Annual Report 2015

Our targets & priorities

Our financial targets

In January 2016, alongside the evolved strategic priorities and following extensive shareholder consultation, the Adecco Group announced new financial targets. In order to drive long-term value creation, the Group will focus on a balanced set of targets to be achieved on average through-the-cycle.

  • Organic revenue growth: grow revenues organically at least in line with our main peers, at Group level and in each major market.
  • EBITA margin leadership: improve EBITA margin to 4.5–5.0% on average through-the-cycle, excluding one-offs, achieving a higher peak and higher trough margin than in the prior cycle.
  • Cash conversion: deliver operating cash flow conversion of above 90% on average through-the-cycle (defined as Free Cash Flow (FCF) [1] before interest and income tax paid as a percentage of EBITA excluding one-offs).

Each of these targets represents an improved level of financial performance compared to that achieved by the Group in recent years.

How we monitor our operations

Management carries out frequent operational and financial reviews 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) approach continues to be a core pillar of our day-to-day operations and strategy. This approach combines discipline with respect to evaluating business opportunities, pricing contracts, driving productivity and efficiency, and generating strong cash flow.

The Economic Value Added (EVA) approach
To ensure alignment of the Adecco Group’s overall strategy throughout the 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 approach we also take the use of capital into consideration, gearing our decision-making towards value generation and enabling us to maximise shareholder returns. According to this approach, 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). EVA is embedded in our operations, fostering consistent 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 approach in incentive plans, contract pricing, and acquisitions.

  • Incentive plans: from 2016 onwards, annual bonuses will be linked to the achievement of key value drivers of EVA: revenues, EBITA, and days sales outstanding (DSO).
  • Contract pricing: we use EVA to measure the value generation of new and existing clients. 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 approach 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 approach helps us to avoid overpaying.

Key performance indicators

To measure the effectiveness of our strategy from a financial perspective, we closely monitor the following key performance indicators (KPIs):

  • Revenue growth
  • Gross profit growth and gross margin development
  • Selling, general, and administrative expenses (SG&A) development
  • EBITA growth and EBITA margin development
  • Conversion ratio (EBITA as a percentage of gross profit)
  • Days sales outstanding (DSO)
  • Economic Value Added (EVA)

We also measure non-financial goals. In line with the strategic priority of engagement, we review the retention rate quarterly and use the Great Place to Work® survey to further improve our attractiveness as an employer. In addition, we conduct our Global Satisfaction Survey among clients and associates on a regular basis – a dialogue with those people who determine our success. It provides us with feedback on our brand promise, brand voice, processes, and KPIs, and allows us to constantly improve. By increasing client, associate, and employee satisfaction we create business value.


[1]Free Cash Flow is calculated as cash flow from operations minus capital expenditures.