Annual Report 2014

Our strategy

We partner with our associates and our clients, serving individuals and enterprises with our full range of services globally and locally. This is what makes us unique.

The strategy of the Adecco Group is to be alongside our associates and clients at each phase in their life cycles. As the world’s leading provider of HR solutions in over 60 countries and territories, we offer all HR services to clients and every day we place more than 650,000 [1] associates at work.

Candidates and 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 potential and goals. 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, to join companies on a temporary or permanent basis and contribute to their 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 regional and country heads of Adecco’s business segments to ensure that the Group’s strategy is embedded in the local operations and that execution remains on track. We selectively invest in high-growth segments and markets, while at the same time continuing to practise 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 Adecco Group’s value-based management approach has moved beyond profitability based on pure accounting criteria as a measure of value creation. By applying the EVA concept we also take the use of capital into consideration, gearing our decision-making towards value generation and enabling us to maximise shareholder returns. EVA is embedded in our operations, fostering consistent and dependable pricing policies, ensuring the use of the most efficient delivery channels, and serving as a basis for performance-related incentives.

Where we apply EVA
We apply the EVA concept in 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, the concept helps us to avoid overpaying.

How we calculate EVA
EVA is a measure of a company’s financial performance based on residual income. According to this concept, value is created only if EBITA after the deduction of taxes is greater than the minimum required rate of return on the invested capital. Our calculation takes the Adecco Group's net operating profit after taxes (NOPAT) and deducts a charge for the use of capital in the business, based on the Group’s invested capital and weighted-average cost of capital (WACC). 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, minus non-interest-bearing liabilities. We apply a 10% WACC across all our entities, although the actual WACC in the reporting period was below 10%. Put simply, using this concept allows us to find the right balance between revenue growth, market share, pricing, 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 2014