Robert Half International Inc. History

Address:

2884 Sand Hill Road
Menlo Park, California 94025
U.S.A.

Telephone: (415) 854-9700
Fax: (415) 954-9735

Public Company
Incorporated: 1948 as Robert Half Inc.
Employees: 182,300
Sales: $2 billion (2004)
Stock Exchanges: New York
Ticker Symbol: RHI
NAIC: 541612 Human Resources and Executive Search Consulting Services; 561310 Employment Placement Agencies

Company Perspectives:

As the pioneer and leader in temporary and permanent professional staffing for nearly 50 years, we have remained committed to providing service beyond the expectations of our clients and job candidates, and to becoming a strategic staffing partner to our customers.

Key Dates:

1948:: Accountemps and Robert Half Finance & Accounting are established.
1985:: More than 150 Robert Half and Accountemps franchises are operating independently in the United States.
1987:: Company goes public.
1989:: Company begins opening new offices in response to temporary-staffing industry boom.
1990:: Recession hits, slashing RHI's growth.
1991:: Robert Half and Accountemps offices merge to cut costs; company acquires The Affiliates, renaming it Robert Half Legal.
1993:: Company expands operations to Europe.
1999:: Continuing strong economy taxes RHI's ability to place job candidates; stock price drops by half; company is revamped to meet changing market conditions.
2001:: Stock value jumps to three times its 1999 low.
2002:: Protiviti is founded.
2003:: Company completes its franchise buyback program.

Company History:

Robert Half International Inc. (RHI) is a leading provider of temporary, full-time, and contract employees, and is the oldest and largest specialist company placing accounting, finance, and information technology professionals. RHI operates seven divisions and one subsidiary. Accountemps places accountants and other financial professionals in temporary positions; Robert Half Finance & Accounting provides permanent, full-time personnel in the fields of accounting, banking, and finance; Robert Half Technology supplies contract information technology professionals; OfficeTeam specializes in high-end temporary administrative personnel; Robert Half Legal supplies attorneys, paralegals, and legal support personnel for temporary, project, and full-time positions; Robert Half Management Resources provides accounting, banking, and finance professionals on a project basis; and The Creative Group provides creative, advertising, marketing, and Web design professionals on a freelance basis. The subsidiary Protiviti specializes in independent internal audit and business and technology risk consulting. At the end of 2004, RHI had more than 330 offices in 43 states, the District of Columbia, Belgium, Canada, the Czech Republic, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Singapore, and the United Kingdom. Revenues for 2004 totaled $2 billion.

Origins

Robert Half was a pioneer in the employment services industry, founding Robert Half Inc. in 1948 as an employment agency for accountants. He eventually created Accountemps to supply accountants and other financial professionals to firms needing those skills on a temporary basis, while continuing to place permanent employees through his Robert Half offices. Following the success of his business in California, Half began franchising the concept around the country. The temporary personnel industry grew slowly during the 1960s and 1970s, then began to expand rapidly during the 1980s. By 1985, there were 150 independent Robert Half and Accountemps franchises.

The second half of the decade saw major changes in the company. In 1985 Harold M. "Max" Messmer, Jr., assumed the presidency of Robert Half Inc. In July 1986, Boothe Financial Corporation acquired all the outstanding stock of the company and Messmer almost immediately began a program to buy all the franchises in the Robert Half system. In 1987, after being divested by Boothe, Robert Half International Inc. went public, and Messmer became chief executive officer as well as president. The following year, he became chairman of the board.

During 1989, the company began opening new offices, and Gibbons, Breen, Van Amerongen, L.P., a merchant banking concern, bought 3.1 million shares of the company's stock, approximately 27 percent of the outstanding common shares. As the decade ended, RHI had revenues of $234.5 million, a 29 percent increase from 1988.

The temporary staffing industry experienced double-digit expansion during the 1980s, and many people believed temporary employment firms would survive any national recession. As a result of rapid consolidation, the number of larger, national firms increased, and competition for contracts was intense. This led to a price war which began in the general clerical segment of the industry but soon spread to the specialized areas such as accounting.

Recession and Recovery in the Early 1990s

In 1990, RHI's concentration on accounting and financial temporary placements helped avoid much of the price war, and the company could afford to acquire Wayne S. Mello & Associates, a financial recruiting firm in Florida. Robert Half, the permanent placement operations, reached a peak in its revenues of $450 million. However the employment recession which began that year did have an effect on the company, with revenues growing by only 9 percent, a big drop from 1989.

In a normal year, Robert Half's permanent placement activity accounted for 15 to 20 percent of the company's total revenues. This meant that RHI was more dependent on permanent placements than most temporary staffing firms, and as the demand for permanent employees fell as a result of corporate downsizing and restructuring, RHI's business began to weaken.

Management's reaction to the situation was a "go slow" strategy. They reduced overhead, cut and focused the advertising budget, and improved cash management. The poor economy also made it easier for the company to acquire Robert Half and Accountemps franchises, which were suffering, and to buy a Seattle-based temporary employment firm, which placed accounting and data-processing employees.

Management also decided the time was right to test a move away from their traditional financial placements. Late in 1991 they started a new division, OfficeTeam, placing temporary high-end, office administrative personnel. This start-up business was in response to requests from longtime clients for help when they needed temporary employees with administrative, word processing, and office management skills. To keep overhead low, RHI placed an OfficeTeam salesperson in a few Accountemps offices. That year the new division brought in $2 million in revenues. That was a bright spot in a year in which revenues dropped by 16 percent and earnings per share by more than 50 percent.

In 1992, its second year, OfficeTeam revenues increased to $12 million, and accounted for nearly 5 percent of the company's total bookings. The permanent placement business, however, brought in only $22 million, less than half the amount it generated in 1990. The company responded by merging most Robert Half offices with Accountemps facilities or combining satellite offices into a single hub office to serve an area.

Company revenues began to turn up towards the end of 1992 as employers felt confident enough to add temporary employees to their workforces. Having expanded into administrative placements through OfficeTeam, the company decided to explore making placements in the legal field, and acquired The Affiliates, a firm in Southern California that placed temporary and permanent paralegal, legal administrative, and other legal support personnel.

During 1993, RHI expanded to the East Coast with the purchase of Key Financial, a Washington, D.C., firm that placed accountants, and opened offices in France, Belgium, and the United Kingdom. The company also completed placing an OfficeTeam salesperson in each of its 135 domestic offices. The temporary administrative placement service had turned into a very successful undertaking as it brought in nearly $41 million that year, more than 13 percent of total revenue. RHI found it had little competition in this area from the national giants such as Kelly or Manpower since most OfficeTeam placements were with longstanding clients who needed only a few workers at a time. Company revenues for the year reached $306.2 million.

Total employment in the United States began to grow in the last half of 1993 and RHI's permanent placement business finally started to improve as a result. As the economy strengthened and corporate downsizing and restructuring slowed, the temporary staffing industry found itself thriving. Employers wanted the flexibility to respond quickly to changing market conditions and to avoid overstaffing. Where traditionally employers hired temporary workers primarily to fill in during busy periods, now there was a growing demand for professionals with skills not usually associated with temporary work--home health care, prison management, scientists, and technicians.

New Directions in the Mid-1990s

RHI responded to the demand for additional specialized placements by creating RHI Consulting, a new division providing systems analysts, computer engineers, and other information technology specialists to clients on a contract basis. Specialized staffing in the IT area became very popular among temporary employee firms during the mid-90s. Not only was the demand there, but the assignments were for longer durations than many other types of placements and, perhaps most importantly, the margins were higher.

As RHI was branching into other areas, it continued to pull together its core business. By March 1994, the company had acquired all but four of the original 150 Robert Half and Accountemps franchises. According to a Kidder Peabody analyst's report that month, "Management believed that centralized ownership would help reduce costs, aid the funding and implementation of advanced data processing systems, and bring more sophisticated marketing, accounting and legal practices to former stand-alone operations." The company completed its franchise buyback in 2003.

The temporary help industry continued its explosive growth. According to the National Association of Temporary Staffing Services (NATSS), in 1995, 2.16 million people worked as temporary employees each day, up from 185,000 in 1970. They represented 1.78 percent of total employment, holding one out of every 56 jobs, compared to one out of every 100 jobs in 1990 and one out of every 384 jobs in 1970.

Furthermore, NATSS estimated that nearly a quarter (24.2 percent) of the total temporary personnel payroll was made up of specialized professionals, including accountants and information technology specialists. The industry itself generated $39.2 billion in 1995, almost twice as much as it had five years before, when receipts were $20.5 billion.

For RHI, 1995 was an outstanding year. Revenues increased by 41 percent to $628.5 million, all through internal growth. OfficeTeam had revenues of $147 million, and the two-year old RHI Consulting brought in $39 million through its 38 locations. The company was ranked 18th among all NYSE companies based on total return to investors for the 1993 to 1995 period.

The industry credited its growth to several factors, benefiting both employers and employees. The primary advantage to both parties was greater flexibility. Employers were able to manage their workflow and workforce more effectively by using temporary help to complete special projects, fill short-term vacancies, and avoid overstaffing. For the employees themselves, taking temporary assignments afforded, according to Edward Lenz, "flexibility, independence, supplemental income, skills training, "safety-net' protection while between permanent jobs, and the opportunity to find permanent work." RHI also offered its temporary employees a competitive benefit package.

In addition to its employment activities, RHI was a recognized research authority. Its annual national and regional salary guides were used by the U.S. Department of Labor in the preparation of the Occupational Outlook Handbook, and the company's accounting and information technology Hiring Indexes provided important hiring projections. A variety of surveys kept executives, managers, and temporary employees informed about issues as diverse as why companies hire temporary help to the length of the average executive's workday.

Both Max Messmer and the company's founder, Robert Half, published books and articles on hiring and job search practices. Half's books included The Right Way to Get Hired in Today's Job Market, Making It Big in Data Processing, How to Get a Better Job in This Crazy World, and Finding, Hiring and Keeping the Best Employees. In 1995, Messmer wrote Job Hunting for Dummies, part of the ... For Dummies series published by IDG Books. He also wrote 50 Ways to Get Hired and Staffing Europe.

The company's reputation also was enhanced by endorsements from leading professional associations, including the American Payroll Association, the National Association of Credit Management, the American Institute of Professional Bookkeepers, and Professional Secretaries International. It also had worldwide marketing alliances with major accounting and word processing software publishers and major CPA review course companies.

Business continued to be good for the company through 1996. It had a two-for-one stock split and reported record revenues of nearly $900 million and income of over $61 million.

The temporary staffing industry was a growing segment of the economy. But with some 7,000 firms supplying their clients with temporary help, big national or international companies had the edge. As CEO Messmer explained in a 1996 Barron's article, "Smaller outfits don't have the clout to attract professionals--accountants, medical workers, technicians, programmers--who can deliver the highest margins for the temp company, because the smaller firms don't offer jobs across the country."

In just over ten years, Robert Half International had grown from a small franchiser to a leading international company in this market. It had created successful specialized niches that connected with its longtime core business of accounting and financial placements, and had paid for its expansion through internal growth. The demand for accountants and auditors remained high; the Bureau of Labor Statistics projected a 32 percent increase in those jobs over the next decade. The number of computer and information technology jobs was expected to double over the same period, many of which could be expected to be filled by contract staffers. All of these factors made the future look good for RHI.

A Downturn and a Comeback in the 2000s

In 1999, however, a continued strong economy and record low unemployment rates slowed the company's growth after nearly a decade of steadily rising revenues. Robert Half's placement services had difficulty finding people to fill their clients' open jobs. Although revenues increased by 16 percent and profits rose 7 percent, the value of the company's stock dropped by a full 50 percent. Standard & Poor's 500 companies averaged 15 percent growth during the 1990s, but Robert Half averaged about 38 percent growth, more than twice the rate of the S & P 500, and wary investors reacted swiftly to the company's sharp slowdown. "We were too slow to see it coming," CEO Max Messmer told Victoria Murphy of Forbes, adding "It was embarrassing to tell (clients) we had no one to fill their empty spots."

Messmer made up for lost time by switching his company's focus away from getting new clients to finding job candidates to meet clients' needs. The ratio of spending in its placement divisions had traditionally been $40 million for marketing to $20 million for recruiting. Messmer reversed the proportions, hired 400 new recruiters, and began paying cash incentives of up to 33 percent of recruiter bonuses based on number of hires made. He also made significant changes in the company's approach to doing business, placing job postings on the Internet career site Monster.com and investing $44 million to improve communication networks between branch offices and give all employees computers and Internet access. To improve employee retention in the tight job market, Robert Half offered stock options with a short vesting period and established Web sites where temps could check payroll and look for work. By 2001, investors appeased by the success of the new direction tripled RHI's stock value from its 1999 low.

Messmer also began to diversify and reorganize along new lines to meet the demands of a rapidly-changing marketplace. As of 1992, Accountemps and Robert Half Finance & Accounting drew 90 percent of the company's revenues. In the late 1990s Robert Half Technology expanded the company's services to provide information technology professionals, and Robert Half Legal extended the business to provide temporary, project, and full-time attorneys, paralegals, and legal support personnel. The Creative Group was formed to supply creative, advertising, marketing, and Web design professionals on a freelance basis. Following the Enron and WorldCom accounting scandals of 2001 and 2002, the company hired 760 former members of the consulting and risk-management practice of the accounting firm Arthur Andersen, which was devastated by convictions for obstruction of justice in the Enron case and stripped of its U.S. accounting license. With these new employees Robert Half founded the subsidiary Protiviti, an independent internal audit and risk management consulting practice. The new venture broke even in 2003, earning $133 million, 7 percent of Robert Half's revenues during the year. This accomplishment placed Protiviti just behind the Big Four accounting firms Ernst & Young, Deloitte & Touche, KPMG, and PricewaterhouseCoopers. By the end of 2002 a full 50 percent of the company's $1.9 billion revenues derived from new divisions and Protiviti, which had not existed a decade before.

Legislation resulting from the Enron and WorldCom scandals provided another new avenue of business for the company. The Sarbanes-Oxley Act, signed into law July 30, 2002, ordered fundamental changes in accounting practices for all publicly-traded corporations doing business in the United States in order to prevent the sorts of abuses that brought about the downfall of a number of large corporations around the turn of the 21st century. Compliance with the act required the intensive work of highly-skilled professionals in a number of disciplines, many of whom had to be independent of the corporations for which they did Sarbanes-Oxley-mandated work. By the end of the third quarter of 2004, Sarbanes-Oxley compliance work accounted for 15 to 20 percent of Robert Half's consolidated revenues for the year. Although the deadline for compliance fell on December 31, 2004, the company expected that the tighter controls and testing regimens mandated by the act would result in a continued need for more accounting professionals. In addition, the New York Stock Exchange began requiring all companies trading on its board to have an internal audit function. Some companies traded on the NASDAQ voluntarily instituted internal audits, as well, all of which was expected to provide Robert Half with a steady growth in client base and revenues into the future.

Principal Subsidiaries: Protiviti.

Principal Divisions: Accountemps; The Creative Group; OfficeTeam; Robert Half Finance & Accounting; Robert Half Legal; Robert Half Management Resources; Robert Half Technology.

Robert Half International Inc. History

Company Perspectives:

Key Dates:

Company History:

Further Reading:

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