Towers Perrin History
New York, New York 10017-4605
Telephone: (212) 309-3400
Toll Free: 800-665-1080
Fax: (212) 309-0975
Incorporated: 1934 as Towers, Perrin, Forster & Crosby, Inc.
Sales: $1.23 billion (1998)
NAIC: 541611 Administrative Management & General Management Consulting Services
Building Relationships ... Producing Results. That simple phrase sums up our view of the qualities that make Towers Perrin an excellent consulting firm. We believe it also expresses the kind of firm we are and the kind of consultants who work for us. In many ways, it also describes our clients: they tend to be organizations in the forefront of their industries. Organizations with effective leadership and a desire to find the best possible partners to help them manage their business effectively and competitively. For those organizations and others like them, we are that partner. Key Dates:
- Founding of Towers, Perrin, Forster & Crosby.
- TPF & C has grown ninefold in sales since its founding.
- Company acquires Cresap, McCormick and Paget.
- Acquisition of Tillinghast, Nelson & Warren.
- Company name is shortened to Towers Perrin.
- Towers Perrin ranks second in size among employee benefit consultants and seventh among actuarial firms.
Towers Perrin is one of the world's largest management consultant firms, serving about 10,000 clients, among them some 65 percent of the world's largest companies. It has more than 70 offices in 24 countries. The company operates in five fields: human resources and general management consulting; employee benefit services; health industry consulting; reinsurance; and financial services and risk management. The firm is owned by its executives and other principal employees.
Reinsurance and Benefits Specialist: 1934-82
Charles Perrin was a partner in a Kansas City, Missouri insurance underwriting firm that formed an association with Philadelphia's Brown, Crosby & Co. in 1919. The two firms combined in 1923, with the merger also including Henry W. Brown & Co., which dated back to 1871. Perrin became a partner in 1930, along with John A. Towers, a Kansas City colleague who managed the reinsurance department. The founding of Towers, Perrin, Forster & Crosby, Inc. (TPF & C) in 1934 also brought in as partners Arthur Crosby, H. Pratt Weaver, and Walter Chase, all partners of the predecessor company. H. Walter Forster, the other founding partner, brought a new focus to the firm as an expert on both fire prevention and pension planning. Forster, who has been called 'the father of pension planning,' was president from 1938 to 1949, and Perrin was board chairman during this period.
TPF & C inherited blue-chip corporate clients such as General Foods, International Harvester, and Union Carbide Corporation, and it acquired others such as Monsanto Co. The adoption of New Deal federal legislation such as Social Security and minimum wage laws kept the employee consulting unit busy, while the reinsurance division was active among Lloyd's of London syndicates. (A wholly owned subsidiary dealing with reinsurance, John D. Pryce & Co., was absorbed by its parent in 1952.) TPF & C added offices in Chicago in 1946 and New York in 1949. By 1950 its sales volume had grown ninefold since its inception. The firm opened its first international office in Montreal in 1956. During the 1960s it acquired companies, opened more offices, and expanded its services to include compensation and organization consulting.
Quentin I. Smith, Jr., a former insurance salesman, joined the company in 1957 and rose to become its president in 1971, when revenue came to $12 million. Under Smith's leadership the firm moved its headquarters to New York in 1975 and continued to grow by acquisition. Interviewed by Business Week in 1979, Smith said TPF & C was adding experts in more fields because 'We realized that a compensation plan must fit in with a total business plan and so we started adding specialists in strategic planning, marketing, and the like.' In 1982 the firm ranked sixth among the nation's consulting companies in size, with annual revenue of $120 million.
Acquisitions and Growth in the 1980s
A vital TPF & C acquisition was that of Cresap, McCormick and Paget (CM & P) in 1982. Founded in 1946, CM & P had annual revenue of only about $15 million at the time of the merger but enjoyed a prestigious reputation, predominantly in corporate strategies, human resources, and information processing. It became a division of the parent firm and by 1987 had made five acquisitions of its own, reaching annual sales of $65 million and adding to its roster of clients General Electric Co. and the World Bank. Cresap was flexible in taking assignments, willing to take a piecemeal rather than a total approach. It teamed its consultants with the client's managers to come up with solutions rather than simply handing down a report that the client was then expected to accept and implement. CM & P added a consulting unit for manufacturing in 1988.
Even more important was TPF & C's 1986 acquisition of Tillinghast, Nelson & Warren Inc., the nation's largest independent risk management consultant. The merger created the world's largest staff of professional actuaries, according to an executive at Atlanta-based Tillinghast. TPF & C annexed Tillinghast's benefits unit but preserved the Tillinghast name for risk management consulting and for life and casualty actuarial practice. (TPF & C's own risk management operation was assigned to Tillinghast.) The amalgamation added $58 million to TPF & G's 1985 revenue of $272 million. In terms of sector, employee benefits consulting now accounted for 58 percent of the combined sum; insurance consulting (nonrisk management) for 16 percent; compensation consulting, 13 percent; general management consulting, 12 percent; and risk management consulting, one percent.
Spurred by rising employee benefit costs and new federal laws and regulations, TPF & C accumulated revenue of $465 million in 1987, reaching fourth place in overall consulting income. The benefits business, a consulting expert told John A. Byrne of Business Week, is 'like an annuity. It comes around every year, just like Christmas, and every year it gets bigger. It's a business few in consulting enjoy.' The firm name was shortened to Towers Perrin in 1987. Smith retired at the end of the year and was succeeded as chairman and chief executive officer by James A. Kielley. His goal was to make the company one of the world's two leading providers of management advice to top executives.
Mixed Results in the 1990s
The ensuing years were not good ones for Towers Perrin, although by the end of 1990 the company had more than 60 offices serving more than 8,000 clients. An absence of new federal laws and rules affecting benefit plans, plus a poor national economy and the maturing of the industry, made it harder than before for consultants to find new clients. Towers Perrin's revenue actually dipped from $714 million in 1990 to $686 million in 1991, resulting in a ten percent staff reduction that year and a 2.5 percent cut in its general management and compensation consulting employees the following year. An internal reorganization resulted in some unprofitable projects and led to an unusual number of resignations for a firm known for low turnover.
Towers Perrin continued to look for new business, however. In late 1992 the firm formed a health policy group to help clients prepare for potential changes in medical programs by the incoming Clinton administration. Its health and welfare practice experienced more growth--greater than ten percent--than any other area of its business in 1992. Towers Perrin also introduced Flex Planner, an interactive software program designed to help clients' employees make better-informed choices about their benefit needs, and Ben Val, software allowing employers to make quantitative comparisons between their benefit programs and those of other companies.
Towers Perrin also sought to draw into its fold Buck Consultants Inc., a rival firm one-fourth its size. Combined, the two companies would have been able to pass William M. Mercer Cos. Inc. to become the world's largest benefits consultant. But Buck surprised Towers Perrin in 1994 by offering to buy its bigger competitor for cash and stock. Towers Perrin quickly turned down the offer.
Towers Perrin established a workplace diversity unit in 1992, when it acquired Atlanta-based Diversity Consultants Inc. But it suffered bad publicity and confirmed cynics' opinions about management consultants when the Wall Street Journal published an article in 1997 reporting that the firm had offered practically identical workplace diversity recommendations to two different companies. The article went on to say that seven of the 11 other diversity reports provided to clients between late 1994 and late 1996 were also almost identical in their recommendations. After many hours of interviews with managers, employee surveys, and review of company documents, Towers Perrin's consultants produced, according to the newspaper, action plans replicating nearly all of Towers Perrin's basic strategies and tactics. A co-leader of the unit, speaking to Douglas A. Blackmon of the Journal, replied, 'That's just one piece of paper and then the real work begins. You're not seeing what we do to work with the president [of the company] to change the market strategy.'
Towers Perrin still ranked second among employee benefits consultants in 1997 and was seventh among actuarial firms. That year it acquired Partners Consulting Group, a healthcare adviser. In 1998 it added Tandem International, a Canadian management consulting firm, and Miller Howard Consulting Group, an Atlanta-based change management firm. It had acquired Kinsley Lord, a leading British change management firm, in 1995. Towers Perrin was appointed investment consultant to Singapore's monetary authority in 1999.
Towers Perrin in 1999
Towers Perrin's human resources and general management consulting unit was offering services in four broad categories in 1999: business strategy, in which the firm often was called upon to help define, clarify, or implement business strategy on an organizational, business unit, or functional level; organizational strategy, which it said called for evaluating every component process through the filter of business strategy to make sure that strategy, structure, and processes were closely interwoven; people strategy, which called for understanding the roles people play in each business situation and making investments in people appropriate to those roles; and change management, intended to help firms learn how to embrace rather than resist change and to implement practices and processes that keep people engaged, productive, and focused on business results.
Towers Perrin's employee benefit services fell into three broad categories: benefit strategy, plan management, and benefit administration. The health industry consulting unit was serving health systems, physician organizations, insurers, and health plans in every U.S. market.
Tillinghast-Towers Perrin was providing management consulting to the financial services industry worldwide. This field of consulting was divided into financial services, property/casualty insurance, risk management, and health insurance. Towers Perrin Reinsurance was providing reinsurance intermediary services and consulting expertise that focused on the creative blending of traditional and nontraditional risk transfer vehicles. Towers Perrin also was offering an array of publications on topics relevant to its activities, many of them in the form of newsletters.
Principal Divisions: Tillinghast-Towers Perrin; Towers Perrin; Towers Perrin Reinsurance Co.
Principal Competitors: Booz Allen & Hamilton Inc.; McKinsey and Company Inc.; Mercer Consulting Group Inc.; Moritz Inc.
- Blackmon, Douglas O., 'Consultants' Advice on Diversity Was Anything But Diverse,' Wall Street Journal, March 11, 1997, pp. A1, A16.
- Byrne, John A., 'A Specialist Slips into Big-League Consulting,' Business Week, July 27, 1987, pp. 73, 76.
- 'Charles Perrin,' in National Cyclopedia of Biography, Volume 56, Clifton, N.J.: James T. White & Co., 1975, p. 320.
- Fletcher, Meg, 'Merger Strengthens Tillinghast, TPF & C,' Business Insurance, May 19, 1986, pp. 3, 29.
- 'H. Walter Forster, Business Counselor,' New York Times, May 24, 1968, p. 47.
- 'John Alden Towers, Insurance Official,' New York Times, November 20, 1956, p. 37.
- 'The New Shape of Management Consulting,' Business Week, May 21, 1979, pp. 100-01.
- 'Towers Perrin Buys Cresap, McCormick, Also a Consulting Firm,' Wall Street Journal, October 13, 1982, p. 14.
- Woolsey, Christine, 'Buck's Offer Falls Flat,' Business Insurance, April 11, 1994, pp. 1, 45.
- ------, 'For Benefit Consultants, Stalled Global Economy Results in Second Year of Slim Revenue Growth,' Business Insurance, December 21, 1992, p. 11.
Source: International Directory of Company Histories, Vol. 32. St. James Press, 2000.