UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

personnel by country 31 Dec. 2015

2014 2013

Finland

7,464 7,855 8,110 4,591 4,586 4,609

Germany

Russia 787 771 United Kingdom 763 1,098 1,136 France 585 785 901 Poland 535 499 440 Austria 518 549 547 Estonia 217 204 206 Spain 109 109 194 Italy 55 61 62 Turkey 42 40 38 Belgium 31 28 32 Ukraine 27 25 22 Sweden 24 27 26 Other Europe 79 86 155 China 1) 1,546 1,424 1,412 United States 2) 1,070 1,087 1,116 Uruguay 573 565 562 Malaysia 122 175 174 Mexico 81 50 30 South Africa 78 67 66 Brazil 58 89 95 Australia 50 61 77 India 42 39 41 Rest of the world 120 118 128 Total 19,578 20,414 20,950 1) Incl. Hong Kong 2) Incl. Madison 50% 798

In 2015, the main focus areas in UPM’s People Strategy were value- based and inspiring leadership, creating a safe workplace, developing both keen commercial ambition and sales capabilities as well as change readiness and agility in changing business environment. It is important to us to develop a safe and inspiring working environment in which people can participate and enjoy equal opportunities. Our people — Growing with Biofore

Encouraging professional growth UPM aims to provide an environment in which employees are capable of achieving good results. UPM encourages its employees to pursue professional growth and supports them in learning and developing their skills further. The company uses the 70/20/10 model based on the assumption that 70% of learn- ing takes place on the job, 20% comes from learning from others, and 10% comes from development programmes. UPM systematically uses a performance management process (PPR) to set indi- vidual strategy-related targets and development plans for all employees globally. The PPR provides an opportunity, both for managers and employees, to give and receive feedback on performance and behaviour based on UPM values. Over the past few years, UPMhas developed its performance appraisal process by emphasising managers’ roles in leading performance and giving feedback. Managers are expected to focus on performance management and guiding their teammembers to reach agreed targets. 86% (86%) of all permanent UPM employees had a personal per- formance review with their managers in 2015. The target of 90% coverage by 2015 was not reached. Engaging employees to develop the workplace The UPMEmployee Engagement Survey (EES) invites all employees across the com- pany to evaluate different aspects of the working environment every year. The survey measures development in three main indices; Employee Engagement, Manager Effec- tiveness and Occupational Health and Safety (OHS). In 2015, 79% (78%) of UPM employees responded to the survey which illustrates a high level of willingness to participate in the development of UPM as a place to work. The figure is well above the 2015 target of 70%. The Engagement index increased to 66% (63%) although the 2015 target of 70%was not met. Favourable scores in the OHS index increased it to 79% (78%). Favourable scores in the Manager Effectiveness index have steadily improved over the years (from 75% in 2014 to 76% in 2015), and the score is now close to the top quarter of the global norm. The EES provides an opportunity for annual monitoring of long-term trends and the progress of agreed development activities. The results and progress are evaluated in order to define further improvements both at organisational and team level. Developing empowering and engaging leaders UPM aims to have inspiring leaders who empower and engage employees at all levels. We strive to lead by our own example, in accordance with UPM values and with integ-

rity. Our values guide and support us in our daily actions – Trust and be trusted, Achieve together, Renew with courage. To further develop its leadership capabilities, UPMhas a development pro- gramme portfolio focusing on self-leadership, coaching capabilities, innovation and leading in complexity. In 2015, UPM continued to support a coaching leadership style and use of vari- ous tools for feedback on behaviours and performance. The target is to improve dialogue and the feedback culture in the company. UPM also continued its mentor- ing programmes as a valuable tool for developing leaders. At UPMwe want to develop our working environment so that it is diverse and inclusive. It is important to employ people with different competences, back- grounds, experiences, genders, ages and nationalities in order to bring multiple views and thus improve decision-making and business success. For the first time UPMmade a diversity status review of all businesses and functions. In addition, UPM offers reward and recognition with an emphasis on high performance. UPM has a total compensation approach consisting of base salary, benefits and incentives, which are determined by UPM’s global rules, local legislation, general agreements, local market practice, level of the position and individual performance. Gender, race, age nor nationality play no role when defining salaries and wages. Intangible recognition is included in the total reward portfolio, which means that UPMprovides, for instance, a safe and healthy working environment, interest- ing and meaningful work, and excellent leadership and career opportunities. Indi- vidual, team and business performance are criteria for compensation planning and decisions. All UPM’s employees belong to a unified annual Short Term Incentive (STI) scheme. The plan includes company and business-level targets, safety targets and personal and/or team performance targets. EBITDA is one of the key financial indicators for the company and business- level targets. The annual incentives paid in 2015 for the 2014 STI plan were EUR 62 million and the estimated amount of annual incentives for the 2015 STI plan is EUR 55 million. For significant individual or team successes, there is a separate Achieve- ment Award system in place. UPMhas two long-term incentive plans: a Performance Share Plan (PSP) for senior executives and a Deferred Bonus Plan (DBP) for other key employees. various local projects supporting diversity were carried out. Rewarding and recognising good performance

UPM’s personnel by business area 2015

UPM Biorefining 13%

Other operations 2% UPM Plywood 13% UPM Paper ENA 48%

UPM Energy 0% UPM Raflatac 15%

UPM Paper Asia 9%

Employee Engagement Survey (EES) results, Trend 2008–2015

80

60

40

20

0

08 09–

15 14 13 12 11 10

10

■ Response rate (%) Employee Engagement Index (EEI) Manager Effectiveness Index (MEI) OHS Index

contents

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UPM Annual Report 2015

UPM Annual Report 2015