Annual Report 2012

Our strategy

AS THE GLOBAL LEADER IN HR SOLUTIONS, WE AT ADECCO GROUP OFFER THE FULL RANGE OF HR SERVICES. WE HAVE THE CAPABILITY TO SERVE INDIVIDUALS AND ENTERPRISES WITH ALL THESE SERVICES, LOCALLY AND GLOBALLY. THIS MAKES US UNIQUE.

The strategy of the Adecco Group is to be alongside each phase in the life cycle of our associates and clients. As the world’s leading provider of HR solutions, in over 60 countries and territories, we offer all HR services to over 100,000 [1] clients and every day we place close to 700,000 [1] associates at work.

Candidates & Associates  We support job seekers from their very first career steps: giving them an opportunity to start to build up valuable skills and to gain the work experience required by the job market. We help people identify roles that will allow them to re-enter the working world and provide them with the training to do so. A temporary job can often lead to permanent employment. Adecco offers talent development services, including training, coaching and counselling, to enable all our associates to reach their professional goals and potential. Our Career Transition services help individuals move into new roles in cases of redundancy, by preparing and guiding them during the phase of career change. They are assisted with the preparation of their CV, in job market orientation, in setting up interviews and during the final placement. We aim to accompany our associates throughout every phase in the worker life cycle.

Clients  When a great idea is ready to be turned into a business, we support our clients through the start-up and growth phases. We find the right people, with the right skill sets, and help in developing individuals’ potential, to contribute to the company’s success. Growth and expansion can also mean mergers and acquisitions, human resources need to be carefully managed and maintained, and changes may need to be made to the organisation: Adecco has the services and skills to support clients through all of these phases and more. Once the client’s company structure matures, we help to manage the attrition of people or to optimise business processes through outsourcing solutions. Should circumstances require a client to downsize operations, we help by deploying staff to increase business efficiency and effectiveness. Whatever the phase in the client life cycle, Adecco strives to provide an HR solution.

How we monitor our operations  Top management carries out frequent operational and financial reviews with the country and regional heads of Adecco’s markets and business segments to ensure that the Group’s strategy remains on track and is embedded in the local operations. While we selectively invest in high-growth segments and markets, we continue to practice stringent cost management to ensure a sustainable improvement in profitability. In addition, the application of the ‘Economic Value Added’ (EVA) concept continues to be a core pillar of our day-to-day operations and strategy, ensuring discipline with respect to client contract pricing, cost containment and evaluating business opportunities.

The ‘Economic Value Added’ (EVA) concept  To ensure alignment of the Adecco Group’s overall strategy throughout the decentralised organisation, firm central control and effective management tools are required. The EVA concept not only helps us to ensure that the interests of our shareholders are met, it also makes sure that our daily decision-making processes are geared to value generation. The Adecco Group’s value-based management approach has long moved beyond profitability based on pure accounting criteria as a measure of value creation. We also take capital intensity into consideration and application of the EVA concept enables us to maxi-mise shareholder returns. EVA is deeply embedded in our daily operations, fostering consistent and dependable pricing policies, ensuring the use of the most efficient delivery channel and serving as a basis for performance-related incentives.

Where we apply ‘Economic Value Added’  We apply the EVA concept in the following areas: incentive plans, contract pricing and acquisitions.

  • Incentive Plans: Performance-related pay is calculated on an EVA basis and applied at almost all levels and regions of the organisation. At branch level, we apply a simplified version of the concept, while the remuneration of senior management is measured using the most detailed form of the calculation, covering all elements of the concept, including goodwill and other intangible assets.
  • Contract pricing: We use EVA to measure the value generation of new and existing clients. First and foremost, this approach ensures that the pricing of our client contracts is consistent and dependable, giving us a clearer picture of the cost structure and capital needs of our business relationship with individual clients.
  • Acquisitions: We apply the EVA concept in order to evaluate the attractiveness of potential acquisitions. As goodwill and other intangible assets are a substantial part of the invested capital which directly affect EVA and subsequently the incentive pay of senior management, the concept helps us to avoid overpaying.

How we calculate ‘Economic Value Added’  EVA is a measure of a company’s financial performance based on residual income. According to this concept, value is only created if EBITA after the deduction of taxes is greater than the minimal required rate of return on the invested capital, equal to the Company’s weighted average cost of capital (WACC). The calculation is based on the Adecco Group’s net operating profit after taxes (NOPAT). Invested capital is defined as total assets, excluding cash and including gross acquired goodwill and other gross acquired intangibles since the introduction of the EVA concept, while deducting non-interest-bearing liabilities. We apply a 10% cost of capital across all our entities, while the actual WACC in the reporting period was below 10%. Put simply, the concept allows us to find the right balance between revenue growth, market share, pricing and cost structure and invested capital. It enhances our ability to make the right choices with respect to client relationships, acquisitions, strategies, incentive schemes and targets.

 

[1]Average 2012.