Barrett Business Services Inc. is on a roll.
In the first quarter of this year, the Vancouver-based supplier of staffing and outsourced human resources services hauled in $111.6 million in net revenue. That’s up 35 percent, year over year.
For all of 2012, it raked in a profit of $13.1 million.
It added a net 198 clients in the January-to-March period — the largest of any quarter since the company’s inception.
Inside a conference room at the company’s headquarters in a leafy office park off Northeast Parkway Drive, President and CEO Michael Elich, 48, looks relaxed in a crisp white shirt with pinstripes (no tie) and black slacks. One moment, he sounds like a hard-charging chief executive. Another, he waxes philosophical, noting the importance of allowing your mind some room to get hold of things.
He exudes pride in the company’s most recent financial results.
But he remains focused on the path ahead. For him, a short-term success is wonderful. But it’s also another opportunity to ask a central question with long-term implications: Will we be better tomorrow than we were today?
It’s a question rooted in the company’s need to innovate, to pioneer where others might play it all too safe. That drive is baked into the company’s 48-year history.
Elich, who holds a bachelor’s degree in economic science from Montana State University, recently discussed with The Columbian everything from his sense of where the nation’s economy is headed to why a good, long walk is sometimes better than burying your brain in news.
His comments are edited for brevity and clarity.
The company added a net 198 clients in the first quarter of this year — the largest of any quarter in its history. What do you think that says about where you’re at right now?
When we went into the recession we said we can’t affect how large our clients are, but we can affect how many good businesses we can impact. By doing that we found that we matured in two areas: One (was our) organizational culture. Our bench got much stronger over the last five years. And two, just the penetration rate that we’ve had in the market. As we’ve reached larger concentrations in certain markets we’ve reached a certain brand tipping point.
What do you mean by “brand tipping point”?
If you’re doing business with five to 10 companies in a market, you’ll find that not many people know about you. If you’re now doing business with 50 to 100, your name starts getting around. When you’re in a local market, depending on how big the market is, and you have a concentration that is in excess of 100, 200 companies — and with a 95 percent-plus retention rate — business owners start talking to business owners, and therefore you become identified by what the market sees you as, not necessarily what you (tell the market you are).
During your most recent quarterly earnings report, you said you don’t see a double-dip recession in the U.S. Why?
A recession … occurs roughly every five to seven years, and (it’s) a shakeout of excess. Contrary to popular opinion, I still believe the way that we’re recovering is healthy. Consumers are starting to spend. Companies that are there to support (that) are continuing to now mature and grow and capture market share.
(The recession) shook out those companies that might not otherwise have been healthy enough to survive a downturn. With the contraction of the supply side of the market you have not seen a massive expansion. But demand is starting to catch up. Because it’s not any easier to run a business it’s created a niche for us, so companies that have made it through the recession (are now) optimizing how they operate, looking at their workforce, looking at how they (can) get more done with what they have. (They are) continuing to gain market share, which in a sense is a steady healthy recovery, and that’s what we’re continuing to see in our numbers.
Your stock price is flexing some muscle. At one point, it reached more than $60 per share. The low point of its 52-week range was $19.30. What does that tell you?
The shareholder (will) take care of the stock price. Our job as an organization is helping shareholders and the general market understand more clearly what it is we’re doing and, as they understand it, they make their own decisions. They buy the stock, and that’s what makes the prices go up. Where being publicly traded has really added to our advantage is that we’re very tight. From a fiscal standpoint, if people get in and really start looking at who we are (and) what we’re about, we’re just getting started. And we’ve got a lot of runway ahead of us. When I go out and visit with our shareholders they ask very good questions. And rather than run from it, I think we embrace that, and by doing that we’re forced to have to look deeper every day and try to figure out how to be better tomorrow than we are today.
The proxy war the company fought with Kimberly Sherertz (widow of former Barrett Business Services Chairman and CEO William Sherertz) was intense. What did you learn from it?
(A) gentleman who worked for us in our Southern California operation — he was a Navy SEAL — I remember visiting with him right during the time I took over, and he shared with me that the Navy SEALs say “Today is your easiest day.” I could understand the words, but I didn’t understand the essence of what he was really trying to tell me, and after the proxy fight I began to understand that today is your easiest day. And where I really understand is when it was over in March (2012), and we kind of were starting to move past it, and I look back and everybody is ringing the bell, and everybody’s happy that we can now move forward. And I’m going, “No, now we’ve got another mountain to climb.” It didn’t really end or begin anything. It was more of the hard work that we have to do every day. I think it gave me the drive to recognize that you can never let up and that’s a little bit of a culture that we drive here.
What challenges, whether economic or regulatory, do you worry about and how do you deal with them?
In general, you always hear the rumbling and the whispers before you really hear the noise, and I think that the way we lead is to be able to make sure that we have enough runway out in front of us. If we can maintain a year-to-18-month runway we feel that we can adapt to most headwinds. You have to be adaptive to change, you have to be nimble and you have to be able to continue to see opportunity in what change there is, especially if you see a macro change.
A macro change would be the Affordable Care Act (federal health care reform). There are companies that will run into that and have it as a true obstacle. And there will be companies that will go out of business because of it. There are other companies that will capitalize on it and look at their workforce and maybe have a different perspective and maybe create a market advantage for themselves against the competition. (Big challenges) start off as micro noise, and if you learn how to listen to that and hear it you’ll adapt, and that’s where great companies are built.
What are you reading these days? How do you stay plugged in?I probably stay plugged in more so from a macro perspective, and then I read things that help me to understand maybe the philosophy of different ways to look at things. You take books like “Good to Great” (by Jim Collins, co-author of “Built to Last”). It’s a great tool, and it’s a great philosophy around how to look at your organization. The Wall Street Journal is a quick read … I can look at the world pretty quick.
(But) I think you’ve got to be very careful, especially with as much information that’s out there today, and you can (end up with) paralysis through analysis. So I think there’s just as much value in taking a quiet walk and letting everything that you have over the years settle in and be able to gain perspective on what you’re seeing. Because at the end of the day, things are not as complicated as we tend to make them.
Firm’s evolution key to longevity, success
Barrett Business Services is a pioneer of “professional employer organization” services. Under that system, Barrett becomes a co-employer of a client’s workforce, handling human resources responsibilities, including workers’ compensation claims.
The Vancouver-based company has 57 offices in 10 states and conducts business in 23 states.
Its clients include electronics manufacturers, light-industrial companies, forest products and agriculture-based businesses, transportation and shipping enterprises, and food processing and telecommunications companies.
As the economy has evolved, so has Barrett. About seven years ago, roughly 50 percent “of our business concentrated around construction,” said Barrett President and CEO Michael Elich. “Today, it’s less than 2 percent.”
Nowadays, the company looks to “expand more laterally,” said Elich, “where we’re adding businesses that give us more diversification.”
It’s a smart move and reflective of the company’s longevity. Not that it hasn’t had its challenges. The company fought a proxy war, launched in late 2011 by Kimberly Sherertz, widow of former Barrett Business Services Chairman and CEO William Sherertz who died unexpectedly in January 2011.
While she expressed support for Elich and the company’s branch managers, Sherertz, representative of her late husband’s estate, wanted to remove all but one of the company’s board members. The proxy war ended in March 2012, when the company reached an agreement to buy about 2.5 million shares from the estate in a deal valued at nearly $60 million.
Elich served as executive vice president and chief operating officer of Skills Resource Training Center, a staffing services company acquired by Barrett in 2004. After six years as Barrett’s chief operating officer, Elich was made president and CEO, and was elected to the company’s board, in 2011.