2024 Variable payout/Merit increase Outcome Discussion
Good evening, folks and pillars of the organization. I
welcome you all to the announcement on the outcomes of this year’s appraisals
and Variable pay & salary increment. First thank you all for all the hard
work for last year and for all the successful execution of the projects. We
have not got any major escalations from our major clients which showcases our
continuous dedicated support. Majority of our customers have renewed the
contracts with us which showcase their strong belief in us as a strategic
partner.
Now Generative AI & AI Agent is in the trend, and we are
successfully integrating this technology internally and to our customers. We
have invested heavily on these technologies and we have started bearing fruit
now.
Ours is a global company and the global business
environment, economic conditions, and the achievement rate of KPIs for the
entire company, not just Japan, affect the variable bonus payout rate.
For the last financial year, our company’s top line was
$23.9 billion, which represents a 1.9% decrease YoY. Our bottom line is $1.81 billion,
which is a slight increase of 0.5% when compared to the previous year, with an
operating margin being 13.3%, which is way less than our competitors’.
This year we saw Trump administration taking control of the
white house. Already we are seeing so much uncertainties day by day due to
this. Since US contributes to most of our business, we are not clear on the
effect of making in US enforcement to our group companies as we have interests
in both engineering and services.
Our board discussed
and debated various scenarios considering changing uncertainties in the parts
of the globe today where our primary business happens. As announced by our CEO,
our company’s overall revenue decreased by 2%, Additionally our Japan unit also
experienced a decline, with a 5.3% negative growth, marking the first in 11
years since the establishment that we did not achieve growth. In this context,
the Business performance factor(BPF), which is the indicator of calculating
variable compensation, was in the 80% range. As a result, with those Exceeding
or higher performance rating received more than 100% of the bonus target, those
with Succeeding rating did not reach 80%.
Individual communication regarding compensation by managers started
last week, but we would like to share the situation with everyone here. Despite
the challenging global economic conditions and the tough business environment
for the consulting industry, urgent actions are being considered to bring Japan
unit back on growth mode, including discussions with our CEO who visited Japan
last month. We ask for your understanding of the circumstances in response to
the business situation in 2024 and for your continued contribution and
cooperation towards growth in 2025.
After lots of deliberations, it was decided to approach this
year with very caution. For this year, Only Exceeding & Exceptional rating
will get the salary increment. Succeeding & below rating will not get the
salary increment. This is in line with the above-mentioned market conditions.
We are far better than our competitors when compared to the variable payout
percentage and salary increases for this year. This shows the prevailing market
conditions and our company’s cautious approach.
From this year onwards, we have introduced new processes to
provide more controls to the individual accounts for merit distribution. We are
introducing the role of pay plan manager who can distribute the hike % within
their team members according to the account’s needs and stability.
Hopefully we believe that within another couple of months,
we will have clarity on Trump’s import tax details, and we can plan well. Since
we operate as a local entity in most of the regions, we do not have much impact
in the services industry, but we will have an impact on the engineering side
where we do import engineering goods to the US.
I request you all to have a detailed discussion with your
team members on the variable payout percentages and salary increments. We
should explain clearly to them and make them understand the decision by our
board considering last year’s financial outcome and prevailing market
conditions.
We have also rolled out Microsoft co-pilot for all our
employees considering the Generative AI & Agentic AI trend in the market
even though the license costs are high. Kindly cascade with all your team
members to utilize this opportunity to learn copilot and start enhancing their
skillsets. It is going to be a game-changer in the upcoming years. It is good
for the employees as well as our organization.
Kindly identify key members in your team, maybe 5% of which
we can have special negotiation for them for Salary increments in case of
resignation. We should anticipate attrition and plan efficiently so that it
will not affect the delivery to our customers.
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