Manpower, Inc. History

Address:

5301 N. Ironwood Road
Milwaukee, Wisconsin 53217
U.S.A.

Telephone: (414) 961-1000
Fax: (414) 961-7081

Public Company
Incorporated: 1948
Employees: 2,015,000
Sales: $8.81 billion (1998)
Stock Exchanges: New York
Ticker Symbol: MAN
NAIC: 56132 Temporary Help Services

Company Perspectives:

Since 1948, Manpower has provided employment opportunities for millions of people around the world. At the same time, we've enabled businesses to remain productive by providing them with quality workers. To do this successfully, we developed a systematic approach to matching worker to work that is unparalleled in the industry. Manpower's Predictable Performance System helps us accurately place people in assignments with more than 250,000 businesses worldwide annually ... providing our customers with productive workers and our employees with work that matches their skills and abilities.

Company History:

The second largest employment services company in the world, Manpower, Inc. provides staffing services through 3,200 offices in 52 countries, serving 250,000 clients worldwide. Fulfilling requests for temporary industrial and office workers is a primary focus for Manpower, but the company has recorded its greatest growth during the late 1990s from technical placements. Worldwide, the company operates more than 200 technical centers devoted to providing temporary technical, information technology, and telecommunications professionals. Manpower derives approximately 75 percent of its sales from international business, primarily from Europe, where the company operates nearly 1,500 offices.

Post-World War II Origins

Manpower was begun in 1948 by Elmer L. Winter and Aaron Scheinfeld, two partners in a Milwaukee law firm who saw the labor shortage that followed World War II as an opportunity to form a temporary agency. A year earlier, Kelly Services, Inc., which would become the second biggest temporary agency, had formed in Detroit. By 1956, Manpower's reputation was established enough that franchising the company name became profitable. In order to set up a Manpower franchise, an investor paid an initial fee, attended a training course, and then set up an office. The franchisee was responsible for recruiting and placement, as well as paying a percentage of gross earnings to Manpower, while the company provided promotion and management guidance.

Under its founders' charge, Manpower expanded during the 1960s, establishing franchises all over the world, most prominently in Europe, but also in South America, Africa, and Asia. In 1965, Mitchell S. Fromstein, whose small advertising agency had been handling the Manpower account, joined its board of directors. Fromstein's role in the company's development grew as the company grew. Its acquisitions in the 1970s included Nationwide Income Tax Service, Detroit; Gilbert Lane Personnel, Inc. of Hartford, Connecticut; and Manpower Southampton Ltd., which had been one of its franchisees. All of these companies were later sold by Manpower.

In 1976, Parker Pen Co. acquired Manpower for $28.2 million. Like Manpower, Parker was a well-known, family-owned business that had begun in Wisconsin. Where Manpower had enjoyed a meteoric rise in the 1950s and 1960s, however, Parker's sales began faltering in the late 1970s due to its failure to compete with inexpensive writing implements in the marketplace. With Scheinfeld dead and Winter eager to pursue other personal interests, a buyout of all stock was initiated by Fromstein and Parker President George S. Parker. Fromstein bought 20 percent of Manpower's stock and moved up to the position of president and CEO.

When Manpower began, it initially concentrated its efforts on industrial help. Fromstein made changes in this and many other respects. Practicing a managerial style he says he learned from Vince Lombardi, the legendary coach of football's Green Bay Packers, for whom he once wrote speeches, Fromstein is considered responsible for virtually all of the growth and development that Manpower underwent in the 1980s. His innovative approach to the temporary industry included shifting emphasis from the factory to the office, recognizing that automated equipment was revolutionizing the way offices operated, and revising the company's Employment Outlook Survey. The survey, initiated in 1962 to measure the hiring intentions of employers and published quarterly, was revised with the assistance of the Survey Research Center of the University of Michigan. Understanding of and sensitivity to its clients needs became hallmarks of Manpower under the guidance of Fromstein.

Above all, it was Fromstein's commitment to take responsibility for training temporary employees, rather than merely finding places for them to work, which accounted for Manpower's dominance in the industry. In his Alternative Staffing Strategies, David Nye writes, "Manpower is by no means the only [temporary] firm involved in training and testing, but its approach is clearly the most extensive."

In 1978, when the prospect of a computer that would fit inside an office, let alone on top of a desk, seemed preposterous, Fromstein announced that Manpower would invest $15 million in a computer training program called Skillware. Nye quotes Fromstein: "The days when a secretary walking into a new office could just flip the 'on' button, roll in a fresh sheet of letterhead, and go are gone." An interactive, self-paced program, Skillware enabled Manpower employees to develop competence in a variety of tasks. This approach made temporary employees more valuable to companies because they required less onsite training and made a greater contribution to productivity in a shorter time. Since its inception, Skillware expanded tremendously and was available for 160 software programs in nine languages.

Spurring Growth in the 1980s

The complexion of the job market in the United States and abroad contributed greatly to the ascendancy of the temporary industry in the 1980s. Because the cost of providing benefits rose faster than the cost of providing wages, employers began to see that, even considering the percentage that had to be paid to the temporary agency, hiring on a temporary basis was more economical than searching for, hiring, and training permanent workers. It also proved to be an effective way of testing potential permanent workers. Furthermore, the increase in dual-income families increased the appeal of temporary work to parents faced with the high cost of daycare. The Bureau of Labor Statistics reported that temporary jobs accounted for one percent of the workforce in 1989, doubling the 1980 statistic. Under Fromstein, Manpower was positioned to capitalize on the situation more effectively than were its closest competitors, Kelly and Olsten Corporation. Total sales were at $300 million in 1976, the year he joined; by 1991 they reached $3.5 billion.

Manpower's rapid growth meant that it was drastically outpacing the pen sales at Parker. For a time, its profits made up for the pen company's losses, but by February 1986 the unbalance had become too great, despite Parker's efforts at reducing its workforce and cutting back on the varieties of pens manufactured. The writing instruments division was sold to a group of investors for $100 million, and Manpower became the name of the parent company.

In 1987, Manpower engaged in an important affiliation with International Business Machines Corporation (IBM). Under the agreement between the two companies, Manpower would provide onsite training and support services (such as a hotline for computer questions) to buyers of IBM systems. IBM benefited from having its users more fully acquainted with its systems, and Manpower benefited from the awareness among these users that its temporary workers were computer literate.

In the same year, Manpower was the target of a hostile takeover in what turned out to be a tangled and complex affair. In August, Antony Berry's Blue Arrow PLC, a British employment-services firm with revenues only one-sixth the size of Manpower's, offered to buy Manpower at $75 per share, for a total of $1.21 billion. Berry, well known in England from his days as a boxer, had terrific success with Blue Arrow since joining them in 1984, taking them from £410,000 (US$725,000) in profits to £30 million (US$55 million). Manpower stock had been at $62.375 at the time of the offer, but excitement over the bid drove the price up to $78, beating the $75 offered by Blue Arrow. In the weeks that followed, Fromstein and Manpower contemplated a return bid on Blue Arrow, considered a joint venture with the Swiss employment firm Adia S.A., threatened to refuse Blue Arrow unless they increased their bid to $90 per share, and publicly denounced Berry's plans for combining the companies, which included implementing an executive search program. This last suggestion infuriated Fromstein, who told the Wall Street Journal, "We aren't blind or deaf. If we thought it was an opportunity, we could have done it years ago." Manpower rejected the bid, prompting a shareholder lawsuit on charges that the directors' decision was financially irresponsible.

Three weeks after the initial offer was made, Manpower finally endorsed the Blue Arrow offer at $82.50 per share for a total of $1.3 billion. Under the terms of the sale, Manpower's operations in the United States would continue under the name "Manpower." Fromstein was allowed to stay on as Manpower president and CEO and one of a five-member Blue Arrow board, though by December 1987, he was fired from this position after a long simmering conflict with Berry became apparent.

Fromstein's separation from Manpower, however, was not long-lasting. In spite of his early successes, Berry proved to be an inept manager. His enthusiasm for sports led Blue Arrow into an expensive and unauthorized investment in a yacht for the America's Cup competition. The stock market crash of October 1987 brought Berry's most substantial impropriety to light. In order to create the funds necessary to purchase Manpower, Berry had secured a loan of $1.3 billion from the National Westminster Bank (NatWest) in England to be repaid from the proceeds of a stock issue. With the bank as underwriters, 38 percent of the shares were purchased by existing Blue Arrow shareholders, leaving the bank the responsibility of selling the rest. According to an article in Financial World, potential buyers might have been scared away had they learned of this situation, so NatWest itself purchased 12 percent in order to boost the amount of sold shares to 50 percent, a more respectable figure. Such a purchase was legal, but the underwriters kept it a secret, and once revealed, this was construed as a deliberate attempt to mislead potential investors. A criminal investigation was launched, and by January 1989, top executives at the bank--most notably its chairman, Lord Boardman--were forced to resign and Berry was disgraced on account of his role in the deal and other financial improprieties.

Backed by Manpower's U.S. franchises, Fromstein mounted a successful campaign to regain control of Blue Arrow. Once back at the helm, his first three decisions were to change the name of Blue Arrow to Manpower, sell all businesses that had belonged to Blue Arrow, and to move the company's headquarters back to Milwaukee.

Most Blue Arrow businesses were sold in 1990 and 1991 and the company became a U.S. corporation in 1991. As Manpower entered the 1990s, its major objectives were to continue its policy of staying current with technological advances in the workplace, and to further international expansion into previously inaccessible regions, most notably Eastern Europe.

Swelling Revenues in the 1990s

During the 1990s, Manpower succeeded in achieving much of what it set out to accomplish at the beginning of the decade. The company recorded robust financial growth, exponentially increasing its revenues as the global staffing services industry became one of the fastest-growing business sectors in the 1990s. Manpower's strident revenue growth, which lifted systemwide sales past the $10 billion mark by the decade's conclusion, was propelled by the company's ever increasing expansion rate, particularly overseas--a primary goal when the Fromstein-led concern entered the 1990s.

Significantly, the company's progress during the decade was achieved without the benefit of any major acquisitions. During the 1990s, there were few temporary staffing firms who could make such a claim. The industry was rapidly consolidating, as competitors merged to form global powerhouses, rapidly in pursuit of establishing a worldwide network of staffing offices. Nonetheless, by striking an independent pose, the company saw its lead over all worldwide rivals disappear. Manpower's relegation to the number two position in the world, caused by the 1997 merger of Adia SA and Ecco SA, was symbolic of the company's progress during the 1990s. Manpower took giant strides forward during the decade, but as it did so the pace of rival firms and the changing dynamics of the temporary staffing industry sometimes passed the company by.

Midway through the decade, Manpower's growth began to pick up speed. Coming off $4.3 billion in revenues and a record $83.9 million in net income in 1994, the company began establishing new offices at a frenetic pace, increasing the number of new offices it opened each year from 100 in 1994 to more than 400 by the late 1990s. The spate of new office openings brought Manpower into dozens of new markets, stretching from Milan to Moscow and spreading into Latin America, Asia, and South America. Important alliances were formed as the company fleshed out its global network of offices, highlighted by two partnerships forged in 1996. Manpower signed an exclusive arrangement with Drake Beam Morin Inc., the world's largest executive outplacement company, and formed an alliance with Ameritech to provide call center and help desk agents. Manpower's 50th anniversary marked 50 consecutive years of revenue growth, but during the celebratory year, Adia SA and Ecco SA merged, usurping Manpower as the global leader in its industry.

One year after the merger that created Adecco, Manpower reached an impressive financial milestone. Systemwide sales eclipsed $10 billion in 1998, representing a doubling of revenues during the previous five years, but the towering growth of revenues did not silence all of the company's critics. The emergence of Adecco as the new international leader in the industry prompted some industry pundits to cite Adecco's successes as Manpower's failures, specifically Fromstein's belated entry into the fastest-growing segment of the staffing industry, information technology. During the late 1990s, Adecco derived roughly 20 percent of its revenues from providing information technology temporary workers, nearly twice as much as Manpower collected. Manpower's perceived failure to assume a strong position in a market that was growing 25 percent each year led Forbes magazine's Phyllis Berman and Adrienne Sanders to suggest that Fromstein should step aside. Although it was doubtful the criticism of two pundits materially affected Fromstein's mindset, he did remark, "I'm putting pressure on myself to replace myself," as quoted in the January 11, 1999 issue of Forbes magazine.

Fromstein retired in 1999, making room for the promotion of Jeffrey Joerres to the posts of CEO and president. A Manpower executive since 1993, Joerres had been credited with spearheading the enormous growth of the company's global accounts, demonstrating a talent that would be instrumental in his efforts to shoulder past Adecco in the 21st century. As Manpower exited the 1990s, it was fast in pursuit of a greater presence in the information technology market. By 1999, the company had established more than 200 offices devoted exclusively to serving technical and information technology staffing needs.

Principal Subsidiaries: Signature Graphics--Milwaukee; Transpersonnel Inc.; Tri Country Business Services Inc.; US Caden Corp.

Manpower, Inc. History

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