Organization

We see this diversity as a significant resource, not least to encourage innovation. To be able to pull together as a team, we depend on an efficient organization with common values and goals. Good leadership, proper organizational structure and the right tools are all essential if we are to achieve this. This includes attracting – and retaining – the right employees.

Hydro had 24,692 employees at the end of 2007, a decrease from 33,605 in 2006. The reduction is primarily a result of the demerger of our oil and gas activities, but it also reflects the sale of the automotive casting business, the closure of the magnesium plant in Becancour in Canada, as well as the restructuring of our extrusion business in the US.

Key elements in our HR strategy are to attract, develop and retain competent and innovative employees, develop leadership for business needs and shape an effective organisation.

Systematic employee development

Our aim is that every employee should have an annual appraisal dialogue with his or her line manager and participate in organizational surveys at least once every two years.

Two key processes form the basis for organizational development in Hydro. Hydro Monitor is an employee survey where we gauge the climate in the organization at regular intervals. The Hydro Leadership Development Process (HLDP) is our common tool for employee appraisal dialogues and performance follow-up. We still do not have annual appraisal dialogues for all employees, but the goal is set, and in 2007 over 50 percent of employees had such dialogues.

There are individual development plans for almost all employees. In the last Hydro Monitor survey, 95 percent of respondents said that they have the necessary ability and competence to carry out their jobs in a satisfactory manner. Despite this, only 69 percent feel that they are able to make best possible use of their abilities and expertise in their jobs. This remains on the same level as the 2006 survey.

Feedback and recognition

Introduced in 2004, Hydro Monitor gives us a broader perspective on the organization, enabling us to identify where we have progressed and where additional measures are required. In 2007, more than 10,000 employees had the opportunity to take part. The response rate was 85 percent, down from 89 percent in 2006.

Through Hydro Monitor, employees can give anonymous feedback on, for instance, the organizational climate. In 2007, 84 percent of those who responded said that they had a good understanding of Hydro's values, 72 percent said that they were encouraged to participate in decisions that affect their own work situation, while 88 percent thought they would be able to tackle future organizational changes. These results were roughly the same as in previous years. In response to Hydro Monitor, special emphasis is made on improving feedback and recognition through raising management awareness.

With the 2007 survey, most employees have participated in the Hydro Monitor survey on at least one occasion. The next survey will be in 2009, when all employees will be asked to participate.

Leadership development

The development of the top 200 managers is a strategic corporate responsibility. Initiatives include the follow-up of HLDP, the leadership planning process, and annual conferences where the top 50 and the top 200 leaders, respectively, take part.

Management training is provided at all levels of the organization, and the training of new managers is important. This is provided through company-wide programs as well as local courses. In 2008 we will review our leadership development ambitions in order to secure a global mindset in the organization.

Diversity

We emphasize diversity with regard to nationality, culture, gender and educational background, both when recruiting, and when forming management teams and other working groups.

Half of the shareholder-elected board members are women. Women are also represented in all business area and sector management teams, and we are aiming at further diversity at all levels. Most women top managers hired in the recent years have been recruited internally. In 2007, the number of women on the Corporate Management Board decreased from two to one, while the proportion of women among Hydro's 50 top managers was 17 percent, compared to 19 percent in 2006. The number of non-Norwegian leaders was 13 percent compared to 11 percent the year before. Among the top 200 managers the proportion of women was 16 percent, down from 20 percent in 2006, and of non-Norwegians 32 percent, a significant increase from 19 percent in 2006.

The changes must be seen in the light of the fact that the Norwegian organization has been substantially reduced following the demerger of the oil and gas activities – giving a more international organization. The flipside is that the ratio of women at all levels is higher in Norway than in most other countries where we are represented.

The deliberate recruitment of women is important in order to increase the proportion of women in the organization. In 2007, around 550 new employees were recruited to the Norwegian part of the organization. Of these, 22 percent were women, as compared to 18 percent in the Norwegian organization as a whole. Half of the newly graduated recruits are women. Our annual graduate trainee program also contributes. It has an even distribution between men and women and represents diversity with regard to nationality and cultural background. In the 2007 program, there are 24 participants, 13 women and 11 men, representing 12 nationalities.

Recruitment

To maintain our status as an employer of choice – as a focused aluminium company in a tight labor market – will be a key challenge in the coming years, especially in Norway and Germany. Positioning ourselves as an employer of choice with interesting tasks and competitive compensation is key to recruiting and retaining the right people with the right competence.

Internal recruitment to the Qatalum project in Qatar continues to ensure the necessary transfer of expertise. A total of 80 managers and professionals will be recruited to serve for a period of three to five years, while almost 100 operators, shift leaders and support engineers will assist for a period of 12 to 18 months during the start-up. The employees come from Hydro's organizations in Norway, Germany, Slovakia and Australia.

New employees are offered essential training, both in order to get to know the organization and their work tasks, and to gain the required competence within the health, security, safety and environment fields. To further strengthen our position as an attractive employer, we continued our graduate trainee program in 2007.

Compensation

All employees shall be secured a total salary that is fair, competitive, and in accordance with the local industry standard. Only relevant qualifications such as performance, education, experience and other professional criteria shall be taken into account when making appointments, or when providing training, settling remuneration and awarding promotion. There are no significant gender pay differentials for employees earning collectively negotiated wages in Norway. Salary conditions for graduates in the Norwegian business are reviewed on a regular basis. No general gender-related differences have been found.

Career, personal development and a flexible workplace are also important elements in our compensation system. In the Norwegian part of the company the majority of employees are covered by a bonus system. In other countries there are bonus systems at management level, and at many locations also at other levels. The criteria for awarding bonuses include the extent of successful business plan implementation. Managers' results within the area of health, security, safety and environment are also measured, along with their results with respect to organizational development and social responsibility. The aim is to promote a result-oriented culture, improving results and rewarding achievements.

Global principles for remuneration will be developed in 2008. Requirements for employment agreements were developed in 2007 and will be implemented in 2008.

Performance related pay is widely used in Hydro. The stock-option program for executives was concluded in July 2007, and we will evaluate alternative long-term incentives during 2008.