Spherion Corporation

views updated

Spherion Corporation

2050 Spectrum Boulevard
Fort Lauderdale, Florida 33309
U.S.A.
Telephone: (954) 938-7600
Toll Free: (800) 900-4686
Fax: (954) 938-7666
Web site: http://www.spherion.com

Public Company
Incorporated: 1992 as Interim Services Inc.
Employees: 370,000
Sales: $2.71 billion (2001)
Stock Exchanges: New York
Ticker Symbol: SFN
NAIC: 561320 Temporary Help Services

Spherion Corporation, formerly Interim Services Inc., is a temporary staffing and consulting firm serving more than 33,000 clients, including a substantial number of Fortune 100 corporations. Spherion operates 940 branch offices in eight countries, maintaining a presence in the United States, Australia, Canada, The Netherlands, New Zealand, the United Kingdom, Hong Kong, and Singapore. The company’s business is divided into three operating segments: recruitment, technology, and outsourcing. These business segments provide blue-collar and white-collar staff on a temporary and permanent basis. Spherion’s outsourcing business provides recruiting, customer support, and administrative support on a long-term basis.

Origins

Spherion, a name adopted at the dawn of the 21st century, was the corporate title for a staffing services business whose roots stretched back to 1946. Throughout the course of the 20th century, the company underwent numerous name changes as the range of the services it provided expanded. Originally, however, the company was formed to provide temporary help to businesses involved in industrial and light industrial activities, giving the firm blue-collar roots that would be still evident a half-century later. Service expansion ensued in the decades to follow, highlighted by a signal diversification during the mid-1960s. In 1966, the company began providing temporary workers to nursing and home care clients, marking the beginning of the company’s involvement in the healthcare industry. The next defining moment in the company’s development occurred roughly 20 years later, its arrival engendered by the intervention of accounting firm H & R Block, Inc.

In August 1978, H & R Block acquired the company, which at the time was operating as Personnel Pool of America, Inc. A little more than a decade later, in January 1991, H & R Block acquired another temporary service business named Interim Systems Corporation. Interim Systems operated in essentially the same business areas as Personnel Pool, providing clerical, secretarial, light industrial, and healthcare personnel. Interim Systems maintained 178 branch offices—a significant measure of a staffing services firm’s size—operating its offices in 20 states and three Canadian provinces. On the last day of 1991, H & R Block combined the two companies, creating a large, North American staffing services firm with considerable expertise in supplying blue-collar workers on a contract basis. On June 15, 1992, the new combined company changed its name to Interim Services Inc., the direct predecessor to Spherion.

Acquisition Spree Triggered by Independence in 1994

H & R Block held on to Interim Services for roughly two years before spinning the company off. On January 27, 1994, Interim Services completed its initial public offering (IPO) of stock, debuting at $20 per share. At the time of the IPO, the company operated 373 offices in the United States and Canada, but that figure soon would change. Interim Services’ IPO marked the beginning of an aggressive expansion campaign whose intensity carried on throughout the 1990s. During the first two years of the buying spree, the company acquired 14 staffing services companies whose aggregate revenues amounted to $265 million.

During the first year of the acquisition campaign, Interim Services acquired five companies, adding $41.4 million to its sales volume. The first of the five acquisitions was the June 1994 purchase of Community Home Health Professionals, which operated four offices and generated $3 million in annual revenue. The acquisition provided a boost to Interim Services’ involvement in the healthcare industry, as did the next acquisition, completed in August, the $1.2 million-in-sales, one-office Med South Health Care. The largest acquisition of the year followed next, the September purchase of Hospital Staffing Services. Hospital Staffing operated 18 offices, generating $23.5 million in annual sales. After acquiring Therapy Staff Services/Gulf Rehabilitation in October, which added another $12 million in annual revenue, the company completed its only acquisition outside the healthcare sector. In December, Interim Services purchased ICS Temporary Services, which was grouped within the company’s commercial staffing division. With one office, ICS generated a $1.6 million a year in revenue.

As Interim Services proceeded with its ambitious expansion plan, the acquisitions completed were grouped within two divisions: commercial, which included two units, commercial staffing and professional services; and healthcare. The commercial staffing segment served clients who needed temporary personnel with clerical and light industrial skills. The segment also aided in the management of temporary and permanent personnel. Interim Services’ professional services segment offered consulting and staffing services tailored for clients whose needs fell into information technology (IT), legal, accounting, and human resource areas. The company’s healthcare division provided physicians, nurses, therapists, home healthcare aids, and home companions.

After spending nearly all of its attention in 1994 on bolstering its healthcare segment, Interim Services turned its attention to its other business areas in 1995. In June, the company completed two acquisitions, both of which were organized into its professional services division. OCS Services & Group and Career Associates each operated five offices, together generating $21.7 million in annual revenue. In September, the company acquired Juntunen, adding two offices and $13.6 million in sales, and in November, the company acquired Hernand & Partners, an operator of three offices with $2.7 million in revenue. The largest acquisition of the year joined Interim Services’ fold in December and, like all the acquisitions completed in 1995, was absorbed by the company’s professional services segment. The company acquired in December was Computer Power Group, an $81 million-in-sales company with 17 offices.

In 1996 Interim Services added $105 million to its revenue base through acquisitions, completing a two-year expansion plan that left the company with 998 offices. The largest purchase of the year occurred in May, when the company acquired Brandon Systems Corp., a professional services concern with 32 offices and $89 million in annual revenue. During the year, Interim Services also purchased Allround/Interplan, a commercial staffing company based in The Netherlands, part of the Interim Services’ ongoing efforts to establish a presence overseas. By the end of the year, the company was providing staffing services in the United States, Puerto Rico, Canada, The Netherlands, and the United Kingdom. Revenues for the year eclipsed $1 billion, making Interim Services, according to its calculations, the fourth largest provider of staffing services in the United States and the seventh largest in the world. At this point in its development, Interim Services derived 53 percent of its sales from commercial staffing services, 27 percent from professional services, and 20 percent from healthcare.

During the latter half of the 1990s, Interim Services completed roughly 20 acquisitions. Some of the acquisitions were quite small, similar in size to the more diminutive of the companies acquired between 1994 and 1996. Several of the companies represented massive acquisitions for Interim Services, beginning with the April 1997 acquisition of Michael Page Group PLC, a London-based staffing services company. The transaction was valued at $578 million, roughly four times the value of Michael Page in 1993, giving Interim Services ownership of a specialist in providing job placements for junior and senior management. Under the terms of the acquisition, Michael Page was allowed to retain its identity and operate as a complementary business to Interim Services, rather than being absorbed by the Ft. Lauderdale, Florida-based concern.

The rapidly growing economy during the late 1990s created fertile soil for most companies, but for temporary staffing firms the halcyon years presented their own challenges. Unemployment rates fell to historic lows, making it difficult for Interim Services to find applicants for its temporary and permanent placement services. To adjust to the problems presented by a robust economy, Interim Services began marketing itself as a recruiter for its clients instead of broadcasting itself as a temporary employment agency. As this shift in market orientation was underway, the company completed a strategically significant acquisition.

Company Perspectives:

Spherion delivers recruitment, outsourcing and technology solutions that measurably enhance workplace performance. Spherion was a pioneer in the temporary staffing industry. Over the past 55 years, it has screened and placed millions of individuals inflexible and full-time jobs that have ranged from administrative and industrial positions to a host of professions that include accounting, finance, sales, marketing, manufacturing, engineering, law, human resources and technology. Spherion’s broad-based experience in recruiting is founded on an in-depth understanding of the workforce and the issues that drive performance. It has extended this expertise into high-value workforce management and outsourcing solutions that incorporate specialized knowledge of many workplace processes and technologies. It is these core competencies that Spherion offers to clients who want to more effectively plan, acquire and optimize talent to improve their bottom line.

In March 1999, Interim Services announced that it was acquiring one of its rivals, Norrell Corp. The merger, a $553 million stock deal, gave Interim Services nearly 400 new offices, making it the third largest temporary staffing company in the United States, trailing only Manpower Inc. and Kelly Services. Norrell Corp., founded by Guy Millner, who twice entered Georgia’s gubernatorial race, operated as a temporary employment company, serving some of the largest companies in the country, including Coca-Cola, United Parcel Service, and IBM. The merger, hailed as a good strategic fit by industry observers, gave Interim Services a $300 million outsourcing unit and call center service, two businesses the Ft. Lauderdale company did not previously own. The transaction also significantly strengthened Interim Services’ technology, accounting, and commercial staffing operations.

Signs of Problems Emerging in 2000

Problems surfaced at Interim Services at roughly the same time the company adopted Spherion as its new corporate title. In March 2000, Spherion fell short of its earnings estimates for the first time, leading to internal and external scrutiny that sparked dramatic changes. An economic downturn exacerbated the financial burdens wrought by the company’s near decade-long acquisition campaign. Between 1989 and 2000, the company’s revenues had increased from $593 million to $2.1 billion in large part through acquisitions. The period framed the tenure of Raymond Marcy, who as chief executive officer had orchestrated the acquisition spree. Industry pundits charged that Marcy and his management team had underestimated the costs incurred from absorbing the 35 acquisitions completed during the period, leaving the company hobbled by debt as the economic climate soured.

The search for a solution to Spherion’s problems led to divestitures, substantial layoffs, and new management. By the fall of 2000, the company had retained Credit Suisse Boston as an advisor to determine what should be done with the Michael Page division. In the spring of 2001, the company decided to sell Michael Page to the public through an IPO, netting $186 million when the offering was completed. In April 2001, Marcy resigned as chairman, chief executive officer, and president, ushering in a new era for the company, one led by Cinda A. Hallman.

Hallman left her post as vice-president of global systems and processes at Du Pont Co. to join Spherion as its new president and chief executive officer. During Hallman’s first months of stewardship, Spherion implemented a series of cost-cutting measures, including laying off 700 employees, reducing administrative expenses, and shuttering 100 of its branch offices. The company divested several consulting companies it had acquired in recent years and, of significance, it exited the healthcare market. In addition, the company officially terminated its acquisition campaign in 2001. Spherion announced that it had no intention to complete any sizable acquisitions in the coming years, except for small purchases in the company’s new areas of emphasis, recruitment and outsourcing.

Hallman espoused an altered vision of Spherion’s future. To cure the company’s ills, she intended to exploit the economic downturn by focusing on outsourcing, that is, handling recruiting, customer support, and administrative tasks, such as secretarial work, for companies. Aside from providing a new source of growth for the company, outsourcing was expected to impart greater financial stability to Spherion, creating long-term customers. Outsourcing contracts typically ran for five years, making Spherion’s ability to predict its financial future more acute. Looking ahead, Hallman was attempting to double Spherion’s revenues from outsourcing contracts by 2004, hoping to reach the $1 billion mark. “We’ve got our timing right,” Hallman said in a November 26, 2001 interview with Forbes. “We just have to get off our butts and move.”

Principal Subsidiaries

Spherion Financial Corporation; Spherion (Europe) Inc.; Spherion Technology (UK) Limited; Spherion Assessment Inc.; Norrell Corporation; Spherion (Europe) Staffing Limited (U.K.); Spherion Limited (Ireland); Spherion Recruitment Group B.V. (Netherlands); Spherion Australia Pty. Ltd.; Spherion (S) Pte. Ltd. (Singapore); Spherion Limited (Hong Kong).

Principal Operating Units

Recruitment; Technology; Outsourcing.

Principal Competitors

Adecco S.A.; Manpower, Inc.; Kelly Services, Inc.

Key Dates:

1946:: Spherion’s predecessor is founded.
1966:: The healthcare market is entered for the first time.
1978:: H & R Block, Inc. acquires Personnel Pool of America.
1991:: H & R Block acquires Interim Systems Corporation and merges it with Personnel Pool of America.
1992:: Interim Services Inc. is adopted as the new corporate title for the combined companies.
1994:: H & R Block sells Interim Services to the public through an initial offering of stock.
1997:: Michael Page Group is acquired.
1999:: Norrell Corp. is acquired.
2000:: Spherion Corporation is adopted as the new name for Interim Services.
2001:: Michael Page Group is sold; Cinda Hallman is appointed president and chief executive officer.