Management Services

SIC 8741

Companies in this industry

Industry report:

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 workforce. Construction management services, which make up the largest single division of the industry, are highlighted.

The U.S. Census Bureau estimated that the office administration services industry generated revenues of about $13 billion and employed about 300,000 workers in the late 1980s. In the early 1990s, the industry expanded 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. Into the mid-1990s, companies in all economic sectors were increasingly seeking the expertise and flexibility offered by professional management firms. In 1997, the U.S. Census Bureau estimated that total receipts had reached $30.3 billion. By 2007, total revenues for the office administrative services industry were $44.4 billion, based on 2008 U.S. Census Bureau figures. An estimated 29,876 establishments employed 389,567 people.

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 time-consuming 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 was 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 were social services, with a projected increase of 1.1 million jobs, and engineering, management, and related services, with an increase of 1.0 million jobs. Together, these four industry groups accounted 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. Only 10 years later, the number of jobs in this service sector had doubled to more than 1.03 million. 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.
One of the largest divisions 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 in-house 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 year--roughly 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 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. 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 in-house 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.

By 1992, U.S. management service firms were garnering revenues of nearly $23.0 billion per year and paying $9.7 billion in wages to more than 215,000 employees. Annual receipts had almost doubled from $13 billion in 1988. Moreover, the industry's reported 1988 payroll was nearly $7.0 billion and employment exceeded 280,000. Fewer employees generated greater profits, perhaps due to the double-edged sword of an economic downturn in the late 1980s and early 1990s while, concurrently, increased global competition in all industries induced continued expansion of the management services industry.

Current Conditions

In the late 2000s, the overall management services industry in the United States employed more than 1 million people, according to Dun and Bradstreet's (D&B) 2009 Industry Reports. About 79,052 establishments generated $166.7 billion in annual sales. D&B figures showed that Missouri accounted for the largest share of revenues, with $18.0 billion, followed by Massachusetts with $14.15 billion and Georgia with $14.12 billion. Florida and Michigan rounded out the top five states in terms of revenues in the industry, with $13.1 billion and $10.9 billion, respectively. A large percentage (almost 95 percent) of establishments in the management services industry were small, with fewer than 50 employees, although businesses with more than 50 employees accounted for about 55 percent of total sales. California employed the most people in the industry, with 99,600. Other top states in terms of employment were Florida (81,900 workers), Texas (64,820), and New York (64,686).

Statistics from the Bureau of Labor Statistics show that in the office administrative support category, office and administrative support jobs account for the most positions. About 161,790 of the total 401,440 employees worked under this subcategory in 2008. Other subcategories that employ large number of workers in the industry include business and financial operations (58,180 employees) and management (5,980 employees). The average annual salary of individuals employed by the office administrative support industry was $54,340 in 2008, although this included a wide range of positions, from managers who earned an average $107,670 per year to personal care and services workers who made an average $23,500 a year.

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. Sales reached $6.7 million in 1999, and the company's payroll included 152,000 workers. By 2008, revenues topped $13.4 billion with 260,000 workers. About two-thirds of revenues were 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.

ServiceMaster L.P. of Downers Grove, Illinois, was characteristic of many management service firms in that it offered a broad range of related services. ServiceMaster was comprised of seven major divisions that were established to respond to the entire facility development process: strategic facility planning, architecture/engineering, interior design, equipment planning, construction services, project management and development, and computer-aided facility management. Renamed ServiceMaster L.P., in the mid-2000s the company posted more than $4.0 billion in revenues and had almost 40,000 employees.

In the early 2000s, AmeriHost Properties Inc., based in Illinois, was ranked as one of the fastest growing hotel and motel management firms in the United States. After beginning operations in 1987, Amerihost grew to manage 90 hotels. Although its operations were national, a majority of its hotels were in the Midwest and the South. Focusing on small communities, Amerihost sought out a market niche in mid-priced hotel rooms. While it operated under the AmeriHost Inn name, it also managed hotels under franchise agreements with Days Inn, Holiday Inn, Ramada Inn, and Hampton Inn. Franchised management services proved successful for AmeriHost: with just 1,820 employees, total revenues were $68.6 million in 1998.

AmeriHost Properties Inc. sold the AmeriHost Inn and AmeriHost Inn & Suites brand names, as well as its franchising rights to Cendant Corp., in 2000. Following the sale, AmeriHost changed its name to Arlington Hospitality. Sunburst Hospitality of Silver Spring, Maryland, purchased the company on January 12, 2006. At the time of the sale, Sunburst operated 47 hotels throughout the United States, with other interests in golf courses, self-storage properties, and multifamily dwellings. Revenues for Sunburst in 2008 topped $110 million.


In the late 2000s, the U.S. Bureau of Labor Statistics (BLS) estimated that about 401,440 individuals were employed by the office administrative services industry. Office and administrative support positions accounted for about 40 percent of these jobs, and these workers earned an average of $16.30 an hour in 2008.

The BLS estimated that the number of jobs in this industry would increase an average of 3.9 percent per year between 2006 and 2016. The BLS further predicted that jobs for managers and administrators would grow in addition to a marked increase in management support jobs. Positions for marketing and public relations professionals were also expected to increase.

Research and Technology

New management techniques and advanced communications technologies continued to propel the expansion of management services. The trend toward corporate reductions in middle management, renewed emphasis on core competencies, and expanded government regulations encouraged 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 allowed companies to make greater use of outside consulting and management services. Construction management firms especially benefited from portable electronic devices that could be used on-site. Scheduling, estimating, and field engineering activities became more precise with the development of new software and communications technology.

The division between management consulting services and the companies that hire them was expected to become less distinct for several reasons. Firms began to retain a greater number of their employees as independent contractors and home-based workers. In addition, companies were expected to form more partnerships with their competitors, or with firms in noncompeting industries. Eventually, a large portion of U.S. companies were expected to view themselves as providers of specialized management services.

With the proliferation of Internet access throughout the 1990s and 2000s, management services began to embrace a new paradigm as virtual service providers. No longer limited by geography, such enterprises could advertise, interact, communicate, and service clients from any place in the world. Coupled with an increased reliance on an ever-growing global business culture, virtual firms could also engage in robust service support to international clients with subject-matter experts of international reputation. By expanding the customer base and tapping into a worldwide labor force, the service management industry promised to revolutionize through the use of advanced wireless and communications technologies.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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