UPM annual report 2015

UPM Annual Report 2015

contents

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

personnel by country

31 Dec.

2015

2014 2013

Finland

7,464 7,855 8,110

Germany

4,591 4,586 4,609

Russia

798

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

Turkey

Belgium

Ukraine

Sweden

Other Europe

86 155

China

1,546 1,424 1,412

United States

1,070 1,087 1,116

Uruguay

573

565 562

Malaysia

122

175 174

Mexico

South Africa

Brazil

Australia

India

Rest of the world

120

118 128

Total

19,578 20,414 20,950

Incl. Hong Kong

Incl. Madison 50%

15 14 13 12 11 10

08 09–

■

Response rate (%)

Employee Engagement Index (EEI)

Manager Effectiveness Index (MEI)

OHS Index

Employee Engagement Survey

(EES) results, Trend 2008–2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

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,

various local projects supporting diversity were carried out.

Rewarding and recognising good performance

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.

UPM’s personnel by business area 2015

UPM Biorefining 13%

Other operations 2%

UPM Plywood

13%

UPM Paper

ENA 48%

UPM Energy

UPM Raflatac

15%

UPM Paper

Asia 9%