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
Oslo Branch estab. in 1997
Helsinki Branch. in 1997
Stockholm Branchestab. in 1995
Östgöta Enskildabought in 1997
Danske Bank Polskabought in 2000
London Branchestab. in 1983
Fokus Bankbought in 1999
Hamburg Branchestab. in 1985
Danske Bank Intl. Lux
.
estab. in 1976
Danske Bank estab. in 1871
Northern Bank bought in 2004
National Irish Bank bought in 2004
estab
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 completedDKr m Breakdown of profit growth
3,1312,984
2,000
3,250
4,500
Q1 2005 Income, exNB&NIB
Income,NB&NIB
Expenses,ex
NB&NIB
Expenses,NB&NIB
Creditlosses
Tax Q1 2006
DKr bn (end-period) Q1 2005 Q1 2006 Index- Corporate loans 338 393 116- Retail loans 204 251 123Bank loans ex repos 542 643 119Repo loans 197 217 110Mortgage loans 531 567 107Trading portfolio 468 357 76Deposits 569 618 109
Shareholders' equity 65 70 109Total assets 2,271 2,392 105
Risk-weighted assets 884 972 110
DKr m Q1 2005 Q1 2006 IndexIncome 8,039 9,123 113Expenses 3,958 4,871 123
Profit bef. credit loss exp. 4,081 4,252 104Credit loss expenses -126 -129 -Profit before tax 4,207 4,381 104Tax 1,223 1,250 102
Net profit for the year 2,984 3,131 105
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
The Danske Bank Group will attract and retain people with the best competencies and the highest performance.
The management of the Danske Bank Group employs best-in-class HR solutions
HR vision
HR mission
HR is a mutual responsibility …- among equal stakeholders
HR DevelopmentOwns the HR strategy
- responsibility for concepts, follow-up and support
HR ServicesDelivers efficient,
flawless administration
Business unitsExecute HR and assure - committed employees
- a high level of competencies- a high level of performance
through HR tools
ExCo HR Dev.
Business Unit HRand Management
Local Management and HR
HR
Policie
s
Group vision, mission and focus areas,Models/solutions
Local adaptationsand requirements
Execution
HR
Data
an
d S
urv
eys
EntersOwn data
Local managementreporting
Top managementReporting/analysis
Employees
…that leaders execute- and report on
A wide range of HR tools•Competency profiles•Learning methodology•e-Learning•Management foundation•Leadership programme
•Succession Management•Talent management•Incentive programme•Performance agreements •HR Key Figures•HR System•Recruitment/employer branding
•Coaching, sparring and support
•Employee Engagement surveys
•Projects
HR-handlingsplan2005
HR-mission
Lederne i Danske Bank-koncernen
praktiserer ’best in class’-løsninger
inden for HR
HR-vision
Danske Bank-koncernen vil tiltrække og engagere de mest
kompetente og bedst præsterende medarbejdere, der med en
høj grad af integritet giver vores kunder de bedste løsninger
Fokusområde Performance mana-gement
Indsatsområde
Mål/delmål – hvad skal vi opnå? (målbart)
Midler – 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 tid-ligere 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 2005 – ultimo 2005
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 2005 SRN/HR-komite
Assessment
Training/competencies
Leadership training
Performance management
Recruitment and attraction
HR Consultants
Centres of excellence
Succession/ talent
Support• Projects• Coaching• Sparring
Robust HR Leadership Practices- tools, assessment, support
Str
ate
gic
Focu
s A
reas
Jan.-Feb.: Promotions/pay/ bonus distribution
BeginningofApril: Recommendationsfor executiveeducation
Sept.-Nov.: Employeesurveyand internalcustomersurveySept.-Oct.: Bonus pool/model
Dec.-Jan.: Performance agreementsDec.-Jan.: HR action plans 2006
Jan.
Feb.
Mar.
Apr.
Maj
JuniJuli
Aug.
Sept.
Okt.
Nov.
Dec. Jan.
Feb.
Mar.
Apr.
Maj
JuniJuli
Aug.
Sept.
Okt.
Nov.
Dec.
-
Nov. : Follow-upHR action plan 2005Nov.: ExecutiveconferenceNov. : Recommendationsfor promotions - Input from talent pools Feb.-March: Annualreview
manager/employee
May: Succession management (ExecutiveCommittee)
Jan.-Feb.: Promotions/pay/ bonus distribution
BeginningofApril: Recommendationsfor executiveeducation
Sept.-Nov.: Employeesurveyand internalcustomersurveySept.-Oct.: Bonus pool/model
Dec.-Jan.: Performance agreementsDec.-Jan.: HR action plans 2006
Jan.
Feb.
Mar.
Apr.
Maj
JuniJuli
Aug.
Sept.
Okt.
Nov.
Dec. Jan.
Feb.
Mar.
Apr.
Maj
JuniJuli
Aug.
Sept.
Okt.
Nov.
Dec.
-
Nov. : Follow-upHR action plan 2005Nov.: ExecutiveconferenceNov. : Recommendationsfor promotions - Input from talent pools Feb.-March: Annualreview
manager/employee
May: Succession management (ExecutiveCommittee)
Yearly circle
• Process owned by HR• Conclusions owned by
business units
All HR activities are monitored
Prioritising targets and activities
Evaluation of results and new target setting
ACTIVITIES
RESULTS
1. Management
3
1. Management
Source: Employee Survey 2005; 0 indicates new question
Source: Managers assessed in Employee Survey 2005 in relation to reporting of staff resources 2005
Realised GroupMen 74.2% 73.7%Women 25.8% 26.3%
Distribution of men and women among the managers
Percentage distribution of managers' A-F perfomance ratingsTotal number of managers 497Rating A+B C D E+FPercentage distribution 10% 42% 47% 1%Source: Managers assessed in
Employee Survey 2005
Realised 2005
GroupBenchmark
BG Bank Areas
Realised 2004
Overall management indicesIndex for immediate superior 82 80 82 82Index for top manager 75 77 82 78In generalYour overall perception of immediate superior 82 80 83 81The managerial skills of immediate superior 76 75 82 78Strategic LeadershipImmediate superior has the right professional focus on the unit's development potential 86 83 84 83People LeadershipImmediate superior ensures correlation between my personal goals and the goals of the unit 79 77 81 80Immediate superior gives constructive feedback on my work 74 77 79 78Immediate superior delegates adequate responsibility and authority so I can solve my assignments 84 85 88 88Immediate superior is able to handle conflicts in the unit 73 75 77 75Immediate superior contributes actively to help me develop 78 77 80 74Professional LeadershipImmediate superior has the right focus on the scope for developing 81 78 83 0Immediate superior shares knowledge through sparring and coaching 73 75 77 0Operations ManagementImmediate superior is efficient and goal-oriented 82 80 82 83Immediate superior makes it possible for the unit to deliver high quality on time 77 79 81 77Personal RessourcesThe ability of immediate superior to keep calm in difficult situations 77 80 81 0The profesional skills of immediate superior 80 82 85 84Immediate superior is open to constructive criticism 78 78 81 78What immediate superior says is consistent with what he/she does 76 79 83 79
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
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 and talent development
4
Portion of talents (A+B) broken down by job levels - total of 127
20%
14%11%
20%
0%4%
8%
39%
5%0%
3%8%
12%
20%
0%5%
10%15%20%25%30%35%40%45%
Contract 10 9 8 7 6 5
Job level
Danske BankRegions
"Idealdistribution"
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
Potential realised
Further potential
High potential
not flexible
High potential flexible
1 2 3 4
Below average
1Not so good
2
Potential & Flexibility
Per
form
ance
5Very good
4Above
average
3 Good
2. Succession management and talent development
Source: Reporting of staff resources 2005 as of 31/12-05
Source: Reporting of staff resources 2005 as of 31/12-05 Notice that some talents can be below job level 5
A performers 1.5% 1.2% 2.0%B performers 2.4% 2.7% 8.0%C performers 33.5% 36.4% 40.0%D performers 59.4% 56.8% 40.0%E performers 0.6% 0.5% 8.0%F performers 2.6% 2.4% 2.0%Percentage of staff registered 85% 80%
Normal-distribution
Percentage distribution of A-F performers
Realised 2005
Benchmark BG Bank
Areas
A-F distribution of men and w omen
3% 5%
35%
52%
1% 4%1% 2%
27%
67%
1% 3%
0%
10%
20%
30%
40%
50%
60%
70%
A B C D E FRating
Men
Women
Management - age distribution
5%
20%
42%
29%
4%10%
28% 27% 28%
7%6%
32%35%
23%
4%
0%
10%
20%
30%
40%
50%
<30 30-39 40-49 50-59 60++
Age
Danske BankRegions
Managementlabourforce
ManagementSector
Source: Managers assessed in ES 2006 in relation to ageManagement labour force and management sector are from Statistic s Denmark 2005
Matrix of performance, potential and flexibility
Source: Reporting of staff resources 2005 as of 31/12-05
Source: Reporting of staff resources 2005 as of 31/12-05
Comments
- Small group of talents – less than in2004 (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 agedmanagement (12% above 55 year)
2006:
Develop talents/core employees
Succession aimed at high superiors, region managers, parent branchmanagers, FC managers and others.
- Bring along succession slides
Update at appraisal interviews 2006
3. Commitment
5
3. Engagement
Source: Employee Survey 2005 and reporting of staff resources 2005 as of 31/12-05
Source: Employee Survey 2005, absence due to illness via PLAS.
Realised 2005
GroupBenchmark
BG Bank Areas
Realised 2004
Index of Satisfaction & Motivation 78 75 80 77Index of Loyalty 84 84 85 85I would like to be working for the Danske Bank Group in two year's time 89 86 86 87Absence due to illness 0-14 days 0.93% 1.09%Absence due to illness 15+ days 1.26% 1.21%Absence due to illness overall 2005 2.19% 2.30%
Comments
Employee survey:
- Above level of group
- Same level as in 2004
- Talents generally most satisfied – close to ”ideal” distribution
8078
7674
Indeks X
”Ideal” distributionOverall indices for A+B, C, D and E+F performers
7779
8081
7978
82
75 75
78
82
7476
75
78
75
78
81
7877 7777
74
78 78
7374
71
Image Top Management Immediate superior Co-operation Your daily w ork Remuneration Professional andpersonal
development
Med
arb
ejd
ern
es v
urd
erin
g
A+B
C
D
E+F
4. Recruitment and attraction I
6
4. Recruitment I
Source: Inflow, status and outflow 1/1-05 - 31/12-05 (PLAS); Inflow = New employees and internal transfers to the area from other parts of the group. Outflow = internal transfers, severance schemes and other external resignations
Source: Questionnaire for new employees 1 month after start. 1/1-05 - 31/12-05 (Recruitment analysis).
Source: New employees in the period 1/1-05-31/12-05 (PLAS). In parenthesis are the numbers of new employees, who are externally recruited
Questions to new employees 1 (LOW) 23 (NEITHER
/NOR)4
5 (HIGH)
DON'T KNOW
Number of replies
- 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
Have your expectations been met so far? 1% 4% 6% 35% 54% 0% 226Do you think you add value at the present time? 1% 2% 10% 56% 25% 6% 226Overall, how would you rate the employment process you have been through? 3% 3% 5% 45% 44% 0% 226How do you rate working in the Group? 1% 3% 8% 43% 45% 0% 226
Welcome and introduction. How do you rate the introduction to...
Expectations for the job and your work
Age distribution - inflow, status, outflow
17%
30%
24%
35%
6%
26%
50%
13%
21%
21%
19%
10%
19%
10%0%
0%
20%
40%
60%
80%
100%
Inflow (number=413) Status (number=3028) Outflow (number=332)
Pro
cent
60++
50-59
40-49
30-39
< 30
Source: Questionnaire for new employees 1 month after start. 1/1-05 -31/12-05 (Recruitment analysis).
Level of education - new hires Number PercentageFundamental education 6 3%Grammer school 26 12%Vocational education 70 31%Short higher education 76 34%Undergraduate education 35 15%Graduate education 9 4%Other 4 2%Overall 226 100%
Comments
Net inflow of employees (+60):
- Generally good introduction and job satisfaction among the 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
Age difference -age outflow – age inflow: 13 years
96% of new employees maintained during 2005
Titles - new hiresTop 9 + other Percentage
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 14 (3) 3%
Other 136 (33) 33%
Overall 417 (263) 100%
Number
4. Recruitment and attraction II
7
4. Recruitment II
Source: Reporting of staff 2005 in relation to resigned employees from 1/1-05 to 31/12-05
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.
Reasons for resignationNumber Percentage Number Percentage
Satisfied with this job - resignation is due to practical reasons (distance, time of transportation etc.) 0 0% 0 0%Satisfied with this job, but has wants new challenges 12 24% 14 19%Not satisfied with work assignments 3 6% 11 15%Not enough challenges / career opportunities 4 8% 9 12%Not enough opportunities for personal / professional development 0 0% 6 8%Unfulfilled redeployment wishes 0 0% 1 1%Uncertainty in job 1 2% 0 0%Too much time- / work pressure 9 18% 6 8%Unsatisfied salary level / salary conditions 1 2% 0 0%Lack of cooperation / bad atmosphere in my department/unit 2 4% 3 4%Not satisfied with immediate superior 0 0% 1 1%Other 17 35% 22 30%Overall 49 100% 73 100%
Primary Other reasons*
Number Percentage Number Percentage Number Percentage Number Percentage185 5.2% 4 0.1% 131 3.7% 320 9.0%
External - excl. resignation agreements
Resignation agreements Internal redeploymentsOverall know n resignations
Resignations 2005
Performers overall
External - excl. resign. agreements
Resignation agreements
Internal redeployments
A-performers 28 1 0 1B-performers 64 6 0 8C-performers 734 66 1 61D-performers 1448 101 2 50E-performers 11 1 0 0F-performers 60 10 0 10
Resignations 2005 broken down by A-F performers
Source: Resignation analysis 1/1-05 - 31/12-05 *Possible to give more than one answer
Comments
Outflow of employees:
- 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
8
Realised 2005
Group 2005Benchmark
BG Bank Områder
Realised 2004
I know what is required of me to qualify for bonus 71 68 73 73The Groups' bonus scheme motivates me to make an extra effort 56 55 53 0
5. Performance management I
Source: Employee survey 2005
Bonus level 2004/2005 for A+B, C, D and E+F
0
5000
10000
15000
20000
25000
30000
35000
40000
A+B C D E+F
Conditional shares aw arded in 2004Conditional shares aw arded in 2005Bonus earned in 2003, aw arded in 2004Bonus earned in 2004, aw arded in 2005
Monthly salary level 2004/2005 for A+B, C, D and E+F
0
5000
10000
15000
20000
25000
30000
35000
40000
A+B C D E+F
Per month Dec. 2004 Per month Dec. 2005
Number of employees aw arded bonus 2004/2005 for A+B, C, D and E+F
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
A+B C D E+F
Bonus earned in 2003, awarded in 2004
Bonus earned in 2004, awarded in 2005
Comments
- Awardment of salary and bonus in high degree to high performing employees, still awardments to low performers
2006:
Danske Bank DK to participate in areview of incentive program with alignment to bank concept
5. Performance management I
8
7
6
5
4
3
2
1
0
9
5. Performance management II
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
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.
2005 200438.8% 61.1%
Variability in bonus for contract employed
Employees appointed on a contractual basis
E and F performers covers one person with a bonus awarded.
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.
Comments
- Greater variability in bonus awards in 2005, still room for improvement, so that bonus not becomes fixed part of the salary
2006:
- For employees on a contractual basis as well as for other employees: Focus on bonus awards and salary development i relation to performance
Monthly salary level 2004/2005 for employees appointed on contractual basis for
A+B, C, D and E+F
0
10000
20000
30000
40000
50000
60000
70000
A+B C D E+F
Per month Dec. 2004 Per month Dec. 2005
Bonus level 2004/2005 for employees appointed on contractual basis forA+B, C, D and E+F
0
20000
40000
60000
80000
100000
120000
140000
A+B C D E+F
Conditional shares aw arded in 2004Conditional shares aw arded in 2005Bonus earned in 2003, aw arded in 2004Bonus earned in 2004, aw arded in 2005
Number of employees appointed on a contractual basis aw arded bonus 2004/2005 for A+B, C, D and E+F
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
A+B C D E+F
Bonus earned in 2003, awarded in 2004
Bonus earned in 2004, awarded in 2005
Salary distribution for employees appionted on a contractual basis 2005
87%
7%6%
Salary
Cash bonus
Conditionalshares
5. Performance management II
6. Competency development
10
6. Competency development
Source: Employer Survey 2005
Source: HR-system as of 16/2-06
Competencies with the most employees below match - ”top 10”
Source: HR-system as of 16/2-06
Realised 2005
GroupBenchmark
BG Bank Areas
Realised 2004
Your opportunities for professional and personal development 82 76 81 81The attention given to your professional and personal development 76 71 79 77My job assignments are challenging 77 79 80 80My appraisal interview supports my further development 75 71 80 75
Status on approved competency evaluations
AreaBelowmatch Match
Abovematch Overall
Danske Bank Regions 17% 58% 25% 100%
Competency evaluations - average
Source: HR-system as of 16/2-06
Competency evaluations - status
Source: HR-system as of 16/2-06
Not advisors (private)
Not advisors (private)
Comments
Employer Survey:
- Above level of group
- Fall in opportunities and attention on professional and personal development
Competencies:
- Competency evaluations inprogress, 20% done/approved
2006:
- Personal competencies fills too much – increased professionalism wanted
Number of employees with a competency profile 2835Not done 1321 46.60%During proces 130 4.59%Forwarded to approval 473 16.68%Approved 415 14.64%Rejected 496 17.50%
Kompetencies
Private Consultants - DB
ResponsibleEmpathicAdaptableBusiness focusGeneral product knowledgeHolisticInvolvingCommunicate directlyContact establishingCustomer focusPlanning skillsResult-orientedSocietyIndependentUse of system
Update at appraisal interviews 2006
Competency OverallCustomer focus 210 22% 525 55% 214 23% 949Contact establishing 174 22% 472 60% 138 18% 784General produkt knowledge 148 18% 506 63% 154 19% 808Use of system 134 20% 413 62% 123 18% 670Result-oriented 96 11% 543 62% 237 27% 876Sparring and development of others 89 30% 191 64% 19 6% 299Business focus 70 10% 474 68% 158 23% 702Flexible 62 23% 162 60% 46 17% 270Involving 59 24% 183 73% 9 4% 251Adaptable 59 11% 299 58% 157 30% 515
Below match Match Above match
General product knowledge
Competencies advisor (private) -DB
Development in employee engagement outperforms peers and industry
Cultural activities and organisations
Primary industry
Groceries and tobacco
Engineering, iron and metal working industry
Other industry
Building and constructionRetail and services
Transportation
Post and telecom
Banking and insurance
IT and consulting servicesPublic authorities
Education and researchHealth care
Social services
Danske Bank Group 2002
Danske Bank Group 2003
Danske Bank Group 2004
Danske Bank Group 2005
Danske Bank Group 2006
74
76
78
80
82
84
86
64 66 68 70 72 74 76 78Satisfaction & Motivation
Loya
lty