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SEAFARERS AS A STRATEGIC RESOURCE OF SHIPPING COMPANIES: THE GREEK CONTEXT. Ioannis THEOTOKAS 1* and Maria PROGOULAKI 2 1 Assistant Professor, University of the Aegean, Business School, Department of Shipping, Trade and Transport, 2A Korai Street, Chios, GR82100, Greece, Tel. +30.22710.35265, Fax: +30.22710.35299, e-mail: [email protected] * Corresponding author-presenter 2 PhD Candidate, Scholar of Propondis Foundation and PENED Programme, University of the Aegean, Business School, Department of Shipping, Trade and Transport, 2A Korai Street, Chios, GR82100, Greece, Tel. +30.22710.35218, Fax: +30.22710.35299, e-mail: [email protected] ABSTRACT Analysis of global seafarers’ demand reveals that seafarers from low cost countries gradually increase their share by substituting their colleagues from traditional maritime countries. This process is provoked by the shipping companies’ manning strategies and decisions on crew selection that are based on the need for cost cutting. Many shipping companies that strive to reduce their cost and to realise the short run result turn to the employment of low cost seafarers. The factor that mainly defines this process is the payment of wages for each category of seafarers. Factors, such as the productivity of the seafarers, their tacit knowledge, their commitment and the role they have on the formation of the total cost of seafarers and the performance of the shipping companies in the long run, are gradually ignored. However, the efficiency of this approach seeing from a long run perspective is questioned, as it ignores the strategic role of the human factor and its contribution to the value that shipping companies create. This paper aims at examining the competitiveness of seafarers not only in terms of the cost that the payment of wages creates to the companies, but also in terms of the qualifications of the seafarers and the value they create for the company that employs them. For this, the Resource Based View of the firm is applied, which realises the firm as a bundle of resources and capabilities that are combined to develop competencies; the last are the basis for the formation of competitive advantage. Thus, seafarers are examined as a strategic resource that creates value for the shipping companies and contributes to their competitiveness. The analysis focuses on Greek-owned shipping. The paper discusses the results of a research project on the competitiveness of Greek seafarers assigned by the Panhellenic Seaman Federation to the University of the Aegean. Based on the results stemming from a survey conducted in a sample of Greek-owned shipping companies, the analysis focuses on the crewing management practices of the companies, the examination of factors that contribute to the value that companies draw from their seafarers, and the identification of the alternative approaches that are applied by the companies on the subject. Key words: Seafarers, competitiveness, human resources, knowledge.

Seafarers as a strategic resource of the shipping companie: the Greek context

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SEAFARERS AS A STRATEGIC RESOURCE OF SHIPPING COMPANIES:

THE GREEK CONTEXT.

Ioannis THEOTOKAS1* and Maria PROGOULAKI2 1 Assistant Professor, University of the Aegean, Business School, Department of

Shipping, Trade and Transport, 2A Korai Street, Chios, GR82100, Greece, Tel.

+30.22710.35265, Fax: +30.22710.35299, e-mail: [email protected]

* Corresponding author-presenter 2 PhD Candidate, Scholar of Propondis Foundation and PENED Programme, University

of the Aegean, Business School, Department of Shipping, Trade and Transport, 2A Korai

Street, Chios, GR82100, Greece, Tel. +30.22710.35218, Fax: +30.22710.35299, e-mail:

[email protected]

ABSTRACT

Analysis of global seafarers’ demand reveals that seafarers from low cost

countries gradually increase their share by substituting their colleagues from traditional

maritime countries. This process is provoked by the shipping companies’ manning

strategies and decisions on crew selection that are based on the need for cost cutting.

Many shipping companies that strive to reduce their cost and to realise the short run result

turn to the employment of low cost seafarers. The factor that mainly defines this process

is the payment of wages for each category of seafarers. Factors, such as the productivity

of the seafarers, their tacit knowledge, their commitment and the role they have on the

formation of the total cost of seafarers and the performance of the shipping companies in

the long run, are gradually ignored. However, the efficiency of this approach seeing from

a long run perspective is questioned, as it ignores the strategic role of the human factor

and its contribution to the value that shipping companies create.

This paper aims at examining the competitiveness of seafarers not only in terms of

the cost that the payment of wages creates to the companies, but also in terms of the

qualifications of the seafarers and the value they create for the company that employs

them. For this, the Resource Based View of the firm is applied, which realises the firm as

a bundle of resources and capabilities that are combined to develop competencies; the last

are the basis for the formation of competitive advantage. Thus, seafarers are examined as

a strategic resource that creates value for the shipping companies and contributes to their

competitiveness.

The analysis focuses on Greek-owned shipping. The paper discusses the results of

a research project on the competitiveness of Greek seafarers assigned by the Panhellenic

Seaman Federation to the University of the Aegean. Based on the results stemming from a

survey conducted in a sample of Greek-owned shipping companies, the analysis focuses

on the crewing management practices of the companies, the examination of factors that

contribute to the value that companies draw from their seafarers, and the identification of

the alternative approaches that are applied by the companies on the subject.

Key words: Seafarers, competitiveness, human resources, knowledge.

I.Theotokas-M.Progoulaki – IAME 2007, Athens

2

SEAFARERS AS A STRATEGIC RESOURCE OF SHIPPING COMPANIES:

THE GREEK CONTEXT.

1. INTRODUCTION

Literature on strategic human resource management emphasises the importance of

people as a strategic resource of the firms that can lead to the creation of sustainable

competitive advantage (see e.g. Barney and Wright 1998; Boxall 1998; Richard and

Johnson 2001; Wright et al. 1994). Human resource management in the shipping industry

is one of the areas that research is growing the last few years. However, while there is a

growing body of research that focuses on aspects related to seafarers’ working life and

multiculturalism on board (e.g. Gerstenberger 2002; Horck 2004; Kavechi 2003; Moreby

1990; Progoulaki et al. 2006; Thomas 2003), and to the global and national seafarers’

labour markets (Leggate and McConville 2002; Lillie 2004; Knudsen 2004; Theotokas

and Progoulaki 2004; Wu 2004; Wu et al. 2006), there is limited published research

focusing on the seafarers’ strategic role and their contribution to the competitiveness of

firms. At the same time, while there is a considerable emphasis given on the importance

of human resources at an industry’s and companies’ level, there are many issues

unresolved in regard to the management of seafarers.

One should take into account that there are two categories of employees in the

shipping industry, i.e. those employed at the establishments ashore and the seafarers

working onboard the ships. In most of the cases, the management of these two categories

is performed through different systems, a fact justified by the different task environment

that each one has. This being the case, the analysis of matters related to the human

resources management of each category should be specific.

In addition to the task environment, there is another one important factor that

should be mentioned, which is related to the nature and the characteristics of the labour

market of each category. While for the vast majority of the shore based employees the

labour market is bounded to the wide geographical area that the shipping company is

established, this is not the case for the seafarers. The labour market for seafarers is global,

highly competitive and stratified. Shipping companies are able to recruit seafarers of any

offered nationality, given that their ships fly flags that do not pose any restriction

regarding this. As Lane (2000) notes, this market is characterised by its inclusiveness,

which means that all the available nationalities are regarded as potentially employable.

The existence of separate markets for seafarers inside the global market makes possible to

distinguish between groups in the seafaring labour force and to give them differing

income (Leggate and McConville 2002). The existence of multicultural crews is the result

of this globalised market. It has been found that the percentage of the world merchant

fleet which adopts a multinational crewing strategy reaches the 65%, while over ten

percent is staffed with crews that are composed of five or more nationalities (Kavechi et

al. 2001).

In their effort to exploit the cost advantages offered by the global seafarers’ labour

market, shipping companies outsource functions related to the management of seafarers.

In the case of Greek shipping companies, it was found that the majority of them continue

to manage in-house those issues related to their Greek seafarers, but to outsource relevant

functions related to their foreign seafarers (Papademetriou et al. 2005). This means that

shipping companies do not have a full control of the human resource management

systems that are applied by the agents, who in many cases are the employers of the

I.Theotokas-M.Progoulaki – IAME 2007, Athens

3

seafarers working on board the ships of the companies. Thus, in practice, Greek seamen

are managed according to the system that the company itself has developed, while

foreigners are managed according to the respective system of the manning agents. The

seafarers’ role in the performance of the ship remains crucial, because, even the most

technologically advanced ship depends on the skills, the ability for co-operation and the

commitment of the crew members. The question that one might pose could be ‘what are

the consequences of this systemic duality’ with regard to the ability of the companies to

increase their competitiveness based on human resources? It is acknowledged that the

competitiveness of a company depends on the effective management of the relational

bases of its members. In this context, attitudes, values and commitment of the employees

are very important for the success of the firm (Snell et al. 2005). This means that shipping

companies, and especially those that employ seafarers of many nationalities, should

develop and implement systems for the management of these matters.

This paper aims at examining the competitiveness of seafarers, not only in terms

of the cost that the payment of wages creates to the companies, but also in terms of the

qualifications of the seamen, and the value they create for the company employing them.

For this, the Resource Based View of the firm is applied, which realises the firm as a

bundle of resources and capabilities that are combined to develop competencies; the last

are the basis for the formation of competitive advantage. Thus, seafarers are examined as

a strategic resource that creates value for the shipping companies and contributes to their

competitiveness.

The paper discusses results of a research project on the competitiveness of Greek

seafarers, assigned by the Panhellenic Seaman Federation to the University of the

Aegean. Based on the results stemming from a survey conducted in a sample of Greek-

owned shipping companies, the analysis focuses on the crewing management practices of

the companies, on the examination of the factors that contribute to the value that

companies draw from their seafarers, and on the identification of the alternative

approaches applied on the issue by the companies. Section 2 examines the human

resource as a factor that affects the competitive advantage, while section 3 presents the

role of knowledge management. The methodology of the research follows in Section 4,

while Section 5 presents the results of the survey, which are further discussed in Section

6. Finally, conclusions and suggestions for further research are given in Section 7.

2. HUMAN RESOURCES AND COMPETITIVE ADVANTAGE

According to the resource based view, the firm is realised as a bundle of tangible

and intangible resources and capabilities. Resources and capabilities constitute the base

for the formation of sustainable competitive advantage. Resources can be classified in

three basic types, namely the physical capital resources (including plants, equipment,

finance), the organisational capital resources (e.g. organisational structure, control

systems, human resources’ systems) and the human capital resources (skills, judgment

and intelligence of employees) (Barney 1991).

Human resources or human capital is considered as one of the most important

intangible resource of the firm. As Schuler and Jackson (2005) state, a firm can pursue to

gain competitive advantage through human resources, either by adopting human resource

policies that have been proved to be effective in other organisations, or by developing its

own practices based on its needs. While the first choice promises success in short-term,

the latter is more likely to lead to sustainable competitive advantage. Compared to other

I.Theotokas-M.Progoulaki – IAME 2007, Athens

4

resources, human resources are difficult to be copied by the competitors. They might have

characteristics and skills that are valuable, not widely possessed and not easily imitated

by others. In case that a firm invests to develop and make worthy these characteristics and

skills, human resources is the key for the creation of sustainable competitive advantage.

To identify the role of human resources in gaining competitive advantage, Barney (1995)

proposed a set of questions with regard to their value, rareness, imitability and

organisation, the VRIO framework.

Human resources create value by contributing either to the decrease of the cost or

to the increase of the income of the firm. Shipping crews for example, can contribute to

cost reduction through their low level of wages, their knowledge and performance, or

their commitment to the goals of the firm; all these means can lead to cost savings in the

maintenance of the ships or the minimisation of claims. Especially in periods of low

freight rates, this contribution might prove crucial for the survival of a shipping company.

In this connection, the case of a Greek shipping company (Fafaliou and Theotokas 2006),

whose fleet flew the Greek flag and which employed Greek seafarers all along its history,

may be remarked. The company succeeded to weather the long lasting crises of the 1980s

with the contribution of its crew. As it was confirmed by the shipowner during the

personal interview conducted for the scope of the current survey, the company’s seafarers

were invited by him to contribute their ideas and initiatives in order to achieve cost

reduction. They not only succeeded to help the company during the crises, but also

created knowledge and developed practices that are implemented successfully even to the

present day. The contribution of the crew to the company’s income, can also be detected

in the ability they might have to face emergency conditions that happen on board, thus

reducing to the minimum the off hire dates.

While the bundle of human resources’ characteristics is a necessary condition

contributing to high value creation, it is not sufficient for a firm’s competitive advantage.

To achieve competitive advantage, a firm should focus on developing and exploiting

human resources’ rare characteristics (Barney and Wright 1998). For example, the ability

of taking the proper initiatives, the creativity, the seamanship, are characteristics that

cannot be found to all seafarers, and even when they exist, they can be manifested and

become worthy under certain conditions. The seafarer that carries those characteristics

will not make them fully worthy, unless the working environment motivates him. At this

point, it is crucial for the company to seek for tracking and exploiting the above

mentioned characteristics of its human resources.

Both valuable and rare characteristics contribute to short- term competitiveness. In

the long- run however, they can be imitated by competitors. What is important for a

company is to seek for developing such characteristics to its human resources, which

could not easily be imitated by the competitors. For this, the company should focus on

phenomena, such as its history and culture (Barney and Wright 1998). For example,

characteristics of Greek seafarers such as the trust, the loyalty and the adoption of the

“company’s identity” have contributed to the competitiveness of Greek shipping

companies (Harlaftis 1996; Theotokas 1997). More importantly, these characteristics still

exist in the context of the global seafarers’ labour market. The tradition of the maritime

islands of Greece, the common culture, the permanent employment that allows career

advancements, are conditions that have favoured the trust and loyalty of seafarers, which

are among the factors that explain their increased productivity (Harlaftis 1996).

Furthermore, they have favoured the development of rare characteristics, as is the taking

of the proper initiatives in the working environment.

I.Theotokas-M.Progoulaki – IAME 2007, Athens

5

The way the firm organises and manages its human resources will define its ability

to gain the advantages that the valuable, rare and inimitable characteristics of them might

create. This means that the firm should develop systems that according to Barney and

Wright (1998: 35) will allow “human resource characteristics to bear the fruit of their

potential advantage”. The existence of human resource management systems makes the

competitive advantage of the firm sustainable (Wright et al. 1994). The reason can be

found in the fact that, while practices are easily imitated by competitors, coherent systems

are not. Consequently, the firm should invest in maintaining its structures and systems

and the relationships with its employees. Any changes in the systems and practices that

might lead to the modification of characteristics, such as the trust and the loyalty, will

endanger the existence and manifestation of other valuable and rare characteristics of the

employees. At the same time, such changes will jeopardise the feeling of employment

security, which in the case of Greek seafarers more particularly, favours their trust and

loyalty to the company.

The question of organisation, mentioned in the VRIO model (Barney 1995) is the

most important in the companies’ effort to exploit the characteristics of the employees in

order to increase their competitiveness. However, it seems also to be the weakest element

in the case of shipping companies. As it will be further explained in section 5, a great

number of Greek shipping companies do not implement a unified human resource

management system, but at least two; one for the employees ashore and one for the

seafarers onboard. Moreover, the human resource management (HRM) system for the

seafarers seems to have various levels; one for the Greek officers, one for the foreign

officers, another one for the Greek ratings and a different for the foreign ratings. This

diversification of the HRM systems, combined with the continuous effort of many

companies to reduce crew cost, has led to manning choices that might be efficient in the

short term, but risk the companies’ competitiveness in the long term.

The sustainable competitive advantage comes out not from general skills, but from

firm specific skills, not from individuals but from teams, not from single practices but

from human resource systems (Barney and Wright 1988). This is not to say that general

skills are not important, bur rather that they cannot lead to the excellence as they are

available to all firms. On the contrary, the specific skills that have been developed by the

company’s employees are implemented in the specific context of the company and, thus,

cannot be imitated or implemented in different contexts. With regard to the importance of

teams for the shipping companies, and especially the ships, it seems to be obvious that the

higher performance of a ship is the result of the crew performance; in turn, crew

performance is the result of the crew team and not of individuals. The leadership skills of

the captain are very important for the motivation of the crew. However, the achieved

results are depended on the performance of the team members who should be able to

coordinate and operate effectively in either normal or emergency conditions. The team

spirit, the development of specific skills and all other characteristics that contribute to the

crew performance come out of unified crew management systems and not from practices

directed to individuals; the last usually do not contribute to the increase of crew

coherence and do not take into account the complex conditions that the crew members

face. Such an approach lacks the seafarers’ strategic role to the competitiveness of the

shipping companies, and seems to be more short- term oriented.

I.Theotokas-M.Progoulaki – IAME 2007, Athens

6

3. KNOWLEDGE MANAGEMENT AND COMPETITIVE ADVANTAGE

Human capital refers to the physical, cognitive, social and reputational resources

that individuals contribute to the firm (DeNisi et al. 2003). The creation, possession,

protection and use of knowledge assets that cannot be easily imitated contribute to

competitive advantage (Teece 2000). The importance of knowledge as an intangible

resource was amplified by the knowledge based view of the firm which emphasises the

creation of competitive advantage from resources based on knowledge i.e. on the

intellectual abilities of the employees, the knowledge they possess and their capacity for

learning. The knowledge view relates the type of knowledge to its transferability. Two

types of knowledge are found, the explicit and the tacit (Nonaka and Takeuchi 1999). The

explicit knowledge is codified and can be easily shared. The tacit knowledge resides to

every employee and cannot be codified, which means that is difficult to be transmitted.

Tacit knowledge is deeply rooted in the practices, the experiences, the values and

sentiments of the employee. Explicit knowledge is capable of articulation, while tacit one

is manifested only in its application and is not amenable to transfer (Grant 1997: 451)

Tacit knowledge provides the basis for inimitable competitive advantage (Lubit 2001).

It is important for the firm to build on knowledge that cannot be disdained over

the time, cannot be imitated and to create mechanisms that will facilitate its acquisition.

More specifically, the explicit knowledge can be easily disseminated, and also imitated.

This means that explicit knowledge cannot be used in the creation of sustainable

competitive advantage; only the tacit knowledge which is internally disseminated and

cannot be easily imitated by others, contributes to it. Very often, tacit knowledge is not

shared or transferred and thus, becomes lost when the employee that possesses it leaves

the firm. When the tacit knowledge is disseminated among colleagues and becomes

explicit, organisational knowledge is created (Nonaka and Takeuchi 1999).

Organisational knowledge is a strategic asset that is inimitable, rare, valuable and non-

substitutable, thus, can be a source of sustainable competitive advantage (Bollinger and

Smith 2001).

Tacit knowledge is learned by using it, which means that its dissemination

demands extended periods of social interaction (DeNisi et al. 2003). In the case of

seafarers, this process meets limitations which are related to the fact that their service is

not continuous and the group they belong to may consist of different colleagues each time

they embark. These limitations however, do not appear to the same degree in all cases. If

a shipping company has developed systems and practices which exploit the tacit

knowledge created on board, and reduce the negative effects of the seafarers’ service

interruption, then those limitations are minimised. These systems and practices, of course,

should be integrated with the human resource management system of the company, the

permanent employment of the seafarers and all those mechanisms that make seafarers feel

that they are members of a team. Moreover, the company should try to develop a

knowledge-friendly culture, which motivates employees to value learning and be oriented

to knowledge (Meso and Smith 2000).

As it has already been mentioned, the HRM systems of the Greek shipping

companies are not unified but differ, i.e. one for the Greeks and one for the foreign

seafarers. This differentiation is explained by the fact that companies have a improved

supervision of the Greek seafaring labour market and usually offer permanent

employment to the Greeks they employ. On the contrary, for reasons related to the

information access and transaction costs that the recruitment, selection and placement of

foreign seafarers would create, companies choose to outsource functions related to

I.Theotokas-M.Progoulaki – IAME 2007, Athens

7

foreign seafarers (Papademetriou et al. 2005). A seafarer that is selected and placed on a

ship by a manning agent realises as his employer this agent, and not the shipping

company that manages the ship. Such an employee appears to have common

characteristics with contract workers who offer their services for a given time. They

possess tacit knowledge and provide it for the limited period they are employed, and often

they are not given any incentive to share their knowledge with others (DeNisi et al. 2003).

Tacit knowledge is transferred only if the shipping company has already developed

relevant system in order to motivate all seafarers to share their knowledge. This applies to

all cases; Greek and foreign seafarers, even to these that realise the manning agent as their

employer. For example, if we consider the case of a seafarer from a low cost country who

is hired by a crew agent to work for a Greek shipping company, it is very possible that he

will realises as his employer the agent and not the company that manages the ship. He

possesses tacit knowledge that has been accumulated during his working life, which will

be enriched during his service onboard the Greek ship. If he does not know that he will

return to the same ship (or the same company) next time he will embark, it stands to

reason that he will not adapt the “corporate identity” and will not try to share and

disseminate his knowledge with his colleagues. On the other hand, if he knew that his

employment with the shipping company would be permanent, he would have a motive to

share his tacit knowledge and to create the conditions for the enrichment of his

knowledge, the improvement of his performance and the continuation of his employment.

At this point, the current analysis highlights the importance of a unified human

resource management system and spotlights the advantages of this factor to the revelation

of the knowledge and all the valuable, rare and inimitable characteristics of the seafarers.

4. METHODOLOGY OF RESEARCH

This paper aims at examining the role that seafarers play in the creation of

sustainable competitive advantage, according to the applied strategies and practices of the

shipping companies. The analysis focuses on companies that operate ocean going ships,

since this business environment is substantially different to passenger and cruise shipping.

Moreover, the analysis focuses on companies that operate at least one ship flying the

Greek flag. Given that on Greek flagged ships both Greek and foreign seafarers are

employed, the sample allows the examination of the practices that shipping companies

adopt for each sub-category of seafarers.

The analysis is based on data gathered during a field survey conducted for the

scope of a research project on the competitiveness of Greek seafarers (University of the

Aegean 2006). The project was assigned to a research team of the University of the

Aegean, Department of Shipping, Trade and Transport, by the Panhellenic Seamen’s

Federation.

The survey took place in Athens and Piraeus during the period of June- July 2006.

The methodology followed included the development of a questionnaire that was used in

structured interviews. The questionnaire aimed at examining the HRM practices and

strategies, and the attitudes and opinions that the shipping companies hold, regarding the

competitiveness of their seafarers. The last was examined through particular

characteristics and criteria. More specifically, the questionnaire consisted of the following

sections:

- Introduction: this part preceded the list of questions, and offered information

regarding the aims of the research.

I.Theotokas-M.Progoulaki – IAME 2007, Athens

8

- Part A- Company’s Profile: this referred to data of fleet characteristics and

company’s profile;

- Part B- Manning Strategies: hereby were included questions that examined the

manning strategies from the aspect of crew synthesis and nationality of

crewmembers;

- Part C- Crew Management Strategies: this part included questions about the

practices and policies of managing shipping crews;

- Part D- Attitudes and Opinions: the aim of this set of questions was to examine the

attitudes and opinions of the shipping companies in the issue of the qualitative

characteristics of the seagoing personnel, and the way that these affect the choice

of flag;

- Part E- Stated Preferences: this part consisted of a set of hypothetical scenarios,

which examined the inclination (stated preferences) of the shipping companies to

choose certain nationalities, considering the cost.

The survey was based on personal interviews with crew managers or managing

directors that were responsible for crew management issues. The sample consisted of

fifteen Greek- owned shipping companies that managed a total number of 259 vessels.

The majority of the companies were medium-sized, with a fleet of five to fifteen vessels,

and large- sized with fleets counting over sixteen vessels, as presented in table 1. The

majority of the vessels were flying the Greek flag, while the rise of nine foreign flags was

also confirmed, as can be found in table 2.

Table 1. Fleet size of the sample companies

Fleet size Number of companies (%)

1- 4 vessels 1 (6.7%)

5- 15 vessels 8 (53.3%)

16 + 6 (40%)

Total 15 (100%)

Table 2. Flag and Type of vessels of the sample companies

Vessel Types/

Flags

Tanker Bulk

Carrier

Container Other /ship

types

Sum of

Flags

Greek 73% 30% 75% 4% 50%

Liberian 9% 8% 0% 0% 3%

Cyprus 0% 26% 15% 0% 6%

Malta 3% 8% 0% 18% 5%

Panama 7% 0% 2% 0% 2%

Singaporean 0% 0% 7% 7% 2%

Bahamas 7% 20% 2% 43% 14%

S. Vincent 1% 2% 0% 14% 3%

Egyptian 0% 6% 0% 0% 2%

Bermuda 0% 0% 0% 14% 2%

Sum of Vessels’

Types

29%

37%

23%

11%

100%

The following table 3 analyses the representative ness of the sample, with regard

to the flag and ship types, according to the data offered by Skolarikos (2005). The

companies of the sample managed the 10% of the Greek-owned fleet and the 22% of the

Greek-flagged ships.

I.Theotokas-M.Progoulaki – IAME 2007, Athens

9

Table 3. Comparison of flag and ship types of sample and statistics by Skolarikos

Tanker Bulk Carrier Container Total

Greek-

owned

Greek-

flagged

Greek-

owned

Greek-

flagged

Greek-

owned

Greek-

flagged

Greek-

owned

Greek-

flagged

Sample of

survey

(2006)

75 55 97 29 59 44 231 128

Data by

Skolarikos

(2005)

672 254 1.400 278 160 45 2232 577

% 11% 22% 7% 10% 37% 98% 10% 22%

5. RESULTS

The research project that the present paper is based, examined the competitiveness

of Greek seamen. In order to fulfill the basic criteria of the survey, the researchers should

ensure that Greek seamen were employed by the shipping companies of the sample. For

this reason, the sample consisted of companies that operated at least one ship flying the

Greek flag. In most of the companies however, it was found that either all ships or the

majority of them were flying the Greek flag. Not surprisingly, the examination of the

nationality of the seafarers employed by the companies of the sample revealed that

Greeks prevail. As it can be seen in Table 4, the vast majority of the officers are Greeks

(93%) while the most popular foreign nationality is the Filipinos (47%), Ukrainians

(13%) and Russians (13%). With regard to the ratings, there are no significant differences

between the Greeks (87%) and the Filipinos (80%), with Ukrainians (20%) and Russians

(13%) to follow. The analysis of the seafarers’ nationalities shows that the majority of

them come from countries that offer low cost labour, which is an additional indication of

the fact that the main reason they are chosen is their lower wages. These results are also

confirmed by the national data regarding the Greek seagoing labour and Greek-owned

fleet (GSNSS 1996-2004). From the majority of the respondents (93%) it became

apparent that the shipping companies perceive a qualitative difference between Greek and

foreign seafarers. This was valid for both officers and ratings. This point is going to be

examined in depth later on.

The labour turnover is considered as an indication of the effectiveness of the

firms’ HRM system. High turnover is an indication of chronic human resource problem

that shows a weak alignment between firms and employees interests, which contributes to

business failure (Boxall 1998), while turnover reduction is an indication of the

effectiveness of the human resource system (Richard and Johnson 2001). The percentage

of the employees who have had at least one year service shows the labour stability index,

which is used for measuring labour turnover (Graham and Bennet 1998: 169). The

analysis of the data shows that Greek shipping companies appear to have a high labour

stability index, which means that they are able to retain long- lasting work relations with

their seafarers. It should be noted however, that the index is different for the Greeks

seafarers and their colleagues of foreign nationalities (see table 5). In the vast majority of

the companies it was found that Greeks were employed for periods of more than 10 years.

I.Theotokas-M.Progoulaki – IAME 2007, Athens

10

The respective percentages were in average 72% for officers and 58% for ratings. On the

contrary, seafarers of foreign nationalities were employed for far shorter periods; long

lasting employment of more than 10 years was noticed in approximately 30% of the

companies surveyed.

Table 4. Nationalities employed on the sample fleet

Nationalities Officers Ratings

Greek 93% 87%

Ukrainian 13% 20%

Polish 7% 7%

Russian 13% 13%

Filipino 47% 80%

Spanish 7% 0%

Rumanian 7% 7%

Bulgarian 7% 7%

Georgian 7% 7%

Pakistani 7% 7%

Maldivian 7% 7%

Myanmar 0% 7%

Table 5. Average employment length (in years) for Greeks and foreign seamen

Greeks Foreigners

Officers Ratings Officers Ratings

<1 year 7% 17% 27% 16%

2-4 years 7% 0,0% 9% 23%

5-7 years 7% 17% 37% 23%

8-10 years 7% 8% 0% 7%

over 10 years 72% 58% 27% 31%

Total 100% 100% 100% 100%

An interesting result of the survey is that Greek shipping companies employ

Greek seafarers not only on ships that fly the national flag, but also on foreign flagged

vessels, although there is no nationality restriction imposed by these flags with respect to

the crew synthesis. In total, 80% of the companies that participated in the survey recruit

on foreign flagged ships Greek seafarers. In 60% of the sample it was found that they

recruit four senior officers (bridge and engine), while in 20% it was found that they

recruit four senior officers, junior officers and ratings (the cook and the bosun).

Given that Greek ratings are less competitive compared to their colleagues from

the low cost countries, in terms of wage payment comparison, the questionnaire aimed to

identify the reasons they are employed by the companies, no matter the flag of the ship. In

most of the cases, companies’ representatives stated as the main reason, the exploitation

of the Greeks’ capabilities that stem from their experience, skills and training. Shipping

companies employ Greeks regardless the vessel’s flag, in order to exploit the Greeks’

explicit and tacit knowledge and to transmit this knowledge to the rest of the crew.

Thereby, companies achieve improved co-operation, control, discipline and productivity

on board their ships.

The present survey confirmed what previous research (Papademetriou et al. 2005)

has found with regard to the existence of different systems for the management of

I.Theotokas-M.Progoulaki – IAME 2007, Athens

11

seagoing personnel, no matter what their nationalities are. The management of Greek

seafarers, both officers and ratings, is performed either in-house by the crew management

department (87%) or is undertaken by an affiliated company (13%). On the contrary, the

management of foreign nationalities seafarers is in most of the cases outsourced to

manning agents (57%), while training is even more often outsourced, with 72% of the

companies to assign it to independent agents (Table 6). It becomes evident that in the

majority of the companies exists more than one HRM systems. This duality leads to an

application of different practices for each category of seafarers, regarding compensation

or motivation. Furthermore, the consequence that this duality might have in the coherence

of the crew is questioned.

Table 6. Crew resource management activities

Internal

management:

company’s crew

department

External

management:

Company’s

affiliated agency

External

management:

Independent agent

Greeks 87% 13% 0%

Foreigners 32% 11% 57%

Regarding the benefits given to the seafarers, one can see that the vast majority of

companies on the top of the standard wage offer various schemes of extra payment that

aim at motivating them to improve their performance and at minimising the seafarers’

turnover. These schemes are concerning mainly the Greeks (92.3%) and secondary the

seafarers of foreign nationalities (58.3%). It should be noted, that the majority of the

incentives are directed to the Greek officers, a clear evidence of the value the companies

ascribe to them. On the other hand, data analysis shows that Greek companies have

started to invest resources in building long-term relationships with their foreign seafarers.

In any case however, the incentives offered to foreigners are considered as less important,

in terms of the cost they create to the companies and the commitment that create to the

seafarers, compared to those offered to their Greek seafarers. The benefits schemes for the

Greek officers include bonuses, recognition awards, service awards, payment for time not

worked, award for the re-employment, allowances for training, retirement plans etc. In

addition, several companies provide incentives related to seafarers families, both officers

and ratings, such as support of the family especially in periods that the seafarer is onboard

the ship, scholarships to their children, social events etc. With regard to the foreign

seafarers, incentives take the form of bonuses, which are given to both officers and

ratings, based on their performance.

An additional evidence of the differentiation of the incentive schemes and of the

perception that Greek companies have for their Greek officers, is the incentive offered to

them with respect to their career plan. This extra benefit concerns promotion to the rank

of the officers or even transfer to a shore- based position after several years of service as

first officers. It was found that in 86% of the companies Greek officers were offered a

career plan, while the respective percentage for foreign officers was 14%. This is one

additional factor that explains the fact that the majority of Greeks stay with the same

company for more than ten years.

It has been mentioned that the majority of the respondents realise there is a

difference between Greek and foreign seafarers. To clarify this matter, companies’

representatives were asked to specify what they perceive as the main strength and

weakness of their seafarers. For this, the questionnaire included open questions. In regard

I.Theotokas-M.Progoulaki – IAME 2007, Athens

12

to the strengths of the Greek Officers, respondents realised as the most important Greeks’

responsibility and their contribution to the maintenance of the ship. Emphasis was also

given to their leadership and crisis management skills, and to their experience, discipline

and loyalty. Regarding the Greek Ratings’ strengths, the respondents mentioned as the

most important seamanship, ‘filotimo’, experience, willingness to take initiative and

morality. It should be noted that in most of the cases these characteristics were also

acknowledged as important for the Greek officers.

On the side of the Greek Officers’ weaknesses, respondents realised that they

work better when working alone, than in teams, even when they have to work with people

of the same nationality. This weakness was attributed to one of the flaws of their culture

and is related to their high temperament. It should be noted though, that this result is a

surprising one given that Greeks are not classified to nations with individualistic culture

(Hofstede 1980). Although the respondents acknowledge the importance of Greeks’

experience, they also realise that the training given to Greek officers in the Marine

Academies of Greece is antiquated. As an important weakness was also mentioned the

demand of Greek officers for higher wages, which leads to the increase of the manning

cost. The basic weakness of Greek ratings was mentioned to be their wage level,

especially when compared to their colleagues from the low cost countries.

The respondents also revealed the strengths and weaknesses of foreign seafarers.

As the main strengths of Filipino Officers were stated their lower wages, their knowledge,

and characteristics such as discipline, teamwork, productivity and loyalty. On the other

hand, they seem to lack initiative (especially when employed on multinational crews),

special training, and experience. East- Europeans, such as Polish and Bulgarians are also

considered to be low cost, professional and obedient. The same occur for Russian and

Rumanian, who are considered, though, to be better skilled. It was also mentioned that

Polish, Bulgarians and Russian need special treatment, because they usually disobey to

the Greeks’ Officers orders. Finally, the respondents mentioned that East-Europeans have

a tendency to alcohol consumption on board, even if it is forbidden.

To clearly identify the perception of companies’ representatives on the value of

Greek seafarers and their willingness to employ them, taking for granted the strengths and

weaknesses they have compared to their colleagues from the low cost countries, the

questionnaire included two stated preferences scenarios that used as dependent variable

the wage cost. According to the first scenario, respondents were asked what would be

their choice if there were two offered position, one for an Officer, and the other for a

Rating, and the following conditions were valid:

(a) Greek and foreigner are paid the same wage

(b) Greek’s wage exceeds foreigner’s 30%

(c) Greek’s wage exceeds foreigner’s 50%

(d) Greek’s wage exceeds foreigner’s 100%

(e) Greeks accept to be recruited with the collective agreement.

The results of scenario 1 are presented in figure 1. It is clear that as long as the

Greek’s wages increase, compared to those of the foreigner, there is an inclination to

substitute Greeks (and mainly ratings), with foreigners. In the case that Greek Officers

accepted to receive the wage level that the collective agreements sets, which is lower than

the real current wage, there is a small inclination of balance between Greeks and

foreigners.

I.Theotokas-M.Progoulaki – IAME 2007, Athens

13

Figure 1. Results of the analysis of Scenario 1

0

20

40

60

80

100

120

sam

e wag

es

Gre

ek'swag

e +30

% fo

reign

Gre

ek's w

age +

50% fo

reign

Gre

ek's wag

e +10

0% fo

reig

n

Gre

ek- c

ollective

agre

emen

t

Greek Officer

Greek Rating

Foreign Officer

Foreign Rating

The second scenario concerned the selection of a bosun. Respondents were asked

what would be their choice for hiring of a bosun if there were two candidates, one Greek

48 years old and one foreigner aged 30 years. The conditions given were the same with

the first scenario. The results are presented in figure 2. As long as the Greek’s wages

increase, compared to those of the foreigner, there is an inclination to substitute Greeks,

with foreigners. In the case that the Greek accepted to receive the wage level of the

collective agreements, there is a small inclination of balance between the Greek (holding

a percentage of 57%) and the foreigner (43%).

Figure 2. Results of the analysis Scenario 2

same wages

Greek's wage +30% fo

reign

Greek's wage +50% fo

reign

Greek's wage +100% fo

reign

Greek- colle

ctive agreement

Greek

Foreigner0

10

20

30

40

50

60

70

80

90

100

Greek

Foreigner

I.Theotokas-M.Progoulaki – IAME 2007, Athens

14

6. DISCUSSION

The analysis of data clearly shows that Greek shipping companies’ representatives

perceive a qualitative difference between Greek and foreign seafarers. In the course of the

research project mentioned before it was found that this was one of the main reasons for

the preference of Greek flag for their ships. The use of the Greek flag gives to the

companies the ability to recruit able number of Greek seafarers. However, when the

criteria are confined and the cost reduction becomes first priority, then the inclination to

substitute Greeks with seafarers from the low cost countries is evident. It should be noted

though, that a factor which plays a decisive role in the final choice is the approach taken

by the companies in regard to the human resources and their contribution to the

competitiveness of the companies. This approach is directly related to the strategic

business horizon of the companies, i.e. if they are short term or long term oriented.

The analysis of data reveals that both above mentioned strategic approaches are

applied among the Greek shipping companies. The main difference between the two

approaches is that they produce different results for the companies, seeing from a long-

term point of view. Those companies that adopt the short-term approach are interested in

gaining the instant benefits it creates with regard to the operational cost of the ships. The

decision to substitute Greeks with seafarers from low cost countries is based on the

difference of the wages paid to them. In many cases, substitution of Greeks with

foreigners is not the result of a plan for the gradual selection and placement of the foreign

seafarers to the working environment and culture of the company, and for the reduction of

the negative effects of hiring Greek seafarers. More often, the company and the –both

hired and dismissed- seafarers are going to the new situation almost instantly. This of

course, apart from raising ethical matters, creates several other risks. Very often, the

companies that adopt this approach might undertake the risk of a lower performance of

the vessel, as a result of malfunctions related to the change of personnel or even of the

lower efficiency of the newcomers. As a result, problems related to the poor maintenance,

the increase of the off-hire periods, the increased claims, the effect on the reputation of

the company etc. might be created. The cost that these problems create becomes evident

only in the long-term basis. Thus, as Pfeffer (1997: 49) notes, even the poorly paid and

seemingly cheap employee “is still much too expensive if the person does not have the

knowledge, experience, or commitment to do what is required to make the business

profitable”. On the contrary, the companies that adopt the long term approach do not

focus on the instant decreases of the cost, but are interested on the long-run performance

of their ships.

The long-term approach implies that the company realises the importance of

human resources on the competitiveness of the firm, and applies ideas similar to those

defined in the context of VRIO model. This means that the company seeks for recruiting,

hiring and retaining employees, who are able to add value to the company, have

characteristics that are rare and inimitable and are supported in their duties by unified

systems of HRM, which allow them to think of themselves as part of the company they

work for. Under these conditions, seafarers are able to adapt the values and beliefs that

form the company’s culture and to connect their personal development to the company’s

progress. Companies that adopt this approach, even though they do not implement unified

systems applied to all seafarers, try to provide motives to all of them and to minimise the

negative effects that the feeling of unfair treatment would have on part of the seafarers.

They invest on building strong and long lasting relationships with the seafarers and do not

run them like a spot market.

I.Theotokas-M.Progoulaki – IAME 2007, Athens

15

The survey results revealed that this approach is adopted by the majority of the

Greek shipping enterprises that choose to fly the Greek flag on their vessels. They invest

in creating and retaining a pool of competent Greek seafarers by providing a challenging

working environment and specifically designed incentives schemes. It is not of

coincidence that in the vast majority of the companies that took part in the survey was

noticed that very rarely seafarers employed by them had left the company to follow a

competitor who offered a higher wage to them. Most Greek shipping companies of the

sample also seek to create long lasting relationships with the foreign seafarers, and

although the main motive for their recruitment is their low wages, they provide them with

extra benefits aiming to build such a relationship. One might question the effectiveness of

an approach that leads to the existence of two different categories of employees.

However, it is acknowledged that an assumption of an architectural perspective of human

resources is that different employees contribute in different ways, so they could be

managed in different ways (Snell et al. 2005). The crucial point of the effectiveness of

this approach is whether the employees feel that are fairly paid and treated and that their

treatment is the result of a fair process (Kim and Mauborgne 2003).

However, one should take into account that not all companies which choose the

Greek flag adopt identical approach. There are companies that use the Greek flag mainly

for exploiting the advantages of the quality profile and the reputation of the flag, seeking

ways to decrease the additional cost it creates. The elaboration of national statistics

reveals that a non negligible percentage of ships that fly the Greek flag do not apply the

rules regarding the minimum number of Greek crew members (University of the Aegean

2006).

Using as a criterion the willingness to employ Greek ratings that are paid at least

twice the wage of the seafarers from low cost countries, in case that this is not required by

the Greek flag, the analysis of data show that there are three different categories of

companies:

a) those that will continue to do so because they believe that Greek ratings are

valuable human resources that contribute to the competitiveness of the companies;

b) those that will continue to employ the same seafarers they do today, as long as

they are available, and finally;

c) those that will stop employing Greek ratings instantly, substituting them with

seafarers from low cost countries.

While the companies of the first and the second category can be classified to those that

adopt the long-term approach, the third category seems to be closer to the short-term

approach. Under the short term approach, the main motive for the decision taking is the

instant decrease of the operational cost, through the decrease of manning expenses.

Seafarers are not considered as human resources that contribute to the competitiveness,

but as a complement to the technical system that one names ‘vessel’, as Gerstenberger

(2002) has noted. The choice then would be to employ seafarers from low cost countries

and to register the ship under a flag that does not pose any restriction to the nationality of

the seafarers.

One should not consider that all companies using flags of convenience adopt the

short-term approach. On the contrary, it was found there are companies that use mainly

flag of convenience and adopt the long-term approach, regardless that they employ only

foreign seafarers onboard them. Nevertheless, it does not mean that these companies are

not seeking to decrease their cost. In the vast majority of the cases, this is the only reason

I.Theotokas-M.Progoulaki – IAME 2007, Athens

16

for the de-flagging from the national flag. However, they try to do it with the minimum

risk. More particularly, they invest in building long lasting relationships with the

seafarers; they provide incentives to them and have developed human resource and other

management systems that aim at increasing the coherence of the ships’ crew and at

minimising the negative effects of the non-controlled high turnover. The fact that the

percentage of foreign seafarers with average employment period of more than ten years

approximates the ten percent is an evidence of this. It should be noted that in this category

fall companies that operate fleet of tanker ships. The operational requirements of a tanker

vessel are higher compared to that of bulk carriers and containerships, while the rules and

regulations are stricter. Thus, the ship type that the company manages is an additional

factor that shapes the approach it will implement in regard to its human resources

management.

7. CONCLUSIONS, LIMITATIONS AND SUGGESTIONS FOR FURTHER

RESEARCH

Human resources are the most valuable resource of the firms as they contribute to

the creation of sustainable competitive advantage. The resource based view and the

knowledge based view of the firm provide the theoretical basis for the ascertainment of

the human resources’ strategic role. They create value to the firms by exploiting their rare

and inimitable characteristics such as their knowledge and commitment. To build on these

characteristics of human resources, firms should develop management systems that will

allow employees to feel of themselves as part of the organisations they work for.

This paper focused on the analysis of the strategic role of the human resources in

the shipping industry. While there is a considerable emphasis given on the importance of

human resources at industry’s and companies’ level, there are many issues unresolved in

regard to the management of seafarers. The existence of the global seafarers’ labour

market that gives to the shipping companies the ability to recruit seafarers of any

nationality in order to decrease their cost, might lead to the adoption of practices that raise

ethical issues and affect the image of the industry. It might also lead to practices that have

as main criterion of the seafarers’ competitiveness their wage cost. In this context,

seafarers are not treated as the strategic resource that contribute to the competitiveness of

the firm, but rather as cost element that should be minimised.

A factor which plays a decisive role in the approach that each company adopts in

regard to its seafarers is the horizon of its human resource strategy, i.e. if it is short term

or long term oriented. As this analysis has shown, in the case of Greek shipping

companies one can see that both approaches are applied. The companies that adopt the

long term approach recruit seafarers by taking into account not only their wage cost, but

also their performance in the long term. They develop systems that aim at exploiting the

valuable, rare and inimitable characteristics of the seafarers, and at creating the conditions

for the creation of long lasting relationships with them. On the contrary, for the

companies that adopt the short term approach the main criterion for the crew selection is

the wage cost. The seafarers are treated almost like any other cost element and not as

qualified human resources that could contribute to the competitiveness of the companies.

The main difference between the two approaches is that they produce different results for

I.Theotokas-M.Progoulaki – IAME 2007, Athens

17

the companies seeing from a long-term point of view. The companies that adopt the long

term approach are able to employ a competent and committed pool of seafarers who

contribute to the high performance of their ships. Those that adopt the short term

approach are interested in gaining instant benefits with regard to the operational cost of

the ships. However, the latter also undertake risks that are related to the lower long run

performance of their ships that might be created due to the lower commitment,

satisfaction and coherence of their crew teams.

There is one point that should be mentioned in regard to the findings of this

analysis. As the limited sample of the companies consisted of Greek shipping companies

that operate ocean going fleets, questions are raised in regard to the generalisation of the

findings for companies that operate in different context. For example, the Greek shipping

companies are able to draw human resources from the pool of able Greek seafarers, a fact

that certainly affects the approach they adopt and the practices they apply. This is not the

case for the companies of other maritime nations, though. Moreover, the analysis did not

focus on the role of factors such as the fleet specialisation, the governance system of the

company, the chartering strategies etc. Thus, the present paper opens the agenda on an

issue that appears to have many promising research prospects.

ACKNOWLEDGMENTS

The authors acknowledge Propondis Foundation for its support. The present paper

consists part of the project PENED 2003, funded by the European Union (75%) and the

Greek Government- YPAN- GSRT (25%).

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