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General Employment Enterprises, Inc.

General Employment Enterprises, Inc.

ORIGINS

FACING A CRISIS

BACKPEDALING IN THE EARLY 21ST CENTURY

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

FURTHER READING

1 Tower Lane, Suite 2100
Oakbrook Terrace, Illinois 60181
U.S.A.
Telephone: (630) 954-0400
Fax: (630) 954-0447
Web site: http://www.generalemployment.com

Public Company
Incorporated:
1962
Employees: 320
Sales: $20.1 million (2006)
Stock Exchanges: American
Ticker Symbol: JOB
NAIC: 561310 Employment Placement Agencies

General Employment Enterprises, Inc., offers professional staffing services to corporate clientele, providing temporary and permanent engineering, accounting, and information technology professionals through a network of branch offices. General Employment divides its business into two segments, offering placement staffing services and contract staffing services. Its placement staffing segment puts candidates into regular, full-time positions with employers. Contract services entail placing professional employees on temporary assignments under contracts with client companies. The company derives 51 percent of its annual revenues from contract staffing services and 49 percent from placement staffing services. General Employment operates 11 branch of- fices located in Arizona, California, Illinois, Indiana, Massachusetts, North Carolina, Ohio, and Texas.

ORIGINS

General Employment traces its beginnings to the entrepreneurial efforts of F. L. Winslow, who founded an engineering staffing firm known as the Engineering Agency in 1893. More than a century passed from the opening of Winslows small office to the modern version of the company in the 21st century, but the period of the greatest significance for understanding the history of the company began following World War II. The latter part of the 20th century marked the Imhoff era of General Employments history, a period dominated by the personality and actions of Herbert F. Imhoff, Sr., that extended into the 21st century under the direction of his first-born son, Herbert F. Imhoff, Jr.

Herbert F. Imhoff, Sr., was 31 years old in 1958 when he joined the engineering staffing firm founded by Winslow. He spent the ensuing 43 years at the company, working full time until his death. Imhoff rose through the companys management ranks, earning his last promotion in 1964, when he was named chief executive officer and took charge of a company that supplied secretaries, clerical workers, accountants, and engineers on a permanent basis to corporate clientele. Imhoff led the company through its initial public offering (IPO) of stock in 1967, when shares in General Employment began trading in the over-the-counter stock market. The following year the company moved to the more prestigious American Stock Exchange. Imhoff presided over modest financial growth and physical expansion during his first decades in control. In 1982, he was joined by his son, Herbert F. Imhoff, Jr., who was known by his nickname Corky. The younger Imhoff earned a law degree from Drake University in 1975 and worked as a practicing attorney and partner at a Chicago-based corporate law firm before joining General Employment as the companys general counsel. Herbert, Jr., like his father, climbed his way up the companys executive ranks, working alongside his father when General Employment faced the first great crisis in its history.

By the beginning of the 1990s, Herbert, Sr., had been in charge of General Employment for nearly 30 years. The company, throughout the period, had operated its employment agencies as separate subsidiaries, maintaining the distinct identities of its various entities until 1985, when the subsidiaries were merged into the parent company. In 1988, the company made one exception to the cohesiveness achieved three years earlier by establishing Triad Personnel Services Inc. as an Illinois-based subsidiary, but there were vestiges of the decentralized structure of General Employment that existed into the 1990s. The company operated under the trade names General Employment, Craig Agency, Omni One, Business Management Personnel, and Triad Personnel Services when Imhoff made arguably the boldest move in General Employments history. His actions, which represented his response to General Employments singular crucible, left an indelible mark on the history of the Oakbrook Terrace company.

FACING A CRISIS

The early 1990s changed the face of General Employment. A recession between 1990 and 1991 prompted companies nationwide either to trim their workforces or to suspend hiring activities, creating harsh conditions for staffing services firms of all types and sizes. General Employment, which subsisted solely on placing accountants, engineers, and similarly skilled professionals on a permanent basis, felt the sting of the times as its clients stopped expanding their payrolls. Im-hoff, who watched his company sink into the red at the start of the decade, took action in 1992, when he faced a nearly $2 million operating loss. He decided to shift General Employments focus away from the accountants and engineers who had represented the companys lifeblood for 99 years, and to specialize instead in providing information technology professionals to companies. Imhoff also created a second facet to General Employments profile, establishing a contract services division in October 1992. Through its contract services business, which became the primary focus of the Triad Personnel Services subsidiary, General Employment began providing temporary and part-time professionals to companies for medium- to long-term work assignments.

COMPANY PERSPECTIVES

Ours is a service business which is highly dependent upon the relationships and trust we develop with our clients. Our branch office personnel are on the phones every day, working to establish new relationships and to maintain existing ones. Our goal is to provide our clients with more than just a business service. We provide the personal service they expect from uslistening, understanding and responding to their needs.

The profound changes to General Employments business and structure produced encouraging results. Between 1993 and 1995, revenues increased from $10.8 million to $16.7 million, a period that saw revenues from its fledgling contract services business increase from $2.3 million to $5.1 million. Perhaps more heartening, the company demonstrated strong profit growth, registering an increase in net income from $61,000 in 1993 to just over $1 million in 1995. The early results marked the beginning of what proved to be a highly successful decade for General Employment. The company offered its two types of services through branch offices, which numbered 24 by 1995, focusing on the market for computer programmers, systems analysts, and other information technology professionals, while at the same time emphasizing the contract services side of its business. Revenues jumped nearly 40 percent in 1996, when contract services accounted for nearly a third of the companys business, as companies clamored for the type of high-technology employees offered by General Employment. In 1997, after averaging 27 percent revenue growth for the previous three years, the companys stock value tripled. Business Week magazine took note, ranking General Employment 15th on its list of the 100 Best Small Companies in the United States. Imhoff responded to the companys surging growth by expanding its network of branch offices, opening nine new locations in 1997 and announcing plans for opening 12 new offices in 1998 and 16 new offices in 1999. Were in the right place at the right time, he explained in a March 13, 1997, interview with Arlington Heights, Illinoiss Daily Herald. We have people with the know-how. Were good at what we do. And, all of sudden, there is a fantastic need for what we do.

General Employment enjoyed the greatest financial and physical growth in its history during the 1990s, responding to the crisis early in the decade with a plan that fueled its robust expansion and broadened its market presence. The company moved into rapidly growing markets such as Atlanta, Georgia; Las Vegas, Nevada; San Diego, California; and Charlotte, North Carolina, sharing in the explosive advancement of the technology sector by supplying technology professionals. Weve been through some boom times, Imhoff reflected in an April 13, 1998, interview with the Daily Herald, but never anything better than this. Unfortunately for General Employment, Imhoffs next statement proved to be prophetic. This may be as good as it gets, he said.

BACKPEDALING IN THE EARLY 21ST CENTURY

On the march through most of the 1990s, General Employment entered the 21st century in retreat, forced to give up ground as its luster quickly faded. What had been largely responsible for its rise in the 1990ssupplying information technology professionalscaused its downfall when the technology sector imploded, leaving General Employment heavily reliant on a moribund market. The disaster meant the company would be forced to look back at the late 1990s as its years of peak performance: net income reached a record high of $3.09 million in 1998, the same year its stock traded for $19 per share. Both figures fell well beyond the companys reach in the first years of the new century. Revenues reached a high of $39.8 million in 2000, when the company operated 42 branch offices in 14 states. Those figures, too, slipped from the companys grasp as it reeled backward, facing the second great crucible in its history.

The timing of the crisis could not have been worse. Just as the company realized the severity of its predicament, it also had to contend with a leadership crisis. In June 2000, while the technology sector was beginning to fall apart, Imhoff was diagnosed with lymphoma. He took a three-month leave of absence the following month, but by the fall of 2000 he was back working full time, focusing his attention on finding a solution to his companys woes. I decided not to sit at home and worry about myself, he said in a November 9, 2000, interview with the Daily Herald. Id rather go to work. His efforts during the last months of his life centered on returning General Employment to its roots, back to the types of services that had supported the company for a century. We had become a staffing company that was almost 90 percent devoted to placement of people in the information technology arena, he explained in a March 12, 2001, interview with Crains Chicago Business. Now, were going to get back into fields like engineering and accounting and become more diverse in the process. The task of orchestrating the companys recovery was a chore passed from father to son. Herbert F. Imhoff, Sr., died in June 2001. Herbert F. Imhoff, Jr., was named chief executive officer of General Employment two months later.

KEY DATES

1958:
Herbert F. Imhoff, Sr., joins General Employment.
1962:
The company is incorporated.
1964:
Imhoff is named chief executive officer of the company.
1967:
General Employment completes its initial public offering of stock.
1992:
General Employment begins offering contract services and focuses its efforts on the information technology field.
2000:
The collapse of the technology sector forces General Employment to pare down its operations.
2001:
Imhoffs son, Herbert F. Imhoff, Jr., is appointed chief executive officer.
2005:
The company posts its first quarterly profit in three-and-a-half years.
2006:
The company records $1 million in net income for the year.

Corky Imhoff inherited a company suffering from significant problems. His first years in control were spent on the defensive, time devoted to getting General Employment on sound financial footing. Cost-cutting initiatives were implemented, including eliminating half of the companys headquarters staff and selling a subsidiary, Generation Technologies Inc., to its management in 2004. Imhoff took a 20 percent cut in salary and a half-dozen senior executives also accepted reductions in pay, but the most visible aspect of the cost-cutting efforts entailed greatly reducing the number of branch offices operated by the company. General Employment operated 42 offices in 14 states in 2000, a physical presence that shrank to 19 offices in a ten-state territory by 2005. The effect of the cost-cutting measures was profound. General Employment, which boasted a market capitalization of $47 million in 1997, saw its value on Wall Street diminish to $10 million by 2005. Its stock, which had traded for $19 per share in 1998, was trading for $1.60 per share by 2006.

As General Employment planned for the future midway through the decade, there were signs that its health was on the mend, but much remained to be achieved. In the first fiscal quarter of 2005, ending December 31, 2004, the company posted a small profit of $119,000, the first net profit since the collapse of the technology sector in 2000. I hope this is a turning point, Imhoff said in a March 7, 2005, interview with Crains Chicago Business. Of course, he continued, wed like to see more earnings, but were encouraged that we seem to now be going in the right direction. The actions weve taken over the past few years have made a significant impact on our results. Steady growth continued to elude the company, however. One year later, in a March 6, 2006, interview with Crains Chicago Business, Imhoff conceded his cost-cutting efforts had diverted attention away from pursuing growth opportunities. We gave up some contracts with clients because there were lower-profit deals, and we havent filled the pipeline with replacements as quickly as we should have, he said. Thats our fault. In the years ahead, Imhoff hoped to adopt a more aggressive approach to expansion and lead General Employment toward prosperity. His hopes were buoyed at the end of 2006, when the company registered $1 million in net income, the highest total in more than five years.

Jeffrey L. Covell

PRINCIPAL SUBSIDIARIES

Triad Personnel Services Inc.

PRINCIPAL COMPETITORS

Kforce Inc.; MPS Group, Inc.; Robert Half International Inc.

FURTHER READING

Comerford, Mike, Imhoff, 74, Dies, Daily Herald, June 8, 2001, p. 3.

Eaton, Dan, Tech Staffing Agency to Double Dublin Employees, Move Offices, Business First-Columbus, July 28, 2000, p. 5.

General Employment Rides High-Tech Boom, Daily Herald, March 16, 1997, p. 1.

Imhoff Takes 3-Month Leave of Absence, Daily Herald, July 13, 2000, p. 1.

Mawhorr, Sarah, Cancer Doesnt Keep CEO from Work, Daily Herald, November 9, 2000, p. 1.

Murphy, H. Lee, Boom Times: Genl Employment Expands to Hot New Markets, Crains Chicago Business, April 13, 1998, p. 6.

, Genl Employment Enterprises Still Looking for Work, Crains Chicago Business, March 8, 2004, p. 31.

, Growth Leaves General Employment Behind, Crains Chicago Business, March 6, 2006, p. 13.

, Staffing Firm Going Back to Its Roots, Crains Chicago Business, March 12, 2001, p. 51.

, Staffing Firm on the Upswing, Crains Chicago Business, March 7, 2005, p. 22.

Schmitt, Anne, The Right Place at the Right Time, Daily Herald, March 13, 1997, p. 1.

Silvestri, Scott, General Employment Plans Expansion, Daily Herald, December 30, 1999, p. 1.

Tascarella, Patty, Midwest Staffing Company Acquires 3-Year-Old Generation Technologies, Pittsburgh Business Times, April 20, 2001, p. 15.

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