Strength in numbers
By Christina O’Neill
Our annual list of the Top 100 Companies, ranked by employee headcount
Who’s at the wheel of our local economy? Who provides the jobs and the purchasing power that determine the economic well-being of our region? As the state mulls job-creation initiatives and economic development experts fret about the loss of local corporate control in the Boston area, we take a snapshot of what’s already happening closer to home in our second annual Top 100 Companies list. Our list is unique in that we rank companies by the number of employees they have in our readership area of Central Mass./Metrowest.
This year, we made a point of trying to include more of the region’s most highly-visible companies — Verizon, for example, and big retailers such as TJX, Staples and BJ’s Wholesale Club, and CVS. We left out banks as a category. The larger banks often cannot or do not report employee numbers by state or by market segment. We also passed up Gillette’s large operation in Devens — which Gillette acquirer Procter & Gamble says it will close — because of the high number of workers there who are reportedly supplied by third-party employers. And we were selective in our pursuit of companies that did not respond to our surveys. The resulting product is more comprehensive than last year’s list, but we welcome your comments to make it even better.Portable versus place-specific
Because there’s been so much discussion this past year about job creation, economic growth, and local control or lack thereof, let’s look at the companies that fill the top 10 spots to see how they contribute to the region’s economic stability. Five out of 10 of them are not portable, by which we mean their business relies on customers who are also based in this region.
UMass Memorial Health Care Inc., the UMass Medical School, Verizon, Shaw’s Supermarkets, and Stop & Shop aren’t selling their services to people in Asia. EMC Corp., Fidelity Investments, Hewlett-Packard, Intel-Hudson and, to a certain extent, The TJX Cos. Inc. (see side cover story, this issue), serve a wider customer base and could be considered "portable." They are an example of a company that could do their business anywhere (although one should not automatically presume that because they can, they will).
Interestingly, the 50-50 portability factor primarily holds for the next 15 companies on the list (eight out of 15 are portable, seven are not) with services that range from insurance, abrasives and sound systems to more health care and retail outlets.
What about local control? Four of the top 10 companies headquarter here. Among the next 15 companies, eight of them are headquartered here, but five of that set of eight are portable.
The companies at the top
What contributes to economic growth? A big top line doesn’t always mean a big bottom line. Ask any hospital. In a hospital setting, the majority of the cost of running the business is people. UMass Memorial Health Care may look like it had a banner fiscal 2005, but that was the result of a one-time Medicaid payment of $115 million. The hospital system is partway through an intensive investment in infrastructure, supported in part by generous, high-profile philanthropists and financial institutions. The impact on the hospital system of Massachusetts’ new health-care law, which seeks to reduce reliance on that pool by making insurance available to every Bay State resident, is yet to be seen.
Several miles down I-495 is EMC Corp., which had a banner year in 2005, due to upgrades of its own. It kept its spot as world market leader in external disk storage systems, capturing 21 percent of the market, and reported record revenues that surpassed the boom days before the dot-com bust. EMC first updated its large-user Symmetrix of high-end storage array, and is now doing the same thing for its mid-range Clariion systems, a legacy from its 1999 acquisition of Data General Corp. EMC opened training and briefing centers in California to support its software and services business, and expanded its consulting services in Japan, Asia Pacific and Latin America. Most notably, EMC began to target small and mid-sized businesses, multi-facility organizations and even home offices with its data protection products.
Donna Cupelo, who is president
of Verizon Communications’ Massachusetts/Rhode Island operations, told The Boston Globe earlier this month that Verizon views the state as one of its top 10 marketplaces in the U.S. She said the company values "human capital" and has sited one of its two testing labs in Waltham. But she also said Massachusetts is a strong site for call center jobs, held by about half the company’s Massachusetts workforce. That’s because Verizon requires at least a two-year degree and the technical ability to communicate with customers. Bay State call center workers are more expensive, she told the Globe, but they’re worth it. On the downside, she noted that, of the two states in which her division does business, Rhode Island is more business- and tax-incentive friendly.
Fidelity Investments seems to think so. It’s relocating an entire division out of the Boston area to Smithfield, RI (see "Fidelity seeks greener pastures," May 1 issue). Fidelity needs many highly trained workers, keeping it firmly rooted in Massachusetts. It has more employees here than it does in any other state, but it needs more of a nationwide presence to regain its top spot in the mutual fund services sector. In Feb. 2004, it dropped to No. 3, behind Vanguard and American Funds. Fidelity’s biggest growth in 2005 came from its brokerage business and FESCo, which manages 401(k) and other benefit plans, and which has a significant base in the Marlboro campus that put Fidelity on our Top 100 Companies list.
The University of Massachusetts Medical School is among the top-earning U.S. colleges in terms of its technology licensing revenue. It netted $26.3 million in fiscal 2004, outstripping even Harvard and MIT that year. UMass Med School’s Worcester campus, which originated most of the technology being licensed, has taken an aggressive role in recruiting faculty. It licensed the technology that Marlboro-based drug developer Sepracor used to develop the antihistamine Claritin, and has licensed its RNAi technology to CytRx Corp. The school’s presence is often cited by local business people in the biopharmaceutical sector as a reason they have chosen to locate their companies in the greater Worcester area, rather than in Boston.
The two supermarket chains, Shaw’s Supermarkets and Stop & Shop, have been on a building spree in recent years. Stop & Shop faces opposition in Northboro to a planned superstore. Competition from specialty retailers, wholesale clubs and, of course, Wal-Mart, is heating up in Central Mass., and the big retailers are adding more non-grocery in-store services, such as in-store banks, pharmacies, office supplies (Stop & Shop has a section of Staples goods), Starbucks coffee, and even wireless Internet service, to keep their edge and bring shoppers in. They’re also boosting their hiring of bilingual workers to more closely reflect their customer demographics.
Hewlett Packard has shifted some of its Central Massachusetts workforce in connection with the closure and sale of the bulk of its Littleton properties this past April. The company has transferred the 800 employees formerly based in the King Street offices to other facilities in Marlboro, Andover, and Nashua NH, but will reportedly keep another facility in Littleton that houses an estimated 400 employees. Our Central Massachusetts headcount, which we mark with an (E) for estimate, attempts to reflect the changes in staff location. It’s our own figure - as with many of the other companies on the list similarly marked, we felt HP still has too much of a presence here to overlook. The job shifting in Central Mass. follows a companywide restructuring, announced last year, that is trimming 14,500 jobs, or about 10 percent of the company’s workforce, mostly in the U.S. workforce of about 58,000.
Intel Corp. is Hudson’s largest taxpayer, and its presence is partly responsible for a bond-rating upgrade from Moody’s. Last September, Intel announced a $150-million plant expansion in Hudson that would add 300 new jobs; the company has added 200 jobs since then. To date, Intel has invested more than $2 billion in the 1.3-million-square-foot plant, which it bought from Digital Equipment Corp. in 1998. But at an April 27 analyst conference, Intel CEO Paul Otellini announced a cost-cutting initiative, to be implemented within 90 days, that would result in $1 billion in savings going forward. As this issue went to press, it was not determined whether the Hudson facility would be affected.
Roots versus ROI
The big picture — and the big question — is what it takes to become (and remain as) that desired taxpayer and employer. For the for-profit giants, it’s a matter of roots versus ROI. Massachusetts is trying its best to be business-friendly, but the Bay State has always had an uphill challenge: six contiguous competing states. Because Massachusetts isn’t very big, it’s easier here than in other parts of the country for companies to ship employees over the border without costly relocation.
As the experience of Fidelity Investments shows us, competition gives no quarter to community. But looking further down the list you can see a universe of companies, subsidiaries and other organizational entities, many of them interdependent on one another, that make up the bulk of the region’s economic base and its intellectual central nervous system. Without the presence of the smaller companies, organizations, colleges, hospitals and retailers, the big companies wouldn’t be here. That’s just as true as it is the other way around.
Christina P. O’Neill can be reached at coneill@wbjournal.com
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