ServiceMaster Industries Inc.`s one-time janitors have made the move into operating rooms, classrooms and even boardrooms.
The Downers Grove-based company, ranked the most profitable management service company in 1985 by a Forbes Magazine survey, has made a clean sweep of its competition. But maintaining its recent growth levels may not be easy.
Founded in the 1950s by Marion E. Wade, a Baptist; Robert L. Winger, a Roman Catholic; and Ken Hansen, a Presbyterian, the company has adhered to its literal philosophy ”service to the Master” and has gone from a $100 million company in 1974 to $1 billion in 1985.
ServiceMaster began as a rug and furniture cleaning service for homes and offices. Its hands are in housekeeping, laundry and linen, plant and operation maintenance, clinical equipment, materials management, food service management and hospital-based home health care.
Though some in and outside the service industry may view ServiceMaster as the company that cleans, Chairman Kenneth T. Wessner and President and Chief Executive C. William Pollard said the company is a management service.
”Our business today has more balance and greater clarity as a management support service,” said Pollard. ”Our product is service and our greatest component is people.”
”What we`re able to do is come into a school, a hospital or an industrial setting and supervise and perform jobs at a lesser cost than they would be able to do it themselves,” Wessner said.
Hospitals comprise a bit more than 70 percent of ServiceMaster`s market, with schools and corporations making up the remaining 30 percent.
Though the company is best known for its work in health care facilities, ServiceMaster did not sign its first hospital, Lutheran General in Park Ridge, until 1962. The agreement marked the company`s entrance into the health care business, which soon surpassed general cleaning work as ServiceMaster`s focus. ”Ken (Wessner) got the first hospital contract in the `60s and we`ve had the hospital market since that time,” said Pollard. ”He had the vision to pursue this market.”
ServiceMaster serves more than 1,500 hospitals nationwide, including two large hospital systems–Voluntary Hospitals of America and American HealthCare Systems.
”What we provide ultimately results in better patient care in hospitals, better educational standards in schools and better support services in industrial settings,” Pollard said.
Wessner, 64, has been with ServiceMaster for nearly 30 years.
”I got my share of raw knuckles knocking on doors in trying to win hospitals over to our way of thinking in the beginning,” he said.
”Hospitals resisted the idea of having us come in because they felt it would be a reflection on their management or lack of management
capabilities,” he said. ”Those that came on board realized it was more cost- efficient to do so and really a good reflection on them.”
Hospitals never have specialized in the things ServiceMaster does best, Pollard said.
”We`re there to help the hospitals and their staffs perform their jobs to the best of their abilities,” he said. ”As a management service in hospitals, we`re there to take care of every part of the business that doesn`t have to do with doctoring and caring.”
Hospitals contract the company to provide services in laundry, housekeeping, maintaining equipment, ordering medical supplies and food preparation.
Since entering health care more than 20 years ago, ServiceMaster has gone through the rapid industry changes.
”The transition phase of hospitals has also had an effect on our business,” said Pollard, 48. ”We`ve taken the good with the bad.”
”Some hospitals have seen fit to cut back on using our services when they`ve had to close wings because of fewer patients and shorter hospital stays,” said Wessner. ”But we`ve had success in renewing the majority of our contracts and seen the start of newer ones despite downsizing and reduction in services.”
John Larson, a service company analyst with Blunt, Ellis and Loewi Inc. said the health care changes have stifled the rapid growth to which ServiceMaster has grown accustomed.
”It`s hard to say anything bad about them but they are not growing at the rate they once were because of changes in health care,” he said.
The company`s stock has been trading in the $22 to $23 range. Its common stock is traded in the Nasdaq over-the-counter market as SMAS.
”Some investors may be disappointed that the company`s growth is below its historical standards, but the company is a good performer and well managed,” he said.
”There really isn`t another company that does what they do. They are in a class all their own.”
Pollard said the health care changes provide more opportunities for the company and noted its advances in home health care management and a joint agreement between ServiceMaster and American Physicians Service Group Inc.
ServiceMaster signed an agreement in April to market and promote the service group`s products and services to hospital-physician networks across the country. The group, based in Austin, Tex., is divided into automated office systems, financial services and practice management services. The group serves more than 17,500 physicians and dentists in 40 states.
Pollard said the joint effort maximizes the strengths of both organizations for the benefit of hospital and physician customers.
ServiceMaster has polished some of its services and introduced others.
In 1985, the company unveiled a more accurate method of evaluating and delivering housekeeping services, called Inteflex, an automated food management system for menu planning and purchasing. The company also developed a computerized energy control system called SABER to reduce energy usage and costs.
”We`re making ourselves more attractive by expanding our services and broadening our market,” said Pollard.
Pollard and Wessner said ServiceMaster`s biggest competition is with companies, schools or hospitals that do the job themselves.
”We try to convince them that they may be getting away from their objectives of care or education by doing it themselves,” said Wessner.
ServiceMaster`s objectives are: To honor God in all we do. To help people develop. To pursue excellence. To grow profitably.
”Our corporate objectives are very much a part of us,” said Wessner.
The company`s objectives have more of a spiritual ring than a corporate one. Pollard said the first two objectives define goals and the last two present means of reaching those goals.
”We really do what the name of our company suggests, service to the Master,” he said. ”It`s part of us and the jobs we do. Our company cannot grow if the people in our company are not able to grow in every way.
”We`re a company of people. We recognize every person in the true image of God. Every person is different,” Pollard said. ”The people here are more than a production unit and should be growing spiritually and mentally.”
”This is the standard we seek in the company, and it goes back to the founders,” Wessner said. ”It shouldn`t be an abnormal thing to do but a normal thing to do in and outside of work.”
Wessner said proof of the company`s involvement with its employees lies in the fact that ServiceMaster has a relatively low turnover in management.
”The average age of the ServiceMaster manager is 44 and the average length of time with the company is 16 years,” he said.
ServiceMaster`s way of doing business also has caught the attention of academia.
Pollard said Harvard University`s graduate school on intergovernment is using ServiceMaster as a case study on value systems.
Judging from ServiceMaster`s books, the company knows the value of the dollar. ServiceMaster has a five-year return on equity of 43.1 percent and exceeded its five-year figure in 1984 and 1985 with no long-term debt.
The company surpassed the $1-billion revenue mark in 1985 and is using a 20-year plan to become a $2 billion company by the year 2000.
Annualized revenue from all management services on June 30, 1986, was $1.1 billion, a 12 percent increase from $1 billion a year ago, Pollard said. For the three quarters ended June 30, ServiceMaster reported an increase in its second quarter earnings and told shareholders to expect a regular quarterly dividend of 22 cents a share payable Oct. 31, 1986, to stockholders of record Oct. 5.
Net income for the most recent quarter increased 3 percent to $8.4 million, compared with $8.1 million a year ago. Earnings per share increased 4 percent to 26 cents a share, compared to 25 cents last year. Operating revenue for the quarter increased 21 percent to $275 million, compared to $245 million a year ago.
Wessner said the company has charted its growth from a medium-size firm to a larger one with its extended growth plan called SMIXX (ServiceMaster Industries 20). The plan, which began in 1980, examines potential new businesses and markets.
ServiceMaster has more than 1,300 locations worldwide and serves residential and small business customers through more than 3,000 independent franchised licensees in the U.S., Canada, Japan and England.
A spokesman said most franchisees specialize in housekeeping and lawn care services.
The company`s wholly owned subsidiaries include ServiceMaster International Ltd., Village Green Lawn Spraying Ltd., Seaboard Energy Systems Inc., ServiceMaster Operations AG in Switzerland, ServiceMaster Ltd. in England and ServiceMaster Investment Co.
The company manages nine health care facilities in Jordan and has 15 in Japan.
