When Peter T. Dameris joined On Assignment in November 2003 the staffing firm had $180 million in revenues and some structural problems that needed fixing. As a practical entrepreneur with an eye for opportunity, Dameris improved the execution of the business, grew the revenues to $620 million in 2008, and broadened the array of services the company provides. Strategic acquisitions have allowed the company to enter into the field of IT, engineering and physician staffing, in addition to its previous core offerings in the life sciences and nursing fields. Serving clients that include some of the top pharmaceutical and biotech companies in the world, On Assignment’s more than 1,200 recruiters and sales personnel are focused on providing hard to find, mission critical, value added skills in the math and science arena, through relationships with coveted physicians, scientists, engineers and other professionals that are not discoverable on job boards like Monster or CareerBuilder, according to Dameris. “The greatest opportunity in the human capital space is really professional staffing and in my opinion math and science skills,” he said. “I think we have an incredible opportunity ahead of us because our economy is continuing to be dependent on these skill sets.” Although the company contracted during the downturn, On Assignment is now growing as the labor markets begin their recovery. Having outgrown their current space, the company leased a new building in Calabasas where they will relocate their headquarters next spring. The firm’s strategy is to reach a billion dollars in revenue by 2015 mostly through organic growth with $250 million added through selective strategic acquisitions. Question: How did you come to On Assignment? Answer: I was looking for a business investment opportunity, and I called on On Assignment. The business wasn’t capable of being taken private, but they asked me to come in and make some improvements to the business, so I agreed to do so. In July of 2004 I moved from Houston to California and everything else is history. Q: Tell me about your background? A: I’m an entrepreneur. I went to law school, I practiced mergers and acquisitions for ten years and one of my clients was an industry leader in the staffing industry and I helped him sell his first business. He called me six years after the sale and said ‘I’m going to start a new business will you help me raise the money and come join me?’, so I did. In 1993 we got $28 million of private equity money and we started a business and went from zero revenues to $1.5 billion in a period of seven years. I worked my way from general counsel to head of M&A to head of European operations, to CEO, to CEO and chairman of the board. I enjoyed building teams and growing businesses. We sold that business [Metamor] in March of 2000. Then I was living in Houston and I sat on the board of another public company with a gentleman who had started Quanta Services and he asked me to come in and be his chief operating officer. I did that for a while but I was more accustomed to working with a workforce that were IT programmers, engineers, healthcare professionals and I also saw the cyclical upturn occurring again in the labor markets so I decided in 2003 that I wanted to get back into the staffing industry. Q: What were some of the changes you made when you took over in 2003? A: When I came in, the business had a well positioned focused on math and science skills but it had lost some of its operational excellence so I came in and fixed what was wrong, I re-built the management team and hired a number of seasoned staffing executives and field personnel. And doing all of that, and simultaneously having the labor markets commence a recovery in 2004, permitted us to grow 20 percent. So it wasn’t a business model issue, it was an execution model issue. And we fixed the execution issues. Q: Tell me about that recovery of the labor markets in 2004. A: Very much like what we have now, after the Internet bubble and 9/11 we had a very difficult economic environment in 2002 and 2003 and there were many people that were laid off. But the economy got back on its feet, people started to invest in technology again, people started to look at growing their businesses and that required labor. In 2007 white collar unemployment was 2.2 percent; you had virtual full employment with anybody with a college degree or above. Today you have the exact opposite. Q: What lessons did you learn that you’re applying during this downturn? A: Capitalization matters, you have to be able to withstand the storm. Typically the storm lasts 18 months, this go around – as the staffing industry is concerned – we’re really going on 28 months of difficult times. And if you look at reports by the bureau of labor statistics the only job growth right now is temporary labor. During the downturn the staffing industry as a whole lost about 905,000 jobs in North America and we’ve only recaptured about 450,000 of them so there’s still a lot of room to grow just to get back to the previous cyclical peak. And on top of that, the staffing industry finds itself with an incredible secular trend opportunity. Q: What is that secular trend? A: When you look at socialistic countries like Germany or France or the United Kingdom because of legislation regarding labor, you have temp penetration in the 4-5 percent range, where temporary employees are 4-5 percent of the total workforce. We’re starting to see that same phenomenon here in the United States as it becomes more expensive to have full-time employees. Employers are trying to make that a variable cost versus a fixed cost. So as an industry we believe that we’re going to see contract labor grow beyond its previous peaks. Q: What are some of the larger implications of this trend? A: There are all sorts of social and economic issues that impact this trend. It could potentially elongate people’s work lives because people may elect to work part time in a temporary assignment. Many people do. The classic physician that works with us is over 55 years old, their children are out of the house, they’ve put enough away where they feel relatively confident and secure in their retirement and they want to engage in the purest form of patient care there is which is just seeing patients. They don’t want to run an office, they don’t want to worry about an employee not showing up, they don’t want to negotiate with the insurance companies over reimbursements, they don’t want to have to worry about malpractice insurance, so they give up all those administrative burdens and all they deal with is ‘I go to this hospital and I see patients’. That’s a lifestyle decision that’s causing someone maybe to work a little bit longer, and they may only do it for 8 weeks and then take two months off and then do it for another 8 weeks. Q: What’s the state of the staffing industry? A: The staffing industry is cyclical, people like to say the staffing industry leads the labor markets into a recession and leads the labor markets out of a recession and I think that’s what you’re seeing right now, with the only type of true job growth being temporary labor right now. Q: How has the company grown? A: In 2006 after we stabilized the business and re-established our credibility with Wall Street we raised about $85 million to go prefund an acquisition program and in 2007 we bought two large companies. We bought a company called Oxford Global Resources, it had done about $108 million in revenue, and we bought a company out of Salt Lake City called Vista Staffing that had done about $60 million in revenue. In 2007 we did about $560 million in revenue and in 2008 we did $620 million. In 2009 we did about $420 so very much in line with how the labor markets performed, we shrunk about 30 percent. But we focused on what was within our control which was to maintain as many of our quality people as possible. We were one of the few staffing companies that didn’t take any restructuring charges, we managed to grow our gross margins and we dramatically improved our capitalization and paid our debt down by about 40 percent. And now we stand here in 2010 and we’re growing very nicely. Today our margins are over 35 percent. We’re not a bulk seller of human capital we focus on the most value added, hardest to find skill sets and that’s what distinguishes us from other staffing companies. Q: What are the areas that are growing within On Assignment? A: Right now our IT and life science businesses are growing 40 and 25 percent respectively and our healthcare businesses are flat. On the IT side, especially what we’re seeing is that a lot of projects that should have been performed in 2009 got postponed because people were afraid they were going to run out of money. Most corporations today aren’t afraid of running out of money, they may be afraid of their revenues not growing fast enough but they are generating profits and cash and to the extent that they’ve identified an IT project that has a strong return on investment analysis to it, they are releasing those projects now. So we are seeing a big pick up in demand for IT professionals. On the life sciences side, that had gotten severely impacted by the lack of funding for start-up biotechs, a lot of the pharmaceutical companies were trying to preserve their cash flows, but now people are beyond that and they are trying to replenish their discovery pipelines and we’re seeing a pick up in demand there too. Q: You would think that healthcare would be growing too, why has that side remained flat? A: It doesn’t make sense for the average person when they look at it. It’s undeniable that we have an aging baby boomer population, it’s undeniable that people are living longer but then when you look at how that is being applied to current economic circumstances, it’s unique. For example, many people are medicating instead of operating, people are not having elective surgeries, so instead of getting your knee fixed they’re taking two more Advil. Hospitals are getting away with 120 percent utilization of their existing workforce, nurses especially. The hospitals are getting more coverage with fewer nurses, which basically eliminates the need for any sort of contingent labor. The oddity is on the physicians’ side, there’s been relatively flat demand as well and that really doesn’t make much sense because in order to generate revenues a hospital has to have physicians because without a physician you can’t have a visitation or an admission. But physicians are postponing their retirements, physicians are willing to work full time for certain hospital systems that they previously wouldn’t have considered and that too is affecting contingent labor. These are all temporary phenomenon but they are real and here now, but they’ll end soon. Q: Why was the purchase of Oxford a strategic acquisition? A: We’re focused on providing hard to find, mission critical, value added skills in the math and science arena. Before I arrived at On Assignment I built and ran a public company called Metamore Worldwide, it had about $1.5 billion in revenue and it was exclusively in the IT services space so I was familiar with that space. I sold that business in March of 2000 for $1.9 billion and then I went over to Quanta which was an engineering company. So I was familiar with the IT world and I was looking for a very large end market that had a big large annual spend, and IT has a bigger spend than healthcare has combined. I was familiar with it and we found a world class company, Oxford Global Resources. Q: What challenges are you facing? A: There’s still a pretty significant shortage of qualified skills in some of the places that we spend our time, IT and physicians for sure, nurses are pretty discoverable these days. If we’re looking for a PHD to do a medical writing project for a federal FDA trial submission, we still spend the majority of our time trying to identify and locate qualified resources to place at our customer’s assignments. Peter T. Dameris Title: President and Chief Executive Officer Company: On Assignment, Inc., Calabasas Age: 50 Education: University of Texas School of Law Personal: Married with three kids
The Human Capitalist
