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MANAGEMENT SERVICES

This category covers establishments primarily engaged in furnishing general or specialized management services on a day-to-day basis and on a contract or fee basis. Establishments in this industry do not provide operating staff. Management and operation of a business, where operating staff as well as management is provided, is classified according to the activity of the establishment managed.

Industry Snapshot
The management services industry is highly fragmented and unstructured. It consists of a conglomeration of different services for almost every sector of the economy. As a result, this entry presents examples of companies that are representative of different segments of the industry, and describes how the proliferation of management services is affecting the American economy and work force. Construction management services, which make up the largest single division of the industry, are highlighted. The U.S. Bureau of the Census estimated that the management services industry generated revenues of about $13 billion and employed about 300,000 workers in the late 1980s. In the early 1990s, however, the industry continued to expand at a rapid pace, with some major segments growing by more than 30 percent per year. Plodding growth in the 1980s and early 1990s was a general shift in the dynamics of the American economy. Going into the mid 1990s, companies in all economic sectors were increasingly seeking the expertise and flexibility offered by professional management firms. By 1997, the U.S. Bureau of Census estimated that total receipt had reached $30.3 billion.

Organization and Structure


Management service firms benefit their customers by providing expertise in certain areas of the company's operations. In addition to expertise, companies may also benefit from increased flexibility. By contracting a service firm to manage a short-term project

or administrative task, for instance, a company avoids the expensive and timeconsuming chore of hiring, managing, and later eliminating workers. Many service companies specialize in managing, or outsourcing, one niche of an organization's operations. Some companies, for instance, manage an establishment's mail room, or handle all electronic communications in an organization, such as voice and electronic mail. Other companies oversee various marketing and selling activities, or manage high-tech product development projects. A construction supply manufacturer, for example, might consider its core competency to be the development and production of paving tiles and concrete forms. However, the company must also engage in several activities at which it may not be particularly adept, such as managing internal data and information systems, motivating its sales force, and handling administrative paperwork. By hiring service companies that specialize in managing each of these subordinate functions, the manufacturer is able to focus its resources on its competitive strengths, thereby increasing its overall productivity. Within the service division, most of the projected job growth is in just two industry groups: business services, with a job gain of 3.6 million, and health services, with an increase of 3.2 million. Together, these industry groups account for 59 percent of the job growth in the services division and 38 percent of the increase in total non-farm wage and salary employment. The industry groups with the third and fourth largest projected job gains within the services division are social services, with a 1.1 million increase, and engineering, management, and related services, with an increase of 1 million jobs. Together, these four industry groups account for 78 percent of job growth in the services division and 50 percent of the total increase in non-farm wage and salary employment. During 1988, approximately 508,000 jobs were reported in the management services industry. By 1998, a scant 10 years later, the number of jobs in this service sector doubled to over 1,034,000 jobs. Management services firms were primarily engaged in offering management services to almost every industrial, commercial, and nonprofit sector of the U.S. economy. In addition, many companies classified in other industries offered management services to their clients. Typical services included management of health care facilities, hotels and motels, all types of business offices, factories, research

and charity organizations, theaters, restaurants, commercial and residential properties, and other operations. Construction Management. The largest single division of the management services industry was construction management. Firms practicing this discipline were hired to organize, staff, direct, plan, and control a development project. They also offered inhouse design or construction services. By hiring a professional manager, developers usually hoped to speed up construction, lower development costs, and increase overall project quality. To achieve these goals, many management companies specialized in one type of development, such as power generation facilities, transportation infrastructure, office buildings, health care facilities, land reclamation, or renovations. In the late 1980s, construction managers were generating about $4 billion in revenue per yearroughly equivalent to 25 percent of total annual U.S. management service contracts. Engineering and construction firms accounted for 75 percent of all construction management services. Design firms captured about 10 percent of the market, general contractors held a 5 percent share, and pure construction management companies accounted for 10 percent of this segment's billings. Industry Associations and Accreditation. There is no central licensing agency for management consultants. In fact, no guidelines or regulations exist in the industry at all as standards for operating practices. The only available form of acknowledgement of consulting expertise is the Certified Management Consultant designation which is granted by the trade association, the Institute of Management Consultants. Another primary industry association is ACME (formerly Association of Consulting Management Engineers). Both ACME and the Institute of Management Consultants operate as divisions of the Council of Consulting Organizations (CCO). Other industry associations include the Society of Professional Management Consultants, the Association of Management Consulting Firms, the Association of Management Consultants, and the Association of Internal Management Consultants.

Background and Development

Companies have offered management services in various forms for decades, such as construction firms that developed company facilities early in the Industrial Revolution. It was not until the 1970s and 1980s, however, that an identifiable management services industry gained stature in the United States. Several developments led to the proliferation of management services. Significantly, as the rapid economic growth characteristic of the post-World War II boom years began to fade in the 1970s, large corporations began to seek ways to increase the efficiency of their operations and gain a competitive edge. While corporations had traditionally handled almost all of their administrative and office management activities with inhouse staff, some firms began seeking the expertise and efficiency that management contractors offered. Particularly during the 1980s, as corporations restructured their organizations, reduced layers of management, and cut administrative overhead, the demand for specialized management services burgeoned. Likewise, as the economic representation of small businesses mushroomed during the 1980s, management services became important partners for many small companies that outsourced administrative tasks. Also influencing industry growth was the proliferation of government regulations. New employment rules, safety and environmental regulations, financial reporting laws, and other constraints forced many firms to seek the assistance of outside professionals to handle administrative paperwork and to avoid litigation. Concurrent advances in computer, information, and communications technologies provided the tools many management services needed to serve their markets.

Industry Leaders
Indicative of a growing trend in the management services industry, ARAMARK Corp. provided management services in three divergent lines of business: food and support

services, uniforms, and childcare. 1999 sales topped $6.7 million and their employee payroll included 152,000 workers. Two-thirds of company revenues derived from food, building maintenance, and housekeeping services provided to businesses, prisons, and colleges. ARAMARK also managed concessions at sports and other recreational facilities, operated before- and after-school programs, and provided employee on-site childcare via Children's World Learning Centers.

Workforce
About 25 percent of the work force was employed in secretarial, bookkeeping, and clerical jobs. Management and executive jobs represented about 15 percent of total employment, and management support, financial management, and administrative services jobs accounted for an additional 10 percent. Other occupations relate to computer programming and information systems management, engineering, marketing, and public relations. Because the industry will likely realize strong growth, the U.S. Bureau of Labor Statistics estimated that most occupations in the industry will thrive between 1998 and 2008. In fact, almost every position in the industry will increase employment by more than 45 percent. Jobs for managers and administrators, for instance, should grow in addition to a marked increase in management support jobs. Positions for marketing and public relations professionals were also expected to take a dramatic increase by 2008. Total employment in this industry section was estimated at just over 1 billion jobs in 1998. By 2008, almost another half million jobs were expected to be created.

Research and Technology


New management techniques and advanced communications technologies will continue to propel the expansion of management services into the new millennium. The trend toward corporate reductions in middle management, renewed emphasis on core

competencies, and expanded government regulations will encourage companies to increasingly employ and form partnerships with specialized services. Wireless communication devices, electronic and voice mail, portable computers and digital devices, and advanced information management systems will allow companies to make greater use of outside consulting and management services. Construction management firms will especially benefit from portable electronic devices that can be used on-site. Scheduling, estimating, and field engineering activities will become more precise with the development of new software and communications technology. Eventually, the division between management consulting services and the companies that hire them will become less distinct for several reasons. For instance, firms will retain a greater number of their employees as independent contractors and home-based workers. In addition, companies will form more partnerships with their competitors, or with firms in noncompeting industries, that resemble management service arrangements. Eventually, a large portion of U.S. companies will begin to view themselves as providers of specialized management services.

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