Annual Incentive Plan (AIP) FY13 Results and Sodexo's Financial Results
The AIP awards were paid prior to Sodexo announcing its financial results for FY13. Now that those results have been publicly announced, you may be wondering how Sodexo's financial results influenced the AIP award. First, here is a quick overview of Sodexo's results.
Sodexo Results Overview
Corporate Services, Government Services and Canada had a strong 2013 fiscal year, all hitting their targets for their Profit measure. However, several markets had a challenging year with results that were below target. Despite generating approximately $100M in savings from ACE-related initiatives and a record-breaking sales year, NorAm missed its Earnings Before Interest and Taxes (EBIT) target by $30.5M and fell short of the margin improvement target by 25 basis points (bps). On the positive side, NorAm improved its EBIT margin to 5.6%—up 20 bps year-over-year.
AIP Awards and Funding
Despite the market and financial challenges, our total AIP payouts increased from $28.9M (6.7% of earnings) in FY12 to $36.5M (8.5% of earnings) for FY13, driven primarily by increased awards to GMs and DMs who hit their Profit thresholds. This success can be attributed to the changes in the GM and DM AIP Plan put in place this year to reward GMs and DMs for the results they control.
AIP-eligible employees receive awards based on results in three components: Financial, Measured Performance Objectives (MPOs) and Diversity. The specific measurements vary by market, division, department and position. AIP awards are based on a combination of your line of sight and market or company attainment of targets. Market Management AIP awards are funded based on market segment financial performance results.
Detailed information about how your FY13 AIP award was calculated is available at the SGVestia website. If you do not remember your login and/or password, you can request it at the site or send a request to inquiries@sgss.socgen.com or call SGVestia between 8:30 a.m. and 5 p.m. ET Monday through Friday at 888 580 0007.
GMs and DMs Were Rewarded
New this year, GMs who hit or exceeded their line of sight financial target for Field Contribution, Revenue and Accounts Receivable (DSO) received an AIP award for their financial results regardless of their market segment's financial performance. DMs who hit or exceeded their line of sight financial target for Controllable Profit, Revenue and Accounts Receivable (DSO) also received an AIP award for their financial results regardless of their market segment's financial performance. The financial component supports our focus on attracting and retaining profitable business, and creating operating efficiencies, which are all key goals for our three-year plan. For the 78% of GMs and DMs who hit the threshold, the rewards were much greater than in previous years—approximately 140% higher. In accordance with our plan rules, the 22% of GMs and DMs who did not reach their Profit threshold (GM 60% of target, DM 80% of target) were ineligible for payment for their attained MPOs and Diversity targets.
New Unit Opening AIP
Another big change for the FY13 AIP was creating a separate AIP to incent experienced managers to take on new units to ensure that we get new business up and running as efficiently as possible. We had 261 GMs join new units and participate in this plan.
Looking Ahead
To achieve the NorAm goal of 150 bps of growth by 2015 will require a sustained effort. To attain our FY14 budgeted EBIT margin improvement of 51 bps, we must:
- Put appropriate resources on the ACE initiatives impacting gross profit, especially the MOP initiatives. We have $92M of year-over-year growth tied to these initiatives.
- Hit our sales target of $880.7M in 2014 and profitably open the business we sell.
- Ensure that we attain the margin commitments made on the 233 units retained through the 2013 portfolio management process and actively pursue turnaround opportunities on the units that will be tracked during 2014.
- Find SG&A savings beyond our budget commitments in 2014.