RemedyTemp Moves to Exploit Europe’s Market : Employment: The moderate-size San Juan Capistrano placement agency for temporary workers is timing its recession-defying expansion to coincide with the 1992 fall of trade barriers scheduled in the European Community.
With the nation’s economy in recession, unemployment climbing and his company’s revenues down 10% this year, Robert E. McDonough is taking a trip to Europe.
McDonough is not trying to escape these problems, though. The founder of RemedyTemp Inc. is making his second European trek of the past year as he prepares to start his fast-growing employment agency’s overseas expansion.
RemedyTemp, which has grown in the last 25 years from a single location to a network of 80 offices in 18 states, is going overseas in a move timed to coincide with the fall of the European Community’s trade barriers in 1992.
It is a bold move for a moderate-size, regional firm that has had most of its growth in just the past three years.
Just two other U.S.-based firms for temporary placement have a significant presence in Europe: Manpower Temporary Services and Kelly Temporary Services. Both are giants compared to Remedy.
“Europe is a different market, and companies do business differently there,” said Samuel Sacco, executive vice president of the National Assn. of Temporary Services, a trade group based in Alexandria, Va.
But McDonough said the differences can be overcome by using local management rather than exporting RemedyTemp executives from California to France or the United Kingdom.
It is in one of those two countries, he said, that the first cluster of RemedyTemp European offices will be established, probably in the third quarter of 1992.
The expansion has been planned for half a decade, so even the current domestic slump will not change things. In fact, it actually makes RemedyTemp’s plans for Europe more compelling, McDonough said.
After all, if the U.S. economy remains sluggish, the surge of new business expected as borders open and trade barriers tumble throughout Europe should more than make up for any distress in the company’s domestic operations.
That economic diversity is one reason that McDonough and company president Paul Mikos decided to take RemedyTemp abroad even before completing the company’s U.S. expansion. The company now has offices in 18 states.
And McDonough, who has guided the company through four recessions since he opened his first employment office for temporaries in Riverside in 1965, said he knows that the economy is cyclical, so this recession will pass.
Already, he said, many of the company’s 10,000 employer-clients say they are sensing a thaw.
“We’re not sure yet whether it is just a temporary euphoria with the Gulf War being over or if it will be a real, lasting recovery,” McDonough said.
In the meantime, RemedyTemp’s roster is growing and the quality of people applying for postings through its offices is soaring, as laid-off workers with years of experience search for jobs.
Although business has been off for the last two years, with slight declines in total temporary employment in the country in both 1988 and 1989, the industry has boomed since the last recession, with the number of temporaries employed in the United States more than doubling since 1983.
The temporary personnel industry had a U.S. payroll of $10.1 billion in 1990, up 60% from $6.3 billion in 1985, according to the National Assn. of Temporary Services. About 1 million Americans worked as temporaries sometime last year, or 41% more than in 1985.
And industry watchers expect a second domestic boom to begin in the next year or so as the nation rolls out of the recession.
The reason?
After the merger and acquisition binge of the 1980s, the pain of laying off permanent employees is still fresh in most employers’ minds. Many are reluctant to add permanent positions to their payroll until there is a strong sign of an economic rebound. So they hire temporaries.
In Europe, where political and cultural pressures make it much more difficult to fire permanent employees, temporaries make up a much bigger slice of the employment pie than in the United States, said Judith G. Scott, an industry analyst with the Milwaukee brokerage Robert W. Baird & Co.
“In the U.S. last year, 0.95% of the work force was temporaries,” she said. “That’s up from 0.4% in 1982. But in France, about 1.5% of all workers are employed as temporaries,” for a nearly 60% higher level of use than in the United States.
That acceptance of temporaries has created a strong home-grown employment agency industry in Europe, Scott said. But of the U.S. companies, only Manpower has a major presence overseas. Manpower, based in Milwaukee, is the largest temporary agency in Europe, establishing itself there just after World War II.
“It has been extremely beneficial for them to be there, because it has given them a balance of economies,” Scott said.
The opening of the European marketplace next year, under a complex set of rules that break down trade barriers among most of the major West European nations, “should provide some real opportunities for temporary employment firms,” Scott said.
Among other things, government prohibitions against temporaries in Italy and Greece are likely to fall, opening up two new markets.
But Sacco said that, other than Remedy, there has been little interest among domestic temporary agencies in opening European offices.
“We see the growth of the European economy as a wedge in the door for us,” McDonough said. “New growth means that businesses there will have shortages of qualified people, and that’s what creates a market for temporary workers.”
The move to Europe is the culmination of a philosophical metamorphosis for McDonough, who grew up in the Chicago area in the heyday of Robert McCormick, the fiery isolationist who published the Chicago Tribune from 1914 until his death in 1955.
“We believed the isolationism that he preached, we really did,” McDonough said. “But the world has changed dramatically since then. Now our competition comes from places people not that long ago had never heard of--Korea, Singapore, Taiwan. Companies from these places are taking a large share of the U.S. market.
“And now Europe is uniting economically, and Eastern Europe is freeing up, and someday the Soviet and Chinese economies will also be more open and global. The world is becoming so . . . competitive,” he said.
“So we will go international,” he said, “because the market is international.”
That does not mean that Remedy is abandoning the United States.
The closely held company began a franchising program in 1987 that has helped it grow from 37 offices in five states to 80 in 18 states in less than four years. In the same period, revenue jumped to $99.2 million from $50 million. The company, which does not disclose profit figures, plans to add two dozen new offices this year and expects gross sales to hit $114 million.
RemedyTemp’s ultimate game plan is to have perhaps 200 U.S. offices in major markets. The company has positioned itself as a quality company that, McDonough said, “wants to be best, not biggest”--a dig at Manpower and Kelly, each with more than 700 offices nationally.
McDonough, who is 68 years old, started Remedy as a placement center in Riverside for industrial workers seeking temporary jobs. With the Riverside area then growing slowly and the temporary business not that well known nationally, the company stayed relatively small for nearly a decade. He moved the company to San Juan Capistrano in 1976--about the same time that the industry took off nationally.
Although the company still places workers in industry, the RemedyTemp mix quickly changed to stress office and word-processing workers to meet the demand in Orange, Los Angeles and San Diego counties and, more recently, in fast-growing Riverside and San Bernardino counties. Other California offices are in San Francisco, Santa Barbara and Sacramento counties.
From California, RemedyTemp pushed east into Arizona, hopscotched across the Sunbelt to Texas, Georgia and Florida and pushed up the Eastern Seaboard as far as Connecticut. The company, which started a franchise program in 1987 to spur its growth, also has offices in several Midwestern states and in Oregon and Washington. About 30% of the RemedyTemp offices now are franchises.
McDonough said the company’s successful growth in a highly competitive industry has been accomplished by growing selectively--picking markets where there is a demonstrated demand for temporary workers. The company plans to follow the same strategy as it moves into Europe.
In addition, RemedyTemp has taken the high road in marketing, advertising itself as a company that provides “the intelligent temp.”
Sales took a big jump in 1989, when the company signed actress Susan Ruttan as its TV spokeswoman. Ruttan portrays legal secretary Roxanne Melman in the “L.A. Law” TV series.
RemedyTemp officials said the ad campaign, which still airs occasionally, has generated 450 new employer clients for the company.
“We pride ourselves on targeting and recruiting temporaries only from the top 4% of the populace, measured in terms of career tracks and academic and social records and future potential,” McDonough said.
It takes an average of five interviews and testings for an applicant to be enrolled on RemedyTemp’s list. To attract these people, RemedyTemp offers a broad array of training, including on IBM and Macintosh personal computers. The Macintosh training program is the company’s newest, opened in response to demands from employers for clerical workers who can use a growing number of Macintosh-compatible business programs.
RemedyTemp also provides its temporaries--nearly 43,000 of them in 1990--with vacations, sick pay and health and dental insurance programs.
While these benefits are typical among larger temporary firms, few small firms can afford to offer that broad array.
In its newest recruiting effort, RemedyTemp has begun paying for part of its workers’ child-care costs. A spokeswoman at Manpower Services said that is an uncommon benefit in the industry.
“We see ourselves as a marketing company,” McDonough said in explaining his insistance on high recruiting standards. “The organization, which has 400 corporate employees, is built to persuade potential clients of our competency. We need good clients to be successful, and by that I mean companies that hire our temporaries, pay their bills and use our people in an ethical manner. But to get good clients, we must have a good product, and that product is ourselves and our success in selecting good temps.”
The job is more difficult than it sounds, McDonough said: “Just look at the basic education system in this country. The level of what we turn out gets lower and lower. The overall U.S. work force is much less qualified (in basic reading, writing and math skills) than the work force of 20 years ago.”
Still, McDonough said that in this country, as well as in Europe, there is a big future for the temporary employment industry.
“Look at all the niches that exist, and there really isn’t any area of business and industry that you can’t put temps into,” he said. “The future is good because there tend to be fewer and fewer skilled people, so if you have skilled people, or can train your people and give them skills that are in demand, you will succeed.”
EUROPE’S TEMPORARY EMPLOYMENT MARKET The rapid growth of temporary employment in the European Community reached the equivalent of 850,000 full-time jobs, according to a 1988 study, roughly the same as in the United States. However, the concentration of temporary employment offices per million workers is much higher in Europe, leading the study’s authors to conclude: “The level of competition and concentration is expected to rise” in the European Community.
Full-Time Job Equivalent United Kingdom *: 400,000 Netherlands: 91,300 France: 260,000 Belgium: 25,000 West Germany: 69,000 Denmark: 1,580 Spain: 9,500 Total EC **: 856,380 USA *: 850,000
Number of Offices United Kingdom: 6,000 Netherlands: 1,220 France: 3,610 Belgium: 327 West Germany: 1,486 Denmark: 100 Spain *: 200 Total EC **: 12,943 USA *: 10,000
Offices Per Million in Work Force United Kingdom: 227.3 Netherlands: 204.3 France: 149.2 Belgium: 77.5 West Germany: 52.6 Denmark: 34.5 Spain: 14.5 Total EC **: 122.4 USA *: 89.3 * Estimate ** Excluding Ireland, Luxembourg, Portugal Source: CIETT, Bakkenist Management Consultants
