Incorporated: c. 1965
Sales: $285.52 million (1996)
Stock Exchanges: NASDAQ
SICs: 7363 Help Supply Services
RemedyTemp, Inc. provides temporary staffing of a clerical or a light industrial nature to mid-sized industrial and service companies, professional organizations, and government agencies. The company utilizes technology and value-added services to provide clients with solutions to their staffing problems. RemedyTemp offers its clients temporary staff—called “associates”—for full-time, long-term temporary, short-term temporary, and part-time work assignments. The company also maintains a full-time placement service. Headquartered in San Juan Capistrano, California, RemedyTemp has franchises throughout the United States, in Mexico, and in Canada.
Jobs for Middle-Market Companies in Clerical and Light Industries
Historically, RemedyTemp targeted middle-market companies with 50 to 500 employees. These clients allowed the temporary-help supplier to expand its revenues and profitability in an environment with less price-cutting and competition than the national market. RemedyTemp earned a reputation for providing more personalized, value-added services and for building closer relationships with decision makers at client companies, thus promoting longer client relationships.
RemedyTemp offered the following types of jobs to clients: office/clerical; computer applications; call center and customer service; light industrial; manufacturing; technical; shipping and receiving; and distribution. Clerical positions, one of the larger job categories, included secretaries, word processors, receptionists, accountants, bookkeepers, telemarketers, computer operators, and other office staff. Light industrial work jobs—done by mechanical assemblers, machine operators, stock clerks, forklift operators, lab technicians, electronic engineers, and mechanical engineers—comprised the second large job category supplied by RemedyTemp.
RemedyTemp focused on clerical and light industries as core business segments. Since 1991, clerical and light industries contributed $12 billion in revenues to the temporary-help arena, growing at an annual rate of 18 percent. Staffing Industry Analysts, Inc., found that clerical and light industries were worth $25 billion combined and accounted for about 60 percent of the total payroll for temporaries in the United States during 1995 alone. Paul W. Mikos, president and chief executive officer, explained in a Business Wire press release: “Our focus on the rapidly growing clerical and light industrial markets places us in the two largest segments of the temporary staffing industry; and we have successfully targeted middle-market accounts which represent high growth areas in U.S. business.”
Value-Added Work Force Support
RemedyTemp was among the first temporary-help suppliers to offer value-added work force support—such as human resources services—to clients, especially in the area of office technology. The company used proprietary information technology widely in obtaining and maintaining relationships with clients, placing associates, and managing temporary-help resources. RemedyTemp initiated technology programs that provided extra services for its client base. According to Mikos, quoted in a Business Wire news release, “Our proprietary information-based technology programs continue to differentiate RemedyTemp and provide us with a competitive advantage in the marketplace. Specifically, our HPT and EDGE Systems help to provide superior client services, positioning RemedyTemp as the intelligent staffing’ provider in the industry.”
Winning Attitudes and Intelligent Staffing
Studies long established that attitude was the primary criterion for employers when contracting temporary help. In his 1996 president’s letter, Mikos explained: “We learned that employee attitude was the most critical factor. While clients expect temporary employees to have basic skills at a minimum, attributes such as attitude, work ethic, and fitting in with their corporate culture are the key criteria from their point of view.” RemedyTemp, then, adopted the Human Performance Technology (HPT) evaluation system that predicts how employees will perform on the job. Based on a testing method developed by Detroit-based HRStrategies, HPT was similar to tests used by Fortune 500 companies such as General Motors, Chrysler, Ford, AT&T, Pepsi Cola, and Hewlett Packard. HPT’s multimedia tests measured attitudes in varying work situations, as well as work habits, initiative, team work, and adaptability. An individual’s scores allowed RemedyTemp to ascertain that person’s attitude, work ethic, and flexibility. The company looked for people with “will do” attitudes: employees who demonstrated initiative, teamwork, dependability, and an ability to learn. (Employees who simply possessed acquired skills or technical knowledge might have “can do” abilities, but not the gumption or flexibility of someone with a “will do” attitude.) HPT test results profiled associates; then RemedyTemp matched associates to corporate profiles to ensure that its temporary workers would fit in well wherever they were placed. Using the HPT method, Remedy-Temp increased the productivity of its associates, as well as shortened training and orientation schedules for client companies, hence lowering costs—even worker’s compensation costs.
RemedyTemp also developed technology to better match its associates with client companies. The company designed an Intellisearch database that held client and associate profiles, HPT results, skill test results, and associate recommendations. This technology allowed clients to search for specific associate qualifications that meshed with their specific needs. Extensive use of the Intellisearch database resulted in longer assignments for associates and improved perceived quality of the temporary-help service operations of RemedyTemp.
Giving Clients the EDGE
RemedyTemp created an automated time keeping and management program—Employee Data Gathering and Evaluation (EDGE) System—to facilitate the onsite management of temporary staff. The EDGE System offered clients online access to workforce hours, costs, attendance, and performance evaluations. The system easily tracked hours, monitored costs, showed labor costs, reported head count, projected costs, and forecasted future needs and costs. According to Mikos, quoted in a 1997 Business Wire release,“Our proprietary EDGE Systems remain a major marketing differentiator for RemedyTemp, and we now have 102 EDGE Systems installed throughout our customer base, with average annual sales of approximately $1 million per installation. During each week of our second fiscal quarter, one new EDGE System was installed and an average of 1.5 new EDGE Systems were sold, expanding our reach and enhancing our future growth potential.”
The EDGE System operated simply: RemedyTemp associates electronically swiped cards when starting and ending their work days for online tracking of their work hours and productivity. The system required less paper and yielded more timely replacements for habitually late, absent, or unproductive associates. Some client companies also used the EDGE systems for tracking the work of staff hired through RemedyTemp’s competitors as well.
A Major Industry Shift
Robert E. McDonough—chairman of the company in 1996—founded RemedyTemp in 1965. He opened the first office in Riverside, California, and followed that one with others located in the western United States. At this time, temporary employees used to be a one-time event for client companies; for instance, a client company might hire a temporary worker to fill in during vacations or sick leaves. Typically, lower-level staff at client companies worked with Remedy-Temp to hire for such positions.
Beginning in the 1980s, however, the role of temporary help changed dramatically. The help supply service industry experienced remarkable growth as the use of temporary workers became planned and purposeful. Client companies, for instance, utilized temporary workers for special projects or during peak seasons. Human resources and purchasing executives assumed responsibilities for hiring temporary help.
Franchisees and Licensees
RemedyTemp traditionally operated independently managed offices in addition to company-owned—direct sales—offices. In the late 1980s, however, RemedyTemp developed a strategy to expand beyond its locations in the western United States in order to play a larger role in the growing help supply service industry. At this time, the company initiated an expansion program that was successful in meeting client companies’ demands for strong local offices. RemedyTemp concentrated on developing a growing network of local offices throughout the United States with a national resource base. Henceforth, RemedyTemp focused on opening new local offices—independently owned and operated by experienced business professionals with known records of achievement and entrepreneurial spirit—and new markets. As Mikos revealed in his 1996 president’s letter: “We essentially harness the entrepreneurial energy of the new licensees who then build the business in new markets. Once our name has been established, we can then either invest or buy into these new mature markets.”
Since RemedyTemp was founded over thirty-one years ago, we have been dedicated to providing our customers with the most innovative services available in the market. From day one, our management’s devotion to this philosophy, coupled with the recognition of changing market dynamics, is what has fueled the growth and success of RemedyTemp.... RemedyTemp is as committed as ever to these fundamental principles, and we believe we can take this company to greater heights, enhancing its value for our shareholders, customers, and employees.
Between 1987 and 1990, RemedyTemp operated independently managed offices as franchises. Franchisees paid Remedy-Temp an initial franchise fee and royalties from their gross billings, as well as assumed financial responsibility for their leases and office-related working capital costs such as payrolls. Franchisees employed any management staff and all temporary personnel associated with their individual offices. RemedyTemp processed payroll and invoiced client companies for the franchised offices.
Beginning in 1990, RemedyTemp opened independently managed offices under licensing arrangements. According the RemedyTemp’s 1996 management discussion, “The company switched from [a] franchise to [a] license format to exercise more control over the collection and tracking of the receivables of the independently managed offices and to allow the company to grow without being limited by the financial resources of franchisees.” Nevertheless, licensed offices operated in a similar fashion to franchised ones. Licensees paid initial fees and assumed all lease and working capital costs. Licensees also employed any management staff for the office, but temporary personnel were employees of RemedyTemp. RemedyTemp also invoiced clients and collected on accounts. The company remitted a percentage of profits to the licensees, the size of which depended on the level of billed hours from the previous contract year.
A New Breed of Temporary Help
The 1990s brought more sophisticated clients and a more strategic use of temporary personnel, changing the role of contingent workers in U.S. businesses. As businesses increased outsourcing, temporary personnel became a significant component in the long-term workforce because they increased a client company’s productivity, added flexibility, and contributed to cost efficiency.
Instead of being just transient workers, temporary personnel became more a part of the organizations for which they worked, receiving more perks and benefits. For example, companies allowed temporary personnel to work flexible schedules. Remedy-Temp began a generous benefit program for its associates, although particulars of the programs varied because Remedy/Temp offices were independently owned and operated. Still, Remedy-Temp workers typically received a wide range of benefits: Associates participated in 401(K) plans. An associate’s contributions stayed in the plan when his or her assignment ended and resumed upon reassignment. Associates also received bonuses for longevity, holidays, referrals for new hires, and 40-hour-a-week drawings for free gifts or bonuses. In addition, RemedyTemp provided its temporary personnel with medical and dental insurance and a voucher-based child care program.
Most importantly, the company gave its associates on-the-job experience at client locations before actual assignments began and initiated an extensive training program for its associates. The company sponsored free instruction in personal computer software, as well as cross-training in word processing, spreadsheets, database programs, presentation packages, desktop publishing, and Windows and Macintosh operating systems. RemedyTemp also subsidized advanced PC workshops for its associates.
Growth and More Growth
From 1993 through 1995, RemedyTemp added 61 offices. The company’s before-tax revenues increased at a compound growth rate of 30.6 percent, amounting to $209 million. Its before-tax income grew at a compound growth rate of 63.7 percent or $6.5 million. In 1995, RemedyTemp placed 93,000 temps at 13,000 client companies, totaling 24.4 million staffing hours.
Through 1995, RemedyTemp operated as an S corporation. In July 1996, though, the company became a public company and changed its status to that of a C corporation. RemedyTemp’s initial public offering included 3.57 million shares at $13.00 per share: Company shareholders sold 1.47 million shares, and RemedyTemp issued the rest for net proceeds of $24 million. The company used the proceeds from the sale of stock for shareholder distribution, expansion, technology, and working capital.
More than 90 percent of businesses in the United States utilized temporary help in some capacity by 1996. This amounted to $41 billion in revenues annually for the temporary-help service industry, and about two million temporaries employed weekly in 1996. RemedyTemp placed 109,000 of those temporaries at 14,000 client businesses in 1996—more than 29.3 million staffing hours in the year ending September 29, 1996. In 1996 RemedyTemp added 19 offices, so the company comprised 158 offices in 32 states at this time: 65 offices were company-owned; 93 were independently managed offices (20 franchised and 73 licensed).
Before-tax revenues for the company from 1993 to 1996 increased to $285.5 million—a compound annual growth rate of 32 percent. Before-tax income grew at a compound annual growth rate of 69 percent or $12 million. By the first quarter of 1997, quarterly revenue rose 31 percent to $84.6 million. The company’s net income for the quarter was $2.6 million.
Positioned for the Future
With a secure financial footing, RemedyTemp planned to expand market awareness in the future and to increase sales nationwide. The company intended to broaden its role as a national presence by opening additional offices. In a 1997 Business Wire release, Mikos commented: “We continued to experience robust sales growth in both our company-owned and independently managed offices___We made significant progress on the expansion of our network of nationwide offices, opening ten new offices during the [first] quarter, eight of which were independently managed and two were company-owned offices.” RemedyTemp also expected to market its proprietary data management technology and to develop client relationships further in the future.
“RemedyTemp Appoints John Swancoat Controller,” Business Wire, September 27, 1996, p. 9270009.
“RemedyTemp, Inc.,” Going Public: The IPO Reporter, June 24, 1996.
“RemedyTemp Names Two Additional Board Members,” Business Wire, September 25, 1996, p. 9251003.
“RemedyTemp Reports 32 Percent First Quarter Net Income Growth,” Business Wire, January 21, 1997, p. 1210013.
“RemedyTemp Reports 61 Percent Second Quarter Net Income Growth,” Business Wire, April 23, 1997, p. 4231006.
“RemedyTemp Reports Record Results for Third Quarter and Nine Months,” Business Wire, August 6, 1996, p. 8060216.
“RemedyTemp Reports Record Fourth Quarter; Operating Income up 67 Percent_Proforma Net Income Rises 47 Percent,” Business Wire, November 19, 1996, p. 11190344.
—Charity Anne Dorgan