Where the Money Stops, Buck Goes

Having depleted their own savings, Buck's new owners were slow in making additional investments. As a result, the firm's activities were limited to the New York City area. "During that period many of our competitors were growing faster than we were," LoCicero says.
Gradually during the next twenty years, Buck expanded, adding offices in Toronto and Pittsburgh, and in 1986 making its first move outside North America. "We opened an office in Brussels," says LoCicero. "That was our first venture overseas."
By 1996, Buck was doing $200 million a year and was providing its services to about 5,000 clients, ranging from large multinationals to small businesses. It also expanded into the United Kingdom and Australia while adding significantly to its U.S. operations, in part through the acquisition of a competitor, W.F. Corroon. "That was the largest acquisition we ever made," notes LoCicero. "It really established us in some cities where we didn't have a presence, such as St. Louis."

Changing times

By the late 1990s, Buck's market segment started to undergo profound changes. With 401K plans booming, employee benefits became much more than simply a defined contribution records keeping business. Clients were looking to outsource a lot of the administration of these plans as well as benefit, health and welfare plans. "Many clients were coming to us and asking if we could support that service," LoCicero recalls. "We found that we were in a rapidly growing business that required a tremendous technical investment."
By themselves the margins for merely doing the administration and recordkeeping work weren't high enough to be attractive. And subsequent to the W.F. Corroon acquisition, Buck didn't have the deep pockets needed to fund such an investment itself. But the downside of not providing outsourcing was significant. "If we gave up on outsourcing, we might be considered a smaller player," says LoCicero. "And if we tried to go it alone, that might destroy us financially."

After a long search Buck found a partner, Mellon Financial Corp., that was committed to the institutional employee benefit business and had the financial wherewithal to make outsourcing a successful business.
The price tag, howsever, was steep. "It was a very gut-wrenching decision," LoCicero says of the deal, in which Buck was bought by Mellon and in the process lost its cherished independence.
With Mellon's capital and the bank's substantial IT infrastructure, Buck has been able to build up its outsourcing business, bundling in new services such as communications consulting, trust and custody and asset management, thereby bolstering margins. Today outsourcing represents 20 to 25 percent of Buck's business, LoCicero says.
It has also been able to broaden its international presence. Last year, it joined with NSP, an Australian HR consultancy, and today NSP Buck is the second largest HR and employee benefit firm in the robust Australian market. In addition, Buck now has about 400 people operating out of the U.K. and is expanding its Asian operations. In countries where it doesn't have its own operations, the firm has developed a network of affiliates. "My personal desire is to expand more globally, and that may be through acquisitions," notes LoCicero. "Mellon is very supportive of us looking at any acquisition that makes sense in parts of the world where we have no operation."
Buck provides its multinational clients, which include Gillette, Colgate and Tyco International, with such services as the administration of global stock plans, an area the firm pioneered, and guidance with often-thorny local tax and legal issues relating to such plans. For clients such as H.J. Heinz this support is invaluable. "Buck facilitates us operating globally," says Heinz's Matson. "In one instance, for example, when we had an accounting problem overseas, Buck helped us resolve it even though they weren't the primary actuarial."

Buck.com

Ironically, even though it's an old-line firm, Buck was well positioned to move into the Internet era. "We've always been fairly entrepreneurial and oriented toward dealing with start-up companies, even before the Internet became a big driver," explains Rob Lynch, Buck's senior managing partner, who has responsibility for the firm's western operations. "As a result, when the whole boom hit, we moved into the new e-economy space fairly seamlessly."
This move has been facilitated by Buck's structure. In effect, Buck functions as two firms, one to deal with Fortune 500 clients and another to focus exclusively on startups. "It almost takes two different types of organizations to serve both these constituencies," Lynch says.
Buck operates on dual levels as well.  "We function on the strategic level, where we may be helping a company orient their entire HR function and adjust to the new reality of e-business, but we also provide software that can be installed and maintained at a client site or delivered on an application service provider basis from our platform,'' Lynch explains. "One of the things that differentiates us from our competitors is that we're not afraid to get our hands dirty."
Buck has set up a compensation practice group in New York that deals exclusively with dot-coms, but most of its Internet-related business comes out of the Bay Area and the West Coast. "Much of our business is relationship-driven, and as people on the West Coast with whom we had close relationships moved to start-ups, they were very insistent we move with them," says Lynch.
One such relationship is with Healtheon/WebMD, the company Netscape founder Jim Clark started. Buck began working with Healtheon several years ago, developing on-demand enrollment and defined health care plans and setting up on-line menus that would allow employees to move between various plans. Later, as Healtheon began contracting with physicians and providers as part of its WebMD initiative, Buck began helping the company install the software platform at the customer site, customizing the software to meet the customer's needs and helping to manage the platform once it was up and going. "Healtheon is an important partner for us," Lynch says.
With its expertise in creating and maintaining innovative employee benefit and compensation programs, Buck is clearly at the right place at a time when both dot-coms and brick-and-mortar outfits are placing an enormous premium on attracting and keeping good people, especially technical talent, in the New Economy. "The whole move toward human capital being the center point of the organization has really put the focus on our area of consulting," Lynch says. "That's any area that's historically been very specialized and really dominated by a small number of firms. It's a huge growth area now."

Buck's human capital

Buck's competitors would likely beg consulting pundits to harbor a degree of skepticism when the firm's management boasts of not having any difficulty attracting good people in the Bay Area and the West in general. "Being very entrepreneurial allows our employees a lot of freedom in what they do and a lot of project richness that comes to bear in our organization," Lynch notes. "Being in the human resources business, we are a totally flexible organization in respect to work. I think everyone in the firm would say the quality of their life is terrific because they have control over how they spend their time."

LoCicero expresses similar sentiments. "We have not had any difficulty in retaining and attracting good people," he notes. "This year, as an example, we've had a record number of senior-level hires."
Again, the consulting pundits can hear the pleas of Buck's rivals. Skepticism is indeed a virtue when it comes to recruiting inside a talent market as competitive as consulting's.
No matter what Buck's recruiting record may be, the firm today prefers to hire experienced people, often going after competitors' personnel. It offers a variety of performance-related compensation and bonus plans as well as Mellon stock options and promotes largely on the basis of peer review systems.
As for the future, LoCicero sees Buck reaching the $800 million level by 2005. "I think we can grow by as much as 25 percent a year and maybe more in the HR, organizational-development, communications and compensation areas and probably our health-consulting areas," he asserts. "If so, it will be pretty easy for us to double revenue over the next five years."
That's not to say Buck is abandoning the practice area that has sustained growth over most of the past century. "Our retirement practice remains very strong and is considered in the marketplace as being at the top or very close to the top in the country," LoCicero says. "That's how the Buck name is known."
And speaking of the past, there's also the matter of the old softball trophy. "I'm very embarrassed to say this,'' he confesses, "but I won't let that leave my office."

Sidebar: Building a Career at Buck
Consultant: Trey Wood, principal and communications consultant

Practice area: Four years after starting up the firm's Atlanta area communications practice, Wood's business has grown from $35,000 to more than several million dollars in annual revenue. His clients include BellSouth, Coca-Cola Co., Georgia Pacific and Hard Rock Cafe.
On what he does: "The communications practice for us essentially does two things. We help organizations deliver key messages from management to employees through all the standard avenues. The second thing we do is to gather information from employees to deliver back to management so that better decisions can be made."
Why he likes Buck: "One of my favorite things about Buck is that we're not particularly territorial about how we run our practices."
"It's the most entrepreneurial consulting firm I'm aware of. That's what keeps me here, and I've been here eight years."
"This is a terrific place to come and be part of an organization that has grown rapidly without any kinds of layoffs over the years. It allows people who tend to be very independent to pursue their consulting dreams without necessarily checking with others. We have very specific financial goals and how one reaches those goals is not dictated."