Plant Protection Service Blossoms : 4th Largest Security Firm in U.S. Seeks to Shake Industry’s Shabby Image
With their long and colorful histories, Pinkerton’s, Burns and Wells Fargo are practically legendary in the security business.
During the 1850s, Pinkerton’s protected trains out of Chicago against robbers while Wells Fargo guarded California miners’ treasures. Decades later, Burns smashed counterfeiting rings and solved bombings for President Theodore Roosevelt.
Van Nuys-based California Plant Protection Inc. had more prosaic beginnings. It got started in the late 1940s, performing night patrols for small retailers in the back streets and alleys of the San Fernando Valley.
The company, however, has blossomed into one of the fast-growing firms in a rapidly growing industry. With sales of more than $230 million last year, it is widely ranked as the fourth-largest guard security firm in the United States and the biggest in California.
At a time when most of its competitors are diversifying into such areas as electronic surveillance, CPP is booming by sticking to its traditional line of business, protecting factories and office buildings. The company’s expansion also has been driven by the spirited leadership of its sole owner and president, Thomas W. Wathen.
Bought Company in 1964
Wathen, 56, a former Air Force security investigator, bought the company in 1964 after being its general manager for six months. Back then, CPP had just a Canoga Park office with five administrative workers, four patrol cars and 13 uniformed guards. Now, CPP has about 23,000 employees at 130 offices in 38 states. The headquarters staff in Van Nuys has grown to 70.
Meanwhile, the company’s sales have increased an average of 35% annually over the last eight years and are up 269% since 1980. The U.S. security industry, in comparison, was a $5-billion business last year with sales up 40% since 1980, according to Richard J. Barry, a spokesman for the Memphis-based Committee of National Security Companies.
Despite that growth and its storied past, the industry is afflicted by image problems. A stereotype persists of the aged, potbellied security officer lugging around an AM/FM radio and a thermos of coffee.
To combat that, Wathen, an athletic, affable man, keeps a high profile with his clients and staff members, said Richard E. Cavanagh, a principal in the management consulting firm of McKinsey & Co. Cavanagh helped write a 1985 book titled “The Winning Performance,” that characterizes CPP as a “successful high-growth company.”
In the book, Cavanagh and co-author Donald K. Clifford Jr. cite Wathen’s work for the 1984 Olympic Games in Los Angeles as an example of his management style. CPP was one of the main private security agencies hired for the games.
Walking through the crowds, radio in hand, Wathen carried out routine security checks himself. He also personally screened guards hired for the Olympics contract. The book describes Wathen as an example of “typical winning CEOs--deeply involved in the details and loving it.”
CPP also advertises heavily to overcome the industry’s image. It has spent $200,000 a year on advertising since 1984, buying space in Dun’s Business Month and trade journals. The ads display hearty, uniformed guards, including one who appears to be running in hot pursuit of a crook. Outside California, the company calls itself CPP Security Service to enhance its national identity.
Along with image problems, CPP and its counterparts face high turnover. Security guards are traditionally low-paid, sometimes receiving only the minimum wage, and so have relatively little attachment to their employers or the places they protect.
Gradually Increasing Wages
Security firms, however, gradually are increasing wages. CPP pays most of its officers $5 or $6 an hour. CPP also is trying to inspire loyalty by awarding merit badges, titles and 5% pay raises to guards who pass a battery of five written tests.
CPP’s big competitors are mostly divisions of large companies. Burns International Security Services, Inc. of Paramus, N.J., the industry leader, is a subsidiary of Borg-Warner Corp. Another Borg-Warner unit, Wells Fargo Guard Services of Parsippany, N.J., is generally acknowledged to be fifth-biggest security firm. Borg-Warner won’t disclose each unit’s revenue, but together they recorded sales of $552.5 million last year.
Ranking second is Pinkerton’s, a New York-based unit of American Brands with about $310 million in annual sales. Publicly held Wackenhut Corp. of Coral Gables, Fla., a $300 million-a-year company, is the industry’s No. 3 firm.
Besides providing sentries, Burns, Wells Fargo, Pinkerton’s and Wackenhut all have substantial investigative staffs that look into matters such as suspected internal thefts. Wackenhut also sells electronic security systems and firefighting equipment and operates jails under contract to local authorities.
Tripped on Diversification
CPP, Wathen said, faltered in the early 1970s when it tried to diversify into investigations as well as selling fire extinguishers, central alarm stations and detective and bodyguard services.
The company operated the new businesses for several years but they never produced significant profits. Wathen said they all were hampered by high expenses.
For example, inventory carrying costs were high in the fire extinguisher business. Alarm systems required heavy investments in communications equipment. Investigative and bodyguard services required more highly skilled and highly paid personnel.
As a result, the company sold all but the plant guard business, staying in the field it knows best.
Barry, the spokesman for the Committee of National Security Companies, said CPP’s reliance on one kind of business “certainly has not hurt” the company. “They’re successful doing just what they’re doing. CPP enjoys one of the best reputations in the business.”
May Try to Branch Out
Nevertheless, Wathen acknowledges that he eventually may need to try diversifying his business again if technological advances make traditional security guards outmoded.
Wathen partly credits the company’s profit-sharing program, designed as an incentive plan for managers, for its rapid expansion. He said two CPP managers with $18,000-a-year base salaries have earned more than $100,000 in a single year because of the strong performance of their offices.
Rapid growth hasn’t been a complete plus for CPP, however. Wathen said the cost of opening new outlets has kept CPP’s profit margin below the industry’s already thin margin of under 3%.
Like many of his counterparts, Wathen has supported efforts to disarm most private security guards, largely to cut liability insurance expenses.
“Quite candidly, I don’t need the risk,” said Wathen, adding that a lawsuit from “a single bullet could put me out of business.”
Only 1% Carry Arms
Only 1% of CPP officers are armed. Barry said the industry average is close to 4%. About 100 of CPP’s armed guards work at the Indian Point nuclear power station in New York, where all sentries are required to carry weapons. CPP’s armed guards earn about $12 an hour, double the pay of their unarmed counterparts.
Wathen claims his officers are better disciplined than most. Each must carry a pocket-sized blue booklet that contains a code of conduct. “I will maintain a neat appearance” and “I will avoid being known as easy-going” are typical injunctions.
The booklet also reminds officers that they don’t have authority beyond that of private citizens. “You are, in fact, subject to civil suit for false arrest or imprisonment if you detain someone illegally,” the booklet says.
Wathen says he generally prefers that his employees call the police in an emergency, rather than try any heroics.
