Eivind Reiten: Continual improvement, innovation and sustainable behavior

Eivind Reiten

(May 3, 2001) Continually improving performance reflected in good results. Creative innovation resulting in profitable growth. A responsible approach to operations that contributes to sustainable development. These are the main points Hydro's new president and CEO, Eivind Reiten, wants to highlight as he paints a picture of the company in the future.

"I will not initiate a full review of the corporate strategy, for the simple reason that we are still implementing what was a successful change of course for Hydro at the end of 1999. I do not intend to change something that is working well just to mark the fact that Hydro has a new president and CEO.

"My main task now will be to ensure that the current positive development of the company continues. I can see major potential for development within our three main business areas Agriculture, Light Metals and Oil and Energy," he explains.

However, he does not deny that improving the company's performance involves facing significant challenges.

"Hydro has a firm foundation to build upon," he says. "But we have to be aware that maintaining the top position in our business areas will become increasingly challenging. Apart from the advantage we have had recently from positive markets and not least high oil prices, there is still considerable potential to be realized through improvements to our operations. I intend to concentrate on ensuring that Hydro's operations are continually improved independently of market and price fluctuations, which we are unable to influence.

"The measurement and evaluation of our results, of our performance, must first and foremost be on the basis of normalized markets and prices," Reiten emphaisizes. He refers to the fact that Hydro now has far better tools for follow-up of results than was the case a few years ago, namely key performance indicators (KPIs), value-based management and performance-related remuneration.

Profitability and growth
Reiten is in no doubt that the future value of Hydro depends primarily on the company being able to demonstrate continued improvements in operations and higher returns on investments.

"We have to constantly think business first. What is needed for success in the markets? What will make customers see Hydro as an even better company to deal with? What will make our partners feel that an alliance with us is an even better way of creating value? These must be the items on our agenda.

"We will, to an increasing degree, be judged according to our ability to grow and adopt new strategic positions within our business areas. The rate of growth is strong and restructuring takes place at a fast tempo in the industries we are involved in. In addition to maintaining focus on the column representing growth in our presentations, we have to focus on attaining new strategic heights. Demonstrating profitable growth is a significant factor in ensuring the increase of value that Hydro's owners should be able to expect of their company," he says.

He refers to the fact that Hydro's financial position is stronger than it has been for a long time.

"However, this does not lessen our responsibility for utilizing the strength of our financial position in the best possible way for our owners. The profitability requirements for our investments remain unchanged. There will be no question of recklessness, even though we have considerable room for maneuver at present.

"This principle also applies to one of our immediate and major tasks – negotiations on the purchase of the state's direct financial interest (SDFI) in the North Sea oil and gas assets," Reiten underlines. From Hydro's point of view, the pursuit of SDFI units will remain linked to the question of profitability for the company.

"We are pleased that the process to release SDFI units has started," he adds. "However, from Hydro's perspective, we are not happy about only being able to negotiate on 6.5 percent of the SDFI units together with other companies. But the authorities have made their decision, and we now have to ensure the best outcome possible for Hydro."

On target
According to Reiten, one of Hydro's main problems is that turnover for each krone invested is too low, which again results in an insufficient rate of return.

"We have to direct more focus on how we can create business opportunities that do not necessarily require major investment," he says. "This is a question not only of finding cheaper and smarter solutions than we are used to, but also to a great extent of utilizing the commercial creativity and skills that are in integral part of Hydro's organization. We basically have to strive to increase our skills and competence relative to our fixed assets.

"If we are to succeed in the future, we will have to maintain a high tempo and turn fast. We have to have the courage to take quick decisions, even where some details remain unclarified. For this reason we must ensure that our organization and decision making systems are as streamlined and free of bureaucracy as possible, and that our communication channels are open and clear. We have to be dare to aim straight for our targets to a greater degree."

He believes that a key issue in the future will be to direct greater attention to the individual employees in the company.

"There are considerable latent resources in the individual employees. If our working methods were more inclusive and individuals were met with greater openness and confidence, I strongly believe that we would release greater energy and get more ideas on the table, in addition to valuable opposing points of view," he says.

"We also have significant challenges in connection with ensuring diversity throughout our organization and in relation to management. This is linked to the way we organize our work, how we communicate and cooperate. Greater diversity, for example with regard to Norwegian and non-Norwegian employees and the ratio of men to women in the organization, will help to make Hydro a more attractive work place and give the company a greater advantage in the competition for the best employees in the future."

In this connection he refers to the company's decision to introduce a system of performance related remuneration in the form of bonus and shares.

"As I see it, this system is a milestone in Hydro in terms of focusing on the significance of really delivering the results we have agreed to achieve in our yearly plans. This will help to promote the winner culture that I want to encourage in Hydro."

"No doubt"
Since the announcement just before the new year that Eivind Reiten would be the new president and CEO, he has spent considerable time in dialogue with major parts of Hydro's organization. Key questions have been what the employees feel should be the mark of Hydro as a company. What would make Hydro's employees even prouder of the company than they are today? What should be the immediate association with Hydro's Viking ship logo?

"Three important characteristics can be drawn from this dialogue," says Reiten. "Firstly Hydro should be characterized by the ability to get results. We want to be a company that is known for its ability to deliver excellent results, and for doing what we say we will do.

"Secondly, we will distinguish ourselves through innovation, not just in the form of finding new technical solutions and developing new technology, but also through identifying new business opportunities and building up new sources of income through the activities and positions we already have. We must have a thorough discussion in all our core areas on what can be done to focus more on this particular dimension in the company.

"Hydro's third important characteristic shall be sustainable behavior," says Reiten.

"Sustainable behavior for me is an umbrella concept for the way we operate our company as a whole. It includes our approach to the safety of our employees, our consideration of the external environment, and the way we use our research and development resources to find solutions that will improve sustainability in the long term. It is also a question of how we communicate and interact with society and our customers, and not least now we secure the economic basis on which we can develop the company further.

"With regard to safety, I am absolutely convinced that the key to improvements is to continue and develop the systematic safety work we have carried out for several years. But we have to be humble enough to adjust our course in areas where we are not good enough; we must guard against complacency and losing contact with our surroundings.

"All in all, sustainable behavior is a matter of value choices and attitudes. We should be able to look our children and grandchildren in the eye with regard to what we do and how we do it. Even if we meet many dilemmas and difficult sidetracks, we shall be in no doubt of the attitudes that are the grounds for our choices.

"Continual improvement, innovation and sustainable behavior – these are concepts that must characterize all our operations, from major development projects in the North Sea to the operation of ammonia plants in Trinidad.

"I want to foster these approaches in the company because I believe that this is the key to our future success," says Reiten.

Egil Myklebust: Getting ready for his new role (2001-05-03)