Client Case Study

Starting from scratch

How does a traditional forest products company establish a state-of-the-art production facility with an entirely new organisation – and all in a former Eastern Bloc country?

Mercuri Urval’s co-operation with Stora Enso shows that building an organisation from scratch is not simply about recruitment.  It’s all about defining recruitment needs based on local knowledge and a sound business understanding, as well as selecting people with the right personality and attitudes.

Stora Enso is a global paper, packaging and forest products company producing newsprint and book paper, magazine paper, fine paper, consumer board, industrial packaging and wood products.  The company’s sales totalled 11 billion euros in 2008. The group employs some 29,000 people in more than 35 countries worldwide.

In the early nineties – before Enso joined forces with Sweden’s Stora in 1998 – recycled paper emerged as a cheap alternative to wood pulp for the manufacture of newsprint paper. This made proximity to densely populated areas more advantageous than the firm’s more traditional paper manufacturing locations in forested, but remote parts of Finland. Shipping heavy paper rolls all the way to European markets was eating up already dwindling margins.

The challenge

Determined to meet the challenges head-on, Enso decided to open its first production facility outside Finland. The firm looked to the newly re-united Germany, a big market with a large population, producing huge amounts of waste paper.

The federal government offered great incentives for companies to invest in the underdeveloped former East Germany. Furthermore, the region had a surplus of well-educated engineers and technicians who had lost their jobs when Soviet-style factories failed to perform in the new, competitive environment.

On the other hand, the previously socialist eastern Germany had a deficit of business and management professionals and a workforce whose culture and mentality was shaped during decades of operating in a planned economy.

Unfamiliar with the local conditions, Enso decided to hire a German Human Resources Manager and task that person with recruiting 420 employees, following the blueprint of the traditional hierarchy of the firm’s Finnish organisation.

Several recruitment companies submitted offers in a bidding contest, after which Mercuri Urval won the contract.

Mercuri Urval’s proposed solution

Albert Nussbaum, the business consultant representing Mercuri Urval, had substantial experience from the automotive industry but knew nothing about forestry and paper manufacturing. His bid was by far the most expensive in the contest and his approach to solving problems was different from that envisaged by Stora Enso.  However, he convinced the company’s management that Mercuri Urval’s set of solutions would be the most effective.

Inspired by modern, highly competitive German car manufacturers, Nussbaum proposed a smaller, leaner, less hierarchical organisation with an emphasis on flexibility and high skill levels.

He suggested that, initially, the management team should comprise people from the former West Germany, and that local personnel from the old East Germany should be trained and supervised by engineers with experience from the paper industry, supported by specialists in state-of-the-art manufacturing.

Attracting local applicants would be easy; Enso offered great professional and career opportunities, so the real challenge would be to select the right people.

Seeing the bigger picture

Mercuri Urval always looks beyond routine résumés when comparing applicants, but in the case of local candidates for jobs with Enso, a more wide-ranging approach was essential. Mercuri Urval placed an emphasis on personality, attitude and ability to communicate, when assessing potential recruits.

The final candidates for technical positions were very well educated, but often inexperienced. Their intensive training required them to be open to the new concepts and know-how provided by specialists, as well as to the modern organisational ideas from the management team.

The new organisation needed to be horizontal, with responsibility placed as far down in the flat hierarchy as possible. Teams had to be flexible, made up of professionals who could perform several tasks, thus being able to adapt to the fast-changing needs of the operation.

Mercuri Urval selected candidates who would enjoy working and performing in this environment.

How Stora Enso became a market leader

Totalling DEM 750 million (approximately 400 million euros), Enso’s production facility was one of the largest investments by a company in eastern Germany at the time. The stakes were high and the risks great. But the new production facility in Saxony turned out not only to be Stora Enso’s most successful factory, but also a market leader within its sector. The adoption of Mercuri Urval’s recruitment and restructuring plans has played an important role in this success.

Instead of hiring and training 420 people one year ahead of the launch, as the client had originally planned, some 320 people were recruited and trained in stages, starting with the management team.

Mercuri Urval worked in close co-operation with Enso during the first two years of this German venture, and is still providing assistance to this day. Stora Enso is one of Mercuri Urval’s largest accounts worldwide.

A calculation of the return on investment revealed that the additional cost of Mercuri Urval’s involvement has yielded substantial overall gains for Stora Enso – and the process undertaken here has become a reference case for Stora Enso when launching greenfield projects.

Case Summary

The client’s key challenges:

• Creating a western-style corporate structure in a former Eastern Bloc economy.

• Overcoming a lack of appropriately trained local labour.

• The client’s lack of knowledge of local market conditions.

Mercuri Urval’s solutions: 

• To use a lean staffing structure based on a flat hierarchy.

• Initially bring in experienced management from western Germany.

• Employ local workers whose eagerness and ability to learn and work as part of a team compensated for their lack of experience.