Adecco CEO Alain Dehaze Bets Big on Labor

Alain Dehaze assumed the helm at Adecco Group, the world’s largest staffing agency, last September. After a mere two months on the job, he found himself having to announce an unexpected third-quarter loss for the Zurich-based company, downgrading earnings expectations for the year, and watching its stock tumble by nearly 12 percent the following day on the news. Worldwide economic growth was even feebler than the company had projected at the beginning of 2015, Dehaze explains, and Adecco is a company whose fate is uncommonly dependent on the hiccups and lurches of the global economy.

At least that’s how it’s been in the past. As its new chief executive, Dehaze is intent on finding ways to grow Adecco in spite of economic stagnation and volatility — and in some cases, because of it. He’s on the hunt for new opportunities, advocating for regulatory changes to help Adecco access more markets and evolving the temporary worker model on which his business is based.

Dehaze has announced financial targets for his company that underscore his confidence that these moves can help untether Adecco from the broader economy. The CEO plans to increase earnings before interest, taxes and amortization (EBITA) to between 4.5 and 5 percent, on average, through the economic cycle, rather than targeting a particular margin in a particular year — up from an average of 4.2 percent between 2009 and 2015. “To achieve this, we have to work hard, be more efficient, be more innovative,” Dehaze says.

The 53-year-old chief executive has plenty of experience readjusting. As a child and young adult, he dreamed of becoming an athletic coach, having played competitive volleyball and other sports growing up in Tournai, Belgium. But a job in retail as a teenager sparked his interest in working for one of Europe’s big consumer goods companies, and he enrolled at Ichec Brussels Management School to earn a business engineering degree.

After graduating, he joined German consumer goods and applied chemicals company Henkel, where he stayed for ten years, ending his tenure there as the company’s first European marketing director. In 1997 he moved to Denmark-headquartered ISS Facility Services as director of business development for ISS Europe. Later, as managing director of ISS Germany, he oversaw the integration of an acquisition for the international cleaning company.

After three years at ISS, Dehaze entered the human resources industry in 2000 when he joined Solvus Resource Group and soon became its CEO. He led a successful restructuring at Solvus during the recession of the early 2000s and sold the company to Dutch staffing agency USG People in 2005, serving as its COO and deputy CEO and overseeing the two companies’ integration for a year before deciding that he wanted to become an entrepreneur. After nine months of looking for the right opportunity, he participated in a management buy-in of Netherlands-based Humares, which specialized in maritime and technical staffing, becoming its CEO.

In 2009, Dehaze met the then-CEO of Adecco, Patrick De Maeseneire, who himself had just stepped into the top role. Looking to strengthen his management team, De Maeseneire convinced Dehaze to sell parts of Humares to Adecco. Dehaze joined the staffing agency behemoth as regional head of Northern Europe and was assigned the task of managing the company’s Northern European business and then integrating business operations in France, which had remained separate since the 1996 merger between personnel services firms Adia and Ecco. After helping to institute a new corporate strategy in France based on segmentation by customer size, Dehaze was tapped to succeed De Maeseneire.

As CEO, Dehaze has accepted a new set of challenges. He and his team are still working to repair damage caused by a 2011 scandal in which Adecco workers in Norway were found to have been paid lower wages than had been agreed upon in their collective labor agreement and failed to receive overtime pay. After the revelations, several major customers terminated their contracts with Adecco.

Institutional Investor Contributor Katie Gilbert recently spoke with Dehaze about how to wring opportunity from economic volatility, why Adecco is taking on a new role advocating for changes to labor laws and whether robotics and automation are a threat to staffing agencies everywhere.

Institutional Investor: Does your vision for Adecco differ significantly from that of your predecessor?

Dehaze: No. As a member of the executive committee, I was part of the team under Patrick [De Maeseneire] that worked on company strategy for the past six years. When I took over as CEO, I said it would be a continuity with evolution. Of the six strategic priorities we had under Patrick, I changed two. One of them has to do with the digitalization of our industry.

The second new priority is about thought leadership. As one of the top ten employers in the world, we are one of the biggest actors on the labor market. It’s important that we speak up, that we advocate for the right regulations across many countries.

What are some of the specific changes that Adecco is calling for?

Labor legislation is very local. I would say we are trying to build Europe. Every single country still has its own legislation. It is slowly developing toward a European labor market, but it is quite slow. One thing we’re advocating for is a simplification of the labor laws in France. If you are a French entrepreneur and you want to start a business in Zurich, you can read the 36-page labor code of Switzerland on the hour-long flight from Paris to Zurich. If you are a Swiss entrepreneur and you want to start a business in France, you can fly Zurich to Paris, but it would be better to fly around the world so you have time to read the 3,600 pages in the French labor code.

We are the biggest private employer in France. Every day in France we have more than 130,000 people working with an Adecco contract. That’s why we are advocating for a simplification in the labor code, to create a more fluid and dynamic labor market capable of boosting greater competitiveness and job creation.

What other changes are you pushing for?

Another area where we are very involved is the reform of education systems, to drive the development of apprenticeship and other work-based training models. If you take almost any of the countries in the world, on average youth unemployment is double that of the average unemployment rate of the country. There are three or four countries where you have exceptions: one is Germany, another is Switzerland and another is Austria. What do these countries have in common? They have a vocational training system, or dual system, in which youngsters are combining work and study. You see that in these three countries you have youth unemployment rates which are almost in line with the average unemployment rates, which are quite low — in Switzerland the rates are 3.5 percent unemployment and 3.2 percent youth unemployment.

In France, almost one youngster in four has no job. In Spain, it’s one out of two. So it’s really dramatic. Together with some global corporations — such as Nestlé, UBS, Accenture and IBM — we are engaged in the Global Apprenticeship Network where we promote, worldwide, the solution of apprenticeships. Our objective is to start apprenticeship networks at the local level and work together with the local institutions to allow for the development of this system of combined education and work.

How does Adecco stand to benefit?

We are the intermediary. We are the ones recruiting the youngsters. In some cases, we will be the one taking them on our payroll.

What have you done to repair damages to client relationships and win back contracts since the working violations issues in Norway in 2011? Do relations with unions continue to be a challenge?

We have worked for five years on this. At the time, we acted immediately once we were aware of the issue. I think we have been very transparent and we took responsibility. As in every relationship, time is needed to regain trust. In December 2013 we won a new contract from the Municipality of Oslo.

We want to have a good dialogue with our stakeholders — not only in Norway but everywhere in the world. Unions are part of that. That’s why we have a European Works Council [a committee that represents employees in discussions with management on transnational issues]. We were the first to enter into the collective labor agreement. We will continue to work in this sense. But it needs time.

What employment trends are you seeing, and what are they telling you about the health of the global economy?

What we see is that economies are becoming more and more volatile. Uncertainty everywhere in the world is growing. Customers are, more and more, relying on us to manage this volatility and provide flexibility. We have to develop all kinds of solutions. Today, in some countries — like Germany and Sweden but also Italy and France — we are taking a portion of the agency workers on our books with contracts of indefinite duration. We are also developing more and more outsourcing. I’ll give you two examples of what we have done for our customers: In Japan, the global leader in housing and building materials, products and services has 96 showrooms. We are running these showrooms with 1,600 salespeople. We’re paid according to satisfaction and the order levels of customers visiting the showrooms. For another company, a leading fashion retailer, we are managing the full replenishment of the outlets in Spain.

You’ve predicted that technology will replace many low-skilled labor jobs. Do you see that as a potential threat to Adecco’s business?

Every challenge is an opportunity. Robotics, automation, artificial intelligence and so on — all of this impacts not only the Adecco Group and our industry but also the labor market. We have to capitalize on this. We are also trying to take advantage of big data, developing new types of assessment, moving past typical psychometric tests.

What we know already is that six out of ten pupils in the education system today will hold jobs in 2025 that currently do not exist. This is another challenge for the Adecco Group, and for society. The education system has to somehow design a program for students to make sure that they are employable in the next ten to 15 years. It’s quite difficult to say what a cloud analyst or a cloud architect or a data scientist will look like in the future. And there are a lot of new jobs coming in. That’s why we’re partnering with our customers and also with local education systems to make sure the needs are recognized and are embedded in training content.

How could Adecco use developing technology and big data in its own business?

We are currently piloting a solution in France based on big data that will allow us to have better visibility into labor market needs. What we see, globally, is 73 million youngsters unemployed. But if you take Europe and the U.S. combined, you have more than 8 million unfilled jobs. There is a mismatch. Using a combination of big data, but also, again, educational training, should help us to take advantage of this opportunity.

What are some of the places where it’s most important to grow your business — where employment opportunities are on the rise and likely to stay strong?

We see an opportunity to grow in health care. We see demand there. We also see the opportunity to grow in all kinds of technical, engineering functions. Going forward there is a huge need for that kind of profile, the so-called STEM [science, technology, engineering, math] profile. We have to develop in that direction.

Can you tell us about what you’re doing in Germany to help immigrants find work?

Let’s start with the big picture in Germany: Basically, due to demographic trends, everybody knows that Germany is facing a decreasing population and a decreasing labor force. Immigration is one way to cope with this aging population and decreasing workforce.

At this stage you have around 900,000 immigrants in Germany. We’ve been involved in what we call early registration. The local legislation imposes a watch period of 15 months before taking a job. We can’t put people to work.

Today we’re advocating to change this law allowing us and every German company to hire immigrants, to give them language training, skills training and so on, so that we can put them to work and help start the integration process. What we see today in Europe — Germany is the most extreme example — is that in almost all the countries, the local legislation in place is not geared to the fast integration of immigrants.

Why is this important for you to do?

For more than 2,000 years, work has been the most successful integrator in social life. If you want to integrate people into society, into a community, one of the best ways has been to provide work, so you can have contact, practice the language, gain skills and be connected with people. I see today in a lot of countries we are isolating immigrants.

How do you respond to the challenge that the watch period is necessary?

I come back to these 8 million unfilled vacancies. Some of those vacancies are in Germany. Especially with the aging of the labor force, these countries will need resources. •