MAKING MODERN LIVING POSSIBLE

Mexico tops the happiness chart • 1,000 pupils adopted • Work & leisure time in Shanghai • Warehouse of the future • Danfoss Silicon Power outgrows its suit again • 222 leaders gather in Barcelona

3/2011  |  A Stakeholder Publication  |  English edition

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Published by Danfoss A/S Total number printed: 21,550 Address: Danfoss A/S, D11 DK-6430 Nordborg [email protected] Responsible: Ole Daugbjerg Editor: Niels Chr. Larsen Prepress: Christa Hartmann Photographers: Glenn Simonsen Rasmus Erslev Holt Print: Laursen Grafisk A/S

Published in Danish, English, French, Spanish, Polish, Slovenian, German, Chinese and Russian. Printed with vegetable colors on environmentally approved paper. Reproduction only by permission of the Editor and always with acknowledgement to Global Danfoss

Global Danfoss July 2011

6 Say it with flowers. Danfoss Mexico tops the happiness chart. 12 Fiery advocates. How to get more of them at Danfoss. 14 Word-blind. Apprentice becomes key person. 17 GMM. Thoughts from a pit stop. 20 Work & leisure time. Meet Fang Yi in Shanghai. 24 Warehouse. The warehouse of the future is outsourced. 30 Danfoss Development. Mission – almost – accomplished. 32 Danfoss around the world.

Front page photo: María Guadalupe Rodríguez Méndez, Danfoss Mexico

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Leader

What became of passion? By Executive Vice President and CDO Nis Storgaard

For the past 18 months we have been working with Core & Clear. Core businesses, outsourcing, quality and performance, and reduction of complexity are some of the subjects which have been high on the agenda. They will remain there.

tomers collect; from the financial results that we jointly obtain. Last year, we created the best-ever result in the history of Danfoss, and we have continued to progress in the first quarter of this year. Personally, this is something that makes me enthusiastic and inspired.

Meanwhile, however, I have been asked several times as to what became of the passion in ’Passion & Performance’. What was that all about? How did we want to deal with it?

Did you feel extra proud recently, when telling others where you work? Have you stood a little taller on customer visits or when meeting up with an old school mate? When you arrive in the morning, do you have the urge to really put your back into your work? If so, you have, most likely, already found the passion.

Let’s be frank: there won’t be any grand internal branding campaign. We won’t be sending each and every employee off on a course to teach them what to feel when they go to work, or for that matter, how to become passionate about your job. Nor do we imagine that passion is found in some sort of HR system, or that passion can be defined in a corporate policy.

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The passion, the drive and the commitment must arise from what we do

It is difficult to get a grip on what exactly is meant by passion. It is easy to talk it to death, and the more you try to define it, the more it slips away. We have therefore chosen to focus on what every employee perception survey shows to be at the root of passion: results and – not least – appreciation of how you, the employee, can contribute both to your own personal achievement and to the success of the business as a whole. The passion, the drive and the commitment must arise from what we do; from the energy and CO2 savings that our solutions help cus3

Mexico

Esperanza Bautista, instructor Communication in the company is good. It’s positive that Danfoss engages itself in local schools and, in particular, that all of us are being involved in the social responsibility programs.

Nelly Cepeda, HR Manager There is very open communication between the leader and the employees. Everybody’s development is in focus. And, in terms of one concern for the employees, when hurricane Alex raged, production came to a halt, but the wages were still paid. The employees saw that Danfoss cares about them.

Armando Chapa, supervisor I used to be with a Mexican company. The difference is that Danfoss cares about the employees and their families. Generally, the Mexican ones don’t, even though I am ashamed to say so, being from Mexico. Danfoss employees are always willing to help each other.

Carlos Tovar Pinal, engineer Mexicans are team players and hard-working. Here in Monterrey, our culture and values center around our personal development and personal improvement areas, such as being innovative and picking up new skills. This fits well with the fact that Danfoss offers everybody the opportunity to develop.

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Jose Reyes, warehouse worker I work in the area which is the most exposed to cold in the winter and heat in the summer, because there has to be open access to the ramps. But that’s ok. We are given warm work clothes for the winter and lots of cold water during the summer.

Enrique Tornel, Sales Director We are open, treat everybody in the same way and speak loudly. And we celebrate when there is reason to celebrate; and shout and complain, when necessary. This is an open environment which means that we have had the staff in our department for a long time.

Fidela Cerna, production employee We have good employee schemes such as food, transport to the workplace, and a bonus. I like working here.

Mario Almanza, team coordinator We have good and safe working conditions, a satisfactory wage, and we are able to develop continually. I have been on a wide range of courses over the years and have been at the highest wage level for the past eight years. My next goal is to become a supervisor. I have been told that I should become better at making decisions. I am working on that.

Mexico tops the happiness chart by N iels C hr . L arsen

When measuring the satisfaction level among the employees at Danfoss Mexico, the result tops the scale: 92 out of 100 say that they are enthusiastic about their job. Half the employees are ’fiery advocates’, as they are characterized in the survey; dedicated to their workplace. In Danfoss as a whole, only every sixth employee out of ten can be described as such. They are a much-coveted and relatively rare breed, though not in Mexico. However, at the same time, Mexico has the biggest turnover rate. How does this connect with what is outlined above?

We went to Mexico to find the answer. And met with a group of very committed Danfoss employees who work six days a week in the middle of a very proud region with a firm belief in the future – despite the current security problems which Monterrey is facing.

and is hereby an easy target for gangs and drug dealers. Join the trip to Mexico on the following pages. Photo and text by Niels Chr. Larsen.

This last bit is a challenge for the company which wants to make a difference in the local area. The Danfoss factory has engaged with two schools for several years, and the trip to Mexico included a visit to a third school that Danfoss has recently adopted. This school is located in a low income and marginal district

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Mexico

What’s the link between a long-stemmed rose, a Spanish-speaking Dane, tacos for a morning meeting and a supervisor’s six-year-old daughter? Read on and all will become clear…

Say it with flowers

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There are two different dates that give some hint as to why Mexicans are so content. May 10 is one. This is an important day for the mothers of Mexico who, on this day, are celebrated by their families, the shopkeepers and everyone who likes to have a good relationship with their mother. Everywhere, mothers are given flowers: on the pedestrian walkway, in restaurants in the evening – and at Danfoss in Monterrey, where this year a small procession marched through the factory on May 10 with fresh, longstemmed roses and lists of names so no-one was forgotten. ”Are you a mum?” “Yes.” “Here you go then, this flower is from Danfoss. Have a good day at home!” The other date this year was April 16. This was a day that Supervisor Armando Chapa clearly recalls. On that Saturday he brought his daughter, six-year-old Amanda, to the ‘Children’s Day’ event organized by the company and held on Danfoss Mexico’s festival square. The event celebrated the children who had obtained good grades in elementary school. Forty children with parents working at Danfoss took part in the day, together with their father or mother, in an event that was held to motivate the employees’ children to aim even higher. ”Amanda is in the first grade and obtained 9.6 out of 10 points,” says the father proudly, highlighting that she was honored on equal terms with other children of Danfoss colleagues who have done well. The two stories are about paying attention to the employees – and about celebrating. Surely, this is not the sole explanation as to why Danfoss Mexico has been in first place in the two most recent Danfoss employee perception surveys, but it gives a hint. Mexicans are good at organizing parties and events. This article aims to track down the reasons and find out

what others could learn from the Mexicans because while they have become more content, Danfoss as a whole has gone in the opposite direction. Danish-Mexican mix We are paying attention to the voice of the employees, so let us begin with shop steward Pedro Reyes Rabelo, who has been the General Secretary of Danfoss Union for three years and joined the company in 1998. He points to open communication, the good working environment and events exactly like ‘Children’s Day’, teambuilding exercises, etc. ”Employees are allowed to give their opinion, and they have a close relationship with their leader. Danfoss also supports the employees through education and offers them career options.” In a corner office on the first floor, you will find Michael Breumsø, Head of Danfoss Mexico. He has worked in Mexico in two stages for a total of ten years, and since 2006 as a General Manager. Michael underscores a few issues which he considers vital. The first is the productive mix of Danish management style and Mexican working culture – both having been fostered during the past 16 years in Danfoss Mexico. The mix means open communication, employee involvement and a creative and hard-working population who are willing to cooperate in order to obtain the desired results. This of course means that the cliché about the lazy José, who takes a nap under his sombrero, is just that – a cliché! You certainly won’t find him in the Monterrey area, which is the second-largest economy in the country. It is far bigger than can be attributed to the number of inhabitants and as a result is favored by a large number of companies from

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If we experience poor results, the reason is never that our production employees are lazy or unskilled, but that we are not good enough at leading them Michael Breumsø

Facts Every year, Ennova, who conducts the EPS surveys on behalf of Danfoss, performs an international comparison of the employee perception in a range of countries. Denmark has been at the top of the scale for a number of years, but was overtaken by Mexico this year. In addition to Mexico, China, Germany, India and Brazil, all moved up in the international comparison. France, Russia, the UK and the USA, among others, went down.

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Mexico

the neighboring US who choose to be based here.

Facts

”If we experience poor results, the reason is never that our production employees are lazy or unskilled, but that we are not good enough at leading them,” says Michael Breumsø.

The response rate to EPS in Mexico went up after the purpose of the survey was explained to production workers in 2007.

As in other countries, the Mexican production workers take part in the daily whiteboard meetings. However, this has represented a real change here. In general, employees are not used to cooperating together in such meetings in Mexico, being accustomed instead to a more authoritarian leadership style in Mexican-led companies. This participation increases the level of satisfaction, Michael emphasizes. He himself participates in shop floor activities twice a week. The level of motivation at Danfoss Mexico. EEI Mexico is the similar number from companies in Mexico which are comparable with Danfoss.

”And, furthermore, people like to work for a recognized company that has a positive reputation. They are aware of whether we are in the press with positive news. They find that more important than their salary, according to the recent EPS results.” So, on the plus side there is a management team that has first-hand experience of the production conditions and a foreign leader who is fluent in Spanish; a very significant advantage that has been noted by many around the factory.

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”They are the ones performing the work, we are only the facilitators.”

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Motivation 20

Mexico Danfoss EEI Mexico

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A Rolls Royce worth of scrap Kenia Zaragoza is very familiar with the issues in production. She is now Director of RC production, but previously was a Value Stream Manager in filters. Today she is manager of 600 production workers and shares Michael’s point of view:

Motivation

Kenia’s code word is communication. People must understand what is going on. Every third month, she organizes a meeting with all the shifts to review the figures in easy-to-understand terms. For instance, she refers to the value of scrap as: ”We could buy a Rolls Royce with that amount.” But, she also acknowledges

that it might be difficult for employees to express criticism in a large forum, so she has integrated a fixed element into the meetings: everyone is free to write down criticism, proposals or other suggestions on ‘post-it notes’, with their name or anonymously, but always with the department. And she promises to give her response within a month. Another of her strategies to keep in close contact is the introduction of the so-called Chat 10-meetings. With this concept, Kenia buys tacos, a traditional Mexican breakfast, and together with the HR manager, she meets once a month with ten employees for breakfast and a chat. Beforehand, she finds out about who they are, how long they have been with Danfoss, how many children they have etc., so she can have a closer contact with each participant. ”The purpose is to listen to what is happening on the shop floor without any intermediaries such as supervisors, the production manager and others whose presence could put a dampener on the urge to talk about any problems they may have in their daily work. The first 20 minutes can be tricky, but then things usually come out into the open,” she says. As a result of the Chat 10-meetings, a training program has been set up to improve the supervisors’ skills within the area of giving feedback and listening.

What do you get for 2 pesos Last year, four out of ten workers left Danfoss in Mexico, voluntarily or involuntarily. But why do they leave, considering that their job satisfaction is high? A few pesos more every day may sound lucrative to a young person. At least that’s one of the explanations from HR manager Nelly Cepeda as to why Danfoss Mexico has a very large employee turnover rate. ”A wide range of foreign companies settle down in Monterrey these days. Some of them offer higher wages, but they don’t have the same kind of benefits. We see a number of people leaving us within the first year but those that stay on after that period will regularly do so for a long time,” she says, adding that some of the ones who leave try – in a few cases successfully – to come back to Danfoss. Another possible explanation is the physical working environment. Not all parts of the facility have air conditioning. This is problematic in an area where the temperature during the win-

ter may drop to around zero and easily reaches 40 degrees Celsius in the summer. Production Director Kenia Zaragoza also points to the fact that missing follow-up on the training programs, which the production workers need to attend in order to get a wage increase, may discourage a few. The production workers have six wage levels and the sixth is more than twice as large as the first. ”We need to investigate that more. I also get a feeling that sometimes there is a rumor among the substitutes that they will not be employed on a permanent basis and they, therefore, prefer to leave.” Danfoss Mexico has 900 employees, and 300 temporary staff employed through the temp agency Manpower. The substitutes are allowed to stay at the factory for six months, after which period they must be permanently employed or laid off. They are not included in the EPS surveys.

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Mexico

1000 employees

adopt

1000 pupils

Facts The city of Monterrey and its surrounding area has 5.1 million inhabitants. The adopted school has two teaching shifts: the Minerva Decanini Mancha School is attended by 400 pupils. In the morning, it is called Ciro Meza Tejada and has 600 pupils.

”The majority of the children have already left school by the age of 12.” Dina Alanis, headteacher

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B y N iels C hr . L arsen

The Minerva Decanini Mancha School is situated in a dangerous area; where kids are tempted by gangs and drug dealers to join their criminal organizations. Now Danfoss has stepped in to adopt it. Dina Alanis, headteacher of the Minerva Decanini Mancha School, which is a ten-minute drive from the Danfoss plant in Monterrey, has seen and heard most things. To her, gang battles, robbery and assaults are not unusual events in the vicinity of her workplace. This only underlines the fact that the school is located in a turbulent neighborhood and that the mindset of children and parents needs to change, as she puts it. ”Many parents here do not have a steady job. Many lack a sense of responsibility towards their children and the majority of the children have already left school by the age of 12.” This school is the most recent that Danfoss has engaged with. The involvement is rather new and, so far, it has resulted in specific improvements such as a new roof for one of the school buildings and the replacement of dangerous light switches. But there’s a wider initiative at work here that involves more than just the replacement of tiles. The intention is to broaden the mindset of the parents and children, to show them that there is a future in having a regular job which pays a salary and offers access to the healthcare system and other benefits, which not everyone in Mexico profits from. What’s a puppet? The cooperative relationship is Danfoss’ contribution to a project run by a number of importexport enterprises in Monterrey. The reasoning was this: we cannot act as police or the military in the streets, but we can try to make an impact on the values of society. The strategic work has been assigned to HR consultant Karisma del Carmen and Michael Breumsø’s secretary Marisela Hernandez, who

are already involved in other social projects in the local area. ”One of the things we did was to organize a free puppet show for the school that looked at human values such as honesty, friendship and unselfishness. Afterwards, some of the pupils said to me that they had never seen a puppet show before. This is where our work begins,” says Marisela, who is planning a summer camp with a focus on those key values and where the children can learn how to make a puppet. Some of the other planned activities include a visit to the Danfoss plant to show the children that they too have the opportunity to get a regular job, and a ’Day of Professions’, where, for example, an engineer nurse or doctor talk about what they do. And also, the intention is for all the children to be adopted by the employees at the plant – leading to them sponsoring a book about values that will be used during the entire school year. The main intention is to promote stronger values to students and their parents. Next year, Marisela and Karisma will try to raise enough funds for new books through, for instance, teaching the mothers to prepare healthy food that they can sell. ”This is not only philanthropy, but a long-term process, teaching the children and parents that opportunities do exist for choosing their own future,” says Karisma del Carmen.

As headteacher, Dina Alanis (in the middle) struggles to raise money – for a new fence surrounding the school, among other things, something which is badly needed. To the left: Marisela Hernandez; to the right: Karisma del Carmen.

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How Danfoss gets more A survey reveals that the leaders should become better at developing their employees - and maybe keep the 28 to 39-year-olds, in particular, in view.

“Hey, read this! That’ll start you off ! Do It Yo urs elf

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Facts

fiery advocates

4,132 employees were asked to take part in the most current survey. 89 percent took part. That makes it very reliable.

B y N iels C hr . L arsen I llustration : J enz K oudahl

Maybe it is not so surprising, but at least now there’s proof:

be either completely switched on – or on their way to leaving, very roughly speaking.

Good leaders create good employees, and tasks must be clearly defined and must make sense before you can bring on an employee from being steady manpower to becoming a ’fiery advocate’; someone who can confirm statements such as: ’I strive to do my very best every day’; ’I am willing to make an extra effort, if necessary’; and ’I would recommend others to seek employment in Danfoss’.

The survey also shows that Danfoss has a challenge to motivate and retain employees aged between 28 and 39. There is an over-representation in this group of those who are indifferent about their job. On the whole, this seems to be a slightly more problematic group.

This has been revealed in an analysis conducted by the consultancy Ennova. The material consists of feedback given last year by employees who took part in the so-called employee perception study, EPS, in response to what they think about working for Danfoss. On the basis of the responses, the employees can be divided into five groups, and in the analysis, Ennova has scrutinized them closely. There are ’the fiery advocates’; ’the solid citizens’; ’the zappers’; ’the disaffected’; and ’the switched off’ – the degree of motivation drops category by category. The analysis involves a few surprising conclusions.

The Danfoss leaders should become better at developing their employees, says Anna Marie Stenbæk, head of HR.

Among other things, it reveals that there are more fiery advocates working in production than could have been anticipated. The manpower at Danfoss consists of 42 percent production employees, but they make up 48 percent of those who are characterized as fiery advocates. This means they are ‘over-represented’ in statistical terms. And that’s good. On the other hand, there are also more in production who feel very little motivation. So, there is a tendency for those working in production to

Moreover, it seems to be a problematic age group, in that a large proportion of the zappers – those who go from job to job – are precisely between 28 and 39 years old. And, furthermore, the zappers include many men and many who have been with Danfoss between five and nine years. Anna Marie Stenbæk, Head of Global HR, has identified from the figures that Danfoss has a problem when it comes to the career development of employees. ”We are not good enough at developing them and offering them career opportunities. This will be a focal point for our work going forward,” she says. The next EPS survey will be conducted in the autumn. Unlike the two previous surveys, the coming survey will be conducted among all employees, not just a selected group.

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Dyslexic Kim has the last laugh

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My teachers told me not to hold out high hopes about a career . . .

Facts Kim Schou will become a trained industrial technician over the summer. After that, he plans to study to become a Production Engineer, which is a two-year long higher education course.

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A person can expect to enjoy several victories during their work life. But Kim Schou’s school did not predict any for him when he was a boy. Now the 22-year-old apprentice has returned from his stationing in Bulgaria, where he has been described as a ‘key person’ by his manager. B y O le K anstrup

”Kim is smart and a quick learner. He has been a key person for the three months that he has stayed here.” These are the concluding words of Toma Tomov, Plant Manager at Danfoss Heating Solutions in Bulgaria, describing Kim Schou’s stationing there from Danfoss in Nordborg. But to get the full story we need to leave Bulgaria for a while and turn back time, to the days when Kim cycled to school carrying his bag on the luggage carrier. In those days he often suffered with stomach aches and anxiety, because Kim had an enemy at school: letters. I’m word-blind, and I struggled for several years to learn to read. I finally managed it, but my teachers told me not to hold out high hopes about a career. As a child, it’s not nice to be told that,” says Kim. Danfoss was his elevator During the years in the schoolyard when Kim plodded around, digesting that bleak message, he grew into a rebel. He did not want to accept being bottom of the ladder. So, even though his grades were below average when he left school at the age of 17, he aimed high and applied for an apprenticeship as an industrial technician with Danfoss. It was like stepping into an elevator and pressing ’up’. Not only has he obtained grades above average in everything related to machines and engineering while passing all his theoretical exams – he is also among the group of particularly motivated apprentices who get to be stationed around the business.

This brings us back to Bulgaria, and his position as a key person. During Kim’s stay, the plant took over part of the production of radiator thermostats from HS in Viby, Denmark. This meant the setting up of machines delivered from Denmark and the training of employees. However, all instructions on the machines were in Danish, which was a problem – until Kim jumped in to help. ”Every time something needed to be translated or explained, he turned up immediately. And at one point, when a machine broke down, he disassembled it and put it together while having a technician from Denmark at the other end of the phone,” Toma Tomov explains. New environment, new outlook So far, so good. But there must surely be a logical explanation as to why years of headwind can suddenly turn into tailwind? According to Kim, an important aspect was his inner rebellion against the label he got from his school days. And simply leaving an environment which had no expectations of him being able to perform well has also had a positive effect. ”I was a blank page at Danfoss, and people placed demands on me and expected me to fulfill them. That gave me a boost. You find skills and confidence suddenly surging out which you did not know you had. My message to those who are down on their knees is that they must fight because they can succeed,” he says.

Kim had with him hundreds of photos from his stay in Bulgaria..

Ten to spread their wings The Danfoss Trainee Center in Nordborg, Denmark, offers all year eight to ten apprentices the chance to be posted to a Danfoss plant outside Denmark. In order to be posted, the apprentice must have shown maturity and motivation and produced good results. The posting is coordinated

in cooperation with the technical college EUC Syd. The employer organization AER covers up to 80 percent of the wage and Danfoss covers the rest. According to the Danfoss Trainee Center, Danfoss does not have global stationing guidelines. If you

have an apprentice who would be an obvious choice to be stationed, or if you would like to have an apprentice from another Danfoss site visit you, please contact Thomas Bjerner Hansen, Danfoss Trainee Center, Nordborg, for further information.

Niels B. Christiansen talking with Troels H. Petersen at the GMM.

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I believe it is important to remember that the global economic downturn didn’t create our weaknesses – it merely revealed them. We have to admit that we had become too self-satisfied and settled, and we had fallen out of step with our customers somewhat. Extract from Niels B. Christiansen’s introductory speech at GMM

Thoughts from a pit stop B y N iels C hr . L arsen P hoto : S ø ren A ger

The GMM – Global Management Meeting – held in Orlando last year set the Danfoss strategy, Core & Clear, in motion. In May this year, 222 leaders dropped into Barcelona to take stock. Conclusion: we are ahead of schedule, but still on the bottom steps of the ladder.

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Outside the work program, the leaders visited Barcelona FC’s home ground, Camp Nou, and put their soccer skills to the test on a football field near the hotel.

”When we met last year, our motivation came very much from the fact that we were on a burning platform. This year, it came from the good results we have achieved. And that’s good … no one can sustain motivation on a negative background for very long.”

“We are ahead of schedule – and we want to stay ahead of schedule! That is the headline of this GMM. And the way to achieve this is by keeping our noses to the grindstone and by making strong progress towards getting the basics right!”

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This is how Danfoss CEO Niels B. Christiansen sums up the GMM in Barcelona. Over the course of two days, more than 200 leaders carried out a pit stop, as Niels B. Christiansen puts it, to take stock, adjust and agree on the way ahead. They met only 16 months after the launch of Core & Clear and against an entirely different background: going directly from the worst year in the history of the group to its best. With the meeting at a distance, we asked the CEO to give a threepoint summary of what has been achieved – and mention three challenges. ”When asked to highlight the areas where we have achieved the most, I would firstly like to mention our portfolio; our concentration of businesses. It has now become clear which fields we are playing on, and where we aren’t. The participants in Barcelona referred to the sale of Danfoss Household Compressors over and over again. And it

struck me that precisely that sale has had an even greater impact worldwide than I had been anticipating. It has really shown that we want this.” Niels B. Christiansen’s next item on ”the plus side” is the fact that Danfoss has taken a more customer-oriented approach. Effective steps have been taken in that direction. The customers have been asked more about their views, and they have been more involved over the past year than they were over the five preceding years, he assesses. ”There is still a lot to be done, but we are off to a really good start.” In Niels B. Christiansen’s view, the third result obtained is the establishment of an efficient working model as to how to carry out plans in Danfoss. Fortyseven key areas have been identified where we must constantly measure our performance.

222 leaders met at the end of May at the Hisperia Tower Hotel in Barcelona for the Global Management Meeting. The headline of the first day was ‘Get the Basics Right’, and the second day: ‘One Company’.

”And when we make plans, we have become better at executing them and following up on the results. That is a significant improvement. We were not always good at this.” The customers like it? On the list of challenges, Niels B. Christiansen first mentions quality and delivery as vital action areas. These two areas have undergone major progress. ”But there is still a lot to do. This is really about ’getting the basics right’. And we also need to get more out of innovation. We have cut down on the money spent on Ventures, and we have channelled it – and more – into innovation in the core businesses. At the same time, we are overinvesting in six development areas. This means that they, in popular terms, are getting a bigger piece of the cake than is justified by their size. We are certain that it is the right strategy, but we still need to see the results; whether the customers like it.”

The final challenge, says the CEO, is that we at Danfoss must become ‘better at dealing with people’. HR must undergo development. ”You could say that last year, Core & Clear set the train in motion in Orlando. It has gained speed, but a few wagons were not fully connected. HR was one of them. Now it is connected. In Barcelona, there was a major focus on HR, and we have now chosen what we should focus on and, as a result, we have managed to become as concrete here as we have in other areas. This is about getting the right people in the right places and having a stronger focus on employee development. A couple of tools have already been designed for this purpose, and others will arrive. The most significant point is that the participants in Barcelona shared the feeling that we are now ready to roll up our sleeves and take action, as compared with earlier when we mostly talked about what did not work.”

All in all, the conclusion seen from the CEO is as follows: ”The short version is that we have achieved what we planned to achieve with the launch of Core & Clear; and a little more besides. We are on the right track. We are even ahead of schedule. But, this is still about ‘getting the basics right’, and we are still only in the first stages.”

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With around 20 million fellow inhabitants in her hometown Shanghai, Fang Yi – Sammi – is used to living at a fast pace. She is the epitome of modern China: well trained, ambitious, hard-working – and demanding… because a wide range of global companies are on offer for the young generation of Chinese.

30-minute commute Many colleagues spend an hour or two getting to work. Sammi spends half an hour. Sometimes she goes by bus, other days by taxi. She works from 9am to 5.30pm. Here, she and her manager, Michael Chang, are on their way home. Michael is Chinese but was born in Denmark and is one of the pioneers at Danfoss China.

B y N iels C hr . L arsen

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Facts Sammi is 30 years old, trained in international accounting and is responsible for the correct reporting of total Danfoss sales in China.

Work & leisure

Coffee with her friends In downtown Shanghai, there is a trendy neighborhood called Tianzi Fang: a labyrinth of small galleries, shops and cafés, which were saved from being torn down when young artists moved in. Here, she drinks coffee with two friends from college, who she still keeps in touch with.

Alternating chairmen Sammi and her colleagues spend 20-30 minutes every week collecting and reviewing ideas and proposals from the accounting teams and the divisions. They take turns heading the meetings and keep track of whether action plans are followed up. 20

Living with the parents Sammi’s parents live in the apartment too. Both have retired after their careers in large state-owned companies, and they own an apartment in downtown Shanghai. It is currently rented out. Sammi enjoys living with her parents. When she returns from work in the afternoon, her father serves Chinese tea to her.

Karaoke queen Karaoke is a popular pastime in Shanghai – as it is in other parts of South-East Asia. Sammi is a VIP member of a local karaoke club. Tonight, she has arranged a surprise birthday party for one of her friends. The guests include friends and acquaintances from the financial and PR sectors who are also part of her network.

time in Shanghai Window seat – without a flag Space is tight in the Danfoss sales office in Shanghai. Being a leader, Sammi is seated next to the window, but she has the same size office desk – 70cm x 140cm – as the other employees. Danfoss has outgrown its setting, but has rented one more floor in the office building, where the employees can look forward to desks twice the size. Every month, the employee with the tidiest desk receives a flag in honor of this achievement. Sammi has not yet received one, she smilingly reveals.

House prices skyrocket Sammi bought an apartment in 2004, close to Danfoss headquarters. Now it is worth three times as much as she paid for it, and today you have to go more than 20 kilometers outside the city to find a similar house at the same price.

Buzzing canteen Due to refurbishment, the companies in the Danfoss office building and those in the building next door are currently sharing the canteen. This means a lot of people. The food is cheap. Once in a while, Sammi and her colleagues prefer to have a meal in a small restaurant on the ground floor. Here, although it takes less time to get the food, it is very predictable – they have not changed the menu for the past three years.

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Leaders have become clearer In past years, Danfoss has found it difficult to know how to measure the leaders’ ability to set targets and to follow up on them. Now a strategy has been devised and the first two evaluations show progress.

The Danfoss leaders have become better at showing direction, they have become better at setting targets and giving feedback. However, they still have trouble following up on targets, and they are not good enough at explaining to their employees how salary and bonuses are related to their performance. This is the concentrated version of the message which was sent out to 2,000 white-collar leaders in Danfoss on June 1. Twice within the preceding six months, their employees had responded to questions about what HR refers to as ’performance management’. In popular terms: to what extent

do the employees understand the targets; how are they followed up; and how is the reward perceived? This is something that Danfoss has struggled with for many years. A wide range of different systems have been tried, but now an easy-to-use system has been implemented, through which the leaders – and the management – can find out whether the situation is progressing or slipping backwards. ”And, in fact, that’s the best thing about it. We now have a mirror that can show us where we are moving in this field. Where are we improving, and where to make

Performance Management survey Employee perception Overall Score

6.6

 7.0

Clarity of direction

6,6 7.4

7.5  6,6

Targets & accountability

7.3

 7.5

Regular reviews

5.7

 6.4

Performance feedback

6.9

 7.3

Reward

5.9

 6.1

The 2011 target is 7.3. 6.0-7.2 is marked with yellow. Below 6.0, with red. Target figures for 2012 have not yet been fixed.

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corrective measures,” says COO Kim Fausing, the head of the project. Green, yellow, red The questions put to the whitecollar employees are boiled down to five figures – which, in turn, are boiled down to one. The overall result applying to all leaders was 7.0 on a scale of 1 to 10 – that means the color yellow and represents progress when compared to the first measurement, which was made in the fall of 2010. The figure is now one of the 47 target figures – Key Performance Indicators, KPIs – which show the temperature at Danfoss on an ongoing basis in

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all key areas such as finance, delivery ability, quality and so on. ”I think it is a good starting point. We should, of course, stay in that position while becoming better at constantly following up on targets. But, it is really good that we now have a precise way of performing the follow-up,” says Kim Fausing. Only leaders with five or more employees can keep track of how they are developing in terms of ‘performance management’.

Facts This is how it works: • E very year, targets are set at corporate level for expected net sales and earnings. • T he divisions set their targets in relation to their business plans, which are followed up every quarter. • T he leader and employees break down the divisional targets to create both targets for the department and individual targets, which can be adjusted during the year. • C  ontinuous dialogue between leader and employee regarding targets as well as any need to improve competencies ensures continuous improvement.

People A very special day You can celebrate your Danfoss anniversary in many ways but not many will have followed the path of warehouse employee Lone Madsen, from Danfoss Industrial Automation in Nordborg, Denmark. On April 8, Lone could take pride in having been with the company for 25 years. So why not make it an extraordinary day by marrying her partner, with whom she has lived for 18 years? “The colleagues and friends who were invited to the anniversary celebration in the evening were very surprised that they were also taking part in a wedding party! It was such a big thing to celebrate the silver anniversary of my job and then to celebrate my marriage – on one and the same day,” says Lone Madsen.

Caramel laces to make people smile How do you boost the energy of 2,000 employees? Dorte Eriksen, HR Business Partner, believes she has part of the answer to this question. Recently, she was the organizer of an intriguing contest for employees at Danfoss Heating Solutions, where they competed to be the fastest caramel lace eater. The aim of the contest – and of similar events to be held later this year – was to give employees an extra boost of energy in their daily work. “It’s not that we will end up playing kindergarten games, but we do believe that fun breaks will make people smile and keep motivation up,” says Dorte Eriksen.

Milko wants to tell the Danfoss story Milko Grebenc, Market Feedback Manager in Danfoss Trata, Slovenia, has volunteered to take on the role of ‘Danfoss storyteller’. So now it will be his job to collect information about Danfoss’ history in Slovenia and make sure to archive it and pass it on to others. The appointment took place during Visitor Relations Manager Georg Meister’s trip to the factory in Slovenia. Georg, who is based in Nordborg, Denmark, was there to recount the history of Danfoss and to encourage employees to appoint a colleague to gather information and stories about Danfoss in Slovenia. So far, around 20 other Danfoss storytellers have been appointed worldwide.

Goodbye with mixed emotions Almost 500 people participated in a ‘goodbye ceremony’ at the end of March for Niels Damgaard Hansen, the now former President and Director of Danfoss Sp. z o. o. in Poland. It was with mixed emotions that he said goodbye to Poland after having been with the company over the past five years. “I had become a part of a great team, where people take care of each other in a strong social network. It’s hard to say goodbye to that, but on the other hand I am glad that the factory is now led by Poles. It shows that it is strong enough to stand on its own two feet,” says Niels Damgaard Hansen, who is now Head of quality at Danfoss Automatic Controls, and will return to Denmark this summer.

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Facts Outsourcing has already taken place within the transport sector, because Danfoss does not consider the transport of products a core competence. And calculations show that there are enormous benefits to be gained by outsourcing this to a specialist.

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The warehouse of the future is outsourced The majority of Danfoss’ warehouses for finished goods are set to be outsourced by 2015. This will lead to savings, greater flexibility and increased focus on the core business. Recently, in Poland, outsourcing the warehouse proved to be the best solution to a space problem. In mid-September 2010, the phone rang in the office of Thomas Lyck in Rødekro, Denmark. Adam Jedrsejczak, GS Regional Manager of Eastern Europe, was at the other end of the line. A problem had occurred. The production of district heating stations was to be shut down in Finland and moved to Poland, but there was simply not enough space in the existing Polish production area, and so, they had to use the raw materials warehouse for production. Normally, a whole new warehouse would have been built, but not so this time. Slawomir Garwacki from Danfoss District energy in Poland came up with the idea of outsourcing the raw material stock for the first time in Danfoss’ history. Thomas Lyck from GS-L, Global Services – Logistics found the idea interesting. Two days later, Thomas flew to Poland, the details were settled in the course of two and a half months, and the raw materials warehouse was outsourced to German logistics giant DB Schenker. “It is unusual to get a project of this size up and running in so little time,” states Thomas Lyck. This solution has secured savings running into millions of Euros, and it has also led to greater flexibility, because Danfoss only pays for the warehouse space which is physically being occupied. In this way, Danfoss avoids having to pay for storage capacity, which is unused during the low season, and can easily be expanded in case of booming orders.

“With this solution we have limited the investment related to the transfer of production from Finland. We save money every year and maintain at least the same quality of service because we harness the experience of Schenker who are warehousing experts,” says Michael Hermann, General Manager of Danfoss District Energy in Poland. More outsourcing in the future The outsourcing of logistics services – especially warehouse operations and transport – is something that we will see a lot more of in the years to come here at Danfoss, estimates Thomas Lyck:

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outsourced, but they are being run in the same way as all of the other Danfoss warehouses. In addition to China and India, Danfoss has also outsourced minor warehouses in Ukraine, South Africa and Columbia, and, currently, possibilities in Australia are being investigated. ”At some point within the next few years, we will calculate the expenses relating to each warehouse. If the calculations prove that it doesn’t pay for Danfoss to own them, the warehouses are set to be outsourced by 2015,” says Thomas Lyck.

”That’s the future, no doubt about that. Our warehouses are of such a size in a wide range of countries that it doesn’t pay for us to run them ourselves. Running the warehouse is not a core competence, so we see a great potential for outsourcing this area. We will get an overall view of how much we spend on warehouse operations, and we will reduce our costs, since, usually, the customers using the warehouse share the costs. We simply earn money on it, if it is done correctly,” says Thomas Lyck. And there’s a lot of money to be earned. An analysis of Danfoss warehouse and transport in Europe has shown that having a central finished goods warehouse in Rødekro, Denmark, serving all of Europe, means that double-digit millions of Euros are saved. GS-L is in the process of developing similar distribution centers in both Shanghai (for China) and Chennai (for India). Their operation has also been

Warehouse manager Tomasz Sikora and the man with the idea, Slawomir Garwarki, are happy with the outsourcing of the Polish raw material stock.

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Increasing your muscle by 50 percent every year might make it difficult to fit into your suit. Danfoss Silicon Power bought its new factory hall several sizes too big to tackle precisely that problem.

by O le K anstrup

Silicon Power outgrows its suit – again Imagine one of those huge supermarkets… then remove all the shelves, the swarms of people, the checkout counters; lower the lighting – and listen to the quiet. This is what it is like to enter the gigantic plant hall in Flensburg,

Facts More than ordinarily clean Dust can destroy a power module. Therefore, the new production hall will be designed for clean-room production, where only a few dust grains are permitted per cubic meter. The employees wear smocks with hoods, and a constant minor overpressure is maintained in the production hall to prevent impure air getting in.

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Northern Germany, which was taken over by Danfoss Silicon Power recently; completely empty. In the fall, however, the business area, which is a part of Danfoss Power Electronics, will have at least 3,600m² of clean-room production. ”It will be one of the largest cleanroom production areas in Northern Europe. We are experiencing a fantastic annual growth of 50 percent and are thinking big now to avoid having to move out again in a few years,” says Vice President at Danfoss Power Electronics Claus A. Petersen. World’s biggest after ten years The secret is the so-called power modules, which the company began producing in 2000. The modules are used to control electric motors and were Danfoss’ response to the automotive industry opening their eyes, at the time, to using energy-saving electrical servo steering in cars instead of hydraulic systems. Today, the electrical ones are standard use, and

Danfoss is the world’s biggest supplier of the power modules used to control them. Demand is on the increase, and the modules are now also entering the wind turbine and industrial market. Up until now, Silicon Power has followed suit by expanding the present plant in Schleswig, 40km south of Flensburg. However, when the expansion carried out last fall was occupied to the last square meter, the plant decided to move to a place with room enough for several years of growing pains. This brings us back to the factory hall in Flensburg, where a craftsman is doing measurements – all by himself in the empty room, just like the man drawing lines in a stadium before the audience arrives. May hit the wall in 2020 The building houses two production halls, each of 4,500m², and according to Claus. A. Petersen, it amply lives up to their predicted space requirements. But this will

not last forever. As mentioned, the first of Danfoss Silicon Power’s 300 employees will move in in the fall and the relocation will be concluded by the end of 2012. So they are well underway to filling the first hall. Afterwards, they can begin on the second. ”If growth continues at the same pace, it does not require much mental arithmetic to predict that we will hit the wall at the end of the decade. And then we will expand again,” he says.

“Most of our sale are to European customers, but we also intend to conquer market shares in the USA and Asia,” says Claus A. Petersen.

Lord Mayor pleased with comeback At city hall in Flensburg, Lord Mayor Simon Faber is happy that Danfoss Silicon Power has come to town. The factory premises, which Danfoss will move into, used to belong to the American mobile giant Motorola, which closed down its operations in the city in 2007. With Danfoss Household Compressors’ ’goodbye’ to Flensburg in 2009, the city lost more jobs, which added to the already high unemployment rate. ”It means a lot for Flensburg that Danfoss will once again be an employer in the city – specifically in the form of jobs, and psychologically because it proves that things only seldom go down,” says Lord Mayor Simon Faber. And when asking Claus A. Petersen, Vice President at Danfoss Power Electronics, whether Flensburg was the right choice? The verdict is that the size of the facility matched the needs of Danfoss. Equally important, Northern Germany is one of the world’s leading centers within power electronics. ”We are not moving to Flensburg for nostalgic reasons, but because the area is an ‘El Dorado’ in our field of core expertise. The educational institutions with which we cooperate are on an elite level within power modules, and the manpower is motivated and well-educated,” he points out.

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Do not change everything from day one When acquiring a company, trust the management, involve the employees in decision-making, and make changes only when they make good business sense. This is the advice of David Lu, the former owner of Holip, who remains as company President. by N iels C hr . L arsen

It’s nearly six years since David Lu cheered together with then CEO Jørgen M. Clausen on the top floor of headquarters in Nordborg. Today, David is still the President of Holip, which is located in Haiyan, close to Shanghai, and he, as well as three others, are all former shareholders in the old company. The four of them remain as Holip’s management team and, in the meantime, the company has expanded considerably. Sales have doubled year after year. Today, there are 21,000m² and, on May 18, the first turf was lifted in the construction

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of a new factory hall of an additional 17,000m². Moreover, there is currently an opportunity to buy a large plot across the road. Danfoss acquired Holip to make an entrance onto the Chinese mid-end and low-end market of frequency converters, and according to David Lu, decisive to the execution of the strategy has, in part, been the continuation of the management team. They were the ones who turned Holip into a success story back then. They know the market. Their retention has also meant that the company could remain flexible.

”Flexibility, low costs and a lean structure are vital factors in order to be successful in exactly that market.” This means that Holip has evaluated closely when, for example, the SAP system should be introduced in the company. The system was implemented this year. He also emphasizes that by joining a large group, Holip has also gained benefits within purchasing and in the supply chain.

Facts

Trust the management And what may Danfoss learn from Holip? Well, according to David Lu – and he would like to emphasize that this is his personal view – two things: the first is the importance of showing trust. ”Once you have decided to buy a company which runs smoothly, you also have to accept the way the company is run and make it clear to yourself that the success of the company must originate from a lot of good activities. Trust the

management and give it time: don’t change everything from day one.” In addition, he underscores the meaning of appreciating the local culture, not least in a country like China. It can become a hazardous situation, if Western companies do not involve the Chinese employees in the decision-making process.

• H  olip produces both Holip and Danfoss frequency converters. The company has nearly 600 employees. • T he four-strong original leader team are: Lu Zhongping (David), General Manager, Ye Meizhen (Jenny), Supply Chain Manager, Hu Xiangyang, Sales Manager, and Ye Shengxue, Manager of Manufacturing Technology.

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Facts The four companies left in Danfoss Development are Danfoss Sea Recovery with 53 employees, Danfoss Semco with 82, Danfoss Solutions with 28 employees, and Danfoss Appliance Controls with 453 employees. In the coming months, a decision will be made as to whether they will remain in the group as parts of the core business, or whether they will be sold.

• B  auer was acquired by Danfoss in 1999 and had 538 employees at the end of April last year. • S ocla was acquired in 1992 and had 521 employees at the end of April.

Mission – almost – accomplished As the head of Danfoss Development, Nis Storgaard is able to tick off the most important task: the three largest companies have been sold. Now focus is on the four little ones. B y N iels C hr . L arsen

When the Core & Clear strategy was prepared, an essential element was to develop, phase out or sell three large Danfoss business areas which produced household compressors, water valves and geared motors, respectively, and which had been defined as non-core businesses. Today, 18 months later, CDO Nis Storgaard announces that that part of the task has been accomplished. The three companies with a total of almost 4,000 employees have been divested. ”Now focus is directed towards the four small companies, and I think that we will know a lot more about their future during the second half of 2011,” he predicts adding that there is, in principle, no difference between the development of a small and a large company. In many respects, they are equally time-consuming. ”So, with this, there remains a really important task for Danfoss Development, even though it will, most likely, be of a more operational nature.” Socla and Bauer get strong owners One of the key ambitions for Danfoss Development is to

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find some owners who are capable of developing the companies further and in a better way than Danfoss could. And with the sale of Danfoss Geared Motors and Danfoss Water Controls, the two companies have both become members of strong groups, with a focus on exactly their specialities. Watts Water Technologies was founded as long ago as 1874 and has specialized in valves used to control water. With Socla’s expertise within, in particular, backflow valves, check valves and pressure-reducing valves, Watts will gain a stronger position on the European market for flow controls for use in houses and in industry, in the field of HVAC and gas as well as waste water. The group employs 5,900 people and has net sales of 1.3bn USD in 2010. Likewise, the Altra group will be strengthened in Europe through the acquisition of Danfoss Bauer. Altra is based in the USA, but is a world leader within the development, production and marketing of a wide range of electro-mechanical power transmission products.

Danfoss Bauer

Danfoss Socla

The company includes strong product brands, which cover more than 40 product lines, and has pro-

duction facilities in eight countries. Net sales last year: 520m USD.

Facts

Energy efficiency for Chinese mega-city A powerful handshake Danish Minister of Foreign Affairs Lene Espersen was present at the signing of a USD 2.2 million contract between Danfoss and Dedini Industrias de Base in Sao Paolo in March. The signing took place during a business seminar which Lene Espersen took part in along with a delegation of 17 Danish companies. As part of the contract, Danfoss will supply a so-called Dual Smart Start drives system to Dedini Industrias de Base’s new ethanol plant in Aguai, Bolivia. Danfoss’ system will help reduce the plant’s overall energy-consumption by making the start and stop functions of a shredder and a chopper in the plant run more effectively.

Lars Tveen, President of Danfoss District Energy, and other Danfoss senior executives signed an agreement with the North-eastern Chinese mega-city Harbin to establish a cooperation in energy-efficient heating technology recently. The city has around 10 million inhabitants and according to the agreement, Danfoss and the city of Harbin will collaborate on heating energy technology. Practical results for energy-savings will be monitored and measured by Danfoss and the Energy Conservation Center of Harbin.

“Harbin consumes a large amount of energy every year. Optimizing heating efficiency with advanced energy-saving technology will have very positive effects on the environment. We therefore decided to cooperate with Danfoss to realize our goal of energy-savings and emissions reduction,” says Duo Lin, Mayor of Harbin.

Dedini is the largest manufacturer of equipment for the sugarcane sector in Brazil and its new plant in Bolivia is scheduled to open in April next year.

Sailing made products rust Previously, the production employees at Danfoss Solar Inverters in Gråsten, Denmark, had to deal with corroded bolts and mold when they unpacked inverter cabinets from Danfoss Holip in China. Now the components look exactly as they did when they were packed: brand-new. Six weeks of carriage by sea had a negative impact on the wooden packaging used for cabinets: the salt and humidity penetrated the boxes and dam-

aged the products. But new packaging has solved the problem. The products are packed in special polystyrene boxes that also include small bags of Silica gel, which absorb the humidity. They are also sealed with plastic foil before they leave the factory in China.

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Danfoss around the world Slovakia

Gladiators celebrate 60th anniversary Gladiator fights, archery, and a liberation action, in which some keys had to be found to free some ‘imprisoned’ monks – these were just some of the tasks faced by a group of Danish and Slovakian employees recently. The reason was Appliance Controls’ 60th-year anniversary as a refrigerator and freezer thermostat manufacturer which the employees celebrated with a team-building event in Slovakia. More than 342 million thermostats have been sold. And the business area has managed to turn the loss of the past few years into a profit. Employees in Tianjin in China also celebrated the anniversary.

Poland

Award for helping Polish society This year, Danfoss in Poland entered a prestigious Corporate Social Responsibility (CSR) competition for the first time – and won third place in the category “Industrial and chemical production”; only beaten by Toyota and Cemex. Only Poland’s 500 biggest companies can enter the competition in which their CSR is measured by Price Waterhouse

Coopers. The companies are given points in different categories such as responsible leadership and social engagement. Overall, Danfoss was rated 34 out of 137 companies; beating companies such as Velux, Samsung and ABB.

South Korea

Heads of state watched as Danfoss signed Jørgen M. Clausen, Chairman of the Danfoss Board, and Yeon-Joo Jung, President of South Korean giant Samsung C&T, signed a Memorandum of Understanding recently concerning strategic and commercial cooperation within district heating and energy efficiency in buildings. The Memorandum of Understanding could lead to increased sales of climate and energy solutions and products worth millions of DKK. The signing took place during the South Korean President Lee Myung-bak’s state visit to Denmark so both he and the Danish Prime Minister Lars Løkke Rasmussen looked on as Jørgen M. Clausen signed the agreement.

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