Olsten Corporation

views updated Jun 11 2018

Olsten Corporation

175 Broad Hollow Road
Melville, New York 11747-8905
U.S.A.
(516) 844-7800
(800) WORK NOW
Fax: (516) 844-7011
Web site: http://www.olsten.com

Public Company
Incorporated: 1950
Employees: 700,850
Sales: $4.6 billion (1998)
Stock Exchanges: New York
Ticker Symbol: OLS
NAIC: 56131 Employment Placement Agencies; 56132 Temporary Help Services

The third largest temporary employment provider in the world, Olsten Corporation recruits, screens, and places individuals for temporary work assignments with employers. In 1999 Olsten Corp. provided roughly 700,000 temporary employees for an estimated 600,000 clients through a network of 1,500 offices. Aside from its commercial business, which supplied temporary personnel for a variety of corporate and light industrial positions, the company provided temporary staffing services to information technology and health care industries, its two areas of specialization. During the 1990s, Olsten Corp. completed a number of acquisitions in the health care industry that made it the largest supplier of temporary health care personnel in North America.

1950 Founding

William Olsten was regarded as one of the pioneers in the temporary help industry, opening his first office—housed in one small room—in New York City in 1950. Ambitious and a risk-taker, Olsten demonstrated an intuitive sense of timing as a temporary help supplier, foreseeing changes in the labor market and anticipating the skills employers were seeking from their work force. He consistently positioned his company to take advantage of emerging trends in the workplace, a skill that enabled his modest, one-office business to flourish from the start. As the 1950s began, office workers were in short supply, their ranks depleted by a postwar transition that saw many women give up the clerical jobs they had performed during the war and return home. Olsten, with the help of his brother-in-law, took to the streets and canvassed suburban New York City to recruit women for temporary office work. Within eight years, Olsten had expanded his business to five offices, first by establishing offices in the outer boroughs of New York City and then moving into other major urban markets such as Boston and Philadelphia. As a tool to promote his business and to recruit temporary workers, Olsten created what he called the “Temp-Mobile,” a Volkswagen bus that traveled from neighborhood to neighborhood. Olsten began using his Temp-Mobile in 1957 and later replaced it with a radio-equipped van that shuttled temporary workers from suburbia to their assignments in New York City.

The 1960s witnessed the maturation of the Olsten enterprise, as it evolved from a relatively small, five-office staffing firm into a rapidly expanding, diversified, publicly held corporation. Market conditions propelled the company forward, as the concept of employing temporary workers cemented itself in the mindset of corporate America. Olsten capitalized on the changing business practices and advancing technologies of the decade, demonstrating a strong desire to develop his company into a national force. Looking for a way to accelerate expansion, Olsten began franchising his business concept in 1962. In 1965 the company opened its first Canadian office, establishing a branch in Toronto. By this point, the company had tripled in size, comprising 20 offices scattered throughout nine states, and had deepened its penetration into the temporary worker industry, as Olsten increased the services his company provided to employers. To the company’s selection of secretarial and clerical workers, Olsten added other professions, such as those related to engineering work. A change in the company’s corporate title to “Olsten Corporation” in 1967 was followed in 1968 by the debut of the newly named company as a publicly traded corporation, the same year corporate headquarters were moved to Westbury, New York. In a display of his company’s newfound might, Olsten finished the decade by completing two acquisitions that diversified Olsten Corp. and foreshadowed its involvement in a new, significantly important area. In 1969 Olsten acquired a medical laboratory named Rush Laboratories and purchased another medical laboratory, Path-Tek Laboratories, the following year.

Expansion and Diversification in the 1970s and 1980s

The foray into the medical field represented a significant event in Olsten Corp.’s history, introducing the company into a market segment that was the central focus of its activity during the 1990s. The acquisition of the two medical laboratories led to Olsten Corp.’s entry into the market for temporary workers in the health care industry, inaugurated by the creation of Olsten Health Care Services in 1971. By creating a subsidiary to provide temporary medical staffing services, Olsten had seized upon a way to insulate his company from the cyclically of its commercial business. As the demand for temporary workers in the corporate world dipped and rose, the company’s medical staffing business would serve as a stabilizer, enabling Olsten Corp. to generate revenue at a more consistent level. The entry into health care services also represented another example of Olsten’s foresight, positioning his company in what would become a significant and lucrative market for temporary staffing services. During the first half of the 1970s, however, Olsten Corp.’s medical services business was little more than a sideline venture; its prominence within the corporation was still two decades away. In the interim, the company’s commercial business was recording explosive growth, as Olsten developed his business into a national chain. Between 1965 and 1975, the number of offices increased from 20 to 150, flooding principal markets throughout the United States. Although there were several areas beyond the company’s reach by the end of the 1970s, expansion during the 1980s ensured that every state in the country could claim at least one Olsten Corp. office within its borders.

The reliance on temporary employees by businesses big and small increased during the 1980s, fueled by the flexibility it gave employers as they contended with the fluctuating productivity demands of their businesses. Temporary staffing firms recruited and screened potential employees, identifying their particular skills and matching those skills with the specific demands of the employer. Olsten Corp. had decades of experience in appraising prospective temporary employees, developing its own system called the Olsten Profiler in 1972 that was trademarked the following year. In 1986 the company computerized the Olsten Profiler, improving its efficiency and accuracy further.

Expansion during the 1980s doubled the size of the company from its stature in 1975, establishing offices throughout the nation. With the opening of offices in Hawaii, Alaska, and Puerto Rico in 1987, the company had offices in all 50 states, the District of Columbia, Puerto Rico, and Canada, ranking it as the third largest temporary staffing firm in the United States. The company had developed well beyond its original business of providing clerical workers to embrace a variety of positions. In 1987 Olsten Corp.’s more than 400 offices placed 240,000 temporary workers in positions for 80,000 clients, providing workers with skills in office services, office automation, accounting, legal support, records management, marketing, technical and light industrial services, as well as nursing, home health care, and therapy. By the end of the 1980s, there were more than 525 Olsten Corp. offices in operation.

Focus on Health Care in the 1990s

The end of the 1980s marked a turning point in the history of Olsten Corp., ushering in a decade of dynamic change. Olsten retired in 1990, vacating his posts as chairman and chief executive officer during the company’s 40th anniversary. Behind him, Olsten left a business capable of generating nearly $1 billion in sales per year, a company with a far-reaching grasp on the commercial temporary staffing market and a promising involvement in the health care temporary staffing market. Olsten’s successor was Frank Liguori, a Brooklyn-born butcher’s son who had been president of the company since 1986. Liguori, an accountant by training, took the helm of Olsten Corp. and initiated dramatic changes, immediately steering the company toward a greatly increased presence in the health care industry. Olsten had not neglected the company’s involvement in health care—opening its first Medicare-certified office in 1983—but Liguori pushed the business headlong into health care, taking the legacy left by Olsten to another level. One of the first steps taken in this direction was the acquisition of Upjohn Co.’s Upjohn Health Care Services subsidiary, purchased in December 1990. Upjohn Health Care Services had collected $182 million in sales in 1989 by providing home health care and supplemental staffing to hospitals, nursing homes, and other health care organizations. The acquisition, which lifted Olsten Corp.’s sales beyond $1 billion, added 200 offices to Liguori’s portfolio of health care properties and made health care a contributor of 30 percent of Olsten Corp.’s revenue volume.

Company Perspectives:

When companies today seek out human-resource management, they’re looking for ways to reduce costs, improve flexibility, and find other business solutions that help them to develop and market new products and services better and more quickly. So the services we offer include everything from helping them fill positions either temporarily or permanently, to full outsourcing activities. Plus we handle these services on a success rather than retainer basis. Companies approaching the 21st century need a human-resource partner that can help them achieve long-term differentiation.

Liguori was merely getting started when he acquired Upjohn Health Care Services. His efforts during the 1990s reflected an emphasis on the global expansion of Olsten Corp.’s commercial business and on the development of an information technology business, but progress on both these fronts paled in comparison with the strides gained in the health care industry. In May 1993, Liguori made headlines when he proposed to pay $449 million worth of Olsten Corp. stock for Lifetime Corp., a supplier of home health care personnel with an enormous $886 million in annual sales. His offer drew criticism from industry analysts for several reasons. Lifetime was saddled with debt and had demonstrated erratic profitability, recording nearly $18 million in earnings in 1990 and $5 million two years later. The company, by its own admission, also suffered from what it referred to as “operational inefficiencies” and overstaffing, but Liguori brushed the problems aside, remarking, “One man’s operating problems are the next man’s opportunity.” Perhaps the most alarming aspect of the deal was the amount Liguori had proposed to pay. Earlier in 1993, Lifetime had been trading at roughly $16 per share when another company, Abbey Healthcare, attempted to purchase it for $23.50 per share. Abbey Healthcare later raised its offer to $27.50 per share, a bid Liguori preempted by offering $33 per share, which critics believed was too high. Despite the widespread belief that the acquisition was ill advised, Liguori pressed forward and completed the deal, gaining shareholder approval on a transaction that doubled the size of Olsten Corp. overnight.

Aside from substantially increasing Olsten Corp.’s annual revenue volume, there were other, equally profound, effects stemming from the Lifetime acquisition. Olsten Corp. was transformed from a company whose foundation rested on commercial temporary staffing into a company whose sideline involvement in health care had become its future—“something of a flip-flop,” according to Liguori. After the acquisition of Lifetime, Olsten Corp. derived 55 percent of its business from health care and 45 percent from its former mainstay commercial temporary staffing business, ranking as the largest supplier of staffing services to the home health care market in the country. Industry pundits watched Olsten Corp. closely, waiting to see if Liguori had made a mistake or acquired the means to create a formidable temporary staffing firm with a two-pronged strategy.

Olsten Corp.’s commercial business also saw its scope increased during the first years of Liguori’s tenure. During the 1980s, the company had solidified its position in the United States, establishing offices in every state. During the 1990s, Liguori set his sights on the rest of the world, beginning a concerted attack on international markets. The company’s progress overseas was achieved through a series of acquisitions. In 1993 Olsten Corp. purchased Office Angels, a staffing service firm headquartered in the United Kingdom. The following year, the company acquired a stake in a Mexican staffing agency, which subsequently was renamed Olsten STAFF S.A. In 1995 the company moved in several directions, acquiring operations in Argentina, Norway, Denmark, and Germany.

By the end of 1995, systemwide sales for Olsten Corp., including franchises, exceeded $3 billion, only four years after the company had reached the $1 billion mark. Much of the financial growth was attributable to the acquisition of Lifetime and the increasing use of temporary employees by employers, but some of the revenue growth was derived from Liguori’s foray into a new business area. In 1995, one year after moving company headquarters to Melville, New York, Liguori acquired IMI Systems Inc., an international information technology services company. With $47 million in sales in 1994, IMI was recording growth in excess of 40 percent per year, making leaping strides in a fast-growing industry. IMI served a clientele consisting of a large number of Fortune 100 companies, including banks, utilities, and telecommunications concerns. For these clients, IMI designed, developed, and maintained information systems, providing its comprehensive services on either an individual or project-oriented basis. The company, which Liguori planned to use as the foundation for the further development of information technology services business, was supported by a network of 12 offices, including two branches in Europe.

After the acquisition of IMI, Liguori moved ahead with further acquisitions during the latter half of the 1990s, behaving “like a Monopoly player on amphetamines,” according to a reporter from Chief Executive magazine. Despite the characterization, there was no implication that he was being too aggressive. Liguori had few critics following the IMI acquisition, having silenced his earlier detractors by successfully assimilating Lifetime into Olsten Corp. “The ongoing shift to lower-cost health care settings, such as the home, and the dramatic growth in business and industry temporary staffing needs should result in continued revenue growth acceleration for Olsten,” explained one analyst, typifying the industry’s assessment of Liguori’s progress. Amid such praise, Liguori completed two acquisitions in 1996, purchasing Co-Counsel, a leading provider of legal staffing services, and Quantum Health Resources, a provider of alternate-site therapies and infusion support services. Also in 1996, CIGNA selected Olsten Kimberly QualityCare as sole-source provider of home health care services for nearly ten million managed care participants nationwide, the type of full-service partnerships with large clients that Liguori was seeking. The following year, further expansion occurred, particularly overseas, where the company established staffing services outlets in Chile, France, and Spain.

Olsten Corp. entered the late 1990s with glowing prospects, its rapid growth during the decade heralded as a success story and its leader hailed as an astute and ambitious manager. Both assessments quickly changed during the late 1990s, however, as Olsten Corp. faltered and Liguori bore the brunt of the damage. The company became embroiled in a series of federal investigations claiming Medicaid fraud charges that eventually led to a $102 million settlement to end the Department of Justice’s litigation. Concurrently, the company’s profits declined by 50 percent in 1998, in large part because of cutbacks in Medicare payments. In response to the internal turmoil, Olsten Corp.’s stock fell to roughly $7 per share, far below the $32-per-share price of two years earlier. To add insult to injury, Fortune magazine reported that the nation’s leading business leaders ranked Olsten Corp. as one of the “least admired” companies in the United States. For Liguori, the situation could not be bleaker. In February 1999 he surprised industry analysts by submitting his resignation. The responsibility for restoring the company’s image and its financial results fell to Edward Blechschmidt.

Blechschmidt had joined Olsten Corp. in 1996 as the company’s president. Although he was regarded as Liguori’s heir apparent at the time, few thought he would assume control over the company three years later. During his first few months in office, Blechschmidt presided over the closure of 60 offices in markets deemed to be oversaturated. Although opinions differed concerning the company’s prospects as it prepared for the 21st century, there was justifiable confidence in the future growth of Olsten Corp.’s commercial temporary staffing business. Sales at Olsten Staffing Services increased 20 percent in 1998, rising to $3.55 billion. Whether or not the company could restore its health care business following the federal investigations was a question to be answered in the decade ahead.

Principal Subsidiaries

Co-Counsel, Inc.; IMI Systems, Inc.; Olsten Financial Staffing; Olsten Health Services; Olsten Staffing Services; Olsten STAFF S.A.

Olsten Corporation

views updated May 17 2018

Olsten Corporation

One Merrick Avenue
Westbury, New York 11590
U.S.A.
(516) 832-8200
Fax: (516) 832-8019

Public Company
Incorporated: 1950
Employees: 3,200
Sales: $1 billion

The third largest temporary and health care services company in the United States, the Olsten Corporation provides supplemental staffing for work in offices, including clerical, legal, accounting, and home health care tasks, as well as in other areas. As a pioneer in the industry, Olsten has expanded operations from the New York area to the entire country and Canada in the course of four decades in business.

The Olsten Corporation was founded by William Olsten in 1950. Born in 1919, Olsten had served in the armed forces in Europe during World War II. While there, he was often asked by illiterate soldiers to read them their letters from home. This experience awakened in him a life-long interest in literacy and continuing education which would one day become a central element of his business philosophy. After the war, Olsten returned home to work in management positions at a bottling plant and at a company that provided entertainment for servicemen. Recognizing a need for temporary office workers to fill in for absent employees in the booming post-war U.S. economy, Olsten opened an agency to provide such workers in New York City. With a brother-in-law as partner and a receptionist as his sole employee, Olsten set out to build a niche in the office staffing industry.

Perhaps the largest hurdle to overcome in running Olsten’s new business was a scarcity of workers to send out on jobs. To recruit likely candidates, Olsten drove around the suburbs of New York City in a station wagon with a bull horn, broadcasting that anyone who wanted a job should yell, “Stop!” This technique yielded six candidates. In addition to this unorthodox recruitment policy, Olsten hung out in supermarkets to ambush housewives and convince them to sign up with his service. When he followed up on these trips with phone calls to the women’s homes, Olsten frequently met with hostility from husbands who saw no need for their wives to work outside the house.

To familiarize office managers with his service, Olsten developed a rolling advertisement for his firm, the “Radio Tempmobile.” This was a Volkswagen bus with a billboard on top showing a smiling woman behind a typewriter, next to the words “Olsten’s Radio Temp-mobile Delivers Temporary Office Personnel In Minutes.” The bus cruised the streets of Manhattan delivering temporary employees to their jobs.

By the end of the 1950s, Olsten had established his firm as a solid presence in the New York City market. The company offered a range of skilled employees, from typists and secretaries to clerks and bookkeepers. Olsten expanded beyond the New York City market in 1962, when a franchise office was opened in Chicago. Within three years the company had expanded to six franchised offices, in addition to 14 offices that were directly owned, in nine states. Olsten had become one of the few firms in the rapidly-growing temporary help industry with a broad geographical reach.

Olsten had increased the range of services offered as well, adding a sales boosters division to provide workers capable of marketing products. Among the tasks undertaken by workers in this division were door-to-door sales, product demonstration, and work at conventions. Moving beyond the secretarial level, the company began sending out executives and other professional personnel, such as purchasing agents, advertising managers, and television producers. By 1966 Olsten’s was also placing engineers—in hot demand due to the military build-up associated with the Vietnam conflict.

In 1967 Olsten’s Temporary Office Personnel became the Olsten Corporation, reflecting the broader scope of its current activities. In the following year the company went public, selling stock for the first time. Olsten branched out further in 1969, purchasing Rush Laboratories, Inc. through a subsidiary. A year later Olsten acquired another laboratory, Path-Tek Laboratories, Inc.

As acceptance of the concept of temporary help grew, the Olsten firm expanded steadily. By the mid-1970s, the company had opened over 100 offices and had branched out to the home health care industry; by the early 1980s, Olsten exceeded 250 offices, including eight agencies devoted to medical personnel. The white-collar workplace in the U.S. began a rapid and irreversible transformation in the early 1980s from the typewriter to the word processor, changing the nature of the temporary employment field. Simply clocking a prospective secretary’s typing speed was no longer as important as insuring that one was capable of using one of several word processing packages. As a result Olsten established a training system for temporary employees using a variety of machines and programs the prospective employee would be expected to use on the job. This training program was the first of many employee education projects that Olsten installed.

Olsten’s steady growth throughout the 1970s and the 1980s came as the structure of one segment of the American workforce underwent a shift ultimately benefiting temporary agencies. Companies began realizing that the cost of advertising for potential employees, screening applicants, training new workers, and providing fringe benefits such as health insurance and paid vacations, along with the administrative expenses associated with these activities, added up to far more than the employee’s actual salary. Overhead costs like Social Security, local employment taxes, unemployment insurance payments, and pension plan contributions, along with payroll and record-keeping expenses, often combined to push a worker’s actual cost to an employer to over 150 percent of the worker’s salary. To keep human resources expenditures down, companies began permanently reducing their staffing levels, planning to add extra employees only at times when a need was recognized. Businesses with leaner workforces relied much more heavily on the availability of temporary employees than companies traditionally had when outside workers were used only to fill in for sick or absent regular workers.

By 1984 Olsten’s sales had reached $332 million. Revenues grew by 20 percent in the next year, representing output from 330 offices. By the mid-1980s, the temporary personnel industry had become the third-fastest growing field in the U.S. economy. As a beneficiary of this growth, Olsten became a tempting target for hostile takeover by corporate raiders; the company took measures late in 1987 to make itself less vulnerable to financial takeover.

By the end of that year, Olsten’s had acquired 400 affiliated offices and the company’s medical division, Olsten Health Care Services, was primed to assume a larger role in the company’s revenues. Workers in this part of the company are professional and ancillary medical personnel. In the mid-1980s, health care-related services had become the fastest-growing segment of Olsten, moving from 10 percent of revenues generated to 13 percent between 1985 and 1988. Olsten’s managers felt certain that this aspect of the industry was virtually recession-proof.

By 1988 Olsten Health Care had 67 offices across the country, of which 11 were located in New York state. Since the 1970s, the company had been buying out Olsten’s franchised health care operations. Olsten Health Care also planned to continue expansion despite the fact that a shortage of nurses limited growth potential. In August of 1988, Olsten purchased the home health care and hospital staffing operations of the Professional Care Service.

Faced with a tight labor market that represented one of the few constraints on its galloping growth, the company began to devote increased attention to the recruitment of new temps and the retention of valuable employees. One previously untapped demographic group was the growing population of retired workers. Olsten began running advertisements aimed specifically at the over-65 market and making visits to senior citizens’ groups to discuss temporary work, much the same way that founder Bill Olsten had once tried to lure young housewives into the labor pool. Retired workers were typically reliable, Olsten found, and had flexible schedules, making them ideal temporary employees.

In addition to the recruitment of older people, Olsten also introduced a number of measures designed to keep workers on the payroll once they had signed up. The company began offering such benefits as a health plan that let workers sign up quickly and a tax-sheltering plan for income spent on child care. Workers who had demonstrated loyalty to Olsten by putting in several hundred hours of service became eligible for a Preferred Employee Plan which provided extras like vision coverage and access to a legal service. The company began handing out rewards too, for jobs performed well, including gift certificates from J.C. Penney.

Olsten also purchased three temporary agencies in 1988, moving to consolidate its standing in the fragmented, heavily localized industry. With five to six percent of the nation’s temporary business, Olsten held the number three spot in the industry. In 1989 Olsten’s sales reached $800 million and the company boasted 520 offices, placing workers in accounting and legal services, as well as secretarial positions. Through licensed offices, Olsten continued expanding by moving into new areas, such as smaller cities and suburbs—where many clients were now locating their corporate offices—and by grabbing a larger share of the markets with which the company was already familiar. With these strategies the company hoped to avoid the effects of the overall slump that had hit the temporary services industry at the end of the 1980s, following decade-long sprees of phenomenal growth.

In May of 1989, Olsten made a second move to increase its share of the health care market through acquisitions. Olsten purchased three home health care agencies from competitor CarePlus for $1.7 million. In a further attempt to increase billings in this field, Olsten introduced an incentive program for hospital discharge planners in mid-1989, based on the idea of frequent flier programs. Under the Free Home Care program, each private-paying client referred to Olsten Health Care by a hospital brought the hospital bonus hours of health care available to assign to patients otherwise unable to afford the company’s services. The program increased business to Olsten’s 75 home health care agencies in 19 states and generated $100 million a year in revenues.

Extending its traditional role, Olsten began gingerly moving into the business of permanently placing employees on an ad-hoc basis, as local offices negotiated arrangements with clients who wished to hire Olsten temps as regular employees. Calling attention to the importance of workplace literacy—a longtime commitment of founder William Olsten—the company also began sponsoring regional spelling competitions called Olsten Great Grown-Up Spelling Bees, in which workers represented their companies.

William Olsten stepped down from his position as chief executive officer of the company in March of 1990; company president Frank N. Liguori was appointed his successor. Olsten did, however, remain in his post as chairperson. In a tribute to his role as a pioneer in the temp industry, Olsten was invited to set up a branch of his company in the Soviet Union by labor ministry officials there—in part to help place skilled Soviet workers in jobs in the West where they could earn much-needed hard currency. Although Olsten declined the offer, the company did begin to explore the possibility of beginning operations in Western Europe.

In September of 1990, Olsten made a dramatic new commitment to the home health care business, agreeing to purchase Upjohn HealthCare Services—which had posted annual losses of $20 million over the last two years—from its parent the Upjohn Company. Valued at $58 million, the deal tripled Olsten’s health care business in one stroke, and the division became formally known as Olsten HealthCare. The purchase gave the company a ready-made network of offices and staff across the U.S. and in Canada, increasing its number of health care agencies from 76 to 258. Buying Upjohn allowed Olsten to “effectively blanket North America with offices,” Olsten vice-chairman and president Frank Liguori pronounced in the Wall Street Journal. “It saves us years of internal growth and development.” Besides the additional income yielded by the purchase, the move also pushed the company’s annual revenues past the $1 billion mark for the first time in 1991.

By the middle of 1991, integration of the Upjohn properties into the Olsten system had proceeded smoothly, and home health care accounted for almost 40 percent of the company’s operating revenues, as demand in the office services sector softened significantly.

On November 3, 1991, company founder and chairperson Bill Olsten died of natural causes at age 72. At year’s end his company had grown to include more than 700 offices nationwide, encompassing nine separate service divisions: office services, office automation, professional accounting, light industrial services, legal support, records management, technical services, marketing support, and health care. During 1991 Olsten had implemented programs in sales training for staff and had increased self-advertising in an attempt to further secure business. With strong operations in both office staffing and home health care, as well as a tradition of conservative management, Olsten appeared well-positioned to sustain a leading role in the temporary services industry during the coming years.

Principal Subsidiaries

Olsten Permanent Agency, Inc.; Handy Andy Industrial Services; Olsten Industrial Services; Olsten Home Health Care, Inc.; Olsten Personnel Inc. (Canada).