Evidence Based Management in HR at Danske Bank

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



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


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



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”


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


Competency evaluations - status


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





74

76

78

80

82

84

86

64 66 68 70 72 74 76 78Satisfaction & Motivation

Loya

lty

100

110

138

80

90

100

110

120

130

140

150

Bottom 1/ 3 Middle 1/ 3 Upper 1/ 3

Employee Satisfaction and Motivation

Index

The “case for HR” at the branch network Employee profit correlated with employee satisfaction and motivation in Danske Bank

Em

ploy

ee p

rofit

abili

ty in

dex

Documents

Evidence Based Management in HR at Danske Bank