Barrett Business Services, Inc.

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Barrett Business Services, Inc.

4724 S.W. Macadam Avenue
Portland, Oregon 97201
U.S.A.
(503) 220-0988
Fax: (503) 220-6234

Public Company
Incorporated: 1965 as Barrett Business Services, Inc.
Employees: 11,480
Sales: $179.8 million (1995)
Stock Exchanges: NASDAQ
SICs: 7363 Help Supply Services

Barrett Business Services, Inc., ranked number 29 in Forbes magazine’s 200 Best Small Companies in America in 1995, provides professional employer services and temporary staffing to both small and large companies. Barrett, the largest company of its kind in Oregon, provided temporary employees to more than 5,000 businesses during the mid-1990s, generating roughly $100 million per year in sales from supplying clerical, technical, and light industrial workers on a temporary basis. The company’s greatest success during that period, however, came from providing staff leasing services. By assuming responsibility for all personnel-related matters, including payroll and payroll taxes, employee benefits, health insurance and workers’ compensation coverage, employee risk management, and other administrative tasks, Barrett moved to the forefront of its industry, recording substantial gains in sales and becoming a leading competitor in the U.S. temporary employment industry. The company provided its services through 16 branch offices, nine of which are located in Oregon, with the remainder located in Washington, California, Maryland, Idaho, and Delaware.

For more than 30 years, Barrett competed as a small, inconspicuous company, its presence in the U.S. temporary employment industry nearly indistinguishable from the myriad other small temporary employment companies scattered across the nation. The company spent this first era of its corporate history—one decidedly more prosaic than its second—quietly conducting its business and operating in the shadow of much larger companies, which, like Barrett, provided temporary workers to businesses whose permanent employees were either sick, vacationing, or of an insufficient number to complete a particular project. Although their business activities were similar, Barrett and industry stalwarts such as Manpower, Inc. and Kelly Girl Service, Inc., were in two different leagues financially speaking. Barrett generated a fraction of what larger companies in the industry collected in sales each year and, accordingly, received scant attention from industry observers for decades. By the late 1980s, however, Barrett’s stature began to grow, thrusting the company into the national spotlight.

National recognition arrived quickly for the small Portland, Oregon-based company as the dynamics of the temporary employment industry changed during the mid- and late 1980s, providing it with new opportunities and new markets, which the company skillfully tapped to catapult itself toward prominence in the U.S. temporary employment industry. In the wake of the sweeping changes occurring in the industry, Barrett recorded an unprecedented surge of growth, increasing its annual revenue volume from $27 million in 1990 to $180 million by 1995 and its annual net income from $360,000 to $4.1 million. Although the company’s traditional business of providing temporary employees to businesses grew resolutely during the first half of the 1990s, it was the prolific growth of a relatively new area of business, staff leasing services, which provided the definitive boost to Barrett’s stature within the temporary employment industry.

Staff leasing, known variously as “employee leasing,” or “co-employing,” was the fastest growing sector within the broadly defined U.S. temporary employment industry during the 1980s and 1990s, providing an infusion of new business and new competitors for an American industry that traced its roots to the founding of the Pinkerton National Detective Agency in 1852. Although the security guards leased by Pinkerton marked the formal beginning of providing temporary workers as a business in the United States, the modern origins of the temporary employment industry date to the years immediately following World War II. The founding of Kelly Girl Service, Inc. in 1946 and Manpower, Inc. in 1948 heralded the beginning of the temporary employment industry as big business, ushering in several decades of vigorous growth, during which thousands of small companies entered the business of supplying employees to employers in need of temporary help.

Origins

Barrett first opened its doors at the outset of this expansion of the temporary employment industry, decades before staff leasing services became a lucrative niche within the temporary employment industry. In 1951, Nancy Barrett founded the company, opening a small office in Baltimore, where she engaged in the business of supplying temporary help for the ensuing 20 years. Although Nancy Barrett’s business provided the name for the Barrett Business Services of the 1990s and gave it its earliest founding date, the driving force behind the 1990s version of Barrett Business Services was Barry Temporary Services, a temporary employment company based 3,000 miles to the west of Nancy Barrett’s Baltimore office.

Headed by Bill Sheretz, who would guide Barrett into the public spotlight during the 1990s, Barry Temporary Services operated one temporary employment office in Portland, Oregon when it merged with Barrett Business Services in 1971. Sheretz was named president of the merged companies, a position he would hold for more than 20 years. With Sheretz leading the way, Barrett continued its deliberate pace of growth for the next two decades, with the only appreciable expansion occurring in 1981 and 1984, when additional offices were opened in Seattle, Washington and Portland, respectively.

In the years spanning the 1971 merger and the vigorous growth recorded by Barrett during the first half of the 1990s, the temporary employment industry continued its robust expansion, albeit at a slower pace than during the 1950s and 1960s. More than 2,000 companies in the United States were supplying temporary workers to businesses during Barrett’s first decade of business after the merger, their existence, like Barrett’s, sustained by the simple need of businesses to maintain a sufficient work force in the face of temporarily departed employees and unexpected surges in business. The services provided by the industry became more comprehensive and, particularly for Barrett, more lucrative during the mid-1980s, when staff leasing services began to emerge as a more prominent aspect of the temporary employment industry.

For several decades before the 1980s, some businesses, particularly professional partnerships, had been using temporary employment services as a way to exclude clerical workers and other nonmanagement employees from retirement plans and from receiving other benefits. The Internal Revenue Service for years had attempted to put an end to this practice through the tax courts, achieving its greatest success with the Tax Reform Act of 1986, which effectively eliminated any pension plan advantages for businesses seeking them. Meanwhile, temporary employment companies that provided pension management services began looking for alternative sources of revenue, mindful that the future of pension management was in danger, and the direction the most progressive companies in the industry took was toward what had by then become known as “employee leasing.” The ranks of temporary employment companies involved in providing employee or staff leasing services swelled; their numbers increased as the services supplied by the temporary employment industry became dramatically more complex and more comprehensive.

Staff Leasing and Barrett During the 1980s

For businesses, particularly small and medium-sized companies, paying for staff leasing services made perfect business sense. Instead of simply providing workers on a temporary basis, staff leasing firms became the employer of record for the client company, leasing employees on a continuing rather than contingent basis and assuming the sundry administrative tasks associated with maintaining a work force. Generally, this business arrangement meant that the temporary employment company, the employer of record, was responsible for generating paychecks, providing health and workers’ compensation insurance, and insuring that the client company was in compliance with legal and environmental regulations. In effect, the temporary employment company operated as an external human resources department for the client company. For smaller companies, which spent as much as 25 percent of their time handling employee-related paperwork, paying for staff leasing services eliminated time-consuming benefits administration and payroll chores, enabling them to devote their energies toward other, revenue-generating aspects of their business.

A trend within the U.S. temporary employment industry quickly emerged, as the popularity of staff leasing services swept throughout the country. In 1985 there were fewer than 100 firms employing a total of 10,000 workers under staff leasing arrangements. Over the course of the ensuing decade, the number of companies providing staff leasing services and the number of workers employed under such contracts skyrocketed, eclipsing 2,000 companies and two million individuals by 1995. To make conditions more favorable for temporary employment companies operating during the latter half of the 1980s and the first half of the 1990s, the traditional demand for temporary employees increased as well, as many businesses, both large and small, sought the work force flexibility and cost efficiencies realized from using temporary employment companies.

Conditions during this decade proved to be a boon for astutely managed companies that developed comprehensive staff leasing programs, and Barrett was one of them, positioning itself as a progressive competitor in the staff leasing arena by the beginning of the 1990s. The company introduced its staff leasing service in 1990 in its home state of Oregon, where three years earlier it had become a self-insured employer for workers’ compensation coverage. At this point, as Barrett entered the staff leasing field, the company already had branched into another business area, seizing the opportunity to expand upon its self-insured employer status for workers’ compensation by marketing its workplace safety program to small and medium-sized Oregon employers. Begun in the late 1980s, Barrett’s safety program was designed to assist client companies in managing workplace injuries and reducing workers’ compensation claims through on-site safety inspections, safety programs and training, and financial incentives to reward safe work practices.

Energetic Growth in the 1990s

The marketing of Barrett’s workplace safety program represented a harbinger of the diversification that would take place as the 1990s began, engendering dramatic growth in annual revenues during the first half of the decade and recasting the company as a decidedly more sophisticated competitor in the temporary employment industry. The inauguration of staff leasing services in Oregon in 1990 was followed by the introduction of identical services four years later to markets in Washington and Maryland. As the operating territory of the company’s staff leasing services was being extended to include three states, Barrett completed moves to market itself as a self-insured employer outside of Oregon as well, obtaining self-insured employer status for workers’ compensation in Maryland in November 1993 and in Washington in July 1994. Meanwhile, the company’s traditional business of providing workers to fill clerical, technical, and light industrial positions on a temporary basis was growing steadily, adding to the sales gains achieved through the provision of staff leasing and workplace safety services.

In 1990, when Barrett’s total sales amounted to $27 million, the company derived nearly all of its sales, $23.4 million, from providing temporary employees to businesses. Its staff leasing services accounted for $3.6 million of total sales. In 1994, when sales had soared to $140 million, the company generated $71 million from its temporary services business and $69 million from providing staff leasing services, more than doubling the size of its temporary services business and increasing its staff leasing business nearly twenty-fold. The gains were enormous, particularly the infusion of business gained from the company’s quick advancement in the staff leasing field, which by the mid-1990s accounted for roughly half of Barrett’s total sales. During this period of prodigious gain in sales, Barrett had become a publicly owned company, making its initial stock offering in June 1993. In the first three months after the public offering, Barrett’s stock jumped 82 percent in value, then, aside from temporary fluctuations, increased steadily upward as the company entered the mid-1990s.

Energetic growth continued to reign following the dramatic gains recorded between 1990 and 1994. In 1995, Barrett’s sales jumped to $180 million, exceeding the $175 million figure projected during the year. Net income rose from the $3.4 million posted in 1994 to $4.1 million, instilling confidence that the second half of the 1990s would be as successful as the first. As Barrett moved toward the future, the company was aggressively expanding into new markets, intent on securing new business in an industry that was growing at between 15 and 20 percent per year. Self-insured employer status for workers’ compensation was obtained in Delaware in January 1995 and in California in March 1995. The following year, in April, Barrett acquired California-based Staff America, Inc., a provider of both temporary staffing and staff leasing services with $6.7 million in 1995 revenues, and reached an agreement to acquire Job Works Agency, Inc., a provider of temporary staffing and staff leasing services based in Oregon. Concurrent with these two moves toward expansion in April 1996, Barrett opened a new office in Boise, Idaho to provide staff leasing and temporary staffing services throughout southern Idaho. The company then set its sights on building upon the legacy of growth established during the early and mid-1990s, hoping to take its newfound prominence to new heights in the future.