Annual Report 2010

Reaching new peaks

Interview with Patrick De Maeseneire, CEO

The six mid-term strategic priorities for the Group were launched a year ago.
Can you give us an update?

“Work is a basic need,
it should be a basic
right for all people.”

“We made good progress on all six. Retaining our talents as the economy further picks up will be key for the whole Adecco Group. Investments in IT were accelerated in 2010 and we continue to invest in 2011. With the acquisition of MPS Group, we became the world leader in Professional Staffing. The increasing trend of globally active companies to outsource HR processes, resulted in several contract wins for us in the Managed Services Provider/Recruitment Process Outsourcing space. And finally, we will further optimise the segmentation within our General Staffing business, as well as enhance our leading position in Emerging Markets.”

Adecco reported a strong performance for 2010. When will you reach the mid-term EBITA margin target of above 5.5%?

“We have used the downturn to sharpen up for the future. We took advantage of the economic crisis in terms of M&A and invested in Professional Staffing. With the structural measures taken to improve the business and with the higher exposure to Professional Staffing, we are very well positioned to take advantage of the economic upswing and to further strengthen our leading market position in both General and Professional Staffing. We achieved solid revenue growth in 2010, and with price discipline and tight cost management, operational leverage was very good. We do not speculate on when we will reach this goal but we are fully committed to reaching our EBITA margin target in the mid-term.”

You have chosen your team; the six strategic priorities and the mid-term target are aligned with the Board of Directors. What’s next?

“I have a broader Executive Committee so that all of Adecco’s markets are represented. This enhances the successful execution of the Group’s strategy. Together we have more than 100 years of staffing industry experience. It’s a great team to work with and our task now is to further implement our strategy and to reach our mid-term target.”

“The recent downturn has
proven the value of a
more flexible workforce.”

What trends are you observing for 2011?

“We see a clear trend in that large global companies increasingly outsource the management of part or all of their contingent workforce spend to a Managed Services Provider (MSP). We observe the same trend for the management of permanent employees, where companies outsource all or part of their HR functions as Recruitment Process Outsourcing (RPO). The aim is to reduce the number of suppliers and to optimise the workforce spend.”

And how is Adecco positioned to take advantage of this trend?

“At Adecco, not only do we have a comprehensive MSP/RPO service offering but we also possess a leading Vendor Management System (VMS), called Beeline. The VMS is used to manage the contingent workforce spend for a given customer, and offers remarkable transparency on candidates and suppliers.”

In what ways and to what extent has the latest economic downturn spread the concept of temporary work? Do you expect to surpass prior peaks in terms of penetration rates?

“The recent downturn has proven the value of a more flexible workforce. Simply put, companies with a higher share of temporary employees were better able to respond to the sudden drop in demand. There is ample evidence of more just-in-time production these days, in order to maintain low inventory levels. This also results in an increased need of companies for flexible staffing levels. The declining inventory to sales ratio in the last decade, as witnessed across multiple sectors in the US, is evidence of this trend and we expect this to continue to drive demand for our services. This, together with further deregulation, socio-demographic changes and the move of production to the east will in our view lead to new peaks in the penetration rates in many countries.”

How do you see the regulatory environment changing in the next few years; will doors open or close for the industry and why?

“Generally speaking, more flexible labour markets lead to higher penetration rates for temporary staffing. In the EU countries, the Agency Work Directive effective as of December 2011, foresees the lifting of all restrictions related to temporary work. The most recent liberalisation happened in Spain during 2010, where the construction, the healthcare and the public sectors are now open for temporary staffing. In France, the public sector was opened up to temporary staffing during 2009.”

Besides the Professional Staffing business, do you also see opportunities for profitable growth in General Staffing?

“Absolutely, our clear focus is to further segment our offering in General Staffing. Tailoring our services towards either large or small customers is a key objective for 2011. We will also remain cost disciplined and continue to work on our delivery models. In order to remain the cost leader, we work towards fewer, more standardised IT platforms. We will invest more in development so that we can further profit from fast evolving new sourcing and delivery models.”

What are your expectations for the coming year from the Professional Staffing market which means high growth and provides high margins to Adecco?

“In the mature markets, the ageing population and the mismatch between educated individuals and labour market needs will continue to drive scarcity of talents. That’s why our strategy is driven by being alongside each phase of the life cycle of our candidates, from the moment they leave school, to the moment they retire. We have to attract them better than anybody else and we have to keep them longer than anybody else. In order to keep our candidates within the Adecco space, we have to be able to constantly offer them the best jobs, with the best clients, at the best possible wage. Statistics show that in the last decade Professional Staffing in the US grew three times faster than General Staffing. We expect this trend to continue driven by the race for talent.”

You have a leading position in the Emerging Markets – what is your growth strategy in these markets?

“It is a clear strategic priority for us to take advantage of the immense growth potential in the Emerging Markets. Our strategy is to grow both organically and through bolt-on acquisitions. Our organic revenue growth in India in 2010, for example, was close to 60 per cent compared to a group average of 12 per cent and we went from zero to 100,000 associates in just six years. Our international clients are investing more in these regions and so are we.”

Why did you decide to form a joint venture in China? What does each party bring to the JV?

“Taking 49% in this joint venture is an important step forward for Adecco in China. Pooling our global staffing know-how with a Chinese partner enhances the offering for our multinational client base, which is expanding into China. At the same time, we are excited to broaden our Chinese customer base and take advantage of the growth potential within China. We have more than 40 years of learned processes to share and at present we place more than 700,000 associates with over 100,000 clients every day at Adecco, plus a further 100,000 associates through the joint venture in China.”

What is your personal mid and long-term vision for the Adecco Group?

“The work we do has a direct impact on the lives of hundreds of thousands of people every day. The importance of work and what we do to help people find jobs cannot be overstated. Work is a basic need, it should be a basic right for all people, and we try to realise this, every day, in over 60 countries around the world, with more than 32,000 fantastic colleagues. To foster and enhance the key role we play is clearly my long-term goal.”