Olsten Corporation

One Merrick Avenue
Westbury, New York 11590
U.S.A.
(516) 832-8200
Fax: (516) 832-8019

Public Company
Incorporated: 1950
Employees: 3,200
Sales: $1 billion

The third largest temporary and health care services company in the United States, the Olsten Corporation provides supplemental staffing for work in offices, including clerical, legal, accounting, and home health care tasks, as well as in other areas. As a pioneer in the industry, Olsten has expanded operations from the New York area to the entire country and Canada in the course of four decades in business.

The Olsten Corporation was founded by William Olsten in 1950. Born in 1919, Olsten had served in the armed forces in Europe during World War II. While there, he was often asked by illiterate soldiers to read them their letters from home. This experience awakened in him a life-long interest in literacy and continuing education which would one day become a central element of his business philosophy. After the war, Olsten returned home to work in management positions at a bottling plant and at a company that provided entertainment for servicemen. Recognizing a need for temporary office workers to fill in for absent employees in the booming post-war U.S. economy, Olsten opened an agency to provide such workers in New York City. With a brother-in-law as partner and a receptionist as his sole employee, Olsten set out to build a niche in the office staffing industry.

Perhaps the largest hurdle to overcome in running Olsten’s new business was a scarcity of workers to send out on jobs. To recruit likely candidates, Olsten drove around the suburbs of New York City in a station wagon with a bull horn, broadcasting that anyone who wanted a job should yell, “Stop!” This technique yielded six candidates. In addition to this unorthodox recruitment policy, Olsten hung out in supermarkets to ambush housewives and convince them to sign up with his service. When he followed up on these trips with phone calls to the women’s homes, Olsten frequently met with hostility from husbands who saw no need for their wives to work outside the house.

To familiarize office managers with his service, Olsten developed a rolling advertisement for his firm, the “Radio Tempmobile.” This was a Volkswagen bus with a billboard on top showing a smiling woman behind a typewriter, next to the words “Olsten’s Radio Temp-mobile Delivers Temporary Office Personnel In Minutes.” The bus cruised the streets of Manhattan delivering temporary employees to their jobs.

By the end of the 1950s, Olsten had established his firm as a solid presence in the New York City market. The company offered a range of skilled employees, from typists and secretaries to clerks and bookkeepers. Olsten expanded beyond the New York City market in 1962, when a franchise office was opened in Chicago. Within three years the company had expanded to six franchised offices, in addition to 14 offices that were directly owned, in nine states. Olsten had become one of the few firms in the rapidly-growing temporary help industry with a broad geographical reach.

Olsten had increased the range of services offered as well, adding a sales boosters division to provide workers capable of marketing products. Among the tasks undertaken by workers in this division were door-to-door sales, product demonstration, and work at conventions. Moving beyond the secretarial level, the company began sending out executives and other professional personnel, such as purchasing agents, advertising managers, and television producers. By 1966 Olsten’s was also placing engineers—in hot demand due to the military build-up associated with the Vietnam conflict.

In 1967 Olsten’s Temporary Office Personnel became the Olsten Corporation, reflecting the broader scope of its current activities. In the following year the company went public, selling stock for the first time. Olsten branched out further in 1969, purchasing Rush Laboratories, Inc. through a subsidiary. A year later Olsten acquired another laboratory, Path-Tek Laboratories, Inc.

As acceptance of the concept of temporary help grew, the Olsten firm expanded steadily. By the mid-1970s, the company had opened over 100 offices and had branched out to the home health care industry; by the early 1980s, Olsten exceeded 250 offices, including eight agencies devoted to medical personnel. The white-collar workplace in the U.S. began a rapid and irreversible transformation in the early 1980s from the typewriter to the word processor, changing the nature of the temporary employment field. Simply clocking a prospective secretary’s typing speed was no longer as important as insuring that one was capable of using one of several word processing packages. As a result Olsten established a training system for temporary employees using a variety of machines and programs the prospective employee would be expected to use on the job. This training program was the first of many employee education projects that Olsten installed.

Olsten’s steady growth throughout the 1970s and the 1980s came as the structure of one segment of the American workforce underwent a shift ultimately benefiting temporary agencies. Companies began realizing that the cost of advertising for potential employees, screening applicants, training new workers, and providing fringe benefits such as health insurance and paid vacations, along with the administrative expenses associated with these activities, added up to far more than the employee’s actual salary. Overhead costs like Social Security, local employment taxes, unemployment insurance payments, and pension plan contributions, along with payroll and record-keeping expenses, often combined to push a worker’s actual cost to an employer to over 150 percent of the worker’s salary. To keep human resources expenditures down, companies began permanently reducing their staffing levels, planning to add extra employees only at times when a need was recognized. Businesses with leaner workforces relied much more heavily on the availability of temporary employees than companies traditionally had when outside workers were used only to fill in for sick or absent regular workers.

By 1984 Olsten’s sales had reached $332 million. Revenues grew by 20 percent in the next year, representing output from 330 offices. By the mid-1980s, the temporary personnel industry had become the third-fastest growing field in the U.S. economy. As a beneficiary of this growth, Olsten became a tempting target for hostile takeover by corporate raiders; the company took measures late in 1987 to make itself less vulnerable to financial takeover.

By the end of that year, Olsten’s had acquired 400 affiliated offices and the company’s medical division, Olsten Health Care Services, was primed to assume a larger role in the company’s revenues. Workers in this part of the company are professional and ancillary medical personnel. In the mid-1980s, health care-related services had become the fastest-growing segment of Olsten, moving from 10 percent of revenues generated to 13 percent between 1985 and 1988. Olsten’s managers felt certain that this aspect of the industry was virtually recession-proof.

By 1988 Olsten Health Care had 67 offices across the country, of which 11 were located in New York state. Since the 1970s, the company had been buying out Olsten’s franchised health care operations. Olsten Health Care also planned to continue expansion despite the fact that a shortage of nurses limited growth potential. In August of 1988, Olsten purchased the home health care and hospital staffing operations of the Professional Care Service.

Faced with a tight labor market that represented one of the few constraints on its galloping growth, the company began to devote increased attention to the recruitment of new temps and the retention of valuable employees. One previously untapped demographic group was the growing population of retired workers. Olsten began running advertisements aimed specifically at the over-65 market and making visits to senior citizens’ groups to discuss temporary work, much the same way that founder Bill Olsten had once tried to lure young housewives into the labor pool. Retired workers were typically reliable, Olsten found, and had flexible schedules, making them ideal temporary employees.

In addition to the recruitment of older people, Olsten also introduced a number of measures designed to keep workers on the payroll once they had signed up. The company began offering such benefits as a health plan that let workers sign up quickly and a tax-sheltering plan for income spent on child care. Workers who had demonstrated loyalty to Olsten by putting in several hundred hours of service became eligible for a Preferred Employee Plan which provided extras like vision coverage and access to a legal service. The company began handing out rewards too, for jobs performed well, including gift certificates from J.C. Penney.

Olsten also purchased three temporary agencies in 1988, moving to consolidate its standing in the fragmented, heavily localized industry. With five to six percent of the nation’s temporary business, Olsten held the number three spot in the industry. In 1989 Olsten’s sales reached $800 million and the company boasted 520 offices, placing workers in accounting and legal services, as well as secretarial positions. Through licensed offices, Olsten continued expanding by moving into new areas, such as smaller cities and suburbs—where many clients were now locating their corporate offices—and by grabbing a larger share of the markets with which the company was already familiar. With these strategies the company hoped to avoid the effects of the overall slump that had hit the temporary services industry at the end of the 1980s, following decade-long sprees of phenomenal growth.

In May of 1989, Olsten made a second move to increase its share of the health care market through acquisitions. Olsten purchased three home health care agencies from competitor CarePlus for $1.7 million. In a further attempt to increase billings in this field, Olsten introduced an incentive program for hospital discharge planners in mid-1989, based on the idea of frequent flier programs. Under the Free Home Care program, each private-paying client referred to Olsten Health Care by a hospital brought the hospital bonus hours of health care available to assign to patients otherwise unable to afford the company’s services. The program increased business to Olsten’s 75 home health care agencies in 19 states and generated $100 million a year in revenues.

Extending its traditional role, Olsten began gingerly moving into the business of permanently placing employees on an ad-hoc basis, as local offices negotiated arrangements with clients who wished to hire Olsten temps as regular employees. Calling attention to the importance of workplace literacy—a longtime commitment of founder William Olsten—the company also began sponsoring regional spelling competitions called Olsten Great Grown-Up Spelling Bees, in which workers represented their companies.

William Olsten stepped down from his position as chief executive officer of the company in March of 1990; company president Frank N. Liguori was appointed his successor. Olsten did, however, remain in his post as chairperson. In a tribute to his role as a pioneer in the temp industry, Olsten was invited to set up a branch of his company in the Soviet Union by labor ministry officials there—in part to help place skilled Soviet workers in jobs in the West where they could earn much-needed hard currency. Although Olsten declined the offer, the company did begin to explore the possibility of beginning operations in Western Europe.

In September of 1990, Olsten made a dramatic new commitment to the home health care business, agreeing to purchase Upjohn HealthCare Services—which had posted annual losses of $20 million over the last two years—from its parent the Upjohn Company. Valued at $58 million, the deal tripled Olsten’s health care business in one stroke, and the division became formally known as Olsten HealthCare. The purchase gave the company a ready-made network of offices and staff across the U.S. and in Canada, increasing its number of health care agencies from 76 to 258. Buying Upjohn allowed Olsten to “effectively blanket North America with offices,” Olsten vice-chairman and president Frank Liguori pronounced in the Wall Street Journal. “It saves us years of internal growth and development.” Besides the additional income yielded by the purchase, the move also pushed the company’s annual revenues past the $1 billion mark for the first time in 1991.

By the middle of 1991, integration of the Upjohn properties into the Olsten system had proceeded smoothly, and home health care accounted for almost 40 percent of the company’s operating revenues, as demand in the office services sector softened significantly.

On November 3, 1991, company founder and chairperson Bill Olsten died of natural causes at age 72. At year’s end his company had grown to include more than 700 offices nationwide, encompassing nine separate service divisions: office services, office automation, professional accounting, light industrial services, legal support, records management, technical services, marketing support, and health care. During 1991 Olsten had implemented programs in sales training for staff and had increased self-advertising in an attempt to further secure business. With strong operations in both office staffing and home health care, as well as a tradition of conservative management, Olsten appeared well-positioned to sustain a leading role in the temporary services industry during the coming years.

Principal Subsidiaries

Olsten Permanent Agency, Inc.; Handy Andy Industrial Services; Olsten Industrial Services; Olsten Home Health Care, Inc.; Olsten Personnel Inc. (Canada).

Further Reading

“Manpower Abroad: Suppliers of Temporary Help Are Expanding Far and Wide,” Barron ’s, January 4, 1965; Long, Jeff, “Bill Olsten: Temp Help Pioneer,” Management World, November/December, 1987; “Olsten Corp.: Strong Earnings Growth Seems Anything but Temporary,” Barron’s, May 29, 1989; Lutz, Sandy, “Home-care Agencies Offer Bonuses for Business,” Modern Healthcare, August 20, 1990; “Employment Boom: Olsten Cashes in on Growing Demand,” Barron’s, July 13, 1992; “Temporary Help Rebound May Prove to be Permanent,” Wall Street Journal, July 28, 1992.

—Elizabeth Rourke