Sodexo’s CEO on Smart Diversification

Sodexo was founded in 1966 to provide food and catering services to businesses, schools, hospitals, and other institutions. When the French space agency, a client, asked the company to organize cleaning and maintenance for its base in Guyana as well, it was an early sign that Sodexo could extend its reach into previously unconsidered areas. Companies have outsourced so many functions for so many years that managing and coordinating the work of their suppliers has become a significant challenge. Some of them realize that working with a single integrated provider such as Sodexo—which now manages everything from employee cafeterias to HVAC systems, landscaping, incentive programs, and employee benefits—is far easier.

Over the past decade Sodexo has diversified broadly and globally while observing four basic rules: (1) Be true to the business model. Almost all of Sodexo’s services can be provided by an individual or a team and don’t require capital investments in property or serious machinery. (2) Make people happy and productive. An orientation toward the needs of the individuals who actually use the company’s services guides choices about what Sodexo will or will not do. (3) Help clients execute strategy. Direct dialogue with top management differentiates the company and demonstrates that its offerings are not just commodities. (4) Rely on employees, not subcontractors. Sodexo owns the businesses it’s in and works hard to motivate and develop its employees.

HBR Reprint R1503A