A few years ago, Bradenton, Florida-based Gevity and CEO Erik Vonk were hot properties in the field of “co-employment,” a specialized niche in which companies turn over most staffing and human resources functions, including payroll and benefits administration, to an outside company. But over the past two years, the company has tried to branch out into other staffing fields, with limited success.
On Friday, October 19, the company announced that Vonk, its CEO and chairman since 2002, was stepping down, and that COO Michael Lavington would take over both positions. Lavington, a British citizen whom the company appointed COO in August, still needs to finalize U.S. work authorization before he can officially take up his post.
The leadership switch is the latest in a series of recent business and executive changes at the company that have thus far done little to assure investors that Gevity is back on track. The company’s stock traded as high as $30 a share in early 2006. But after Gevity reported lower-than-expected revenue and earnings in June, the stock tumbled to a low of $9.85 in September, and has been trading recently at around $11.
Vonk, who in February was recognized as one of HRO Today’s 2007 “superstars in human resources outsourcing,” found himself the brunt of criticism from Wall Street for the company’s poor financial performance.
“The biggest problem the company has had is its inability to drive sales,” says Gary E. Bisbee, a Lehman Bros. analyst who covers the business and professional services sector. “Somebody has to take the blame for that.”
Vonk’s departure follows that of Peter Grabowski, who resigned as senior vice president of national sales in July.
Gevity’s problems stemmed in part from the full-service nature of its operation. Gevity has traditionally been a company that serves as a “co-employer” of workers at small and midsize companies, providing benefits like health and workers’ compensation insurance.
Vonk tried to move the company into staffing services without health and workers’ compensation insurance, hoping to find a more stable and simpler business model. But the effort backfired, as some clients left and the company faced lower revenues and profits.
“A primary goal of the former CEO was to get the business out of the co-employment model,” Bisbee says. “As the company took several steps toward that goal, they clearly created periods of very big turnover among their existing clients.”
Bisbee viewed Vonk’s departure and the arrival of Lavington as a welcome sign that Gevity will renew its emphasis on the co-employer model, a specialty that Gevity knows and understands.
But while Gevity will continue to offer co-employer services, it will likely continue looking to expand into other niches, according to Patrick Lee, Gevity’s director of investor relations.
“An increased emphasis on co-employment does not necessarily represent a departure from other HR products,” Lee says. “In fact, we intend to continue developing additional offerings while strengthening our co-employed business.”
Irwin Speizer is a contributing editor for Workforce Management. To comment, e-mail email@example.com.