Temporary Lab Help Is Formula for Success : Employment: On Assignment supplies customers with skilled scientific personnel. The Canoga Park company nearly doubled its profits in 1992.
Call them test-tube temps.
They are scientists-for-hire, ranging from technicians just out of college to experienced chemists, immunologists and microbiologists. And placing them with companies that need temporary lab help has made Canoga Park-based On Assignment Inc. a hot growth company.
On Assignment’s 1992 profits nearly doubled, to $1.76 million on a 25% increase in sales to $33 million. This year analysts expect its earnings to jump 42%, to $2.5 million as sales climb 15% to $38.1 million.
Little wonder its stock has attracted Wall Street’s attention. On Assignment went public at $7 a share in September, zoomed to a high of $15 in February and lately has been selling for around $12 a share in the over-the-counter market. Big institutional investors have snapped up nearly a third of its shares.
Indeed, because such specialty companies can charge a premium well above the going rate for less skilled workers, the elite temp business is the fastest-growing--and most profitable--niche in the about $10-billion-a-year temporary-help industry.
In hopes of keeping up its earnings momentum, On Assignment intends to expand into new areas, such as health care and legal services, possibly later this year. It is also eyeing the market for “temp execs,” from middle managers to chief executives, to handle short-term projects.
The company’s Lab Support division, its only operating unit so far, supplies 1,100 scientists out of 27 offices throughout the country. While there are some regional rivals in that business, none operates on a national scale.
For On Assignment, the test-tube temp business has been “a laboratory experiment itself,” said its chief executive, Thomas Buelter, formerly a top operations manager at Kelly Services Inc. “What we’ve developed here is a formula we can apply to many kinds of temporary professionals.”
Part of Lab Support’s strategy has been to hire account managers who know what labs do because they are scientists themselves. Buelter said the company also tries to fill most customer orders within 24 hours.
The formula seems to be working. Last year, On Assignment’s stockholders earned a handsome 32% return on equity. The company has $7 million of working capital, less than $1 million in current liabilities and no long-term debt.
But plenty of other companies, large and small, have entered the elite-temp business. One of the most successful, 5-year-old Mactemps in Cambridge, Mass., places people to run Macintosh computers. It has 20 offices with a combined $20 million in annual sales. New York-based Designtemps supplies architects and designers, while Robert Half International Inc. in Menlo Park, places attorneys and paralegals.
Nearly one-quarter of the 1.15 Americans who get their paychecks--but usually no benefits--from temporary-help companies are professionals or other highly skilled workers. Their ranks have nearly doubled since 1981, according to the National Assn. of Temporary Services.
On Assignment’s customers include major companies in industries ranging from petrochemicals, plastics and food to pharmaceuticals, biotechnology and semiconductors. On the roster are such companies as Exxon Corp., Johnson & Johnson, Union Carbide Corp. and Hewlett Packard Co.
When they hire a lab temp, they pay On Assignment anywhere from $10 an hour for technicians to $35 for microbiologists with several years’ experience. After paying its workers’ employment taxes, On Assignment still earns a 30% profit on every hour billed.
“People hire temporary help because they need it right now. That’s the main reason why it isn’t cheap,” Buelter said. “Employers no longer staff for the peaks. They staff for the valleys and use temporary help to manage their employment costs.”
Adds Tadeusz Czyzewski, On Assignment’s chief financial officer: “Employees of all kinds should realize they’re better off thinking of themselves as free agents in this kind of work force.”
About half of the lab workers who register with On Assignment are young people with less than five years of experience who can’t find permanent jobs. Colin Trout, 25, is one of a dozen On Assignment temps working at a Duarte unit of the pharmaceuticals giant Baxter International Inc. Trout, who has been at Baxter for 10 months, started at $10 an hour and now makes $14. “I like what I’m doing and I’m hopeful this will turn into something permanent. There aren’t a whole lot of jobs out there.”
Trout, who is getting married in June, also worries about not having any benefits. On Assignment says it will begin offering its workers medical coverage later this year.
Ironically, it was by refocusing On Assignment, which had strayed into other areas when he took over in 1989, that Buelter saved the test-tube temp company from near extinction.
Founded as Lab Support Inc. by two Woodland Hills chemists in 1985, the start-up was backed by Wood River Capital Corp., a New York venture capital group. A few years later, Wood River, a small-business investment company that received federally guaranteed loans, became better known for backing Apex Energy Co., a failed natural-gas concern headed by Neil Bush, the former President’s son.
At first, Lab Support did well. But the company stumbled badly when it tried to move into other areas, such as consulting and recruiting. By 1989, the company had racked up losses of $1.5 million on a meager $7 million of sales.
That’s when Wood River hired Buelter. As chief operating officer of the temporary-help pioneer’s assisted-living division, Buelter had built caring for the elderly into a $40-million business for Troy, Mich.-based Kelly in five years.
Quickly taking charge of Lab Support, Buelter took the company out of consulting and recruiting and had it profitable within a few months. Both of Lab Support’s founders resigned in 1989, although one, Bruce Culver, still owns 10% of the company. It became On Assignment when the company went public.
As for Buelter’s current expansion plans, he is convinced he can avoid the kind of costly mistakes that almost sank the company once before.
“We know exactly what we’re looking for and we have a lean cost structure in place,” he said. “All we have to worry about is running our business and the growth will come.”
