Buck Consultants, Inc.

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Buck Consultants, Inc.

1 Pennsylvania Plaza
New York, New York 10119-4798
Telephone: (212) 330-1000
Fax: (212) 695-4184
Web site: http://www.buckconsultants.com

Wholly Owned Subsidiary of Mellon Financial
Corporation Founded:
1916 as George B. Buck, Consulting Actuary
Employees: 3,000
Operating Revenues: $416 million (2000)
NAIC: 541612 Human Resources and Executive Search Consulting Services

A subsidiary of Mellon Financial Corporation, Buck Consultants, Inc. is the oldest benefits consulting firm in the United States and boasts a rich history of its own. Located in New York City, Buck offers a wide range of consulting and outsourcing services. Originally focused on pension funds, Buck now provides consulting on a full range of compensation and benefits programs intended to attract, motivate, reward, and, most importantly, retain talented employees. The company also helps companies develop and implement an effective human resources strategy. In recent years, Buck has become increasingly more involved in offering technologies to aid a company in its human resources programs. Not only can it help clients choose appropriate vendors, it has the capability to set up Web site and intranet systems, help to integrate hardware and software, and develop custom technology solutions. Moreover, the company can manage the processes for a client, hosting it on Bucks own systems, thus allowing Buck to offer end-to-end IT solutionsfrom developing a strategy to implementing and running it. Buck also provides outsourcing and insourcing solutions for clients human resources and benefits programs. The company maintains 50 offices located in 15 countries.

George B. Buck: 20th-century Innovator

The companys founder, George Burton Buck, was a pioneer in the development of modern employee pension funds and also played a minor role in the computer revolution. Born in Baltimore in 1891, Buck earned a Bachelor of Law degree from George Washington University. After being admitted to the Bar of the District of Columbia, he became involved in the actuarial discipline of the life insurance business, which used statistics to determine life expectancy and calculate annuity premiumspivotal considerations in the life insurance as well as the pension field, into which Buck moved and made his reputation. In 1912, he helped to found Brown & Buck Consulting Actuaries, the first company to specialize in setting up and valuing employee benefit funds. His first major achievement came a year later when he produced the first actuarial report for the New York City Police Pension Fund. In 1914, he was hired by the city to serve as the working actuary on its committee on pensions, his work leading to the New York City Teachers Retirement System became the first governmental plan in America to adopt the reserve basis for employer contributions.

Bucks interest in statistics led to his 1915 invention of the Hollerith keypunch verifier, an important addition to the Hollerith Keypunch Machine, the first electro-mechanical punch card system, an important building block in the development of the computer. It was invented by a Census Bureau statistician named Herman Hollerith in the aftermath of the 1880 census, which was not completed until 1887 and prompted fears that the 1890 census would not be completed before 1900. Hollerith drew on the automatic weaving machine that relied on a pasteboard method and designed a 3 X 5 card, a card punch apparatus, sorting box, and counter. Information was recorded by punching holes in the card then tabulated by passing the cards over a vat of mercury as pins pressed down on the cards. If a pin passed through a punched hole and touched the mercury, it created a electrical contact that moved mechanical counters. Although crude by todays standards, Holleriths invention allowed the 1890 census to be completed in just three years. In 1903, he left the Census Bureau to start his own company, which in 1911 merged with two other firms to create the Computing-Tabulating-Recording Company. Bucks invention provided a way to double-check the work of the keypunch operators. He patented the device, then sold it to the Computing-Tabulating-Recording Company, where the verifier became a standard part of the punch-card system that was the basis of the early computer. In 1924, the Computing-Tabulating-Recording Company changed its name to International Business Machines, better known today by its initials, IBM.

Company Origins in 1916

Buck launched a new business in 1916, George B. Buck, Consulting Actuary, located in the Wall Street area of Lower Manhattan. He continued to reveal an innovative spirit, becoming a pioneer in the development of methods to determine sound financial reserves for retirement plans. Bucks basic premise was that people could retire with an income of half-pay if they contributed some of their earnings during their careers, 4 to 6 percent, and it was matched by their employer and interest earnings met assumptions. In 1916, Buck was named the actuary for the City of New York, providing much needed guidance for retirement plans for policemen, firemen, teachers, and other municipal employees. He would serve in this capacity until 1956. Because of his success in New York City, other actuaries began to open similar consulting firms to work on government and private pension plans. Buck also served for many years on the New York State Pension Commission and was influential in the establishment of the State Employees Retirement System and the State Teachers Retirement System. In 1920, he became chairman of the Board of Actuaries of the United States Civil Service Retirement and Disability Fund, covering federal civil service employees, a post which he held until his death 41 years later. Buck also represented the Railroad Brotherhoods on the actuarial advisory committee mandated by the Railroad Retirement Act.

Bucks son, George B. Buck, Jr., joined the company in 1938 after graduating from Dartmouth University and would work there for the rest of his life (aside from service in the Navy during World War II, when he commanded an escort destroyer). Buck Consultants also began to take on private industry as clients, in 1940 adding U.S. Steel and Ford. By now, it became the leading consulting firm in a number of industries, including glass, steel, aluminum, tobacco, and banking. It ultimately grew into of the worlds largest consulting firm specializing in retirement, fringe, and disability programs for 1,000 clients, which included such major companies as the United States Steel Corporation, the Shell Oil Company, and the American Telephone and Telegraph Corporation. In 1958, George B. Buck, Jr. succeeded his father when he was named administrative head of the partnership. Three years later, in April 1961, George B. Buck, Sr. died of a heart attack at the age of 69. His son, however, would run the firm for only ten years. After suffering several minor heart attacks early in 1968 he was put on a limited work week. He reportedly suffered from periodic pain and worried about his health, then in the early morning hours of July 5, 1968, while spending a weekend with his family on his yacht, he was found dead in the stateroom by his wife after having apparently committed suicide. A revolver was found next to the body but he left no note.

The partnership carried on the George B. Buck tradition. In 1970, it broadened its purview to include the entire range of employee benefits. In the 1980s, it expanded internationally, opening 21 offices around the world. Despite this growth, by 1992 the firm, now called Buck Consultants, had been surpassed by other companies and ranked just 24 among the nations management consulting firms, with revenues of $157.1 million. Nevertheless, the firms future looked promising due to the recent trend of major corporations to outsource the maintenance of employee pension and retirement benefit plans, especially desirable for companies that experienced a series of mergers and faced the arduous task of tracking employee records through these changes. As part of an effort to grow externally, in 1994 the company made an offer to acquire rival Towers Perrin, the eighth largest management consulting firm, roughly four times its size. The bid was immediately rejected, although there remained some speculation that the two sides might fashion a merger, which could have resulted in the creation of an industry powerhouse.

The combination never materialized and Buck Consultants looked for other opportunities to improve its position. In 1996, it paid $20.3 million to acquire the W.F. Corroon unit of London-based insurer Willis Corroon Group PLC, a move that helped in both the U.S. and British markets by adding offices in key cities. As a result, Buck Consulting became Americas seventh largest benefits consultant and the worlds eighth largest, with annual revenues of $197 million and offices in 16 countries. It served more than 5,000 corporate clients and the pension and other benefits plans of some ten million active and retired employees, the assets of which totaled $400 billion.

Company Perspectives:

From World War I to the World Wide Webthats the span of Bucks history. In that time, many of the issues confronting organizations have changed. New solutions have become available. But our commitment to our clients remains the same.

1997 Acquisition by Mellon Bank

In late 1996, Buck Consultants announced that it reached a tentative deal with Mellon Bank Corp., a client of 50 years, that in one stroke would once again elevate it into the top ranks of benefits consulting firms. The $200 million acquisition was not completed until July 1997, when 300 principals in Buck Consultants who were the shareholders of the employee-owned company agreed to the transaction. It appeared to be a good fit for both parties. Mellon in recent years had pursued a strategy of buying non-bank financial companies that would provide steady revenue in spite of downturns in the economy. Mellon subsidiary Dreyfus Corp. (acquired in 1994) offered investment services, in particular mutual funds, much of which were related to retirement plans, while Boston Co. (acquired in 1993) provided administrative and custodial services for both pension plans and institutional investors. In order to take full advantage of the large amounts of money flowing into retirement plans, especially 401(k) plans, Mellon wanted to offer total outsourcing solutions to clients, a one-stop shopping approach to attract new customers who were now beginning to demand a full package of services before awarding their 401(k) business. Rather than incurring the cost and difficulty of hiring its own actuarial experts and other necessary specialists in order to provide outside consulting and actuarial services, Mellon opted to acquire Buck Consultants. Moreover, Mellon gained cross-selling opportunities with desirable clients of Buck Consultants, and the firms presence in 16 other countries gave Mellon entry into new markets for its other investment service businesses. For Buck Consultants, becoming part of the Mellon family of financial companies provided it with resources beyond mere cash to allow it to better compete in an increasingly competitive field. According to terms of the transaction, Buck Consultants remained under the direction of its current management team and operated independently from other Mellon businesses. As a result, its clients would not be forced to bundle their businesses with other Mellon unitsa provision to guard against the erosion of its customer base.

Folded into Mellons Human Resources Services unit, Buck Consultants continued to operate in much the same manner as before the merger. Unlike some rival consulting firms, it chose not to expand into providing investment advice to its clients, services that normally involved charging performance fees as well as fees based on the amount of assets under advice. Buck Consultants opted instead to maintain its independence and objectivity on the strategic aspect of setting up funds, for which it would continue to charge a fixed fee. Instead, Buck Consultants looked for new areas in which to expand, especially the new technologies, which were becoming ever more important in human resources programs. In 2001, it acquired a major interest in LiveWireMedia, a St. Louis company which since 1999 had been providing it with the capability of creating electronic total compensation reports, intranet and Internet sites, and employee self-service applications for a variety of human resources and benefits programs. Later in 2001, Buck Consultants acquired iQuantic, Inc., a San Francisco-based consulting firm that provided a chance to do business with the technology-based companies in which it specialized. IQuantic offered particular expertise in the area of equity-based pay programs, an area of expansion for Buck Consultants, and was also an industry leader in survey services and conferences. With satellite offices in Boston, Chicago, Denver, Kansas City, and Pittsburgh, iQuantic (now operating as iQuantic Buck, a Mellon Consulting Company) added $15 million in annual revenues. Furthermore, in 2001 Buck Consultants, in an effort to supplement its technology push as well as strengthen Mellons West Coast presence, acquired Harbor Technology Group, an Oakland, California-based technology human resources consulting firm that specialized in creating Internet-based systems for Fortune 500 companies. The four-year-old company now operated as Buck Harbor Technologies, Inc., a Mellon Consulting Company. To cap off an active 2001, Buck Consultants positioned itself for even more significant growth when an agreement was reached by Mellon to acquire the Unifi Network, the human resourcing and consulting units of PricewaterhouseCoopers. It was a move in keeping with a trend of major accounting firms to divest themselves of their consulting business in wake of the Enron scandal and demise of the Arthur Anderson accounting firm. The $275 million cash deal closed in early 2002 when the outsourcing business was combined with Mellon Employee Benefit Solutions and the consulting business, with $100 million in annual revenues, was added to Buck Consultants. In particular, the new assets would greatly increase its benefits and human resources outsourcing business, an area in which Buck Consultants had lagged behind the competition and one that was expected to experience strong growth in the future. For both parties, it was a significant move. Buck Consulting needed the client base that Unifi provided, while Unifis growth was stifled by Securities and Exchange Commission rules that prevented it from providing human resources outsourcing for audit clients of PricewaterhouseCoopers. Moreover, as a result of the Unifi purchase, Mellon became the worlds fourth largest provider of human resources consulting and administration services. As Mellon continued to break away from its roots in traditional banking, Buck Consultants, with its strong heritage, would likely continue to play a significant role in the transformation of its corporate parent.

Principal Subsidiaries

iQuantic Buck; Buck Harbor Technologies, Inc.

Principal Competitors

March & McLennan Companies Inc.; Drake Beam Morin, Inc.

Key Dates:

George B. Buck, Sr. forms the first company to specialize in employee benefit funds.
George B. Buck, Consulting Actuary is established.
George B. Buck, Jr. is named administrative head of the firm.
The company expands its services to offer a full range of employee benefits.
Buck Consultants is acquired by Mellon Bank Corp.
Mellons acquires Unifi Network, adding Price-waterhouseCoopers consulting unit to Buck.

Further Reading

Chase, Brett, High Hopes at Mellon for Pension Business Bought This Month in Little-Noticed Deal, American Banker, July 10, 1997, p. 9.

Kapiloff, Howard, Mellon Buying Nations Oldest Benefits Consultancy, American Banker, December 31, 1996, p. 1.

Kazel, Robert, Mellon Bank to Acquire Buck, Business Insurance, January 6, 1997, p. 1.

Massey, Steve, Mellon Buys Buck Consultants, Pittsburgh Post-Gazette, December 31, 1996, p. B7.

Prince, Michael, Mellon to Enlarge Benefit Consulting, Business Insurance, December 3, 2001, p. 1.

Spina, Phillip, A New Mellon Emerging, Following Reorganization, Pittsburgh Post-Gazette, July 7, 2002, p. E3.

Ed Dinger