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Creating the shaper of the maritime industry Tradeshow Organisation and Governance 24 th October Creating the shaper of the maritime industry Tradeshow Organisation and Governance 24 th October 2004 The Copenhagen Workshop 24 th -26 th November 2004

Content Background A Governance Model for Industrialisation Tuning the Business The Way Forward The Content Background A Governance Model for Industrialisation Tuning the Business The Way Forward The Copenhagen Workshop 24 th -26 th November 2004

The Board decided upon an unbalanced matrix structure for WMS, with Profit & Loss The Board decided upon an unbalanced matrix structure for WMS, with Profit & Loss responsibility in the Business Areas CEO Sales & Marketing CFO Central Staff Chain Management Global Port Marine Services Ship Management Crewing Maritime Consulting Shared Services Regional Director Sales & Marketing Chain Management Global Port Marine Services Ship Management Crewing Maritime Consulting BASS Regional Director Sales & Marketing Chain Management Global Port Marine Services Ship Management Crewing Maritime Consulting Wilh. Insurance Regional Director Sales & Marketing Chain Management Global Port Marine Services Ship Management Crewing Maritime Consulting Wilh. Bunkers Regional Director Sales & Marketing Chain Management Global Port Marine Services Ship Management Crewing Maritime Consulting ITM P/L P/L P/L The model was then stress tested and adjusted. The Copenhagen Workshop 24 th -26 th November 2004

The model was stress tested towards a functional break down of key business activities The model was stress tested towards a functional break down of key business activities and the fundamental strategic assumptions Functional split of WMS’s Core Business Fundamental Strategic Assumptions CUSTOMERS Execution/delivery Product Management A cost efficient operation will be crucial in delivering the increasingly commoditised services at competitive prices. Sales and Marketing Business development Business intelligence Support Services In a commoditised market, people, skills and behaviour – as well as the infrastructure enabling them to perform – will be a major differentiator. The maritime services industry will go through a phase of consolidation to adapt to larger and more professional customers. Local knowledge and entrepreneurship will be vital in securing local business, and will be a significant element in developing the industrialised global network. Larger customers will demand a standardised and high quality delivery in all ports, thus drive an “industrialisation” of the industry. The large and modern customers will increasingly want tailor made solutions from a broad spectre of maritime services, and seek long term, content based relationships with suppliers. Is the existing structure the best way to ensure functionality and to meet the fundamental strategic assumptions? The Copenhagen Workshop 24 th -26 th November 2004

The stress testing lead to five major organisational changes 1. Chain is included into The stress testing lead to five major organisational changes 1. Chain is included into Port Services 2. Maritime Consulting has been defined as fully owned subsidiary of WMS 3. The scope of the Shared Services project has been changed from the initial global, professional Shared Service concept, to a consolidation of support functions reporting directly to the CFO 4. As of January 1 st 2005 Marketing and Sales will a global and regional support to existing sales organisation in business areas, aiming to increase customer development and improve sales processes in the organisation 5. Corporate support functions has been extended to include Corporate Development and Quality Assurance The Copenhagen Workshop 24 th -26 th November 2004

Based on the changes, a matrix organisation with three business areas was decided WMS Based on the changes, a matrix organisation with three business areas was decided WMS Marketing & Sales Finance & Administration Corporate Development Business Processes & Quality Management Port Service & Logistics Crewing Ship Management Region Europe Lysaker P/L Maritime Consulting P/L Region AMB Dubai P/L Software P/L Region Asia & Oceania Singapore P/L Bunkers P/L Region Americas Location TBD P/L Insurance P/L P/L The Copenhagen Workshop 24 th -26 th November 2004

Content Background A Governance Model for Industrialisation Tuning the Business The Way Forward The Content Background A Governance Model for Industrialisation Tuning the Business The Way Forward The Copenhagen Workshop 24 th -26 th November 2004

WMS needs a governance model that can balance Profit and Loss with other key WMS needs a governance model that can balance Profit and Loss with other key measures in our industry Examples on other potential performance indicators • Number of port calls per FTE P&L B A L A N C E Other Key Indicators • Cost per port call • Customer satisfaction • Generation of sales leads • Participation in cross business sales • Order to cash • Employee satisfaction • Operational benchmarks To move in the direction of a balanced performance review and incentives structure is important in order to realise cross cooperation and functionality. The Copenhagen Workshop 24 th -26 th November 2004

We have looked to a governance model that have been used with success in We have looked to a governance model that have been used with success in other industries Starting with the customer Sales, relationship management, customer lifecycle Getting the environment right Vision, values, strategy Driving performance Plan – do – review, performance analysis, dashboard Licence to operate Legislative, financial reporting, managing risk, certificates Business Model Optimising the asset base Asset network, IT, infrastructure, lifecycle, maintenance Building organisational capacity Form and function, capabilities, roles and responsibilities The Copenhagen Workshop 24 th -26 th November 2004

We believe in using an executive dashboard to govern our business, focusing on four We believe in using an executive dashboard to govern our business, focusing on four key areas Key Performance Areas Customer Financial Target: • Improve Financial Forecasting • Improve profitability Target: • Improve margins on existing products • Improve development of new profitable products Operational Target: • Increase sales • Increase revenues • Improve market position and customer satisfaction Executive Dashboard Target: • Build Capability • Operate with integrity People The Copenhagen Workshop 24 th -26 th November 2004

The CFO of WMS have proposed some financial KPI’s, but we need input to The CFO of WMS have proposed some financial KPI’s, but we need input to define the remaining Examples on KPI’s Customer Financial Target: • Forecasting • Improve profitability Examples on Key Measures: • Profitability ROOC* • EBIT, Return On Operational Capital (ROOC) • Liquidity and cash management • Operating Cash flow EBIT* Sales Costs of Sales Market & Brand DSO* DPO* Perceived Quality • Capital Management • ROCE, WACC, Cost of Capital ROCE* Executive Dashboard HR nd ef in Target: Costs • Improve margins on existing products • Improve development of new and profitable products OEE Examples on Key Measures: Workforce • Operating Margin per product and customer Efficiency • Profitability of newly released products New • Product lifecycle Products Product • Revenues and costs per FTE Career Profitability • Overall Equipment Effectiveness (OEE) best practice • General and administrative Operational expenses • Company Growth VS Market Growth Customer • Brand Value Satisfaction • Customer Satisfaction ed • Market Value Target: • Increase sales, revenues and market position Examples on Key Measures: • Sales Pipeline • Costs of Sales • Cross Sales • Market Share U SHE Turnover Talent Target: • Build Capability and behave with integrity Examples on Key Measures: • HR • SHE • Turnover • Attraction and retain of talent • Career path ratio • Entry rate over turnover People This dashboard example is for the executive management, but there should be developed separate KPI’s and dashboards for the various business areas and regions, as well as the various layers in the organisation. *Note: EBIT = Earnings Before Interests and Tax; ROOC = Return On Operational Capital; DSO = Days Sales Outstanding; DPO = Days Payables Outstanding; ROCE = Return On Capital Employed; WACC = Weighted Average Costs of Capital The Copenhagen Workshop 24 th -26 th November 2004

We need to be able to perform internal benchmarking to increase control of performance We need to be able to perform internal benchmarking to increase control of performance and stimulate healthy internal competition 1 2 3 Establish Benchmarking ability Perform Internal Benchmarks Improvement Actions • Define what type of operations and services that need benchmarking • Gather data • Perform initial analysis • Establish initial key figures to perform benchmarks • Adjust key figures to ensure fair and correct comparison • Submit data requests and gather data • Set key figures on value- and cost -driving parameters • Define applicability across business areas and regions • Determine what value and/or cost generating key figures to benchmark • Perform analysis • Analyse and validate data • Benchmark local offices on key figures • Benchmark regions on key figures • Benchmark across business areas • Validate data by interviewing executives and managers • Develop and present report • Validate benchmarking reports • Look at performances in accordance to local situation • Set improvement targets • Regional, local and site improvement plans • Follow up and review process 4 Competition among equals – to enhance performance • Established benchmarking routines enhance internal competition • Internal competition drives increased performance on value generation, and on reducing operating costs • Gives management at all levels instrumental means to govern their business • Increase transparency When we define the key figures and when we perform the benchmarking, we need to be aware of local differences. The Copenhagen Workshop 24 th -26 th November 2004

To ensure that the business is performing according to targets we need to have To ensure that the business is performing according to targets we need to have a centrally managed plan, do, review process Strategy Business Plans Performance Targets Regular/frequent review of performance What happened according to plan and what did not happen according to plan? Generate insights to why things went well/wrong Systemise insights Re-enter Plan – Do – Review cycle Set objectives Define Key Activities Define Milestones REVIEW Quarterly global management meetings Monthly corporate management meetings PLAN Timeframe Who does what How to review When to review Carry out plans and activities DO By having an efficient Plan – Do – Review cycle in WMS, we ensure the right business focus and a continuous validation of our business strategy. The Copenhagen Workshop 24 th -26 th November 2004

Content Background A Governance Model for Industrialisation Tuning the Business The Way Forward The Content Background A Governance Model for Industrialisation Tuning the Business The Way Forward The Copenhagen Workshop 24 th -26 th November 2004

We need to start working towards becoming a shaper • The operational integration will We need to start working towards becoming a shaper • The operational integration will give returns by realising the identified cost reductions • While phase one lays the foundation, phase two and three represents the key changes we have to go through in order to become the industry shaper • Strategic integration Premium Valuecreation To realise phase two and three we have to have close collaboration between business areas – Create new competitive advantages Return Operational integration – Create new business opportunities – Develop new growth platforms – Capitalise on cross selling – Use customer relations and market positions Cost reduction – Use benchmarks and best practice – Combine business development and innovation • In order to realise this we have to start now by moving out of our comfort zones, and starting to make choices Time Source: “The Seven Deadly Myths of M&A”, Mike Davidson To succeed, we need to keep a constant focus on creating arenas and incentive structures to stimulate collaboration and cooperation between business areas and regions. The Copenhagen Workshop 24 th -26 th November 2004

We need to establish arenas and define activities to fulfil our potential Global Arenas We need to establish arenas and define activities to fulfil our potential Global Arenas • Quarterly global management meetings • Cross business development task force Corporate Arena • Monthly corporate management meeting Regional Arenas • Product portfolio review • Regional assemblies Country/Local Arenas • Resource Sharing • On-sight business development WW Academy Incentives Structure • Training • Competence development OD • Global Organisation Development activities The incentives structure stimulates and contributes to the functionality of the defined arenas. The Copenhagen Workshop 24 th -26 th November 2004

To combine corporate governance with local initiatives, we suggest an on sight business development To combine corporate governance with local initiatives, we suggest an on sight business development approach to reach our vision Traditional Top Down Approach Headquarters The on sight Business Development Alternative Headquarters Local Office • Centrally designed processes and initiatives imposed on the local office • Little or no tailoring • Poor buy-in from staff • Limited scope for input from local offices Local Office • Locally identified process improvement • Owned by the local office and involvement of local staff • Tailored to the daily realities of the customers • Fast paced change at local office level • Supported and monitored from corporate The local office is the physical contact point with the customer, and in order to become a customer centric shaper of the industry – it is key to utilise local knowledge and entrepreneurial skills. The Copenhagen Workshop 24 th -26 th November 2004

On sight business development can be used to improve innovation and to ensure process On sight business development can be used to improve innovation and to ensure process and performance improvements Example on introduction of new sales processes: Corporate Sales “Hothouse” Ordinary Local Sales Office Extended Market Intelligence flow to HQ Market Intelligence flow to headquarters In-house evaluation and refinement New sales process Management Sales processes innovation team management Sales staff + Normal sales process and business cycle Sales staff New sales process Normal sales process and business cycle New sales process + Temporary sales staff Customers • Business as usual Customers Sales processes innovation team • • Business continues as usual • New sales processes, technology and products are linked Sales staff and management are supplemented by specialist sales resources The Copenhagen Workshop 24 th -26 th November 2004

Once trailed, the improvements the from the on sight business development can be rolled Once trailed, the improvements the from the on sight business development can be rolled out across the entire network Illustration: How to rollout and cascade from one “hothouse” Wave 4: 243 offices Wave 3: 81 offices Wave 2: 27 offices Wave 1: 9 offices Internally driven High degree of buy-in 3 hothouses England Dubai Singapore Staff become champions of the concept Staff from earlier waves become key in the rolling out change in later waves In addition to being a local strategy and transformation process, the hot-housing approach do also provide central management with information to improve customer profitability and establish enterprise wide KPI’s. Source: Capgemini internal sources, 1999. The Copenhagen Workshop 24 th -26 th November 2004

Content Background A Governance Model for Industrialisation Tuning the Business The Way Forward The Content Background A Governance Model for Industrialisation Tuning the Business The Way Forward The Copenhagen Workshop 24 th -26 th November 2004

The new organisation will be fully functional from January 1 st in 2005 Activity The new organisation will be fully functional from January 1 st in 2005 Activity 11 -15. 10 Octob er 18 -22. 10 25 -29. 10 1 -5. 11 Novembe r 8 -12. 11 15 -19. 11 22 -26. 11 29. 11 -3. 12 Decembe r 13 -17. 12 6 -10. 12 20 -24. 12 2005 As-is Analysis Changes following new org. model Competence mapping Incentive structure Define governance structure Define roles and responsibilities Identify plans for learning and cooperation between BA in new model Organisational Tuning Governance implementation ASE Milestones = planned Cut-off 22. 11. 04 ASG = actual The Copenhagen Workshop 24 th -26 th November 2004