Note 11: Employees

Building an engaged workforce

Our people are critical to the success of our company. We won’t achieve our vision of leading performance in the markets in which we operate without an engaged, diverse and capable workforce.

Having engaged colleagues who live our core principles and values is what underpins the delivery of our strategic objectives and makes AkzoNobel a great place to work. We want our people to truly reflect and represent the many and varied cultures of the markets we serve and the different locations where we do business.

We believe it’s also important that our management teams reflect the diversity of our overall workforce. We know that inclusive and diverse teams better understand customer demands and make our organization stronger and more innovative. Having the right people in the right jobs, with the right capabilities, helps us to build a stronger business. We work hard to find and retain talent and provide continuous learning and development opportunities. Our objective is to create a high performing culture where employees can contribute to the best of their ability.

Employees

 

% of total

Managers and senior leadership

17

Professional staff

6

Sales staff

24

Scientific and technical staff

16

Operations staff

30

Administrative support staff

7

Productivity and ROI of human capital

 

2015

2016

%
Change

Human capital ROI ratio

1.58

1.57

-1

Return on human capital investment (%)

54

56

4

The contribution and value of our employees is made up of their talent, skills and knowledge. The training, education and support we offer enhances their value – their human capital. A higher level of human capital can increase productivity and future earnings at both company and individual level. As such, the talent, skills and knowledge of our employees not only benefits AkzoNobel and the employee, but also society at large. In addition to the 3D P&L, we are further developing the measure of our human capital to underwrite its value as one of our most important assets.

Our employees

Nearly half of our employees are employed in Europe, in line with our revenue generation (43 percent generated in Europe). Our commitment to Asian markets can be seen in our strong employee base in Asia (32 percent).

In common with many industrialized organizations the majority of our employee base is aged over 40. However, we see a clear distinction in age between high growth regions (average age 36.8 years) and (average age 44.4 years). This difference can also be seen in the years of service (an average of 12.2 years in mature markets, and 7.2 years in high growth regions). Both average age and years of service increased compared with 2015. Workforce planning will help us to mitigate the current risk of the aging workforce in Europe and North America by mapping the aging population to start timely succession planning and knowledge transfers.

Revenue and employees per key region

Region

Total revenue

Employees in region

Asia Pacific

27

32

Europe

43

44

North America

17

10

Latin America

9

9

Other regions

4

5

Capability building

Our HR strategy for 2016 and beyond is strongly focused on building the capabilities needed to support our strategic ambition. These are the functional capabilities in the businesses and the leadership capabilities across the company.

In each of our Business Areas, we have identified the required competencies for our key commercial roles and have started a program of assessment and development. With the support of our Learning and Development Center of Expertise, we have developed a clear roadmap to review and refresh the rest of our functional competency frameworks. This will ensure that new capabilities around data science, smart material and digital knowledge are incorporated in the new frameworks.

To further support our strategic ambition of organic growth, we expanded our continuous improvement program to our support functions and use black belts to improve our processes and procedures and work instructions. The new hire process is one of the process improvement examples within Human Resources.

In 2016, we introduced our new leadership behaviors, which complement our core principles and values and behaviors. They provide clarity of expectations for managers and provide the opportunity to assess and build targeted development plans for our leaders. In line with these new behaviors, we have developed a new people management training program – Leadership Essentials – to better reflect the changing role of our managers. By the end of 2016, 167 internal trainers had been trained across the world. We will start the global roll-out of the training in 2017 and aim to train 2,000 managers in the first year. These leadership behaviors will be incorporated into our performance management system from 2017.

We believe the most effective way to learn and develop new skills is to apply and practice them on the job and in real life situations. Our employees say they have good opportunities to learn and grow on a day-to-day basis, and we saw a significant improvement of +0.14 in the engagement score related to learn and grow (4.19 in 2016). That’s why the 70 percent experience, 20 percent exposure and 10 percent education learning philosophy is at the heart of our learning and development efforts. The AkzoNobel Academy serves as a virtual hub for learning and development opportunities and gives everyone in the company access to face-to-face learning programs, as well as a wide range of open access online courses available in multiple languages. By offering learning interventions through multiple channels, we help our entire workforce to continuously develop and ensure their long-term employability.

Ready for the future

Scientist and PhD student Louisa Waine received an Industrial Fellowship from the Royal Commission. (photo)

Scientist and PhD student Louisa Waine – who works for our Performance Coatings business in Felling, UK – received an Industrial Fellowship from the Royal Commission for the Exhibition of 1851 in recognition of a research project focused on low energy curing technology that can eliminate the need to heat large vessels, such as ships, to apply paint.

In further support of future-proofing the organization, we have introduced mandatory workforce planning at both strategic and operational level in each of our businesses. This process has a forward-looking focus to develop and align the capabilities of our workforce to the strategic objectives of each business and sets a company-wide standard. These plans inform our budget, recruitment, development and talent management processes.

Given that we are operating in an increasingly volatile and competitive employment market, it is important that we position ourselves as an attractive employer and streamline our hiring processes. In 2016, we standardized and improved our new hire process across our top nine countries. The process is now easier, simpler and quicker for managers. By giving back around 70 percent of the time to managers involved in these processes, they can better focus on value-adding activities that help our company to grow and continuously improve.

We are therefore proud to have been recognized as an employer of choice in four countries, including Top Employer certifications in China and the UK, number one rated employer in the chemicals industry in the Netherlands, and in Sweden in numerious rankings.

As part of workforce planning, we have identified critical roles and focused on the succession planning of these roles to ensure business continuity. In 2016, internal promotions at executive level were at 61 percent, up from 58 percent the previous year, but still below our new target of 70 percent. To improve our talent pipeline, we are focusing on the identification and development of our internal talent. By the end of 2016, 230 high potentials went through a talent development center to confirm their potential, resulting in individual development plans. In support of the talent centers, all the general managers of our businesses have been trained to assess our talent. This has ensured a common perspective on talent and improved their capability to give feedback.

Human capital ambitions

Ambition: The employee engagement score is at least 4.20 in 2020 (scoring 0 - 5).
 

Employee engagement score
(0 – 5 scale)

Social value creation – Employee engagement score (bar chart)Social value creation – Employee engagement score (bar chart)

Status: On target. We exceeded our ambition level in 2016 and are close to our 2020 ambition of 4.20. See Engaged employees for details.

Ambition: The employee engagement score related to learn and grow is at least 4.20 in 2020 (scoring 0 - 5).

Employee engagement score related to learn and grow (0 – 5 scale)

Social value creation – Employee engagement score related to learn and grow (bar chart)Social value creation – Employee engagement score related to learn and grow (bar chart)

Status: On target. We exceeded our ambition level in 2016 and are close to our 2020 ambition level of 4.20. See Capability building for details.

Ambition: Women hold at least 25 percent of our executive manager positions in 2020.

Female executives in %

Social value creation – Female executives (bar chart)Social value creation – Female executives (bar chart)

Status: Behind target. The current rate of improvement won’t allow us to reach our 2020 ambition. See Diversity and inclusion for details.

Ambition: Women make up at least 30 percent of our executive potential pool in 2020.

Female executive potential pool in %

Social value creation – Female executive potential pool (bar chart)Social value creation – Female executive potential pool (bar chart)

Status: On target. We are on track to reach our 2020 ambition. See Diversity and inclusion for details.

Ambition: At least 70 percent of the executive vacancies are filled internally.
 

Executive vacancies filled internally in %

Social value creation – Executive vacancies filled internally (bar chart)Social value creation – Executive vacancies filled internally (bar chart)

Status: Behind target. While we did not reach our ambition level, we did improve by 3 percent compared with 2015. See Ready for the future for details.

Ambition: Less than 5 percent of employees with upwards potential left the organization (based on voluntary leavers).

High potential turnover in %

Social value creation – High potential turnover (bar chart)Social value creation – High potential turnover (bar chart)

Status: On target. We were able to keep the majority of our talents. See Retaining talent for details.

Engaged employees

Being able to give and receive feedback is vital to creating an engaging work environment. We therefore invite all our employees to participate in our annual engagement survey. In 2016, 89 percent (41,170 employees) of our employees took part. Each manager with four or more direct reports receives a report on team engagement, which allows for action planning at team level.

For the sixth year in a row, our engagement levels have improved (+0.14 in 2016 to 4.17), indicating that we are continuing to transform the daily experience of working at AkzoNobel. The messages behind the survey results indicate strong progress in employee trust regarding where the company is going and the strategic direction we have chosen. At the same time, there is room for improvement in terms of how senior leaders connect our strategy and purpose to the day-to-day work for all employees.

The engagement levels show a positive trajectory at all levels of the company, which illustrates how our managers are lifting their own, and their employees’, score.

Engagement score by management level

 

2013

2014

2015

2016

Last year change

Managers of managers

4.09

4.14

4.25

4.36

0.11

Front line managers

4.04

4.15

4.27

0.12

Employees (individual contributors)

3.85

3.94

4.00

4.14

0.14

Overall average

3.88

3.97

4.03

4.17

0.14

Participation rate (%)

88

85

88

89

1

We also see improved follow-up and action planning, which helps our employees become more engaged. Enabling our managers to continuously give feedback to their employees is an area for improvement and our new management training program will help to build this capability.

In 2016, eight times as many teams (1,472 in total) performed at top engagement levels compared with 2010 (184). It is also important to help any teams that are still somewhat behind (16 percent) so that they can also become top performers. The survey results will give us concrete insights so we can help these teams develop in the right direction.

Engagement and safety
(total reportable injury rate per million hours worked)

Social value creation – Engagement and safety (bar chart)Social value creation – Engagement and safety (bar chart)

In addition, research across a large sample of manufacturing sites demonstrates a clear connection between engagement and safety at site level. Sites with top quartile engagement levels have a 41 percent lower total reportable injury rate (number of injuries per million hours worked) than sites with bottom quartile engagement levels.

Diversity and inclusion (D&I)

Despite just failing to reach our 2015 gender diversity ambitions (we achieved 19 percent female executives, with an ambition of 20 percent), our leadership has committed to increasing our gender diversity ambitions – a clear indication of the company’s commitment to gender equality.

2016 produced mixed results in terms of reaching our ambition levels. As managers play an important role in hiring and promoting women in the organization, diversity is one of the main aspects of the new leadership management training. At the same time, we are reviewing how to better embed D&I in all our HR processes.

We have set a clear ambition to close our gender gap at executive level, calculated as the gap between the average male and female salary. The current gap is 7.7 percent, in line with last year.

At the start of 2016, we sharpened our focus on regional diversity by better linking diversity to the business. Our focus is no longer just on the number of executives from high growth markets, but on the revenue in key regions and the distribution of executives from these key regions. The aim for 2020 is to have a better representation among our executive population of the regions where we do business, supporting growth in these regions.

Gender diversity 2016

 

% Women

2020 Ambition

Overall population

24

Graduate hires

43

50

External executive hires

30

50

Executive talent pool

30

30

Promotions into executive level

33

in line with talent pool

 

 

 

Gender pay gap executives (%)

7.7

0

Revenue against executives from key regions

Region

Total revenue

Executives from the region 2016

Ambition 2020

1

All of Europe

Asia Pacific

27

11

15

Emerging Europe

7

2

63 1

Mature Europe

36

69

 

North America

17

14

15

Latin America

9

3

5

Other regions

4

1

2

Retaining talent

Our employees are the foundation on which our success is built. The basis for innovation and organic growth is a strong talent base with engaged and loyal employees. In 2016, our overall employee turnover was 11 percent (2015: 13 percent), while the voluntary turnover was 7 percent compared with 8 percent in 2015. High potential turnover totaled 4 percent, down 2 percent from 2015. This is in line with the increase in engagement in the company. It also puts us close to the top of the chemical industry benchmark of APQC (10 percent overall turnover) and below the Asian benchmark (AkzoNobel 13 percent, compared with 14 percent in benchmark).

Although a certain percentage of voluntary leavers is part of the employee cycle, it is important that we focus on those employees who are in critical positions and make sure we are able to retain them where we can. The renewal of our retention program in high growth markets has ensured we are seeing 25 percent fewer regretted losses than 2015 in those regions. In mature markets, our number remained constant. We want to further decrease our high potential turnover, so we are introducing one global standard for exit interviews and an exit survey to help us develop the right employee retention strategies.

Optimizing and aligning the HR organization

At the start of 2016, we moved to one HR system globally. The system captures basic HR information and feeds identity and access management, which in turn feeds other systems. This ensures legal compliance and the rapid onboarding and offboarding of employees. It also allows us to more effectively measure the work we do in Human Resources, resulting in greater transparency.

During 2016, we finalized plans to extend our HR operating model from our nine largest countries to the rest of the globe. This will further harmonize, align and standardize HR processes and practices to better support the business.

Restructuring

We continued to restructure our business in 2016 to align with our company strategy. The primary focus was on the further implementation of our organization.

Since 2013, we have been reconfiguring our support functions, such as Human Resources, Finance and Information Management, towards a standard operating model consisting of business partners, centers of expertise and shared services. Our GBS organization covers the shared services organization of Finance and HR in our top nine countries. During the course of 2016, we saw the transfer of activities to GBS resulting in a movement of employees from the business into the function. In 2017, we intend to transfer more activities to , such as procurement of functional spend and talent resourcing.

In parallel to the GBS transition, each of the support functions is embarking on their own journey of transformation. Our objective is to continuously improve efficiency and effectiveness. In 2016, Information Management announced a transformation program which will be rolled out over a period of two to three years.

As part of the change process, we use employee and customer sounding boards to gather feedback from the organization and our internal customers. We are currently consulting with employee representative bodies in the respective countries and follow local laws and regulations in terms of employee relations. In the event of our organizational changes impacting employment, we aim to always give our employees sufficient time to prepare and help them consider various career options both inside and outside the company.

Mature markets

Mature markets are comprised of Western Europe, the US, Canada, Japan and Oceania.

GBS

Global Business Services, which covers functional support activities such as Human Resources, Finance and Information Management, as well as non-product related Procurement.

GBS

Global Business Services, which covers functional support activities such as Human Resources, Finance and Information Management, as well as non-product related Procurement.