Right Management Consultants, Inc.

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Right Management Consultants, Inc.

1818 Market Street
Philadelphia, Pennsylvania 19103-3614
U.S.A.
Telephone: (215) 988-1588
Toll Free: (800) 237-4448
Fax: (215) 988-9112
Web site: http://www.right.com

Public Company
Incorporated: 1980
Employees: 1,702
Sales: $184.25 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: RMCI
NAIC: 54161 Management Consulting Services; 541612 Human Resources & Executive Search Consulting

When a company’s workers are “laid off,” the rank and file may head for an employment agency (as well as the unemployment office), but the executives very likely are sent to a firm that specializes in “outplacement services.” This puts the “dehired” party off premises but presumably focused on a job search rather than a lawsuit or vindictive whistle blowing. Right Management Consultants, Inc. is the largest firm worldwide—and the only publicly traded one—in the outplacement services field, which it prefers to call the “career transition services industry.” The company’s fees for its services, which typically last six months to a year, are paid exclusively by the employer, and it does not provide its services to employees who are not sponsored by employers. In other words, Right Management Consultants is neither an employment agency nor a “retail” career consulting firm open to all. The company also provides management consulting services in the form of leadership development, organizational performance, and employee management. It is structured into five geographic groups and has more than 200 company-owned and franchised offices worldwide, in every populated continent except Africa.

Starting Out in the 1980s

Frank Louchheim was manager of outplacement for Bernard Haldane Associates, Inc., a Philadelphia-based career-counseling firm when he founded—with three others—Right Management Consultants in 1980 and became its chairman, president, and chief executive officer. The moment was propitious, for the nation was entering one of its most severe recessions. By the spring of 1982 one-third of the 500 biggest U.S. companies, and two-thirds of the biggest 100, in terms of sales, were believed to be using outplacement specialists. The 1982 edition of a directory of outplacement firms found 82 in existence, of which more than two-thirds were formed in the 1970s. Most were charging as their fee 15 percent of the dehired individual’s annual salary. Others billed on an hourly basis at $60 to $100 per hour.

Doing business under the name “Right Associates,” Right Management Consultants started out on a shoestring, with the four founders operating in different cities and receiving compensation in the form of commissions because there was not enough business volume to pay salaries. The firm developed into a national network by recruiting experienced, entrepreneurial managers with the authority to run local offices as they saw fit. They received a modest base salary for managing the office, another one for time actually spent counseling clients, and a commission based on the office’s sales. Each manager was assigned an operating-profit target and given a bonus of 10 percent of the profit for meeting the target, plus an extra percentage point, with a maximum of 20 percent, for every percentage point of profit over the target. The successful office manager also was awarded stock options after a year. Similarly, the skeleton corporate staff at the Philadelphia headquarters received compensation in the form of incentive bonuses as well as salary.

Right Management Consultants operated on a franchised basis as well. Its first office outside Philadelphia, in Houston, was such an “affiliate” until 1984, when it was acquired as a company office. In 1981 Right Management opened company offices in Baltimore and Chicago, as well as three in the New York City metropolitan area. It also opened affiliated offices in Boston, Detroit, Fort Lauderdale, Los Angeles, Miami, Providence, and San Francisco in 1982. That year the company earned a nominal $1 in net income on total revenues of $2.25 million.

By the end of 1986 Right Management Consultants had 13 company offices in North America and 23 more operated by 14 affiliates. There was also an affiliate in Paris. Revenues and net income rose each year, reaching $11.92 million and $776,000, respectively, in 1986. That year 75 percent of revenue came from providing outplacement services on a one-on-one basis. These included such job-hunt services as career counseling, resume writing, and preparing and rehearsing for interviews. They also included advice to the employer on conducting the termination interview, terms of severance pay and other termination benefits, and identification of termination-related issues for which the employer might wish to seek legal counsel. Right Management’s remaining source of revenue came from outplacement consulting in group contexts for companies making group reductions in their workforce. Group programs had, as their core, seminars for generally up to 12 employees per group, in sessions extending over two to five days. The company made its initial public offering of stock in 1986, garnering net proceeds of $3.68 million. Louchheim remained the largest shareholder, with 17 percent of the common stock.

Between 1987 and 1990 Right Management Consultants paid $7.28 million for ten acquisitions. These included THinc Consulting Group International, Inc., which had offices in five U.S. cities and a British subsidiary; R.S.F. Gestion de Carriere; Compass Inc.; Executive Services Associates, Inc.; Outplacement Resources Group, San Diego Human Resources; and four affiliates, of which two were in the United States and two in Canada. In Europe, the company acquired its Paris affiliate in 1988 and established a French subsidiary. A company-owned London office was established in 1987. Affiliates opened offices in Birmingham, England; Brussels; Frankfurt, Germany; Geneva; Lyons, France; and Oslo.

By 1989 Right Management Consultants was the second largest firm in a field so competitive that a rate war was underway. The standard fee of 15 percent of the annual gross pay of a dehired executive was reported to be likely to apply to base pay only, and even that charge was said to be subject to a volume discount. The two- or three-day group seminar was selling for as low as $1,200 a day or even less, compared with the previous standard of $1,500. But Right Management was doing fine. Revenues rose by about half, to $34.31 million in 1990, and net income almost doubled, to $2.33 million. The company now had 3,500 corporate customers, served by 74 offices in North America and Western Europe, of which 37 were operated by 19 affiliates.

Looking Beyond Outplacement in the 1990s

The revenues of Right Management Consultants continued to grow each year during the first half of the 1990s, reaching $114 million in 1995. Net income rose each year except 1992, reaching $7.82 million in 1995, when the number of offices came to 126. These were now predominantly company offices (89) rather than franchised ones. Between 1991 and 1995 Right Management Consultants paid $20.69 million for 11 acquisitions. These included Clark & Kevin Associates, Inc.; Green and Herring Job Search Services, Inc.; Jannotta Bray & Associates Inc.; LM&P, a French firm; and Sunbelt Career Development Corp. They also included purchased affiliate offices in Boston; Cupertino, California; and North and South Carolina. Louchheim stepped down as chief executive officer in 1991 and was succeeded by Stanley Tilton, the firm’s president and chief operating officer. A year later he was succeeded by Richard Pinola, formerly president and chief operating officer of Penn Mutual Life Insurance Co. Pinola may have been Right Management’s biggest success story. After parting company with Penn Mutual—for reasons he refused to discuss—he entered the Right Management outplacement program and within months went to work as the company’s chief.

By 1993 Right Management Consultants had expanded its business by offering human resources services in areas other than outplacement. These services were intended to assist employers and their employees in identifying and improving areas of job performance; refining communication skills and improving employee productivity; and assisting companies in encouraging and supporting dual-career families to accept moves by providing spouse employment assistance upon transfer of employment. Other services were designed to enhance the abilities of executives and managers to evaluate employees’ performance when making employment and promotion decisions.

Right Management Consultants earned record net income of $9.7 million in 1996 on revenues of $125 million. Revenues were stagnant the following year and, though they continued their march upwards for the rest of the decade, net income declined. With the strong U.S. economy reducing demand for outplacement counseling, the company saw the average length of its contracts decrease from nine to 12 months to three to six months. One response by Right Management was to make organizational consulting a formal sector of its business. The firm entered this field in 1996 with the acquisition of People Tech Consulting Inc., a Toronto-based company. Although companies were not laying off as many of their employees as in the past, they were engaging in mergers and acquisitions and making other changes that required calling in human resources consultants. Consulting activities included assessing whether employees were suited to their jobs and evaluating managerial talent. One of Right Management’s assessment tools, Team 360, evaluated employees by querying the people who worked alongside, above, and below them.

Company Perspectives:

Right Management Consultants is an international career management and human resources consulting firm dedicated to helping its clients manage the human side of change.

Founded in 1980, Right Management Consultants quickly became a leader in the outplacement industry. Today, Right provides a full spectrum of services to meet the workforce management needs of client organizations and their employees, ranging from individual coaching to career management assignments to the design and implementation of large-scale organizational change initiatives .

In other parts of the world, especially Asia, the economy was not as strong. By focusing on international business, the company raised its share of revenues from outside North America to 28 percent in 1998, compared to only half as much in early 1997. By 1999 Pinola and the company’s two other highest officials were spending about 70 percent of their time outside Philadelphia, visiting clients and executives in places as distant as Singapore. Company executives once more began receiving raises and bonuses, which had been suspended following a 78 percent decline in net income in 1997. “The outplacement business is already substantial,” President and COO John J. Gavin told Peg Brickley of the Philadelphia Business Journal. “But it is only one of the opportunities. All the things driven by pressure on corporate earnings—attention to productivity, merger integration efficiency—present other opportunities.”

Right Management Consultants continued to add companies during this period. Between 1996 and 2000 the company made 27 acquisitions at a cost of $68.17 million. Among these were a London-based firm, Cavendish Partners, Inc.; a French firm, Groupe ARJ; two Belgian companies, Jouret Management Center and N.V. Claessens Belgium S.A.; and a controlling interest in Saad Fellipelli/Coaching of Brazil and in Davidson & Associates, Pty., Ltd., with operations in 11 locations throughout Australia, New Zealand, Singapore, and Hong Kong. The company also took a stake in Way Station, Japan’s second largest outplacement firm, and raised this stake to 51 percent in 2000. In the United States, acquisitions included Atlanta Consulting Group; Berkshire Consulting Services; Career Development Group Inc.; Career Dynamics, Inc.; Chapel Stowell, Inc.; Corporate Resource Group; Manus; Michael D. McKee & Associates; Nelson, O’Connor & Associates; Teams, Inc.; and Transition Management, Inc. It also purchased its former affiliates in St. Louis; Knoxville, Tennessee; and Richmond, Virginia. By the spring of 2001 the company had bought back all but five of its affiliates.

The pace of acquisitions continued unabated in the first quarter of 2001. Right Management Associates purchased two Norwegian consulting firms and signed a letter of intent to acquire a company in Palo Alto, California. The acquisitions added about $9 million in annual income. Company revenues increased about 28 percent in the first quarter of 2001, as compared to the same period in 2000. Net income rose 34 percent during this period.

Right Management Consultants in 2000

Right Management Consultants enjoyed net revenues of $184.25 million in 2000, of which international operations accounted for 35 percent and human resources consulting comprised about 21 percent, compared to only 9 percent in 1997. Net income amounted to $8.46 million during the year after discounting a loss of $11.41 million reflecting a one-time accounting charge. The company’s largest shareholders in March 2001 were FMR Corp., 12 percent; Pinola, 11 percent; and T. Rowe Price Associates, Inc., 9 percent. The long-term debt was $56.97 million at the end of 2000.

Right Management Consultants’ career transition, or outplacement, business, accounted for about 79 percent of total revenue in 2000. The company provided these services to about 5,000 companies during the year, including a majority of the Fortune 500. Approximately 78 percent of the revenue in this sector came from individual outplacement services. These included advice to the employer on conducting the termination interview, terms of severance pay, and other termination benefits. Services by the company to terminated employees included assistance in handling the initial difficulties of termination; identifying continuing career goals and options and planning an alternative career; aiding in developing skills for the search for a new job, such as resume writing, effective networking, identifying and researching types of potential employers, and preparing and rehearsing for interviews; continuing consulting and motivation throughout the job-search campaign; assessing new-employment offers and methods of accepting such offers; and, where appropriate, consulting with the employee’s spouse regarding the stresses of the employment search and the positive role the spouse may play in all aspects of the new job search, as well as assisting with financial planning and health maintenance.

Group outplacement services accounted for about 22 percent of the revenue generated by Right Management Consultants from its career transition services. These one-to-five-day seminars for generally up to 12 employees per group were often preceded or followed by individual counseling. In addition, the company offered to assist corporate clients engaged in a large-scale reduction in force. Career centers typically served groups of 100 or more individuals and were operated for a predetermined time period, usually ranging anywhere from four to 12 months.

The remaining 21 percent of Right Management Consultants’ revenue in 2000 came from organizational consulting services to assist organizations and their employees. These services focused on the following: leadership development through executive coaching and feedback-rich customized programs; organizational development—building competencies by identifying the skills, knowledge, and personal characteristics that determine success in a given company, using these competencies to align human-resource systems with strategy; and talent management—growing talent by attracting, motivating, and retaining the best people in a highly competitive talent marketplace.

Key Dates:

1980:: Right Management Consultants is founded in Philadelphia.
1986:: Company makes its initial public offering of stock.
1989:: Company is the second largest firm in its field.
1996:: Right Management adopts organizational consulting as a business sector.
1997:: Despite sharply falling income, Right Management is by now the largest in its field.
2000:: The company has made 27 acquisitions since 1996 and 38 since 1991.

Principal Subsidiaries

Key Management Strategies, Inc.; Right ARJ Management Consultants, SA (France) ; Right Associates, Ltd. (U.K.) ; Right D&A Pty. Ltd. (Australia; 51%) ; Right Human Resources, Inc. (Canada) ; Right License Holding, Inc.; Teams International, LLC (51%) ; Way Station, Inc. (Japan; 51%) .