The date sticks in Paul J. Sarvadi’s memory: Sept. 14, 2001. And it’s not because of the terrorist attacks on New York and Washington, D.C., three days earlier.
His company, Administaff Inc., headquartered in Houston, suffered its own form of attack on Sept. 14 a major supplier suddenly upped its charges, an act that would eventually cost Administaff an extra $12 million that year and $25 million the next year. And there was nothing Sarvadi and his management team could immediately do about it.
“It was really a disaster,” says Sarvadi, Administaff’s chairman and CEO, who co-founded the $1.2 billion company in 1986 and has headed it ever since. “It was going to dramatically affect profitability [and] it basically plateaued our growth.”
As the company’s financial performance deteriorated as a result of the additional costs and other related factors, its stock dropped, closing at $5.92 on Dec. 31, 2002, down from an average high around $26 the previous September. It lost hundreds of millions of dollars of market capitalization, its growth momentum came to an abrupt halt and its reputation was in ruins.
But the long-term result is that today, the company is better and stronger, and the stock is at record levels in the $40 range.