank index Employee profitability Index 150 140 138 130 120 110 100 110 100 90 80 Bottom 1/3 Middle 1/3 Upper 1/3 Employee Satisfaction and Motivation