March 13, 2009

Different Strokes

At Differentship Management, we are as numbed by the alarming figures coming out of the industry as any of you. Shocked by the reports of ships laid up across the board, we are aware that VLCCs are being used for storage, as also new box ships. Storing oil and empties is cheaper on a laid up ship than in port now. We do not believe that the recent revival of the Baltic Indices is sustainable, because they are not backed up by improved figures coming out of the global economy. Quite the contrary.

Differentship does not believe that the old paradigms of marine recruitment, whether at sea or ashore, apply today. In fact, we have often criticised those prototype solutions as unsustainable at the best of times. The inability of most of the industry to maintain quality in the recent boom, or even produce the required supply of manpower, bears this thinking out.

After a fair deal of thought, therefore, Differentship has decided on the following course of action within the group. Our aim is the retention of excellence by promoting
long term mutually beneficial associations with our employees, both ashore and afloat.

We now make this plan public.


The execution of our plans will be made in a manner that is transparent to all employees, whether at sea or afloat.
The execution of our plans will be carried out in a legal and ethical manner. Our behaviour towards our employees has never been variable, or dependant on market conditions, and we see no reason to change that now.
We have, at present, 50 ships under management. Although this number can certainly decrease if conditions get worse, we intend to maintain our shore and floating staff at a level that will sustain this number with excellence.
We do not see great issues with financing Differentship’s initiatives. As we will show here, enough lard exists in the system that can be burnt off. Additionally, we have some out of the box plans to ensure economic sustainability.
We will pursue our new initiative with vigour for 3 years starting today. Although this initiative will be reviewed annually, our commitments made now to our employees will remain unchanged for 3 years.
The initial selection process of employees will be intensive, robust and discriminating. We will ensure that only excellent performers are identified. If in doubt, the new plan will not be offered to many.


This is what we have started doing today:

Floating staff

A three year contract will be signed between Differentship and carefully selected floating staff that are willing to participate. The contract will be renewable at the end of three years. We are calling this a ‘permanent contract’.
Differentship will offer this permanent contract to 60 officers, Cadets and Crew of each rank. The balance of our requirements, if any, will be met by additional contractual seafarers, although we intend to have permanent employees wherever possible, subject to our overriding requirement of retaining excellence.
A penalty of a three months salary will be payable and incorporated in this contract, in case either party decides to renege. Our lawyers assure us that this is legally binding and enforceable. We hold ourselves to the same penalty, as a sign of our commitment.
Cadets will be offered full pay, whether at sea or not. We estimate that the cost of this, at 12,000 dollars a month, is well worth the future payoff of well trained officers within our fleet.
All other officers and crew will be paid 25% less salary (now called ‘new salary’) than they presently receive when sailing. A minimum of four months full salary will be guaranteed each year, in the event that the employee does not sail for four months.
When not sailing, all officers and crew will receive wages of 15% of the new salary each month when at home. In return, they agree to undergo online training programmes which we are in the process of finalising, from within the comfort of their homes. We guarantee our mariners more than five months salary every year with these initiatives (4 months seagoing plus 15% for 8 months). Of course, if one sails more than four months, one earns more.
These terms will remain in force for the three year period even if market wages collapse elsewhere, provided the employee does not take up any alternate employment.
Tenures on board will be determined by repatriation costs. We expect some flexibility in this regard from seagoing employees. Our intention, however, is to align these tenures with the contract system as it is followed today, where rank determines the length of seagoing time.
All other present terms and conditions now stand cancelled.
Annual bonuses will be payable depending on company performance to all employees, whether at sea or afloat.
Although a seagoing employee will remain subject to dismissal for fraud and gross negligence, we believe that with our robust selection process already in place, the chances of this are negligible. It does not bear repeating that we pride ourselves on being ethical, and so it will be in this eventuality. The process will be transparent to all employees and subject to peer review.

A simple calculation will show that seagoing staff will get the benefit of permanent employment for three years without a great drop in income. This will remain even if contractual wages collapse elsewhere.

Cadets will be assured employment for three years. Sea time requirements may take longer to complete if fleet size decreases; however, we will persuade owners to increase berths for cadets, which are relatively low cost.

Differentship will get the benefit of retaining performers and weeding out the non performing staff. We envisage that we will be in an excellent position to grow whenever the global economy turns around, as it eventually will. Meanwhile, we will strengthen bonds with our employees within the group.

Shore staff

As with seagoing staff, we will retain shore staff at a level that will support 50 ships. The retention will be based on performance alone. People asked to leave will be given three months notice with full wages.

The following will apply to retained shore staff

A three year ‘permanent contract’ similar to the one with floating staff will be signed. This will have similar enforcement penalties and bonus plans.
As with seagoing employees, shore employees will be subject to a 25% pay cut.
Traditionally, wages at sea have been considerably higher than shore wages, everything else being equal. Largely because of the different nature of work, this is also partly because a shore employee works almost throughout the year. With this reasoning in mind, Differentship will guarantee 6 months full wages to each shore employee (instead of four months offered for seagoing staff). In the event of a shore employee being ‘benched’, he or she will receive 35% of the new salary for the remaining period. This will remain in force for the three year period even if market wages collapse elsewhere, provided the employee does not take up any alternate employment.
Although a shore employee will remain subject to dismissal for fraud and gross negligence, as with seagoing staff, the process in this eventuality will be along identical lines outlined for the floating staff.

Finance, Austerity measures and miscellaneous initiatives

Move to smaller premises. Given collapse in real estate prices and rentals, this makes sense. Also because we envisage a leaner and meaner workforce.
Cost cutting on travel, unnecessary seminars and such expenses. Rollout of online training programmes as mentioned earlier.
New premises to be energy efficient. Functionality to replace flashy ambience. Office to exude a cheerful, professional and no nonsense atmosphere.
We envisage considerably lower recruitment costs after the conclusion of the initial selection, as we believe we will have a core of competent personnel, and a pool that will be growing. Lower attrition rates will give rise to many collateral advantages.
Streamlining of systems to minimise wastage of time, manpower and communication costs, especially between the vessel and the office.
Training programmes for shore and seagoing employees to be well thought, cost effective and sustainable.
Smart maintenance and storing on board. Dead stock to be minimised. Smart maintenance not to mean minimum maintenance, however.

Differentship believes that economic conditions will get worse before they get better. Salaries, too, will probably drop further. While we are locking ourselves in to a three year commitment with a base of higher salaries, we believe that our flexible approach with an annual minimum guaranteed package will offset some of these higher costs, and our austerity measures will do the rest.

Equally importantly, we believe that if Differentship has to come out of this recession poised for growth, we need to identify, employ, retain and train our core employee strength right now. Without people, we are nothing. Our initiative is aimed, therefore, at guaranteeing our performers ongoing employment with us. We are treating them as adults, and we know they will not disappoint us, or we them.

We are comfortable with our back of the envelope calculations on this. We believe that this is a sustainable and forward thinking way of surviving the hurricane that has hit the global economy today. We also believe that we will be idling at the runway, ready to take off, when the storm passes.

While our accountants are crunching the finer numbers, and while we will undoubtedly refine our thoughts as we go along, we will not allow electronic calculators to dictate our business plans in this recession.

We know how damaging it was to us last time this happened.