The Human Element of Ship Management
By Joseph Keefe
The best third party ship managers employ technology, good business practices, economies of scale and a customized approach for each client. None of that will succeed without first addressing the human element of the equation.
Ship managers Crowley Maritime, Thome and Bibby Ship management companies all manage tonnage for others, in sometimes dissimilar sectors and different regions and world trades. Those differences set the three groups apart in terms of the skill sets necessary to manage different classes and types of ships. What brings them all together is a common belief that the human element of ship management is a critical piece of the equation. As it turns out, it may actually be the most important.
Crowley: at home and abroad
Privately held Crowley Maritime’s global ship management team has been on a roll of late, with several notable awards in the ship management arena. A significant award from the U.S. Navy’s Military Sealift Command brought a fleet of seven T-AGOS/T-AGM vessels into the Crowley fold in December. Todd Busch, Crowley senior vice president said of the award, “The very nature of the T-AGOS/T-AGM missions demand sophisticated top management solutions and talented crews that Crowley offers.” The award creates job opportunities for existing crew members with experience on these types of vessels, as well as shore side positions, such as engineers and contracting professionals.
Closely following that award was the February 2015 news that Crowley Accord Management Pvt. Ltd., the international ship management venture managed globally by Crowley Maritime Corp.’s ship management group, was awarded full technical management contracts for five new tankers. These tankers will be joined by three more, bringing Crowley’s international ship management fleet to more than 70. Best known locally as one of the nation’s largest Jones Act operators and employers, Crowley’s reach extends well beyond the Americas.
“Crowley Accord draws on its pool of experienced resources, which are at its disposal both ashore and afloat,” said Sanjay Shesh, managing director, Crowley Accord. “We utilize proven systems based on internationally recognized quality management principles and have the flexibility to meet all owners’ needs for periodic technical and accounting reports – all things our new customers indicated were of importance to them.”
The Crowley Accord acquisition, which took place in April 2014, immediately increased the size and scope of Crowley’s technical ship management group and supported the company’s expansion into the international ship management market with a foreign crewing presence. The acquisition also made Crowley a rare U.S. company – one that provides third-party international crewing and technical ship management. Today, Crowley owns 86 vessels and manages 75 vessels.
According to Mike Golonka, vice president, ship management for Crowley, at the top of the list for qualities that a ship owner should look for when shopping for a ship management company is the search for another ship owner. He adds, “The best ship management companies are usually those who also own and manage their own fleets.” Also on that list are transparent and open communications with principals and, of course, a safety-oriented manager who will not only help to keep employees and property safe, but will also help to reduce claims and costs.
According to Golonka, the decision to outsource is typically financially driven. In most cases, outsourcing ship management services means that the owner can conduct business at a fraction of the cost, primarily due to the reduction in in-house staff and resources. He explains, “Another factor that helps to drive down the cost is the ship manager’s economies of scale, gained from the sheer volume of ships managed. As such, services and equipment are often acquired at cheaper bulk rates – savings that a transparent ship management company will pass on to the customer.”
Touting Crowley’s 120 years of varied experience, Golonka offers that Crowley is able to bring expertise to many different areas of operations and sectors – a benefit few others can offer. To ensure efficiency with all of this in-house expertise, Crowley dedicates commercial managers and a specialized staff to each customer, therefore offering tailored ship management services across nearly any sector.
In the case of Crowley, however, it is the attention given to the quality of its seafarers that may be their strongest suit. Although most of the hires in the Crowley managed fleet are direct referrals from unions, when they do recruit externally, they look for people who are a good fit culturally and want to find a place they can grow their career. Golonka adds, “One of the advantages of our diverse ship management operations is that we can hire individuals who want to work in a variety of fleets and gain a breadth of knowledge that will help them in their advancement. Alternatively, for the individuals who do prefer to ‘homestead’ with a specific fleet, and we can also offer this opportunity and promote from within.”
At Crowley, however, the offer of a job doesn’t constitute the final hurdle to walking up the gangway. “Our most critical and innovative vetting element is our Navigation Assessment Program, which requires all deck officers to complete a simulator assessment before they stand a navigation watch,” says Golonka, adding “Other post-offer vettings include physicals, drug and alcohol testing, and DOT-required previous employer checks.”
The final piece of the process, says Golonka, involves establishing clearly understood, high-quality operating procedures leave little room for interpretation and higher levels of consistency from ship to ship. As a bonus, high-quality ship management attracts and can help keep the most talented mariners, which often translates into even lower claim costs and proper maintenance on the vessel.
Both Thome and Crowley manage ships and are considered quality operators in their chosen sectors. Where they diverge in terms of business models is that Thome prefers to concentrate strictly on providing third party service. Thome’s Ashish Malik, Deputy Chief Operating Officer, Tanker Division, explained, “Ship management is a core competence that we have focused on and would like to continuously improve on, further strengthening our systems and procedures in order that these are also adaptable to accommodate the ever changing requirements of the industry.” He adds, “Owning vessels would involve a lot of focus on the commercial aspects of running the owned vessels and may lead to dilution of the focus on the continuous improvement of ship management capabilities.”
Like Crowley, Thome values integrity and transparency with its principals, but also insists that profitability varies inversely with the cost of operations. Malik told MarPro in February, “In a competitive market, the normal OPEX, as budgeted, may not vary much between one established ship manager and the other. However, the quality of ship management and crew competence influences the safety of operations, and consequently plays the essential role in prevention of incidents. That eventually makes a difference in the costs of operating the vessel.”
There are many reasons to outsource ship management. The Thome model calls for a good partnership between shipowners and the ship manager, which in turn can allow for costs to be reduced and operations improved, capitalizing on the expertise, experience and economies of scale (offering lower fixed cost / ship) that a big ship management company is able to offer. Thome’s Malik adds, “This allows the shipowner to focus more on the commercial aspects.”
Beyond all that, the shipowner gets to share the experience and learning from other vessels being managed by the ship manager, and it here that the quality of the crewing process is important. In fact, Thome manages more than one type of vessel. Malik says that different types of vessels involve various common requirements, while there are also various aspects for which the requirements are typical to the particular kind of vessel. And, he adds, “A ship management company that realizes this and is able to differentiate between the common and typical different requirements and able to address these accordingly, can be successful in different sectors at the same time; while also improving on efficiency by capitalizing on resource and knowledge sharing between different sectors, wherever this is applicable.”
And, because Thome Ship Management operates out of offices all around the globe, it gives them global reach but also cultural diversity. To that point, Malik insists, “Cultural diversity, is, in fact, our strength. We do not focus on a passport / nationality but rather our focus is on competence and attitude. With the world getting more and more connected with each passing day, it is essential for a business, particularly like ship management which involves operations all around the world, to have a 360 degrees approach in all respects. The cultural diversity enables us to understand the requirements and solutions from all angles and in general also prepares the employees better for dealing with different cultural groups outside the company.”
To that end, Thome’s Human Element drive is well recognized in industry and focuses on Quality and Safety; which Malik says go hand in hand. For example, Thome Group recently announced that it had become self-sufficient in recruiting junior officers, thanks to its in-house cadet training program.
Launched in 2005 under Thome’s “Human Element” initiative, the Thome Global Cadet Program has already trained in excess of 1,350 cadets from at least 12 countries in Asia, Europe and the Far East. Currently there are 650 cadets at various stages of training on the program with another 200 due to join soon as deck, engine, electrical or catering cadets. The success of this scheme has enabled Thome Group to fill all of its 2014 junior officer vacancies from within its own pool of trained seafarers.
Michael Elwert, Director of Group HR, HSSEQ & Crewing, said “We place a great deal of importance on our cadet program and are delighted that it is proving so successful, adding, “He added: “We at Thome Group recognize the importance of providing quality training to our seafarers and the difference it makes towards them and ultimately the performance of the vessels they operate. We believe that training is the key to operating safe and efficient ships on greener seas. The level of training we provide is specialized and is over and above the standard recommended by STCW.”
As Thome Group continues with the expansion of its fleet, the requirement for suitably trained officers to serve onboard its tankers, bulkers, gas carriers and offshore has increased exponentially. The cadet program has a robust selection process to ensure that Thome recruits well rounded candidates who benefit from quality coaching. The multi-national and multi-cultural cadets match up well the diversity with Thome Group.
Notable in the long line Thome Global Cadet Program graduates is Chief Engineer Jonathan Duenas who graduated from the very first program in 2005 and has since become Thome Group’s youngest Chief Engineer. Duenas reported, “Being able to be part of the Thome Cadet Program has not only given me an amazing opportunity, it has also given me a career that I’m passionate about. It shaped me to be a better decision maker and critical thinker.”
Industry Calls, Bibby Responds
UK-based Bibby Ship Management is seeing a near 20% increase in inquiries for its services from the offshore sector as ship owners and support vessel operators look to reduce costs and recruit the best crews for their vessels. But, those two seemingly dissimilar goals can be hard to achieve in the same fleet. Not so, says Bibby. Predictably, the trend towards lower costs is being fueled by oil majors as the slump in oil prices weighs on their bottom line.
Can managers improve service and crew quality while reducing costs? Andrew Rodden, Bibby Ship Management’s UK Managing Director says that they can, explaining, “There is a calculable commercial advantage to be made and there is a partnership between owner and manager which can benefit and improve the overall quality of the service delivered to the oil company,” he said.
In the midst of the price downturn, support vessel owners are still operating in high cost areas. Many are now looking to see if they can introduce cost savings without jeopardizing the level of service. Rodden adds, “They are looking at the OpEx of their vessels to see if they can save money from the crew employment perspective. We had one enquiry from an owner who traditionally employed high cost officers and who is now open to alternatives to man his ships while retaining their focus on quality.”
The drive to improve cost efficiencies is not just limited to the North Sea offshore sector, other high cost operators are being pressured to cut costs while maintaining operating efficiency. That’s easier said than done. But Rodden says that Bibby has the answer.
According to Bibby, the key benefit is the operational economies of scale that managers can offer, especially where there are owners with small numbers of vessels within a geographical region. They will have a shortage of options in terms of what economies of scale they can draw on to help them drive costs down, they cannot really cut their crewing costs nor can they drastically trim their travel expenditure or vessel procurement.
“Bibby Ship Management’s strength lies in its door to door, end-to-end service which will add value to the supply chain. Any ship owner can go to any company in the Philippines to get a Filipino crew, but the reality is being able to offer the security of doing all of that in-house. We manage and control that process, and we can add value at each step of the way,” Rodden said.
Rodden also says that ship managers have the ability to leverage whatever cost-efficiencies and performance improvements they are building into their shipping and marine operations onto the offshore business. Rodden adds, “An obvious area here, for Bibby Ship Management, is Mumbai in India where it has set up a strong crew recruitment, training and management operation.”
Different Ship Managers: Same Human Resources Philosophy
The decision to outsource ship management to a third party is typically a financially driven solution. And yet, a sub-standard manager can depreciate the assets, adding to the costs of outsourcing, and negating any advantage there. Often, the owner’s reputation relies on the manager’s performance, which eventually boils down to who is manning those vessels, where they came from, how they were recruited and trained. But, crew quality and financial savings need not be mutually exclusive concepts. This much, the world’s best ship managers can agree upon.
Crowley, Thome and Bibby might operate in different sectors, global regions and employ different strategies when it comes to best practices when it comes to managing their far flung fleets. The one thing that they can agree on is the need for quality mariners, a structured recruiting process and continual vetting of these personnel. Without addressing the human element first, the rest is certain to fail.
(As published in the 1Q 2015 edition of Maritime Professional - www.maritimeprofessional.com)