Manpower Upgrades Its Resume
While surfing the Net, software consultant Charles J. Eckenroed of Boise, Idaho, was surprised to find Manpower Inc. behind a classified ad for a software developer. He'd always thought of the company as better suited to clerical workers than high-tech types. But after Manpower placed him in a well-paying position at Ernst & Young, Eckenroed changed his mind. "For independent consultants," he says, "Manpower offers a great opportunity."
Today, Manpower, with $6.9 billion in revenues, is looking to the Eckenroeds of the world for its growth. Sure, the Milwaukee-based company--the world's largest temporary-services firm--still gets more than 80% of its revenues placing secretaries and factory workers through its 2,400 franchises and independent offices. But the rest now comes from filling high-paying temporary engineering, consulting, and computer jobs, where the growth rate is 20% annually. The reason: As corporate restructurings have left many companies searching for cheaper ways to meet staffing needs, more are turning to temp companies such as Manpower to fill the gap. "We are in the eye of the storm of political, economic, and social change," says Mitchell S. Fromstein, Manpower's chairman and CEO.
BULKING UP. Manpower is hardly alone. With a wave of industry mergers under way--and a host of smaller, specialized placement firms springing up--Manpower faces increased competition. At the same time, large companies are winnowing their temporary agencies. So Fromstein, 68, is driving hard to make Manpower the one-stop global firm of choice for corporate giants. In early May, the company took a big step in that direction when it rolled out an exclusive alliance with Drake Beam Morin Inc. (DBM), the world's largest executive outplacement firm. And by focusing on big contracts with multinationals and spending heavily on worker training, Fromstein figures he can keep Manpower on top.
That will take some work. Although U.S. rivals such as Kelly Services Inc. and Olsten Corp. are less than half Manpower's size, they too are bulking up. "We're in an era where big is better," says Raymond Marcy, president and CEO of No. 6-ranked Interim Services Inc. Interim is aggressively acquiring small high-tech temp agencies. Marcy expects 4 of the top 10 players in the U.S. to disappear soon.
Manpower faces renewed challenges abroad as well. Up to now, its global reach gave Manpower a big advantage: 50% of its revenues come from overseas. But in May, Europe's two largest temp companies, Switzerland's Adia and France's Ecco, announced merger plans. While Manpower already competes with both, their combined $5.8 billion in sales may make them a stronger rival.
Fromstein isn't worried. "I don't see in any individual market what they bring that will make a difference to us," he says. But analyst Judith G. Scott of Robert W. Baird & Co. thinks things could get tougher down the road. "This [industry] is attracting some very smart people," she says. "Manpower's challenge will be to stay innovative."
So far, Manpower has met the challenge. Since 1991, revenues have nearly doubled, thanks to the industry's explosion and the emphasis on bigger contracts. From a $53.3 million loss in 1991, earnings hit $128 million last year. Analyst Scott forecasts a 25% gain this year, to $160 million. The stock, at about 38, is near its all-time high.
The road back to profitability has been a rough one for Fromstein, who took the helm in 1976 but was fired in 1988. That was a year after Blue Arrow PLC, a much smaller British temp agency, acquired Manpower for $1.3 billion in a hostile bid. Just one month later, Fromstein was reinstated by angry franchisees and board members resisting Blue Arrow's efforts to impose central controls on Manpower's independent culture. Manpower stayed in the red until 1994, as the company wrote off $1.2 billion in goodwill from the Blue Arrow acquisition. Only last March did Fromstein finish disposing of nearly two dozen smaller agencies pasted together by Blue Arrow. So it's not surprising that as the merger wave begins, Fromstein says he'll "sit back and watch."
REFERRAL SERVICE. Yet Fromstein knows Manpower can't sit still. Hence the link with Drake Beam Morin, which will bolster both companies in their own markets, although they won't share revenues. The deal works essentially as a referral service: DBM will provide Manpower with a steady stream of laid-off executives to add to its database. For DBM, the advantage should come from moving outsourced managers back into the workforce sooner, since laid-off execs increasingly use stints as temps as a route back to full-time jobs. "We're talking every day to companies who need engineering and research help," says Fromstein. "DBM gives us a source of supply for that upper end." The alliance wins praise from analysts and rivals alike. "It's a wise move, and we're looking at something like this," says Frank N. Ligouri, chairman and CEO of No. 3 Olsten.
Competition is heating up on the smaller end as well. Specialized players such as AccuStaff Inc. and Robert Half International are now pushing computer programming and other high-tech skills that Manpower is emphasizing. But Fromstein figures he can blunt that threat by providing a complete package that includes these skills to large clients. Manpower now acts as a virtual human resources department for such companies as Hewlett-Packard Co. and MasterCard International Inc., doing employee screening, testing and training. Manpower will train clerical and word processing staff on any of 300 different software and hardware combinations, and can customize training for large clients.
Such strengths convinced Jeffery E. Struve, MasterCard's operations vice-president of human resources, to whittle his company's 15 temp suppliers at its St. Louis operations center to just Manpower. Now, Manpower handles 200 to 300 clerical workers every day, with on-site managers expected to staff professional and technical jobs soon. "[Manpower's] testing and screening programs are without equal," says Struve.
To keep the accolades coming, Fromstein is investing heavily in technology. Since early 1995, he's spent $11 million on software and $15 million upgrading computer systems, including a U.S. database of 300,000 technical and professional workers. His aim: 1 million names by yearend.
Negotiating the industry's increasingly competitive waters will require continued tough leadership. And although Fromstein--a former ad exec who still personally courts new accounts--has no plans to leave, succession is an issue. "He's the driving force," says one director, "but we're all aware he's 68." Observers say he's grooming two potential heirs: Executive Vice-Presidents Jon F. Chait, head of international, and Terry A. Hueneke, who runs North and South America. In the end, Fromstein may well be judged--just as his clients judge Manpower--on how well he fills that key job opening.