Combined Management Report
Employees and Social Investment
Our vision to help the world run better and improve people’s lives relies on the power of human thinking, inspiration, and creativity. For this reason, nothing is more critical to the long-term success of SAP and our customers than our people. They spark our innovation, deliver value to our customers, and drive our sustainable growth and profitability.
How we manage employees is even more critical now than in the past, as we have identified several trends that will significantly change the way organizations approach human resources. Demographic change will raise both short-term and long-term challenges related to an aging workforce and a potential shortage of skills, particularly in mature markets. We also see a change in the values and expectations of the labor market. Supported by technological innovation, the boundaries between private and business life are blurring, especially for knowledge workers. Younger generations have a stronger expectation of finding a purpose in their business life and seek to bring their work and private lives into balance.
The links between our financial performance and our ability to attract and retain top talent are so strong that we believe it is impossible to separate these two realms of our business. This belief guides a wide range of programs and initiatives throughout SAP. In 2012, we continued to make progress with our people strategy, which we introduced in 2010 to set us apart in vital areas such as leadership development, career advancement, workforce diversity, and human resources processes. These areas drive our employees to be at their very best. This high level of performance is essential if we are to realize our ambitious growth strategy and further enhance our ability to innovate.
Recruiting Talent to Fulfill Our Vision
We view the recruitment of top talent as an important competitive advantage. As our business evolves and changes, so must our workforce. That is why SAP continues to recruit a diverse group of employees who have both the professional skills and the cross-cultural competence to meet the needs of our global customer base and implement our business strategy. In 2012, our innovative recruitment campaigns helped us attract talented new employees in virtually every geographic region, with a particular focus on emerging markets such as Brazil and China. We continue to focus on being a globally recognized employer of choice by emphasizing our career development opportunities as well as SAP’s purpose.
Nurturing Talent and Leadership
We strive to provide our employees and managers with a culture of continuous learning and development. SAP invests in and actively encourages talent development through challenging work assignments, coaching, collaboration with peers, e-learning courses, social media, and other offerings. We increasingly seek to tailor such offerings to each individual employee so that they can progress on their own unique career path. In 2012, we continued to provide a comprehensive suite of leadership programs to all levels of management including 360-degree reviews, a special assessment process for managers reporting directly to the Executive Board, peer and executive coaching, as well as specialized classroom instruction tailored to new or experienced leaders. Talent and leadership development also supports our ambitious employee engagement goals and fosters our culture of innovation.
Employee engagement is directly linked to our ability to innovate and deliver customer value. Engaged employees are more inspired to develop new ideas and have the drive to bring them to fruition. In other words, they turn innovation from a buzzword into a reality. In addition, they feel a deeper connection to SAP’s purpose and take greater ownership of meeting our strategic objectives. They are expressly supporting us in reaching our goals, whether related to customer success, our growth, our margin, the reduction of our carbon footprint, or successfully bringing a new productproductA non-versioned high-level view of software from a software logistics perspective. It is a “bracket” that contains corresponding software product versions. to market.
Research has found that organizations with engaged employees enjoy higher employee retentionemployee retentionThe ratio of the average headcount (expressed in full-time equivalents/FTEs) minus employee-initiated terminations (turnover) divided by the average headcount, taking into account the past 12 months., greater customer loyalty, and stronger financial results. We view employee engagement as so linked to our success that we have made it one of our four company-wide strategic objectives, in addition to customer success, margin, and growth.
With the significant drop of our employee engagement score from 82% in 2006 to 69% in 2009 and 68% in 2010, we saw the immediate need to make improving a top business priority so that we could meet our ambitious growth goals. Our goal has been to return to an engagement score of 82% by 2015.
In our 2012 employee “pulse check” (which surveys 50% of our employees, compared to the 100% that we survey every second year), our overall employee engagement score increased to 79%. This was higher than our 2011 results (77%), as well as a “global norm” that is calculated as a general point of comparison by our survey provider. Eighty-nine percent of our employees said they are proud to work at SAP (88% in 2011), and 87% said they believe strongly in our strategy and goals (same level as in 2011). The survey results also indicate that sustainabilitysustainabilityFor SAP, sustainability is the ability to manage economic, social, and environmental risks and opportunities holistically for increased profitability. It contributes to our vision to make the world run better and improve people’s lives. SAP is committed t... is now viewed by 91% of employees as central to our purpose (88% in 2011).
The success of our people strategy is reflected in our retention rate, which has a direct and profound impact on our bottom line and overall success. In 2012, we conducted an analysis which showed that for each percentage point that our retention rate goes up or down, the impact on our operating profit is approximately €62 million. This finding underscores the degree to which our management of talent correlates with our financial performance.
In 2012, the employee retentionemployee retentionThe ratio of the average headcount (expressed in full-time equivalents/FTEs) minus employee-initiated terminations (turnover) divided by the average headcount, taking into account the past 12 months. rate at SAP worldwide was 94% (2011: 93%). We define “retention” as the ratio of the average headcount (expressed in full-time equivalents) minus employee-initiated terminations (turnover) divided by the average headcount. In 2012, the average length of service at SAP worldwide was approximately 6.8 years (2011: 6.7 years).
We do not believe that a general retention rate of 100% would be the right target for SAP, as some turnover of talent is beneficial for our ability to innovate. However, maintaining a high retention rate is a priority, and our efforts to do so overlap with our focus on employee engagement and career development. We will focus particular attention on highly competitive job markets such as Brazil and China.
Expanding Employee Ownership
In 2012, SAP implemented new share-based payments which significantly increased the way in which our employees and management share in the company’s success. As a result, our compensation mix more strongly rewards participants for their contributions to achieving our 2015 goals.
The new Employee Participation Plan (EPP) 2015 is a multiyear cash-based share plan that is offered to all SAP employees except members of the Executive Board and the senior leadership team. The plan creates a common financial incentive and reward for achieving the yearly milestones of our 2015 goals. Its formula is based on an individual’s base salary, our target achievement, and SAP’s share price prior to the day of payment.
The new EPP is offered to employees in addition to the existing Share Matching Plan (SMP) and Stock Option plan. Under the SMP 2012, eligible employees were invited to purchase SAP AG shares at a discount of 40%. After a holding period of three years, employees will receive five SAP shares free of charge for every three shares held, as compared to receiving one extra share in previous years. This special one-time enhancement was made in honor of our 40th anniversary.
The SAP Stock Option Plan 2010 (SOP 2010) targets top executives and top performers for an allocation of stock options, for the third year. Altogether, 9,253 employees were granted options in 2012.
As a result, we recorded an expense of €522 million from SAP’s share-based payments in 2012, compared to €68 million in 2011. A large portion of this expense is a result of the new EPP. A detailed description of share-based payments is included in Note (27) of our Notes to the Consolidated Financial Statements.
SAP expects to grant rights to employees under this plan in the amount of €500 million through 2015. The final payout might differ from this budget. In March 2013, we expect to pay out €210 million based on a budgeted amount granted of €125 million.
Driving Innovation Through Diversity
To SAP, diversity is an inherent part of our business strategy. Having a diverse workforce enables us to better understand customer challenges, come up with innovative solutions, and stay competitive in a global economy. To attract and retain top talent, we must find diverse sources of employees throughout the world.
Our corporate culture reflects that of the world in which we operate, with diversity in nationality, culture, race, ethnicity, age, gender, sexual orientation, gender identity, as well as mental and physical ability.
At SAP, we value all types of diversity. In order to drive further development of our female employees, we set a tangible goal regarding women in leadership – a complex issue in the high-tech sector. SAP committed to increasing the number of women in managementwomen in managementPhrase used to refer to the percentage of women in management positions (managing teams, managing managers, executive boards) as compared to the total number of managers, expressed by the number of individuals and not full-time equivalents (FTEs). positions from 18% in 2010 to 25% by 2017. To achieve this goal, we continue to support women through mentoring programs, where we strive to hire more women and train them to enhance their employee and manager awareness. In 2012, our overall percentage of women in the workforce remained stable at 30%, and the percentage of women in managementwomen in managementPhrase used to refer to the percentage of women in management positions (managing teams, managing managers, executive boards) as compared to the total number of managers, expressed by the number of individuals and not full-time equivalents (FTEs). positions increased from 18.7% in 2011 to 19.4%. Going forward, we strive to continue to make progress with focused female leadership development and focused succession planning in the different Executive Board areas. We also plan to put a stronger focus on generational diversity to ensure that we have a strong mix of employees who bring different perspectives and skills to SAP.
Creating a Healthy Culture
At SAP, we seek to support our employees in being their best, both professionally and personally. This means promoting their physical health and well-being, but it also means much more. We think about creating a healthy work environment that inspires people to continually develop, stretch their creativity, collaborate in new ways, embrace change, and achieve work-life balance. To us, a healthy work culture is a business priority, as it supports our innovation, productivity, and ability to serve our customers. Consequently, we have developed a global health strategy that we will be working to implement in coming years.
We seek to measure the success of our health program based on this broader, holistic approach. Our Business Health Culture Index (BHCI) asks employees both about their personal well-being and SAP’s work environment. In 2012, we achieved a BHCI score of 66%, compared to 65% in 2011. Given the dynamics of our industryindustryAn economic sector characterized by a value chain, business processes, and a set of products and services that is typical or common for all companies belonging to this sector., the global nature of our business and the fast pace of change that our employees must manage, we believe that maintaining a score of 65% or higher would be a significant accomplishment in the future.
We also work toward our health goals by calling on our global team of leaders to inspire and motivate employees to reach their full potential. We recognize that to achieve outstanding results, we must constantly reexamine and refine our leadership practices to adapt to a fast-changing business environment.
We make strategic social investments that leverage our expertise, lay the foundation for a healthy business environment, and help ensure a sustainable future for society, our customers, and our company. Our two major focus areas, education and entrepreneurship, build a pipeline of talent and create economic opportunity, spurring job creation and the demand for IT services. We call on our talent, technology, and capital to multiply our impact, and we work in all of our programs to foster change for the long term.
In 2012, SAP contributed €18.4 million in cash donations to non-governmental and nonprofit organizations. In addition, we donated software to almost 1,200 eligible nonprofit organizations, activated more than 130,000 employee volunteer hours, and thereby positively impacted about one million lives to enhance education for underserved youth and propel emerging entrepreneurs to foster economic growth in our communities. Through our University Alliances program, we donated licenses for business software to more than 1,300 schools and universities and improved career opportunities in business and information technology for more than 230,000 students worldwide.
For more information about employees and social engagement, related goals and programs, see the Attracting Talent, Talent Development, Employee Engagement, Retention, Diversity and Women in Leadership, Business Health Culture, Social Investment, and Human Rights sections.
On December 31, 2012, we had 64,422 full-time equivalent (FTE) employees worldwide (December 31, 2011: 55,765). This represents an increase in headcount of 8,657 FTEs in comparison to 2012. Of the overall headcount increase in 2012, 4,816 resulted from acquisitions. The average number of employees in 2012 was 61,134 (2011: 54,346).
We define the FTE headcount as the number of people we would employ if we only employed people on full-time employment contracts. Students employed part-time and certain individuals who are employed by SAP but who for various reasons are not currently working are excluded from our figures. Also, temporary employees are not included in the above figures. The number of such temporary employees is not material.
On December 31, 2012, the largest number of SAP employees (46%) were employed in the EMEA region (including 26% in Germany and 20% in other countries in the region), while 30% were employed in the Americas region (including 21% in the United States and 9% in other countries in the region) and 24% in the Asia Pacific Japan (APJ) region.
Because we invested in support and cloud computing in 2012, our support headcount increased in all regions. Our worldwide headcount in the field of software and software-related services grew 18% to 10,551 (2011: 8,963). Professional services and other services counted 14,259 employees at the end of 2012 – an increase of 7% (2011: 13,268). Our R & D headcount saw a relatively strong year-over-year increase of 14% to 18,012 FTEs (2011: 15,861). This growth stemmed from our acquisitions and greater investment in the APJ region. Sales and marketing headcount grew significantly by 26% to 14,899 at the end of the year (2011: 11,780), because we invested very heavily in the sales and marketing of our products and services in 2012 and employed more sales staff in all regions with a strong focus on the emerging markets. Our general and administration headcount rose 15% to 4,286 FTEs at the end of the year (2011: 3,735). Our acquisitions were the main reason for this increase. Our infrastructure employees, who provide IT and facility management services, numbered 2,415 – an increase of 12% (2011: 2,158) that mainly resulted from our acquisitions and investments in our company IT.
In the Americas region, headcount increased by 3,650, or 24%; in the EMEA region, the increase was 2,057, or 7%; and in the APJ region, it was 2,950, or 23%.
Our personnel expense per employee was approximately €119,000 in 2012 (2011: approximately €108,000). This rise in expense is primarily attributable to an increase in salaries and share-based payments prompted by the new plans and significant rise in the share price in 2012. The personnel expense per employee is defined as the personnel expense divided by the average number of employees. For more information about employee compensation and a detailed overview of the number of people we employed, see the Notes to the Consolidated Financial Statements section, Note (7).