Test-Tube Temps Fill Lab Needs : Employment: Placing scientists for hire has become the fastest-growing niche in the $10-billion-a-year temporary-help industry.

By JILL BETTNER

May 31, 1993 12 AM PT

TIMES STAFF WRITER

Call them test-tube temps.

They are scientists for hire, ranging from technicians just out of college to experienced chemists, immunologists and microbiologists. And placing them with companies that need temporary lab help has made Canoga Park-based On Assignment Inc. a hot growth company.

On Assignment’s 1992 profit nearly doubled, to $1.76 million, on a 25% increase in sales, to $33 million.

Little wonder its stock has attracted Wall Street’s attention. On Assignment went public at $7 a share in September, zoomed to a high of $15 in February and on Friday closed unchanged at $12 on the over-the-counter market. Big institutional investors have snapped up nearly a third of its shares.

Indeed, because such specialty companies can charge a premium well above the going rate for less skilled workers, the elite temp business is the fastest-growing--and most profitable--niche in the $10-billion-a-year temporary-help industry.

In hopes of maintaining its earnings momentum, On Assignment intends to expand into new areas such as health care and legal services, possibly later this year.

The company’s Lab Support division, its only operating unit so far, supplies 1,100 scientists out of 27 offices throughout the country. While there are some regional rivals in that business, none operates on a national scale.

For On Assignment, the test-tube temp business has been “a laboratory experiment itself,” said its chief executive, Thomas Buelter, formerly a top operations manager at Kelly Services Inc. “What we’ve developed here is a formula we can apply to many kinds of temporary professionals.”

Part of Lab Support’s strategy has been to hire account managers who know what labs do because they are scientists themselves. Buelter said the company also tries to fill most customer orders within 24 hours.

The formula seems to be working. Last year, On Assignment’s stockholders earned 32% return on equity. The company has $7 million of working capital, less than $1 million in current liabilities and no long-term debt.

But plenty of other companies, large and small, have entered the elite-temp business. One of the most successful, 5-year-old Mactemps in Cambridge, Mass., places people to run Macintosh computers. It has 20 offices with a combined $20 million in annual sales. Nearly a quarter of the 1.15 million Americans who get their paychecks--but usually no benefits--from temporary-help companies are professionals or other highly skilled workers. Their ranks have nearly doubled since 1981, according to the National Assn. of Temporary Services.

On Assignment’s customers include major companies in industries ranging from petrochemicals, plastics and food to pharmaceuticals, biotechnology and semiconductors.

On the roster are such companies as Exxon Corp., Johnson & Johnson, Union Carbide Corp. and Hewlett-Packard Co.

When companies hire a lab temp, they pay On Assignment anywhere from $10 an hour for technicians to $35 an hour for microbiologists with several years’ experience.

After paying its workers’ employment taxes, On Assignment still earns a 30% profit on every hour billed.

“People hire temporary help because they need it right now. That’s the main reason why it isn’t cheap,” Buelter said. “Employers no longer staff for the peaks. They staff for the valleys and use temporary help to manage their employment costs.”

About half the lab workers who register with On Assignment are young people with less than five years of experience, making it hard to find a permanent job.

Colin Trout, 25, is one of a dozen On Assignment temporary workers at a Duarte unit of the pharmaceuticals giant Baxter International Inc. Trout, who has been at Baxter for 10 months, started at $10 an hour and now makes $14. “I like what I’m doing, and I’m hopeful this will turn into something permanent. There aren’t a whole lot of jobs out there.”

Trout, who is getting married in June, also worries about not having any benefits. On Assignment says it will begin offering its workers medical coverage later this year.

Ironically, it was by refocusing On Assignment, which had strayed into other areas when he took over in 1989, that Buelter saved the test-tube temp company from near-extinction.

Founded as Lab Support Inc. by two Woodland Hills chemists in 1985, the start-up was backed by Wood River Capital Corp., a New York venture capital group. At first, Lab Support did well. But the company stumbled badly when it tried to move into other areas, such as consulting and recruiting. By 1989, the company had racked up losses of $1.5 million on a meager $7 million in sales.

That is when Wood River hired Buelter. As chief operating officer of the temporary-help pioneer’s assisted-living division, Buelter had built elderly care into a $40-million business for Troy, Mich.-based Kelly in five years.

Buelter took the company--renamed On Assignment when it went public--out of consulting and recruiting and had it profitable within a few months. Both of Lab Support’s founders resigned in 1989, although one, Bruce Culver, still owns 10% of the company. It became On Assignment when the company went public.

As for Buelter’s current expansion plans, he is sure he can avoid the kind of costly mistakes that almost sank the company before.

“We know exactly what we’re looking for and we have a lean cost structure in place,” he said. “All we have to worry about is running our business, and the growth will come.”