Manning Strategies & Role of Outsourcing, Papademetriou 2005

Paper presented in the 12th International Conference on Contemporary Developments
in Shipping: Efficiency, Productivity, Competitiveness, International Association of

Maritime Economists (IAME), Limassol, Cyprus, June 23-25, 2005.
MANNING STRATEGIES IN GREEK-OWNED SHIPPING

AND THE ROLE OF OUTSOURCING
Mr George PAPADEMETRIOU, MSc in Shipping, Trade and Finance, Scholar of

‘Propondis’ Foundation, Cass Business School, City of London, 106 Bunhill Row,
London, telephone: +44.7971.106248, e-mail: G.Papadimitriou@city.ac.uk
Mrs Maria PROGOULAKI, Doctoral Student, Scholar of ‘Propondis Foundation’,

University of the Aegean, Department of Shipping, Trade and Transport, 2A Korai
Street, Chios, GR82100, telephone: +30.22710.35218, facsimile: +30.2271.35299, e-
mail: m.progoulaki@aegean.gr
Dr Ioannis THEOTOKAS, Assistant Professor, University of the Aegean, Department

of Shipping, Trade and Transport, 2A Korai Street, Chios, GR82100, telephone:
+30.22710.35265, facsimile: +30.2271.35299, e-mail: gtheotokas@aegean.gr
ABSTRACT
This paper focuses on the role of outsourcing in manning strategy.
Outsourcing in shipping is analysed, and the criterions that influence a ship manager’s
/owner’s decision for outsourcing of operations are discussed. The role of the
manning agencies, their position in the globalized shipping market, and the way they
operate is also examined. The methodology used includes a survey among Greek
owned shipping companies, conducted in the fields of shipping outsourcing and
manning strategy. Crew management as core competence in the short run, and
competitive advantage in the long run, is further examined. Additionally, the role of
human resources’ outsourcing in the general manning strategy and in the cultural
context of the shipping companies is analysed, along with the advantages and
disadvantages that can accrue for both the shipping companies and the foreign and
national seafarers.
KEY WORDS.
Manning Strategies, Outsourcing, Manning Agencies, Crews.
12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Competitiveness, International Association of Maritime Economists (IAME), Limassol, Cyprus, June 23-25, 2005.
Papademetriou G., Progoulaki M., and Theotokas I. 1

MANNING STRATEGIES IN GREEK-OWNED SHIPPING
AND THE ROLE OF OUTSOURCING
1. INTRODUCTION
The shipping industry constantly changes, and as Sletmo (1989; 1993) argues,
four stages (or waves) are defined, which represent four major turning points in the
development of the shipping industry. The first stage included industrialisation and
maritime exploration, while the second stage included the quest for maritime power.
The third stage included the flagging out of vessels, also known as the ‘deflagging’
period that contributed to the internationalisation of shipping. Flagging out from
traditional registries to the so-called flags of convenience combined capital and know-
how from OECD countries with labour from developing countries. The fourth stage,
known as the globalisation of shipping, has led to several changes in the structure of
the industry, because it is related to the growth of ship management as a distinct line
of business separated from the ownership of vessels. As Sletmo mentioned (1989), the
present role of ship management goes far beyond the concept of flagging out, since
modern ship management involves a far greater delegation of operations and
management responsibility.
Even in our days that consolidation effects are experienced in bulk shipping
markets, one basic feature of these markets remains: quite a few shipping companies
of different sizes and types of ships coexist and compete with each other in the global
freight markets, a fact that makes competition more intense. One should also take into
account that although shipping is a global industry that is regulated by a relatively
strict institutional framework, players that avoid conforming to this framework still
exist. This characteristic distorts competition within the industry. In this context, for
companies that compete with their ships in the major trade routes, competitiveness
continues to be a matter of cost, even if they succeeded in differentiating their
services in terms of quality and value creation to the customer (Theotokas and
Katarelos 2001). Thus, shipping companies show great effort in reducing operational
cost and especially manning expenses, which represent a great part of it.
The global character of shipping industry allows shipping companies to plan
and implement a global sourcing strategy, that is to design their sourcing decisions on
the basis of the interplay between their competitive advantage and the advantages of
various locations for long-term gains (Kotabe and Murray 2004). Flagging out and
employment of seafarers from the low cost countries are the primal example of this
strategy. This however demands the possession of specific information regarding the
advantages that could be gained in various locations. Leggate and McConville (2002)
state that the existence of separate markets for seafarers makes possible to distinguish
between groups in the seafaring labour force and to give them differing income. To
succeed in this, shipping companies should be able not only to locate those markets,
but also to recruit seafarers of the best possible quality, in terms of education,
knowledge, etc. In case that the company’s decision makers do not possess this
information, and the cost of acquiring it surpasses the benefits, then, contracting out
the activity to organisations that possess it becomes a strategic choice.
The strategic decision to contract out, either crew management or any other
activity, could take various forms that depend on the specific characteristics of each
company. Crew management for example, can be fully or partially outsourced to third


party management or crew agents respectively. The range of decisions assigned to
third organisations defines the level of control that the shipping company retains for
the activity that is outsourced. It has been contended that the decision of a ship
owning firm to employ third party ship management can be considered as a case of
separation of ownership and management in the shipping context (Mitroussi 2003).
This however, is strongly depended on the range of activities and decisions assigned
to third party. The case of Greek shipping companies is a very indicative one.
Greek shipping companies continue to apply today traditional models of
conducting shipping business. This is so, because the vast majority of Greek
shipowners consider shipping to be a profession and not simply an activity that brings
in an income (Theotokas 1998). Thus, they retain the absolute control of both the
strategic and the operational decisions, refusing to outsource what they consider as the
main source of their companies competitive advantage, which is the cost effective
technical management of their ships. For them, shipping operation was, and still
remains, a core competency that could not be outsourced (Harlafti and Theotokas
2004). However, Greek-owned shipping companies have followed the path mentioned
above to reduce their variable costs during the last decades: flagging out and
recruitment of seafarers from the low cost countries. What differentiated them from
other companies of traditional maritime countries is that they did not use extensively
ship management companies for this. This is the main reason for the low penetration
of the third party ship management sector in Greek shipping. Even in cases that such a
company was contracted, the main task assigned was related to the crew management
in a strategic context defined by the shipping company. Indeed, while only a small
percentage of Greek-owned shipping companies had used ship management
companies, crewing was the service that all of them had assigned (Mitroussi 2004).
This paper focuses on outsourcing of crew management functions and its role
on the manning strategies of the shipping companies. For this, it examines in more
detail the phenomenon of outsourcing in Greek shipping and the various forms that
are implemented by the companies. Section 2 introduces to the meaning of
outsourcing and its application in the shipping sector, while Section 3 analyses the
structure of the world seagoing labour market, along with the role that manning
agencies play in the market. Section 4 presents the strategic seagoing human
resources management model, which is related to the manning and outsourcing
decision. The methodology of the research follows in Section 5, while Section 6
presents and discusses the results of the survey. Finally, conclusions and suggestions
for further research are given in Section 7.
2. THEORETICAL FOUNDATION OF OUTSOURCING AND ITS

APPLICATION IN SHIPPING
Outsourcing can be defined as the process whereby activities traditionally
carried out internally, are contracted out to external providers (Domberger 1998).
Outsourcing creates risks and entails unique transaction costs that at times may
exceed the transaction costs of having the activity directly under management’s in
house control. Quinn and Himler (1996) contend that to address these difficulties
“managers must answer three key questions about any activity for outsourcing. First,
what is the potential for obtaining competitive advantage in this activity, taking
account of transaction costs? Second, what is the potential vulnerability that could be


arisen from market failure if the activity is outsourced? Third, what can we do to
alleviate our vulnerability by structuring arrangements with suppliers to provide
appropriate control yet provide for necessary flexibilities in demand?” Thus,
outsourcing decision is strongly related to the identification of company’s core
competencies, that is “the collective learning in the organisation, especially how to
coordinate diverse production skills and integrate multiple streams of technology”
(Prahalad and Hammel 1990). Core competencies approach seeks to answer three
questions (Arnold 2000). First “Is the activity highly specific?” This is because
specificity is closely related to strategic importance of a transaction, which means that
activities with high specificity are unprofitable to outsource. Second, “Is the activity
strategically important?” There are activities that are vital for a company’s survival,
for that reason should not be outsourced. Third, “Is the activity a core competence, a
central part of competitive advantage?” There are activities that cannot provide any
competitiveness. A competitive advantage must be unique over time and imitable, viz
sustainable.
In order to outsource intelligently a firm must assess the benefits and risks of
outsourcing. Quelin and Duhamel (2003) examine the main motives and risks of
outsourcing, which scholars and practitioners have identified. The motives/ benefits
are to reduce operational costs, to focus on core competencies, to reduce capital
invested, to improve measurability of costs, to gain access to external competencies
and to improve quality, to transform fixed costs into variable costs and to regain
control over internal departments. On the other hand, the main negative outcomes
include dependence on the supplier, hidden costs, loss of know-how, service
provider’s lack of necessary capabilities and social risk. Even though outsourcing
should be a result of a strategic analysis, very often companies focus on the cost
savings without gaining the expected results. This is because several issues that are
involved in the decision to outsource an organisation’s resource are not considered.
Lankford and Parsa (1999) mention that companies should consider outsourcing when
it is believed that certain support functions can be completed faster, cheaper or better
by an outside supplier. Tasks that are not core competencies of the organisation are
candidates for being contracted out. They also identify as key items to analyse in the
decision to outsource the scale economy, the outsourcer expertise, the short and long
term financial advantage from the sale of resources, the inability to manage the
function, the strategic realignment and the need to focus on the core business.
Two generic types of outsourcing can be identified (Gilley and Rasheed
2000): peripheral outsourcing and core outsourcing. The first type occurs when firms
acquire less strategically relevant, peripheral activities from external suppliers. The
second type occurs when firms acquire activities that are considered highly important
to long-run success. Moreover, Arnold (2000) introduces three alternative ways in
respect with the outsourcing decision. As illustrated in Table 1, with regard to the first
option (in-sourcing) the company decides to provide the product/service in-house.
The second alternative is the ‘internal outsourcing’, which means that the mother-
company can outsource an activity to another subsidiary for several reasons. For
instance, quite a few companies establish subsidiaries in the Far East so as to take
advantage of the cheap labour force. Additionally, the last option is the external
outsourcing, which states that the firm decides to use third party companies in order to
fulfil a managerial function.


Table 1: Structural alternatives of outsourcing
In-sourcing Internal Outsourcing External Outsourcing
Long term co-
Alliances with “Spot
“Make” it Establish operation with
specific terms transaction” with
in-house Subsidiary third party
and conditions external suppliers
companies
Source: Inspired by Arnold (2000), p. 23-29.
In the shipping industry outsourcing became a feature after World War II, with
the development of ‘flags of convenience’ (Klikauer and Morris 2003). Rojas et al.
(2004) argue that the long period of ruinous economic competition in the shipping
industry had far reaching effects on capital, management and labour. Regarding
capital, a spate of corporate mergers and takeovers across national boundaries was
provoked, and a number of transnational corporations evolved. In respect of
management, it led to the increased importance of ship management and crewing
companies providing specialist management and labour recruitment services to
owners. In respect of labour, transnational employers reduced variable costs by
intensifying the exploitation of labour through reduced crewing levels, extended
working hours and registering vessels under ‘flag of convenience’ associated with
lower regulatory costs, weak labour rights and lower wage levels. These effects have
either promoted outsourcing as a strategic choice for the shipping companies or have
been promoted by the expansion of outsourcing as such. Shipping outsourcing can be
defined as “the assignment of managerial operations to third party –ship management-
companies instead of providing those services in-house”. The development of third
party ship management and of outsourcing was parallel and interdependent. Panayides
and Cullinane (2002) examined outsourcing in shipping in the form of vertical
disintegration of ship ownership and management. By adopting the transaction cost
approach they perceive that the strategic objective of outsourcing should be to
minimise the total costs of receiving the given services at a given quality, that is to
minimise the costs of production, the bargaining costs and the opportunism cost.
Production is considered as the most significant one.
There are several shipping services outsourced to third party firms like legal
support, marine insurance, manning, Information Technology, chartering, technical
management, accounting, and others (Papadimitriou 2003). More specifically,
outsourcing has been used for several human resource management functions, such as
recruitment and employment of personnel. In this context, the profession of manning
agent has been developed substantially during the last decades, forming a discrete
category within third party management sector. This is owed to the fact that shipping
companies strive to exploit the advantages of the global seagoing labour market by
outsourcing functions related to crewing, such as selection, recruitment and training.
Shipping companies do not develop such functions not only because they do not have
the ability and the necessary related know-how, but mainly because these are
functions that are not profitable to develop. It is believed that, outsourcing offers
increased performance and efficiency, due to economies of scale. Economies of scale
cannot be achieved by small businesses, while they also lack other advantages, such
as professional expertise and know-how.
By adopting Arnold’s (2000) model, regarding the structural alternatives of
the outsourcing decision in the shipping industry, we can end up with the assumptions


that a ship management company can either produce a managerial function in-house
(in-sourcing), or outsource some managerial activities to another subsidiary of the
group, or assign some specific functions to external suppliers. In common practice,
there might be a combination of these three methods, since a shipping company
controlling nine ships for instance, can provide internally some services like
operations, technical support, chartering, financial services (in-sourcing) and others,
assign to an established subsidiary in Manila the crew manning and to another
subsidiary in London the marine insurance service (internal outsourcing), and
outsource to a third party supplier the legal services and the IT support (external
outsourcing).
3. STRUCTURE OF THE SEAGOING LABOUR MARKET AND THE ROLE

OF MANNING AGENCIES
3.1 The world seagoing labour market

According to the latest statistics (BIMCO/ISF 2000; OECD 2003) regarding
the world supply of seagoing labour, the total supply counts 1.227.000 seafarers. The
statistics show that the centre of seagoing labour supply is not any more the traditional
maritime countries, but East Europe, India and Far East. Seafarers coming from the
OECD countries represent 27.5% of the world seagoing labour in the year 2000, while
in 1995 they represented a 31.5%. As Li and Wonham (1999) comment on the
BIMCO/ISF Report of 1995, while some traditional maritime nations, such as Japan,
United States of America, Germany, Norway and Greece, continue to face problems
in recruitment of their national seamen to man their flags, some traditional maritime
nations, such as United Kingdom, Italy, Canada, Poland, Spain, Australia, and France,
have become important suppliers of officers on ships flying foreign flags.
In the first place of the ten top labour supplying countries are the Philippines,
with 19%. The rest countries are Indonesia, Turkey, China, India, Russia, Japan,
Greece, Ukraine, and Italy. In general, the 36.6% of seafarers’ supply is concentrated
in Far East Asia, while 27.7% includes Japanese, Europeans and North Americans.
Moreover, East-Europeans represent the 16.8% of the world seagoing labour market,
Indian and Pakistani represent the 10.2%, and, last come the Africans and Latin-
Americans with 8.7%. Apart from the quantitative way of describing the world
seagoing labour, there is also the qualitative.
Quality of labour can be measured by the education or experience. Seafarers
with long experience on ships have an informal training, as seafarers who have
attended formal educational courses. Although it has been found that 60% of Officers
and 77% of Ratings from OECD countries believe that the training of seafarers in
their country is inadequate (OECD 2003), it should be recognised that most Officers
from the traditional maritime regions are well trained and educated, and are also, the
most expensive seafarers. On the other hand, seafarers from developing countries,
who are mostly ratings, are insufficiently or not trained at all. Their experience is
progressing, by working on ships with the flag of their country or other. The
qualifications of a great number of them might be questioned, not only because of
lack of training, but also because of falsification of certificates, a matter that should
also be considered, and which needs further examination. According to Obando-
Rojas, Gardner and Naim (1999), the key to achieving a balance between officers


supply and demand lies in the level of recruitment and in job retention. Recruitment is
related to career plan and training, while job retention is related to job satisfaction,
health and employers’ attitude.
3.2 The role of manning agencies

Lane (2000) mentions that what apparently characterises the global labour
market is simultaneously its global inclusiveness and its global organisation of
recruitment. He comments that while among crew managers there is an hierarchy of
preferred nationalities, all available nationalities are regarded as potentially
employable and recruitment to ships is organised by a dynamic system of globally
trading manning companies. Manning agencies, either as subsidiaries of ship
management companies, or as independent entities, have the main responsibility of
selecting and recruiting seafarers. As seen in the upper layer of figure 1, the seafarer
seeks for a job through several networks. During his/her initial training in Marine
Academies, he/she tries to obtain experience by working on ships as a cadet. Marine
Academies often co-operate with shipping companies (owners or managers), agents,
and even trade unions, in order for the students to be hired. Seafarers who are
members of trade unions often find jobs via this network. A seafarer may contact a
manning agency in order to apply for a job, the Seafarers’ Employment Agency of
each country of origin (which refers to the Greek Ministry’s National Seafarers’
Employment Agency, in the case of Greece), or even contact directly a ship managing
company or a ship owning company. This distribution to organisation types that
contribute to the supply and demand chain is similar to the one developed by Glen
and McConville (2001). Their categorisation included shipping and ship management
companies, manning/crewing agencies, port authorities, educational, other, and
unknown sources. They showed that the first three types were mostly contributing to
the system, with regard to the number of hired seafarers and the duration of
employment.
Marine Academy
Trade Union
National Seafarers'
SEAFARER Employment Agency
Manning Agent
Ship Manager
Ship Owner
1. In-house Crew Department

owner manager
2. Subsidiary Manning
SHIPPING Agency seafarers
COMPANY (native/ foreign)
owner and 3. Independent Manning
operator Agency
Figure 1. Maritime Labour Supply and Demand Chain: The side of the seafarer and
the shipping company


From the other side of the coin is the shipping company, either an owner who
uses third party ship management, or an owner-operator. The managers/ operators
have three alternatives available in order to hire seagoing personnel. These three
alternatives that may be used in combination, include (a) managing the whole process
of recruitment/hire through the in-house operated Crew Department, (b) establishing a
Subsidiary Manning Agency, (c) employing an Independent Manning Agency. The
In-house Crew Department is a vital part of the ship operating company (either owner
or manager), which among its rest duties, seeks for seagoing personnel. The
Subsidiary Manning Agency is an agent or affiliated company to the ship manager/
owner, either in the inland or in a foreign country, which often is positioned in East
Europe or/ and Far East. Finally, the Independent Manning Agency can also be a
single agent or a company who often is positioned in the major seafaring labour
supply countries. As it has already been mentioned, it could also be an independent
ship management company that offers a wide range of services. It is common for
many shipping companies to recruit foreign seafarers with the use of a manning
agency, and native seafarers through the Crew Department. The applied policy
depends on several factors, which are going to be discussed later on.
It is believed that manning agencies offer valuable services in the world
shipping industry, as an intermediate between seafarers and shipping companies.
Their role in the context of the global shipping and seafaring markets has been
substantial in reducing the transaction cost and the risk for both seafarers and
companies. This role has grown so much, that so the operating companies, as the
seafarers themselves, have a dependent and conditional relationship with the agents.
The performance of shipping operators is affected by the seafaring manpower
provided by the agents.
Manning agencies offer several kinds of services to both individual sailors and
shipping companies. On the one hand, they may offer one or more of the below
mentioned services to ship operators:
(a) Crewing services, which include the selection and casting of seafarers from
one or more regions, according to the requirements of the co-operating ship
operator;
(b) Documentation services, which include all the related activities regarding the
seafarers’ certificates and documentation for employment, on-time travelling
on ship;
(c) Support services, such as incorporation of seafarers, remittance, resolution of
problems and differences, and others;
(d) Informational services, which include information of the operators regarding
factors affecting the supply and demand of seagoing labour market.
On the other hand, manning agencies assist individual sailors by offering one or more
of the below mentioned services:
(a) Informational services, which include information regarding the offered places
in the market, description and reliability of the potential employer, legal
support and clarification regarding the contracts;
(b) Support services to seafarers and families, such as traveling on ship,
certifications and documentation, training, and contact with family,
remittances and information in emergency cases;
(c) Career services, which include a stable relationship, future recruitment,
contractual support, and others.


There is a large proportion of scholars and organisations that examine
manning agencies and the role that they play in the seagoing labour supply system. As
Cooper (2000) mentions, the instability of the industry is strongly affected by the role
of agents, since manning agencies create a working environment, which promotes
insecurity, stress and poor motivation among seafarers. The quality of the offered
services by a certain percentage of manning agencies has been questioned several
times, this owed to the fact that very often agents are involved in the recruitment of
seafarers with fraudulent and falsified certificates. Rubullah (2003) also mentions that
manning agencies have been involved in several cases of employment of seafarers on
substandard ships and abandonment of seafarers in foreign ports. Wu (2004) and
Amante (2004) have discussed the illegal activities of several manning agencies in
China and the Philippines. We could then speak of the substandard agents, those that
are offering services such as falsification of seafarers’ certifications, employment
under illegal charges, ‘watch’- and ‘black-listing’ of seafarers. The problematic and
illegal in many cases, operation of several manning agencies is part of the clouded
and dark side of shipping, which exists along with the substandard ship operators and
substandard ships. Recognizing the issue, ILO (2002) supports that manning agencies
should be supervised and prohibited from using means, mechanisms or lists intended
to prevent or deter seafarers from gaining employment. Also it supports the idea that
strict laws and regulations should be enforced, in order to ensure that no fees or other
charges for recruitment are disbursed directly or indirectly, in whole or in part by the
seafarers.
4. MANNING AND OUTSOURCING MODELS

The knowledge of the maritime labour supply chain management and the role
of all stakeholders can provide the basis for the effective management of maritime
labour. Manning costs are considered as an important part of a ship’s running
expenses, representing the 33%-50% of the operational cost (Willingale 1998). The
significance of crew costs varies with different types of shipping operation
(Sambracos and Tsiaparikou 2001). One should take into consideration that in the
tramp shipping industry the level of running expenses makes the reduction of
manning costs, the basic way of achieving savings. The globalized character of the
seagoing labour market offers the advantage of being able to hire the best from any
nationality and the most cost saving. Of course, one can suppose that the economies
of scale, achieved by ship operators with large requirements in sailors, assure a
greater advantage. This is because large shipping companies have the economic
ability to operate personnel departments and to employ manning agencies in a
worldwide basis, in order to satisfy their large manpower requirements by using a
variety of nationalities. Furthermore, they have the ability to create, operate and
maintain a network with manning agents, trade unions and marine academies. For that
reason one could also support the idea that most small ship operators collaborate with
manning agencies or ship management companies for the crewing part of their small
fleet. This idea is questioned and examined during this survey. As Lane (2000)
argues, the global shortage of experienced and well-trained senior officers gives this
sector of the labour market at least medium term stability. Moreover, the calculation
as to which nationalities to select involves a trade off between price and efficiency
that is cost of seafarers’ remuneration and level of performance, according to their


training and education. These two features affect the decision of, not only which
nationalities to hire, but also which outsourcing suppliers to choose.
The company’s strategic seagoing human resource management model by
which the manning strategies are defined is depicted in figure 2. Each company
follows a strategic human resource management (SHRM) plan, which is strongly
influenced by environmental factors, externally and internally of the shipping
company.
EXTERNAL
FACTORS
-Supply of Labour Market
-Demand of Labour Market
-Cost of crew
-Freight Rates
-World Trade long-term
-Oil price
-National and International
Regulations
-World Merchant Fleet In-House
-Technological changes and (insourcing)
automation
In- Outsourcing
HR ALTERNATIVES
HR ACTIVITIES (internal outsourcing)
COMPANY SHRM single nation/ multination
partially/ fully
native nationality/ foreigner
Out- Outsourcing
(external
outsourcing)
INTERNAL FACTORS
- Company's competencies
-Company's Strategy short-term
-Vessels' type
-Vessels' flag
-Economies of Scale
-Chartering Strategy
-Company's Social
Responsibility
-Size of fleet
-Age of fleet
-Vessels' Technology
Figure 2. Strategic Seagoing Human Resource Management Model
In order to cover the need for manpower, the shipping company searches all the
alternative options. The alternatives that the company has, regarding the seagoing
personnel include all nationalities, so the native nation of the ship owner/ manager, as
all foreign nations. The crew manager (company or manning agent) can choose
between a single national crew, and a multinational one. For instance, in the case of
the Greek-owned shipping, the manning alternatives that exist are: Only Greeks
(GR1), Mixed Crew of Greeks and Foreigners of One nationality (GRF1), Mixed
Crew of Greeks and Foreigners of many nationalities (GRF), Only One Foreign
Nationality (F1), and Mixed Crew of many foreign nationalities, but Greeks (F).
At this point, the range of seagoing human resource management functions
that the company is willing to undertake or develop is decided. As human resource

activities, are defined the choice of crew synthesis or nationality mix, the selection
and casting of seafarers, recruitment, incorporation, training and education of
seafarers, evaluation and wages. The next step includes decision on the organisation
of these activities, that is, whether they will be organised in-house or assigned either
partially or fully to a third party. The relationship between the company and the third
party defines the type of outsourcing, which, in accordance with Arnold’s (2000)
model can be internal outsourcing or external outsourcing (also known as ‘in-
outsourcing’ and ‘out-outsourcing’, respectively). The type of relation defines the
company’s partner/ partners. These can be an independent agent/ manning agency, or
an affiliated crew department, either in the inland or in a foreign country. It should be
noted that in deciding the optimum choice, the company has to evaluate all factors
presented in more detail in the above analysis. The advantages of outsourcing can be
noticed in operational or strategic level, or even in both. As Lankford and Parsa
(1999) allege, operational advantages usually provide for short-term trouble
avoidance, while strategic advantages offer long-term contributions in maximising
opportunities.
Each decision regarding the organisation of HR functions creates different
commitments for the company and engages investment in resources. Seen from this
point of view, in-house development engages both decision management and decision
control and demand investments in human resources and capital. In this case the
company internalises the greatest part of relevant transactions and thus, undertakes the
inherent risk. The company should be willing to undertake these costs only in case
that a long run perspective is adopted. Internal outsourcing demands also investment
in human resources and capital. It can be considered however as a diversification
strategy, as it allows the company to participate competitively in the market by
offering services to other companies. Finally, external outsourcing creates an initial
cost, related to the decision-making itself and the choice of the supplier, but
afterwards the relationship is regulated by the contract, so is the commitment for the
company. The length of the contract defines the perspective of the relationship and the
commitment. In all matters, companies should manage the relationships in a way that
facilitates close partnerships with the service providers (Klaas, McClendon and
Gainey 2001).
5. METHODOLOGY OF RESEARCH
The aim of this research is to explore the way Greek-owned shipping
companies perceive and manage the manning issue. The preceding analysis indicates
the following hypotheses that are going to be examined:
1. Ship operators outsource crewing activities that relate only foreign seafarers.
2. Ship operators outsource partially/ horizontally HR crewing activities.
3. As the size of the fleet grows, ship operators choose less to outsource HR
activities.
4. HR outsourcing decisions are strongly affected by the implemented manning
strategies.
5. When Greek shipping companies outsource crew management, they retain the
strategic control of this activity.
For this, a field survey was conducted among the Greek-owned shipping
companies. The methodology followed included the development of a specifically


designed questionnaire that was sent to 34 Greek-owned shipping companies, located
in Piraeus, representing about 5% (34/733) of the total number of Greek-owned
shipping companies. The response rate (29/34), which reached around 85.3%, gives
the opportunity for a detailed examination of the initial hypotheses of the research.
Data was collected via e-mail and personal telephone contacts during the period of
December 2004. Respondents hold a senior position at shore, either as crew
managers, or general managers. The analysis of the Revealed Preference Data (RP
Data) from the questionnaire was conducted with the Statistical Package for Social
Sciences (SPSS).
Definition and grouping of the sample is based on the categorisation made by
Petropoulos (2004), who divides the Greek-owned shipping companies in the
following groups: 1-2 ships, 3-4, 5-8, 9-15, 16-24 and 25+. Following Spruyt (1990)
who supports the idea that for companies with a fleet size somewhere below 12
vessels diseconomies of scale emerge, we use categorization proposed by Petropoulos
and divide the Greek owned shipping companies to three groups. These groups are
Small-sized: 1-8 vessels, Medium-sized: 9-24, and Large-sized: more than 25 vessels.
Statistics on the number and size of Greek-owned shipping companies show that out
of 733 companies, 607 manage fleets of 1-8 ships, 95 manage fleets of 9-24 ships, and
31 manage fleets of more than 25 ships (Petropoulos 2004).
The sample consisted of 15 small-sized, 8 medium-sized and 6 large-sized.
The descriptive statistics analysis shows mean 13.7 vessels, with minimum two and
maximum 51. The 29 respondent shipping companies represent a total fleet of 397
vessels, which constituted almost 12% of the total number of Greek-owned ships.
With regard to the specialisation of the ships, the companies’ fleet consisted of
tankers (42%), bulk carriers (37.5%), containers (9.4%), cargo ships (8.3%) and other
types of ship (2.8%). The sample is representative of the Greek-owned fleet.
6. RESULTS AND DISCUSSION
6.1 Manning strategies

The matter of manning strategies was initially examined regarding the current
and past implemented manning policies. The alternatives were single national or
multinational crew mix, with native or/and foreign nationalities. For the purpose of
the analysis, manning strategies include: (i) only Greeks (GR1), (ii) mixed of Greeks
and foreigners of one nationality (GRF1), (iii) mixed of Greeks and foreigners of
many nationalities (GRF), (iv) only foreigners of one nationality (F1), (v) mixed of
many nationalities, but Greeks (F), and (vi) other option. Results are summarised in
the following table 2, and show that the most common implemented policy is the
combination of two nationalities, one native (Greeks) and one foreign. It is quite
interesting from the perception of cultural mix to take account of the fact that the
synthesis of two foreign nationalities (F2) is perceived as an alternative from several
companies. One should note that the single native crew (GR1) has been used in the
past, but is totally overruled nowadays. The most important point to consider is that
the single foreign crew is a policy that has been increasingly chosen nowadays. Table
3 compares size of companies and currently implemented manning strategy. It seems
that size does not affect the decision of crew synthesis.


Table 2. Implemented manning strategies: Past- Present
(%) GR1 GRF1 GRF F1 F Other/ N/A
Past 25 34 16.1 10.7 7.1 7.1 (N/A)
Present 0 47.4 18.4 23.6 5.3 5.3 (mix of two foreign)
Key: GR1: Only Greeks, GRF1: Mixed of Greeks and Foreigners of One nationality, GRF: Mixed of
Greeks and Foreigners of many nationalities, F1: Only Foreigners of One nationality, F: Mixed of
many nationalities, but Greeks. Note: It was allowed to give more than one answer. Analysis of
summaries of separate variables is presented in percentages.
Table 3. Manning strategies according to company size

Manning Strategy/ GRF1 GRF F F1 Other
Size (F2)
Small (1-9 vessels) 8 3 1 3 1
Medium (10-24 vessels) 5 1 1 4 0
Large (>25 vessels) 5 3 0 2 1
Total 18 7 2 9 2
Key: As above, F2: mix of two foreign nationalities. Note: Manning strategy ‘GR1’ is excluded
because it is not applicable. It was allowed to give more than one answer. Analysis of summaries of
separate variables is presented in values.
The reasons that companies may change their manning strategy are mainly in
order to reduce operational cost (36.5% of the companies’ sample), for improvement
of crew’s working performance (25.8%), due to a change of registry (13.6%), which
is strongly related to the attempt for reduction of operational and manning expenses,
for commercial reasons, such as the charterers’ requirements (13.6%), for political
reasons (3%), for outsourcing all range of crewing activities (3%), due to lack of
Greek seafarers (2.5%), and a missing value- refusal to answer (2%).
The companies that recognise the need for improvement of the working
performance, in parallel with the need for quality and safety, often choose to man a
ship with low cost seafarers of a sole culture-nationality. The following figure 3
shows the nationalities that man the 397 vessels of the sample.
Other nations
3 Greeks
Indonesian 23
2
Romanian Ukrainian
3 12
Sri Lankan
Chinese
1
2
Bangladeshi
Polish
1 Filipino
4
Bulgarian 22
Russian
4
3
Note: It was allowed to give more than one answer. Analysis of summaries of separate variables is
12th International
presented in values Conference
(sum: 80). on Contemporary Developments in Shipping: Efficiency, Productivity,

Figure 3. Nationalities manning the fleet of the survey
Regarding the labour supply sources, the Philippines and the East-European
country of Ukraine are the most common in use, as the world statistics of BIMCO/ISF
(2000) also confirm. It is quite interesting to note that Greeks are positioned on board
as Senior Officers in most of the cases that the flag of the ships is not Greek. The
results show that in a total of 29 answers, 18 (representing 62.1%) recruit Greeks in
non-Greek-flagged vessels, 8 (that is 27.6%) do not hire Greeks, and 3 values (10.3%)
were missing. Greeks are hired mostly in a combination of Master A and Engineer A
(44%), Master A and B (20%), Master A (12%), Master A, B, and Engineer A, B
(12%) or Master A, B, Engineer A, B and Cooker (12%). Moreover, a further research
is needed to examine the combination of nationalities in the several crew syntheses. In
a total number of 38 cases- answers (as it was allowed to give more than one answer)
regarding the present implemented manning strategy, the results show that in GRF1
manning strategy, Greeks co-operate mostly with Filipinos (14/18) or Ukrainians
(7/18), as it is also the case in GRF strategy. Furthermore, single foreign nation crews
are manned mostly with Filipinos (7/9), Ukrainians or Chinese (2/9), while in
multinational crews without Greeks, the most common co-workers are Ukrainians,
Polish, Filipinos and Bulgarians. Finally, the perceived from the companies as
alternative manning strategy, was a combination of two foreign nationalities, where
the dominant nation was Filipino. The results are summarised in table 4.
Table 4. Manning strategies and nation combinations

Nations/ UKR CHI POL FIL BUL ROM No. of
Syntheses cases
GRF1 7 2 3 14 3 2 18
GRF 3 1 0 6 1 0 7
F1 2 2 0 7 1 0 9
Other: F2 FIL-ROM, FIL-BUL or FIL-CHI 2
F 2 0 1 1 1 0 2
Key: UKR: Ukrainian, CHI: Chinese, POL: Polish, FIL: Filipino, BUL: Bulgarian, ROM: Romanian.
Note: Manning strategy ‘GR1’ is excluded because it is not applicable. Due to multiple-choice
question, analysis of summaries of separate variables is presented in values.
6.2 Outsourcing decisions and HR activities

In order to define the strategic decisions regarding outsourcing of HR, the
operation of crew department and the co-operation with a partner for HR activities are
examined. The majority of the respondents (25/29, representing 86.2%) operate a
crew department, with mean number of personnel 3.5, minimum 1 and maximum 10
persons. In the cases where a crew department does not exist, HR activities are
operated by the operation (3/4) or technical (1/4) department of the company. As
presumed, size of fleet affects the number of persons working in the crew department.
However, size does not affect the decision to outsource. All respondents, except one
company operating a nine-BC-fleet, choose to outsource HR activities. Company’s
size however, is a dimension that strongly affects the type of outsourcing. Therefore,
from the 28 positive respondents to outsourcing (representing 96.6% of the total
sample), the vast majority co-operates with an agent/ manning agency (71.4%), while
28.6% own a subsidiary company. More specifically, 45.2% co-operate with an
agent/manning agency abroad, 26.2% with a Greek agent, 21.5% operate a subsidiary

manning company abroad, and 7.1% operate a subsidiary manning company in
Greece. This multiple-choice question was analysed with summaries of separate
variables and is presented in percentages. One should note that in the case of a
subsidiary manning agency abroad, the region of the Philippines (Manila) is chosen,
while in the cases of an independent agent abroad, the regions of the Philippines and
East Europe (Ukraine, Poland, Russia, Bulgaria, Croatia) are mostly preferred. The
following table 5 shows how size affects the decision on the type of outsourcing of
HR activities. One should take into consideration that it was allowed to give more
than one answer, since all companies, not only in the shipping, but also in other
industries, may choose a combination of outsourcing and in sourcing strategies.
Thereby, In-house is a common policy, along with external outsourcing, so inland
(Greece) and abroad.
Table 5. Outsourcing and In sourcing decisions according to company size.

In- Outsourcing
House Internal outsourcing External outsourcing No out-
(crew or Subsidiary Subsidiary Agent Agent sourcing
Size other GR Abroad GR Abroad
dept.)
Small 11 1 3 7 10 0
1-9 vessels
Medium 8 2 3 3 3 1
10-24 ves.
Large 6 0 3 1 6 0
>25 vessels
Total 25 3 9 11 19 1
Note: Analysis of summaries of separate variables is presented in values. For that reason, Total of ‘in-
house’ is 25/29. The rest four do not in-source. Total of outsourcing (all four types) is 42 answers from
28 respondents, because it was allowed to give more than one answer, due to a combination of
implemented outsourcing policies. Finally, only one respondent of the 29 does not outsource at all.
Furthermore, it is quite interesting to examine how the HR activities are

managed by this combination of out-sourcers and in-sourcers. Table 6 presents the
basic HR activities (Fisher, Schoenfeldt, and Shaw 1996; Harris 2000; Progoulaki
2003), plus the choice of crew synthesis/nationality of seafarers.
Table 6. HR activities managed with In- and Out-Sourcing.

In-Sourcing Out Sourcing
HR (Crew or Internal External
Activities other dept.) (Subsidiaries) (Agents)
1. Choice of crew synthesis/nationality 16.5 11.4 4.8
2. Selection/ casting of seafarers 15.8 25.7 27.4
3. Recruitment of seamen 20 14.3 15.5
4. Incorporation of seamen 16.5 20 20.2
5. Training-Education of seamen 11.5 22.9 20.2
6. Evaluation - Wages of seamen 18.7 5.7 7.1
7. Other 1 0 4.8
Total (%) 100 100 100


Note: It was allowed to give more than one answer. There were companies that performed in house and
assigned to agents the same activity. Analysis of summaries of separate variables is presented in
percentages. Other HR activities mainly include: issues of certificates, Visa, and other documentation,
and hospitalisation and medical treatment of seafarers.
It seems that the choice of crew synthesis is not always a matter of the crew
department, even when this activity is in-sourced. This decision is often taken by the
senior managers of the company. The activity that is less in-sourced is training and
education of seafarers, as this is strongly connected with the ability to exploit
economies of scale, while the most common in-sourced activities are recruitment of
mostly natives-Greeks, and evaluation-remuneration of all seafarers. In case of
outsourcing, the manning decision (selection of crew synthesis/nationalities) is rarely
taken by the co-operating independent agent. Agents and manning agencies are
responsible mostly for the selection, recruitment and training of seafarers. In most
cases of internal outsourcing and the existence of subsidiary companies either inland
or abroad, the subsidiary offers services exclusively to the parent company (81.8%),
and very rarely do they offer services in third competitive companies (18.2%).
Outsourcing Suppliers (internal and external) in general offer services mainly related
to foreign seafarers (89.3%), and less regarding both the natives/Greeks and
foreigners (10.7%), while they never offer services related only to Greek sailors.
Finally, in most cases, outsourced HR activities concern the total fleet of the company
(92.9%), and rarely specific company’s vessels (7.1%).
6.3 Manning strategies and the outsourcing decision

In a recent research (Progoulaki 2003) regarding the influence of manning
strategy in the outsourcing decision, the results showed that in the cases of HR
outsourcing and the existence of a partner (either subsidiary company or independent
agency) the most common implemented manning strategy was ‘GRF1’, followed by
‘F’, and finally came ‘GRF’ and ‘F1’. The current survey shows that ‘GRF1’ manning
strategy preceded again with a great difference, compared to ‘F1’ and ‘GRF’ that
followed. Last came ‘F’ and ‘F2’ (combination of two foreign nationalities) manning
strategies. It is important to note that single foreign national crew (F1) is a strategy
that spreads very quickly, and in contrast to ‘GRF1’ ‘GRF’ influences adversely the
Greek seagoing manpower. The following table 7 presents in more detail the
correlation of implemented manning strategy and choice of internal and external
outsourcing.
Table 7. Manning strategies and outsourcing decision

Internal Outsourcing External Outsourcing
Manning strategy Subsidiary Subsidiary Agent Agent
GR Abroad GR Abroad
GRF1 2 5 6 12
GRF 1 3 3 6
F1 0 4 2 7
F 0 0 2 0
Other: F2 0 1 0 2
Note: It was allowed to give more than one answer. Analysis of summaries of separate variables is
presented in values. Manning strategy ‘GR1’ is excluded because it is not applicable.


Results show that in the case of a single nationality crew, Greeks are totally excluded
and in order to find seamen, mostly an independent agent is contacted, and less a
subsidiary is created. Also, in the case of a crew mix with Greeks and foreigners of
one or more nationalities external outsourcing and independent manning agents are
mostly preferred.
In sum, and regarding the confirmation of the basic initial hypotheses, ship
operators outsource crewing activities that relate mostly foreign seafarers, because of
their manning strategy and the world trend to hire low-cost seafarers. Moreover, ship
operators outsource vertically HR crewing activities, which means that more often
recruitment, incorporation and training services are outsourced. Size does not affect
the decision to outsource, it affects however the type of outsourcing that is chosen. All
respondents, except one small-sized company, choose to outsource HR activities. It is
important to note that single foreign national crew (F1) is a strategy that spreads very
quickly the last years. In this case, and in order to find seamen, the most common
practice is to contact an independent agent, rather than create an affiliated company.
This feature, in combination with the related results per fleet size, conclude to the fact
that the hypothesis that size affects pro rata the decision to out-outsource HR
activities, is not confirmed. Also, in all cases of multinational crew, and despite the
fleet size, independent agents are mostly preferred. However, large-sized companies
assure a greater advantage, because they have the economic ability to operate
personnel departments and manning agencies in a worldwide basis. Finally, the
hypothesis that even when a Greek owned shipping company outsources crew
management, it retains the strategic control of the activity, has been confirmed. In
most of the cases the most important decision, that of crew synthesis’ choice, remains
with the company.
7. CONCLUSIONS, LIMITATIONS AND SUGGESTIONS FOR FURTHER

RESEARCH
The results of this survey offered a wide field for discussion on the strategic
decisions of shipping companies about their seagoing personnel. This study identified
current outsourcing strategy trends and practices for a characteristic sample of Greek-
owned shipping companies. This is a first attempt to outline the strategic decision of
outsourcing HR in the field of shipping companies.
The strategic partnership with suppliers, who –at this case- are manning
agencies, can be a leading factor for shipping companies in building competitive
advantage. The ship operators need to have a leading role in the maritime manpower
suppliers’ network, in order to be able to secure a level of quality of seafarers, apart
from a sufficient quantity of seafarers. This is feasible, via the in-outsourcing method
that is already mentioned. This is becoming more urgent due to the arising arguments
that manning agencies are currently contributing towards wastage of maritime
manpower (Cooper 2000; Lane 2001). Lane (2000) argues that the global shipping
industry is already in a manpower crisis, and that good training, education and
certification may be available for officers and ratings, though only in insufficient
number and in few regions. He finally suggests that the solution to this crisis is in
training and education, and a global regulatory system. At this point, ship operators
should ask themselves what are the benefits of outsourcing activities. If the answer is
only ‘cost saving’, then may be they have more to learn from other industries (Arnold


2000), where managers take also advantage of quality, time and flexibility. Of course,
outsourcing of human resources differs from outsourcing of equipment or spare parts,
but shipping companies –maybe the large firms most- have the ability of managing
effectively the global manpower and multicultural crewing in a long-term strategic
plan; it is only a matter of priorities. As recent researches mention, Greek ship owners
and operators refuse to outsource what they consider as the main source of their
companies’ competitive advantage, which is the cost effective technical management
of their ships, though crewing is the service that all of them assign. This means that
management of seagoing personnel is not considered as a vital part of the strategic
management of the company, despite the fact that manning expenses represent a big
ratio of running expenses.
This research indicates that Greek-owned shipping companies outsource HR
activities in order to cost save only. Most must be learned about the reasons that ship
operators choose each type of outsourcing method (external and internal). For
instance, it must be further examined whether ship operators choose to create a
subsidiary manning agency, in order to assure the quality of the service provided, and
that matters such as falsification of certifications, illegal charges to seafarers, ‘watch-‘
or ‘black-lists’ are excluded. Furthermore, more should be learned about the
percentage of HR activities outsourcing, in order to understand how much are the
companies depending on their service suppliers/ outsourcers.
The current research examined a wide range of issues related to outsourcing of
HR. It focused on the Greek shipping sector and this is its main limitation. The ability
to generalise the study may be limited, because of the uniqueness of the Greek-owned
shipping companies’ characteristics. A more extensive sample of respondents could
enlighten more aspects of the theme.
This exploratory empirical investigation into outsourcing of HR in the
shipping industry provided tentative directions for increasing the probability of
success of outsourcing projects and raised many issues for further study of the
outsourcing phenomenon in this particular field. In the following steps, further
examination can be focused on the reasons for outsourcing HR activities, and on the
degree of success or failure of the implemented outsourcing strategies. Moreover, this
research is the first step of a long survey in the field of managing multiculturalism in
shipping crews.
ACKNOWLEDGEMENTS
Authors would like to acknowledge all representatives of the shipping companies who
kindly responded to the survey. They also wish to thank the anonymous referee for
the helpful comments. Moreover, Mrs Progoulaki and Mr Papadimitriou acknowledge
‘Propondis’ Foundation for its support.
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Paper presented in the 12th International Conference on Contemporary Developments

in Shipping: Efficiency, Productivity, Competitiveness, International Association of

MANNING STRATEGIES IN GREEK-OWNED SHIPPING

Mr George PAPADEMETRIOU, MSc in Shipping, Trade and Finance, Scholar of

Mrs Maria PROGOULAKI, Doctoral Student, Scholar of ‘Propondis Foundation’,

Dr Ioannis THEOTOKAS, Assistant Professor, University of the Aegean, Department

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 1

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 2

2. THEORETICAL FOUNDATION OF OUTSOURCING AND ITS

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 3

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 4

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 5

3. STRUCTURE OF THE SEAGOING LABOUR MARKET AND THE ROLE

3.1 The world seagoing labour market

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 6

3.2 The role of manning agencies

1. In-house Crew Department

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 7

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 8

4. MANNING AND OUTSOURCING MODELS

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 9

Figure 2. Strategic Seagoing Human Resource Management Model

Papademetriou G., Progoulaki M., and Theotokas I. 10

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 11

6. RESULTS AND DISCUSSION

6.1 Manning strategies

12th International Conference on Contemporary Developments in Shipping: Efficiency, Productivity,

Papademetriou G., Progoulaki M., and Theotokas I. 12

Table 3. Manning strategies according to company size

Papademetriou G., Progoulaki M., and Theotokas I. 13

Table 4. Manning strategies and nation combinations

6.2 Outsourcing decisions and HR activities

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Table 5. Outsourcing and In sourcing decisions according to company size.

Furthermore, it is quite interesting to examine how the HR activities are

Table 6. HR activities managed with In- and Out-Sourcing.

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6.3 Manning strategies and the outsourcing decision

Table 7. Manning strategies and outsourcing decision

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7. CONCLUSIONS, LIMITATIONS AND SUGGESTIONS FOR FURTHER

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