Strengthening Competitive Advantage through Gender Diversity at DB Schenker

Executive Report prepared by:

Holly Varshnei | Marriel Cochico | Nancy Nguyen |

Damien La Caze | Nicholas Flood

Executive Summary

Enabling women to progress into senior leadership roles will enable commercial success for DB Schenker (DBS).

This report assesses the current situation within the Transport & Logistics (T&L) industry and asserts that by focusing on gender diversity, DBS will not only gain access to a greater pool of talent, but will: become a vendor of choice; become an employer of choice; improve organisational performance; and access first mover advantage.

The insights gained via extensive academic research, interviews, surveys, and best practice case studies have been used to diagnose DBS’s current performance and identify where DBS can make immediate inroads. These insights form the basis of a custom made plan detailing how DBS can best advance women into their Senior Leadership Team (SLT) over the 2015-2018 timeframe.

To support DBS in their change journey, this report includes:

Key recommendations and potential barriers A change management strategy drawing on leading models Heat mapping resources for visual analysis An implementation plan to effect change Metrics analysis for monitoring progress A compelling cost and benefit overview of the change project

There is a competitive edge available within the T&L industry and this report provides a plan for how DBS can be the one to gain it.

Table of Contents

Part I: Background & Benefits of Increased Female Representation in Leadership Positions.5

Introduction:.....................................................................................................................................5

The Situation in the Transportation & Logistics Industry...........................................................5

The Challenge.................................................................................................................................5

Methodology....................................................................................................................................7

Research and Consultation...........................................................................................................8

DBS Analysis...................................................................................................................................9

Summary of Leading Practices...................................................................................................10

Section II: Implementation Plan for DB Schenker........................................................................11

Recommendations........................................................................................................................11

Communication Plan....................................................................................................................12

Table 5.0 | Communication Plan.................................................................................................12

Obstacles and Solutions..............................................................................................................12

Timeline for Change.....................................................................................................................13

Change Model...............................................................................................................................13

Diagnostic Assessment and Heat Mapping...............................................................................13

Key Metrics – how will we know if we have been successful..................................................16

Cost Benefit Analysis...................................................................................................................18

Conclusion.........................................................................................................................................19

References........................................................................................................................................20

Table of Figures & Diagrams

Tables

Table 1.0 | Interviews and Surveys: 8

Table 2.0 | DB Schenker Diagnostics 9

Table 3.0 | Lessons Learned from Others: 10

Table 4.0 | Recommendations Mapped to WGEA Focus

Areas

11

Table 5.0 | Communication Plan 12

Table 6.0 | Strategies to Overcome Potential Barriers 12

Table 7.0 | Diagnostic Tool 13

Figures

Figure 1.0 | Methodology and Timeline 7

Figure 2.0 | Three Key Strategic Pillars 8

Figure 3.0 | Change Management Strategy 13

Figure 4.0 | Heat Mapping – Current to Forecast Future

State

14

Figure 5.0 | Implementation Plan 15

Figure 6.0 | Measuring Impact 17

Figure 7.0 | Cost Benefit Analysis 18

Part I: Background & Benefits of Increased Female Representation in Leadership Positions

Introduction:

This report has been prepared to provide DB Schenker Australia Pty Ltd (DBS) with insights highlighting the importance of increasing female representation among the Senior Leadership Team (SLT).

Drawing upon a wide array of academic research, surveys, interviews and case studies, a compelling business case for implementing a gender diversity program is established.

Through implementing the recommendations within this report - and doing so quickly - DBS will; (i) Become an employer of choice; (ii) Establish market leadership as a vendor of choice; (iii) Access first mover advantage and; (iv) improve organisational performance.

The Situation in the Transportation & Logistics Industry

AustraliaA growing population, increasing energy prices and demand for goods and services, place pressure on governments who are finding it increasingly challenging to raise capital to fund much-needed infrastructure improvements. This brings with it increased complexity of operations for all organisations within the transport and logistics industry (T&L).

IndustryThe success of T&L operators depends decisively on the quality of its employees, a prerequisite that will only increase in the future as organisations respond to the national trends, infuse technology and other advanced capabilities throughout their organisation (PwC, 2009 p.3). A war for talent is underway as organisations within the T&L industry grapple with the increased complexity brought about by the aforementioned trends.

DB SchenkerFive years ago, DBS ranked #1 globally in all key markets. They now face the ignominy of dropping to fifth place in a highly competitive industry with key competitors - such as Aurizon - demonstrating greater awareness of the benefits that gender diversity will bring to their organisation (Aurizon, 2014).

Despite the war for talent, women are significantly under-represented, as part of the DBS workforce with the trend becoming increasingly prevalent up each rung of the leadership ladder. Less than 37% of the workforce is female, at Level C this falls to 23%, and at Level B this continues to fall to 14%, with no representation at board level. These figures benchmark well below industry standards (WGEA, 2014).

The Challenge

If DBS does not recruit a diverse workforce, they will be left behind. Women, a key source of talent, continue to be overlooked at DBS. The male-dominated image and the overall culture and attitudes within the established workforce are seen as key challenges impeding efforts to attract and retain women in the industry (WISC, 2013, p.4).

Business Case for Increasing Female Representation in Leadership Roles

To extend competitiveness throughout the years ahead DBS must commit itself to increasing female representation within the executive ranks. This will deliver benefits across four distinct areas of business value:

(i) Become a Vendor of Choice

Many clients are electing to award T&L contracts on the basis of competing vendors’ CSR performance. In some cases, it has become a condition of doing business (Shell, 2015).

Clients are beginning to assess their CSR impact across the entire value chain. By differentiating themselves on this criteria – and making this known – many clients will elect to select DBS for their T&L needs.

(ii) Become an Employer of Choice

By winning the war for talent, DBS will be enabled to attract, retain and develop the most talented staff.

(iii) Improve Organisational Performance

Research continues to demonstrate the correlation between increased female representation on company boards and business performance through greater innovation and a more measured approach to organisational risk. (McKinsey, 2012).

DBS will enhance their capacity to identify and develop unique services that meet the needs of an emerging female clientele.

(iv) Access First Mover Advantage

The industry’s male-dominated image allows for early progress to be more effectively contrasted with that of their industry peers.

Methodology

Figure 1.0 | Methodology and Timeline

Research and Consultation

Scope

16-21st Feb 2015Identify issues & challenges regarding women advancing to leadership in DBSMap stakeholders for engagementAgree scope with DBSAgree project timeframeAgree deliverables

Collect Data &

Conduct Researc

h

21st Feb -28th Feb 2015Conduct literature reviewProvide solid evidence based value proposition supporting for or against gender diversity in DBSConduct WGEA benchmarking and identify areas of focusConsult learnings from other companies/ cases. Idenitify initiatives employed internally and externally by others

Company

Consultation

28th Feb - 7th Mar 2015Stakeholder mapping to determine who to consult in DBS and externallyConduct interviewsIdenitify company specific opportunities and challenges

Collate Insights

7 Mar-28th Mar 2015Establish key findings and reccomendationsDemonstrate risk management approach for obstaclesbenchmark information Cost benefit analysisPresent preliminary framework and calibrate with key DBS stakeholder

Develop Implementation

Plan

28th Mar -7 Apr 2015Develop an implementation plan supported by trialled and tested initiatives"Go Live" schedule Provide a supplementary tool kit to support DBS change program

Research identified three key pillars as underpinning the effectiveness of programs to increase female representation within executive leadership positions. These pillars were linked to the 12 focus areas outlined in the WGEA report as illustrated within Figure 2.0

Figure 2.0 | Three Key Strategic Pillars

Consultation canvassed a cross section of businesses to understand current challenges, establish benchmarks and collate lessons learned. Focus was placed on gaining insight into the three pillars as business imperatives to accelerate sustainable progress of women in leadership. Consultation consisted of interviews and surveys as per Table 1.0.

Table 1.0 | Interviews and Surveys

Interviews SLT Surveys

Katy Yale – Senior HR Diversity Manager, Woodside WoodsideNadya Corne – HR Partner, IBM IBMJohan Lundstrom – GM HR, DB Schenker DB Schenker

True AllianceUniversity of SydneyUTS

WGEA Key Focus Area Key Pillars

Gender inclusive culture

Manager and leader capability

Flexibility

Gender composition

Supply chain

Measurement and reporting

Leadership accountability

Strategy and business case

Stakeholder engagement

Talent pipeline

Gender pay equity

Policies and processes

Career Progression, Personal Development Programs and Recruitment

The Future of work and FWAs

Organisational Culture and Management Practices

DBS Analysis

WGEA data was used to establish the organisation’s baseline relating to its gender diversity practices, a summary of which can be found in Table 2.0.

DBS benchmarks against WGEA focus areas demonstrated gender diversity underperformance in all assessed criteria, highlighted by Table 2.0. Employee engagement surveys identified employee dissatisfaction of gender pay disparity, lack of senior management communication/ reporting and unclear career development options. Results from WGEA benchmarking and survey highlighted significant opportunities for DBS to achieve gender diversity.

Table 2.0 | DB Schenker Diagnostics

Key Focus Area0

Avoiding(0 Points)

1Compliant(1 Points)

2 Programmati

c(2 Points)

3Strategic(3 Points)

4Intergated(4 Points)

5Sustainable

(5 Points)

Policies and processes Gender pay equity Talent pipeline Stakeholder engagement Strategy and business case Leadership accountability Measurement and reporting Supply chain Manager and leader capability Gender inclusive culture Gender composition Flexibility

Points sub-totals 0 8 4 - - -(sum of subtotals) 12

Overall indicative roadmap phase 1

Gender Equality Road Map Phase

Summary of Leading Practices

Table 2.0 summarises key lessons learned from others and, in outlining the specific organisational benefits realised, reinforces the necessity of establishing the three key pillars.

Table 3.0 | Lessons Learned from Others

Best Practice Case Initiatives Outcomes

Telstra | ‘All Roles Flex’ Repurposed online recruitment forms Training workshops for managers with

flexible workers Began role modelling, with visible

flexibility amongst executives Included flexibility as one of the six

leading purposes and values

Applications rose and offers accepted by women increased by 13%

Employee engagement of flexible workers higher than company-wide score

Commonwealth Bank of Australia | ‘Opening the Door for Gender Diversity

Mandatory and in-depth unconscious bias training for all senior leaders

Rigorous talent review process Progressive approach to building a

flexible workplace

Women’s engagement scores were above Gallup ‘world’s best practice levels’ in three out of the last four years

Women in executive manager and above roles up 9%. Board representation up 7%. 45% representation from Branch Manager and above.

Qantas Airways | Leadership Transformation

Invested in development and support Bias awareness, change leadership

and coaching for the Top 500 Instituted a broad set of diversity

performance measures including

Qantas Engagement Index increased 8% in 2013

Australian Army | Targeting Female Recruits

Addressed structural barriers Reduced the minimum period of service

from four to one year Established the ‘Join with a Friend’

program

Average 85% increase in female recruits Only 9.6% of women leave the Army

annually, compared with 12.3% of men

IBM | “Your Path to Leadership Program”

Paired high-potential women with influential leaders

Made sponsors accountable for next promotion

Focused feedback on personal impact, visibility and career planning

Implemented FWAs for all

40% of women in the original program have been promoted into executive roles

Staff loyalty increased - 64% of employees reported greater sense of belonging.

ANZ | Childcare Allowance

Introduced a $4,000 childcare allowance for returning parents.

Return rates up from 67% to 89% between 2010 and 2013

Positive feedback that parental leavers felt supported.

Aurizon | Gender Diversity Initiative

CEO Office Rotation - provides development opportunities for women to work as Associate Executive Officers with the Managing Director & CEO.

Mentoring Program - A formal mentoring approach for women comprises three key elements: a self-paced 12 week mentoring program

Female participation in Senior Management up from 12% to 26%. Women in middle management up from 29% to 33%

Female employee turnover reduced from 13% to 7.2%.

Receive a ‘green light’ ranking from Women on Boards in 2013 as part of their national Traffic Light Index

Microsoft Australia | Implemented flexible working Achieved significant cost reductions by

Flexible Working Arrangements

arrangements for all staff – centred on “Activity Work Stations”.

decreasing office footprint by approximately 25%

Section II: Implementation Plan for DB Schenker

Recommendations

It is recommended that DBS set the goal of achieving a target of 30% female representation within the SLT ranks by 2020. To achieve this outcome the following recommendations are those which hold the highest potential for effectiveness.

Table 4.0 Recommendations Mapped to WGEA Focus Areas

WGEA Key Focus Area

Recommendations

Policies and Processes

1. Link to strategy as a business imperative and integrate policies & procedures to business2. Review all gender diversity related policies: what to keep; what to change; what to create3. Create procedures to support policies to ensure the policies are followed

Gender Pay Equity

1. Review gender pay gap annually:- Annually conduct audit for like for like roles & Discuss trends and insights with SLT

2. Establish pay scales based on function and role

Stakeholder Engagement

1. Stakeholder mapping of gender diversity: identify champions2. Create a diversity council3. Communication plan to enable champions and diversity council to raise awareness

Strategy and Business

Case

1. Link Gender Equality objectives to DBS goal to become employer of choice by 2020.2. Have gender diversity as a specific agenda on DBS strategy house

Leadership Accountabilit

y

1. Shift accountability across the SLT via the use of LT diversity champions2. Launch business case with LT with action to collaboratively complete diagnostic tool with each

business function: - agree measurable outcomes- plan to cascade to management (conversation, collaborative, empower)

Measurement and Reporting

1. Create targets:2. Recruitment short list targets

Incorporate Gender Equality strategy in internal coaching program. Track gender compliance in recruitment via reporting.Succession and career planning

3. Implement dashboard to track progressSupply Chain 1. Labour suppliers - communicate and discuss changes pertaining to gender diversity in applicants

(i.e. Job industry specific with percentage of applicants to be submitted for males and females)2. Develop partnerships with universities3. Long term: Once we've moved to integrated, we can go to our vendors to support them to make

the changes.Manager and

Leader Capability

1. Establish baseline competency required2. Roll out diversity training and toolkit for people managers to include:

(i) Best practice recruitment and interview techniques; (ii) Managing and assessing FWAs; (iii) Best practice coaching skills; (iv) Communicating results & and co-creating actions to improve results from quarterly review of dashboard; (v) Engagements survey

Gender Inclusive Culture

1. Increase involvement in external women in leadership groups.2. Make client entertainment and team social events more gender inclusive3. Parent specific facilities & Initiatives4. Create pregnancy parking5. Remove barriers to progression by reviewing recruitment criteria for executive group remove

gender bias from frameworkTalent

Pipeline1. Establish internal recruitment panel for management roles

Flexibility 1. Define flexible working agreements in DBS2. Create AU inclusive 'if not why not' policy3. Coaching programs to be during a time that works for the coach and the coachee

Communication Plan

To increase the likelihood of success with DBS’ change journey, one of the key recommendations is to develop a communication plan. This will ensure that consistent and targeted messaging is going out to DBS’s workforce as to why gender diversity is a business imperative.

Table 5.0 | Communication Plan

Core Pillar Communication Objective Messaging

Organisational Culture & Management

Practices

Communicate to stakeholders that this is a DBS business imperative that is in-line with the overall business strategy.

Highlights the business case of improving female representation in the leadership pipeline. Empower people leaders to take ownership and make this a leadership issue relevant to them.

Do your part to help DBS become an Employer of Choice by 2020. Take a small step towards championing gender diversity at DBS.

Challenge the status quo and be part of the movement making a positive impact to the future of DBS.

Career Progression, Personal Development

Programs & Development

Educate DBS’ people leaders about the issue of gender diversity and provide guidance on the action plan about how DBS is planning on tackling the issue as an organisation.

As an Employer of Choice DBS champions for the equal and transparent treatment of its workforce.

Flexible Working Arrangements

To inform DBS’ workforce of the available framework and resources in place to encourage action towards driving gender diversity in the leadership pipeline.

DBS has policies and procedures in place to enable you to contribute to DBS’ target of reaching 30% of women in executive positions by 2020.

Obstacles and Solutions

As DBS begin to undertake their change journey, barriers will be encountered. Given that the change journey is all about complex human interactions, it is important that DBS is mindful of bringing stakeholders along the journey with them.

Table 5 below highlights potential barriers and provides corresponding actions to enable DBS to overcome it.

Table 6.0 | Strategies to Overcome Potential Barriers

Core Pillar Key Barrier SolutionOrganisational Culture

& Management Practices

Possibility that SLT feel equality initiatives threaten their own career progression

opportunities.

Launch initiative: Career planning for every member of SLT.

Career Progression, Personal Development

Programs & Development

Internal recruiting HR & SLT ill-equipped to make objective decisions.

Have a group of management trained in unconscious bias & recruitment

techniques and establish recruitment panels for all management positions.

Flexible Working Arrangements

Culture of presenteeism & stigma of working flexibly

Enable everyone to apply for flexible work options, not only those with

carers responsibilities. Pilot in QLD.

Timeline for Change

Change Model

This report recommends using a change management strategy that combines two leading change models: the ADKAR Model and the ExperienceChange (EC) model (Figure 3.0), in conjunction with the WGEA gender strategy diagnostic tool.

Figure 3.0 | Change Management Strategy

Diagnostic Assessment and Heat Mapping

To better understand the current state a dynamic diagnostic tool (Table 6.0) has been created. Incorporating the recommendations from the WGEA the diagnostic can be completed by any business unit to validate where they are performing well and highlight any significant opportunities to make progress. Both of which are critical in integrating and sustaining the gender diversity goals. Heat mapping (Figure 4.0) has been employed a visual aid to illustrate a performance snap shot to help prioritise actions. Quantifying results in this way lends the transparency needed to ensure accountability among each individual business unit.

Table 7.0 | Diagnostic Tool

Key Focus Area0

Avoiding(0 Points)

1Compliant(1 Points)

2 Programmatic

(2 Points)

3Strategic(3 Points)

4Intergated(4 Points)

5Sustainable(5 Points)

Stakeholder engagement Strategy and business case Leadership accountability Measurement and reporting Policies and processes Supply chain Gender composition Gender pay equity Flexibility Talent pipeline Manager and leader capability Gender inclusive culture

Points sub-totals - - - 18 24 -(sum of subtotals) 42

Overall indicative roadmap phase 4

Gender Equality Road Map Phase

Figure 4.0 | Heat Mapping – Current (l) to Forecast Future State (r)

Strategy and business case

Measurement and reporting

Policies and processes

Supply chainManager and

leader capabilityTalent pipeline

Flexibility Gender pay equityGender

composition

Stakeholder engagement

Leadership accountability

Gender inclusive culture

Strategy and business case

Measurement and reporting

Policies and processes

Supply chainManager and

leader capabilityTalent pipeline

Flexibility Gender pay equityGender

composition

Stakeholder engagement

Leadership accountability

Gender inclusive culture

Implementation PlanFigure 5.0 | Implementation Plan

Key Metrics – how will we know if we have been successful

DBS’s Global Office has encouraged each region to consider capturing specific gender diversity metrics. When mapped against the three pillars, it becomes clear that FWAs have been overlooked. This report recommends the additional metrics regarding FWA’s be included:

Utilisation of flexibility policy options by gender Proportion of flexibility requests declined Parental leave return rate Parental leave retention rate (1 and 2 years post return to work)

Aligning the recommendations tabled within this report with an existing organisational initiative will greatly enhance its relevance to the business.

To create a user friendly and visual dashboard for management to monitor as they move from avoiding & compliant to strategic & integrated, we propose that DBS embed the metrics into the heat map. Management will then be able to easily track and communicate their progress, adjust when necessary, and celebrate success along the way. This will reinforce the need for change and validate the effectiveness of implementing the recommendations. In turn building motivation and increasing momentum to continue the change journey.

Figure 6.0 | Measuring Impact

Cost Benefit Analysis

Figure 7.0 | Cost Benefit Analysis

Annual returns of > $8M from FY18-onwards:

(i) 20% increased NPAT upside (>$8M /yr) realised from Y3 onwards driven by fthe following factors;

(a) clients electing to award lucrative T&L contracts on the basis of CSR performance;

(b) increased employee productivity; (c) Reduced employee attrition and

cost savings (WISC, 2010).

Once-off costs of $4.35m incurred FY15-18:

(i) Training programs to build management capability = $0.15m (ii) Internal Communication & road show = $0.2m(iii) Accelerated career progression programs = $2m(iv) Infrastructure to accomodate for FWA’s = $2m

Conclusion

Changing workforce demographics and challenging macro-market trends, such as; increasing energy prices, ageing infrastructure and growing demand for goods & services will dramatically increase complexity of operations for DBS. Implementing the recommendations within this report will ensure that DBS is best equipped to tackle these issues head-on, thereby ensuring their success and re-establishing the organisation as the industry leader. Beyond all else, the report clearly demonstrates that gender diversity is not just a “nice to have” but a key business imperative that will drive commercial success for DBS.

References

Aurizon, 2013, Case Study: Gender Diversity at Aurizon, retrieved on March 6th 2015 from: http://www.aurizon.com.au/Downloads/Aurizon%20Diversity%20Case%20Study.pdf

Australian Human Rights Commission, 2013, Accelerating the advancement of women in leadership: Listening, Learning, Leading, Male Champions of Change.

EY, 2013, p3, Untapped Opportunity, The Role of women in unlocking Australia’s productivity potential, viewed 8 February, 2015, form: http://www.ey.com/AU/en/Services/Advisory/The-role-of-women-in-unlocking-Australias-productivity-potential_2_Productivity-potential-of-the-female-workforce

Lockhart, J 2012, Companies With Female CEOs Have This One Huge Advantage, retrieved on March 6th 2015 from: http://www.businessinsider.com.au/companies-with-female-ceos-have-this-one-huge-advantage-2012-3

McKinsey&Co, 2012, p1, Is there a payoff from top team diversity, Retrieved on February 21, 2015 from: http://www.mckinsey.com/insights/organization/is_there_a_payoff_from_top-team_diversity

McKinsey & Company, 2012, Women Matter: An Asian Perspective Harnessing female talent to raise corporate performance, McKinsey & Company

McKinsey&Co, 2012, p1, Is there a payoff from top team diversity, retrieved on February 6th 2015 from: http://www.mckinsey.com/insights/organization/is_there_a_payoff_from_top-team_diversity

PwC 2009, Transportation & Logistics 2030: Volume 1: How will supply chains evolve in an energy-constrained, low-carbon world? Retrieved on February 21, 2015 from: http://www.pwc.com.au/industry/infrastructure/assets/TransportLogistics2030-09.pdf

PwC, 2014, Transportation & Logistics 2030 Volume 5: Winning the talent race, retrieved on February 6th 2015 from: http://www.pwc.com/en_GX/gx/transportation-logistics/pdf/pwc-tl-2030-volume-5.pdf

WGEA, Gender Strategy Toolkit, retrieved on 6th February from: https://www.wgea.gov.au/sites/default/files/Gender_Strategy_Toolkit-V2.pdf

WISC, The Unseen Gender in Transport and Logistics WOMEN MAKING VISIBLE, retrieved on February 6th 2015 from: https://www.gs1au.org/assets/documents/news_room/pr/wisc_0810.pdf

WISC, Improving Women’s Visibility, the unseen gender in transportation & logistics, 2014, retrieved on February 6th 2015 from: http://womeninsupplychain.com.au/files/8714/1741/3948/WISC-report-lowres03.pdf