Tony Grijalva, Chairman & CEO of G&A Partners

G&A PARTNERS’ CEO TONY GRIJALVA SPEAKS TO THE RISE OF PEOS AND JOB TRENDS IN TEXAS

In spite of the economy, in spite of the recession, in spite of companies downsizing or right sizing, Tony Grijalva knows it’s good to be in the hiring business in Texas.

Grijalva, the Chairman and CEO of G&A Partners, started his company in 1995 with COO John Allen in Houston. G&A Partners is a Professional Employer Organization – a PEO. PEOs manage human resource functions like benefits, payroll, accounting and risk management as co-employers with their client companies.

“We do that in an interesting legal concept which is a three party contract: the employee, our client company and us,” said Grijalva. G&A Partners manages the relationship with the employees, allowing their clients to take care of the day-to-day while they take care of the administration.

What makes working with a PEO appealing is its ability to take advantage of economies-of-scale and offer Fortune 500 company-type benefits to a company with as few as 20 to 50 employees. PEOs serve as aggregators and provide workers’ compensation and health insurance benefits to small businesses for a lot less money than the business can get on its own because PEOs deal with large numbers versus the numbers of people a small business employs.

Texas Has Jobs

According to WANTED Technologies, a company that collects online hiring demand data, nearly 2.2 million jobs in Texas were posted in the year ending October 31, 2011. Of those job openings, 29 percent were in the Greater Houston area and 21 percent in the Metroplex of Dallas/Ft. Worth.

The November Economic Outlook from the Texas Comptroller’s office says 94 percent of the jobs shed by employers during the Texas recession have been recovered. Mayor Annise Parker says Houston is leading the nation out of the recession and has recovered all of the 121,000 jobs it lost during the slowdown. Houston is one of the first large markets in the U.S. to bounce back.

Where Are These Jobs?

The job growth in Texas begins with the oil & gas industry, according to G&A President and COO John Allen. “We are seeing growth in the oil services,” he said. “In

John Allen, President & COO of G&A Partners

South Texas the shale oil play created about 12,000 jobs last year and is forecast to generate another 65,000 jobs going forward.” Allen remarked truck drivers in South Texas are making $85,000 to $100,000 a year because of demand and he sees that same demand for oil services workers in West Texas and Ft. Worth, too.

The Texas Workforce Commission agrees with Allen and shows the oil and gas industry grew 25 percent, or nearly 30,000 jobs, in a year. The next highest category for job growth is machinery manufacturing for the oil & gas industry – nearly 10,000 jobs were added in the past 12 months.

Health care is another big growth area. “There are increases in health care employees due to the aging population,” Allen said. Along with older citizens needing health services, there’s also the influx of new Texans who are bringing their businesses here or those who have moved for the prospect of finding jobs. Not only do new and aging residents need health care, new residents bring children who need to enroll in school.

Along with current hiring statistics, the Texas Workforce Commission also forecasts job gains through 2018. Today the forecast for job growth is highest in:

• Ambulatory Health Care                     +40.5%
• Educational Services                           +36.4%
• Food & Drinking Places                     +29.7%
• Professional, Scientific & Tech           +20.2%
• Administrative & Support Services    +19.0%

The Growth of G&A

The projected double digit increase of administrative and support services mean more jobs, and with more jobs comes more growth for G&A Partners. At the end of 2010 gross revenues for G&A were $410 million and the estimated revenue for 2011 is $475 million, a significant increase by any measure.

Last year, G&A Partners was recognized as one of the Top 100 privately held companies in Houston. The company cites manufacturing, contractors and non-profits as key sectors contributing to its strength. Contractors and non-profits have been some of the hardest hit industries in Texas, yet they remain a strong foundation for G&A while the company focuses growth efforts on new areas.

“What we saw was a reduction of employees but not a reduction in our client base, and our development efforts have resulted in an increase of clients in the non-profit area – especially clinics and schools,” said Grijalva, who noted there has been a transition from grey and blue collar to white collar.

Allen agrees and believes education and work experience is important to non-profit executives. “What we do helps them run the business side while they focus on their passion,” observed Allen.

G&A also has clients in manufacturing, another growth sector in Texas with nearly one million employees in the state and growth of 2.2 percent in the last year. Grijalva once worked in manufacturing with companies that exported products worldwide and now G&A is building on his expertise. Allen has found it’s easier to work with manufacturers because they tend to be in one location with a large number of core employees, as opposed to a construction firm that has people on multiple job sites, noting, “It makes more sense for us to shift and service those types of businesses.”

The Experts in Benefits Talk Benefits

One of the continuing trends G&A sees are trade associations and groups of employers joining together to get economies-of-scale on benefits. By joining together, businesses see their costs become more manageable.

When it comes to the cost of health care benefits, Allen sees two trends – the first: wellness is starting to play a bigger and bigger factor in costs. “Fifty percent of health care costs are the result of behavioral choices: what we eat, whether we exercise or not and other behavioral decisions,” Allen said. Until behavior changes, premium costs will go up. G&A is investing in wellness programs, employee incentives, and behavioral change strategies to have more impact on claim costs and consequently what they pay in premiums.

The second trend is: While costs continue to go up, employers are now allocating a certain dollar amount per month, per employee, for benefits. With a benefits program like this, the employees are free to use the money any way they want and are given a menu or a “marketplace of benefits” for selecting.

At G&A, employees receive $450 per month to buy their health insurance, dental, vision, or life insurance with seven or eight plan designs to pick from – and when the money is gone, it’s gone. Whatever additional money it takes to pay for a specific benefit plan has to come out of the employees’ pocket. By doing that, G&A knows what their investment is going to be year-over-year, and they are able to control that line item on their income statement a bit better.

“Bottom line,” says Allen, “the costs continually go up.” Allen believes that health care reform was not designed to reduce costs, but designed to get the uninsured, insured and that’s added to the cost. What G&A sees now is more and more employers changing their benefit plan design and making the plans less beneficial with higher deductibles, less co-insurance, and higher co-pays, all in a desire to hold down the costs.

If Texas Wants Jobs, It Must Provide Education

Tony Grijalva and John Allen are both well educated CPAs. “As the number of people who work in Texas grows, it’s going to be great for us,” said Allen, “but the challenge is not only in the additional infrastructure we need, it is education.”

The partners recognize as people pour in, educating children is critical to help prepare them to work for the types of companies that are part of the new Texas economy. The day of blue collar labor is slowly moving to information technology and that takes a completely different skill set that requires education. Allen mused, “The challenge in Texas is to educate our children in the right way so they can move into the jobs of their future, and that’s not the jobs that were in our past.”