SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


          __X__  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                 THE SECURITIES EXCHANGE ACT OF 1934

                     For the quarterly period ended March 31, 1998

          _____  TRANSITION REPORT PURSUANT TO SECTION 13 OR
                 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the transition period from _____ to _____

                         Commission file number 1-14762

                            THE SERVICEMASTER COMPANY
             (Exact name of registrant as specified in its charter)

               Delaware                                  36-3858106
  (State or other jurisdiction of              (IRS Employer Identification No.)
  incorporation or organization)

One ServiceMaster Way, Downers Grove, Illinois           60515-1700
(Address of principal executive offices)                 (Zip Code)

                                  630-271-1300
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes __X__ No _____.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
shares: 187,791,968 shares as of May 7, 1998.

This document consists of 11 pages, including the cover page.


<PAGE>
                                           
                                TABLE OF CONTENTS

                                                                            Page
                                                                             No.
                                                                            ----
THE SERVICEMASTER COMPANY (Registrant) -

Part I.  Financial Information
-------  ----------------------

Consolidated Statements of Income for the
   three months ended March 31, 1998 and March 31, 1997                        2

Consolidated Statements of Financial Position
   as of March 31, 1998 and December 31, 1997                                  3

Consolidated Statements of Cash Flows for the
   three months ended March 31, 1998 and March 31, 1997                        4

Notes to Consolidated Financial Statements                                     5

Management Discussion and Analysis of Financial Position
   and Results of Operations                                                   7

Signature                                                                     11

                                        1
<PAGE>


<TABLE>
<CAPTION>
                          PART I. FINANCIAL INFORMATION

                            THE SERVICEMASTER COMPANY
                        Consolidated Statements of Income
                      (In thousands, except per share data)


                                                                           Three Months Ended
                                                                                March 31,
                                                                        1998               1997
                                                                     -----------        -----------

<S>                                                                 <C>               <C>          
Operating Revenue..............................................     $    981,788      $     817,136

Operating Costs and Expenses:
Cost of services rendered
and products sold..............................................          794,797            657,145
Selling and administrative expenses............................          117,218            101,391
                                                                     -----------        -----------

Total operating costs and expenses.............................          912,015            758,536
                                                                     -----------        -----------

Operating Income...............................................           69,773             58,600

Non-operating Expense (Income):
Interest expense...............................................           24,095             10,392
Interest and investment income.................................           (3,435)            (2,567)
Minority interest..............................................                -              2,148
                                                                     -----------      -------------

Income before Income Taxes.....................................           49,113             48,627
Provision for income taxes (pro forma in 1997)(1)..............           19,843             19,645
                                                                     -----------        -----------

Net Income (pro forma in 1997)(1)..............................     $     29,270      $      28,982
                                                                     ===========        ===========

Per Share:

Basic (pro forma in 1997)(1)...................................            $ .16              $ .13
                                                                           =====              =====

Diluted (pro forma in 1997)(1).................................            $ .15              $ .13
                                                                           =====              =====

Cash Distributions Per Share...................................            $ .12          $ .11 1/3
                                                                           =====          =========


 (1) The Company  converted  from  partnership to corporate form on December 26,
     1997.  Prior to the conversion,  the partnership  entity was not subject to
     federal and state income taxes,  as its taxable income was allocated to the
     Company's shareholders.  The results shown above for the period ended March
     31, 1997 have been restated to adjust the actual historical information for
     that period to a basis that assumes that reincorporation had occurred as of
     the  beginning  of that year.  Actual net income for the period ended March
     31, 1997, as previously reported (i.e.,  excluding the effects of pro forma
     corporate  income  taxes),  was  $46,860  (basic and diluted net income per
     share was $.22 and $.21, respectively).

(2) Basic earnings per share are calculated  based on 186,597 shares in 1998 and
    216,309 shares in 1997 while diluted earnings per share are calculated based
    on  192,970  shares in 1998 and  224,429  shares in 1997.  All share and per
    share data have been  restated  to reflect  the  three-for-two  share  split
    declared on May 9, 1997 and payable to shareholders of record as of June 11,
    1997.

                 See Notes to Consolidated Financial Statements
</TABLE>

                                        2
<PAGE>


<TABLE>
<CAPTION>
                            THE SERVICEMASTER COMPANY
                  Consolidated Statements of Financial Position
                                 (In thousands)

                                                                                   As of
                                                                         March 31,       December 31,
                                                                           1998              1997
                                                                       ------------      ------------
Assets

Current Assets:
<S>                                                                   <C>             <C>           
Cash and cash equivalents............................................ $      32,860   $       64,876
Marketable securities................................................        64,459           59,248
Receivables, less allowances of $31,971
   and $32,221, respectively.........................................       315,371          299,138
Inventories..........................................................        57,364           48,157
Prepaid expenses and other assets....................................       192,208          122,665
                                                                       ------------    -------------
    Total current assets.............................................       662,262          594,084
                                                                       ------------    -------------

Property and Equipment:
   At cost...........................................................       419,845          362,653
   Less:  accumulated depreciation...................................       237,076          204,383
                                                                       ------------    -------------
    Net property and equipment.......................................       182,769          158,270
                                                                       ------------    -------------

Intangible assets, primarily trade names and goodwill,
   net of accumulated amortization of $227,891
   and $218,293, respectively........................................     1,692,702        1,563,309
Notes receivable, long-term securities, and other assets.............       160,498          159,561
                                                                       ------------    -------------

    Total assets.....................................................$    2,698,231   $    2,475,224
                                                                       ============    =============


Liabilities and Shareholders' Equity

Current Liabilities:
Accounts payable.....................................................$       83,285   $       84,673
Accrued liabilities..................................................       289,605          270,667
Deferred revenues....................................................       220,501          181,298
Current portion of long-term obligations.............................        33,741           21,539
                                                                       ------------    -------------
    Total current liabilities........................................       627,132          558,177
                                                                       ------------    -------------

Long-Term Debt.......................................................     1,379,936        1,247,845
Other Long-Term Obligations..........................................       142,296          144,764
Commitments and Contingencies .......................................

Shareholders' Equity:
Common stock $0.01 par value, authorized 1 billion shares; issued
    and outstanding 187,158 and 186,629 shares, respectively.........         1,872            1,866
Additional paid-in capital...........................................       531,094          519,424
Retained earnings....................................................        72,146           65,000
Restricted stock.....................................................        (4,048)          (4,270)
Treasury stock.......................................................       (52,197)         (57,582)
                                                                       -------------   --------------
    Total shareholders' equity.......................................       548,867          524,438
                                                                       ------------    -------------
    Total liabilities and shareholders' equity.......................$    2,698,231   $    2,475,224
                                                                       ============    =============

                 See Notes to Consolidated Financial Statements
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
                           THE SERVICEMASTER COMPANY
                      Consolidated Statements of Cash Flows
                                 (In thousands)

                                                                                Three Months Ended
                                                                                     March 31,
                                                                               1998            1997
                                                                          ------------      ------------

<S>                                                                     <C>                <C>          
Cash and Cash Equivalents at January 1................................  $       64,876     $      72,009

Cash Flows from Operations:
Net Income............................................................          29,270            46,860
    Adjustments to reconcile net income
    to net cash provided from operations:
       Depreciation...................................................          11,639            10,972
       Amortization...................................................           9,598             7,428
       Change in working capital, net of acquisitions:
         Receivables..................................................         (12,535)          (12,403)
         Inventories and other current assets.........................         (70,791)          (65,210)
         Accounts payable.............................................          (2,394)            2,906
         Deferred revenues............................................          38,026            39,197
         Accrued liabilities..........................................           7,269              (642)
       Other, net.....................................................           2,503             1,320
                                                                         -------------      ------------
Net Cash Provided from Operations.....................................          12,585            30,428
                                                                         -------------      ------------

Cash Flows from Investing Activities:
    Business acquisitions, net of cash acquired.......................        (106,481)          (96,405)
    Property additions................................................         (23,354)          (12,970)
    Payments to sellers of acquired businesses........................          (3,757)           (1,062)
    Notes receivable and financial investments........................          (1,012)           (1,558)
    Sale of equipment and other assets ..............................              748               553
    Net purchases of investment securities............................            (639)             (763)
                                                                         --------------     -------------
Net Cash Used for Investing Activities................................        (134,495)         (112,205)
                                                                         -------------      ------------

Cash Flows from Financing Activities:
    Long-term borrowings, net.........................................         123,242           100,785
    Payments of borrowings and other obligations......................         (10,586)          (14,618)
    Distributions to shareholders and shareholders' trust.............         (22,124)          (24,815)
    Purchase of ServiceMaster shares..................................          (4,018)          (10,151)
    Proceeds from employee share option plans.........................           1,990             1,957
    Other.............................................................           1,390              (208)
                                                                         -------------      -------------
Net Cash Provided from Financing Activities...........................          89,894            52,950
                                                                         -------------      ------------

Cash Decrease during the Period.......................................         (32,016)          (28,827)
                                                                         -------------      ------------

Cash and Cash Equivalents at March 31.................................  $       32,860     $      43,182
                                                                         =============      =============

                 See Notes to Consolidated Financial Statements

</TABLE>
                                       4
<PAGE>


                              THE SERVICEMASTER COMPANY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note  1:  The  consolidated   financial   statements  include  the  accounts  of
ServiceMaster and its significant subsidiaries, collectively referred to as "the
Company".  Intercompany  transactions  and  balances  have  been  eliminated  in
consolidation.

Note 2: The consolidated financial statements included herein have been prepared
by the  Company  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Certain  information  and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.  However, the Company believes that the disclosures are adequate to
make the  information  presented  not  misleading.  It is  suggested  that these
consolidated  financial  statements  be read in  conjunction  with the financial
statements and the notes thereto  included in the Company's latest Annual Report
to shareholders and the Annual Report to the Securities and Exchange  Commission
on Form  10-K for the year  ended  December  31,  1997.  In the  opinion  of the
Company, all adjustments,  consisting only of normal and recurring  adjustments,
necessary to present fairly the financial position of The ServiceMaster  Company
as of March 31, 1998 and December 31, 1997,  and the results of  operations  and
cash  flows for the  three  months  ended  March  31,  1998 and 1997,  have been
included.  The preparation of the financial  statements  requires  management to
make  certain  estimates  and  assumptions  required  under  generally  accepted
accounting  principles which may differ from the actual results.  The results of
operations for any interim period are not necessarily  indicative of the results
which might be obtained for a full year.

Note 3: For interim accounting purposes,  certain costs directly associated with
the  generation of lawn care revenues are initially  deferred and  recognized as
expense  as the  related  revenues  are  recognized.  All such  costs  are fully
recognized within the fiscal year in which they are incurred.

Note  4:  On  May  9,  1997,  the  Company's  Board  of  Directors   declared  a
three-for-two share split effective June 25, 1997, for shareholders of record on
June 11, 1997.  All share and per share data have been  restated for all periods
presented to reflect this three-for-two split.

Note 5: Basic earnings per share  includes no dilution from options,  debentures
or other financial  instruments and is computed by dividing income  available to
common  stockholders  by the  weighted  average  number of  shares  outstanding.
Diluted  earnings  per share  reflects  the  potential  dilution of  convertible
securities and options to purchase common stock.  The following chart reconciles
both  the  numerator  and  the  denominator  of the  basic  earnings  per  share
computation to the numerator and  denominator of the diluted  earnings per share
computation.


<TABLE>
<CAPTION>

                                                           Three months                          Three months
                                                       ended March 31, 1998                  ended March 31, 1997
                                                 -------------------------------      ---------------------------------

                                                                                      Pro forma
(in thousands, except per share data)            Income       Shares      EPS          Income       Shares      EPS
                                                ---------    --------    ------       ---------    --------    ------

<S>                                             <C>           <C>        <C>          <C>           <C>        <C> 
Basic earnings per share                        $  29,270     186,597    $ 0.16       $  28,982     216,309    $ 0.13
                                                                         ======                                ======
Effect of dilutive securities, net of tax:     
   Options                                              -       5,941                         -       4,493
   9% Convertible debenture                             -           -                       246       3,195
   6% Convertible debenture                            32         432                        32         432
                                                ----------   --------                 ---------    -------- 
Diluted earnings per share                      $  29,302     192,970    $ 0.15       $  29,260     224,429    $ 0.13
                                                ==========   =========   ======       =========    ========    ======
</TABLE>



                                        5

<PAGE>


Note 6: In the Consolidated  Statements of Cash Flows, the caption Cash and Cash
Equivalents includes investments in short-term,  highly-liquid securities having
a maturity of three  months or less.  Supplemental  information  relating to the
Consolidated  Statements of Cash Flows for the three months ended March 31, 1998
and 1997 is presented in the following  table.  The increase in interest paid in
1998 is primarily due to overall higher debt balances  relating to the WMX share
repurchase in April 1997 as well as the timing of payments on the public debt.

<TABLE>
<CAPTION>
                                                                    (In thousands)
                                                                  1998         1997
                                                               ---------    ---------  
<S>                                                           <C>         <C>    
Cash paid or received for:
Interest expense............................................  $   31,910  $   11,205
Interest and dividend income................................  $    2,007  $    1,942
</TABLE>


Note 7: Effective  January 1, 1998, the Company  adopted  Statement of Financial
Accounting Standards No. 130, "Reporting  Comprehensive  Income". This statement
establishes  standards for reporting and display of comprehensive income and its
components in financial  statements.  Total  comprehensive  income for the three
months  ended  March 31,  1998 and 1997 was  $31.3  million  and $24.7  million,
respectively,  which  included  primarily  net  income and  unrealized  gains on
marketable securities.

In 1998,  Statement of Position No. 98-1,  "Accounting for the Costs of Computer
Software  Developed or Obtained for Internal Use", and Statement of Position No.
98-5,  "Reporting on the Costs of Start Up and  Preoperating  Activities",  were
issued. These statements, which must be adopted no later than January 1999, have
not yet been  implemented  by the  Company.  The  Company  does not  expect  the
adoption  of  these  statements  to  have a  material  impact  to the  financial
statements.


                                       6
<PAGE>



                              THE SERVICEMASTER COMPANY
                         MANAGEMENT DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997
-------------------------------------------------

Revenues  increased  20 percent  over the first  quarter of 1997 to $982 million
through a combination  of  acquisitions  and solid growth from base  operations.
Approximately  half of the growth  resulted from the formation of  ServiceMaster
Employer Services through an acquisition of a professional employer organization
in August of 1997.  This service line has a  significant  impact on revenues and
margins,  because the entire  payroll of the  employees  for whom  services  are
provided is  recognized  both as revenue and operating  cost.  As a result,  the
margins are low in this business and reduce the Company's consolidated operating
income  margin.  Operating  income  increased 19 percent to $69.8  million while
margins decreased to 7.1 percent of revenue from 7.2 percent in 1997.  Operating
margins  excluding  Employer  Services  increased  to 7.8  percent  of  revenue,
reflecting  improved  operating  efficiencies  and the  continued  growth of the
higher margin businesses. Corporate earnings per share in the first quarter were
$.15  compared to pro forma  corporate  earnings per share of $.13 last year, an
increase of 15 percent. Pro forma information presents the results of operations
as if the Company had been a taxable  corporation in both periods.  On this same
basis,  net income grew one percent,  from $29.0 million to $29.3  million.  Net
income  growth  was  affected  heavily  by higher  interest  expense,  resulting
primarily from the  transaction  with Waste  Management  Inc. (WMX) in which the
company  repurchased WMX's 19 percent ownership interest in ServiceMaster  (40.7
million shares) for $626 million on April 1, 1997.  Earnings per share grew at a
faster rate than net income because the transaction  reduced shares  outstanding
significantly.

The Consumer  Services'  business unit achieved strong double digit increases in
revenues and profits.  Strong  growth in all five  operating  companies  and the
addition of Rescue Rooter, an acquisition in the plumbing business,  contributed
to an  overall  21  percent  increase  in  segment  revenues.  TruGreen-ChemLawn
operations  started the year with excellent revenue growth and improved margins.
Impressive  revenue  increases  across  service lines  reflected  customer count
increases and favorable weather  conditions.  Another important  development was
the entry into the commercial  landscape  business through  acquisitions of four
regional  companies  during the  quarter,  which  broadened  the presence in the
commercial sector of the market.  Terminix achieved strong increases in revenues
and profits and  significantly  improved margins  reflecting  favorable  weather
conditions  and strong growth in higher margin renewal  business.  American Home
Shield had very strong  increases in both revenues and profits with double digit
increases in real estate and direct to consumer  sales as well as strong renewal
growth.  The  franchise  operations,  Residential/Commercial  and  Merry  Maids,
achieved strong growth with encouraging results in our company owned businesses.

The Management Services business unit reported a modest increase in revenue with
profits below last year. The Healthcare  market achieved revenue growth although
profits  were  lower,  reflecting  investments  in the  business  and  continued

                                       7
<PAGE>

competitive  pressures  in the acute care sector of the  market.  Profits in the
Education  market  increased  reflecting  improved margins from base business as
well as the  favorable  effect of the  elimination  of costs  incurred last year
related to unwinding a large  contract.  The Business & Industry  group reported
modest growth in revenue and profits comparable to last year.

Cost of services  rendered and products sold  increased 21 percent due primarily
to the addition of ServiceMaster  Employer Services, as well as general business
growth.  Cost of services  increased as a percentage  of revenue to 81.0 percent
from  80.4  percent  in 1997.  Excluding  Employer  Services,  cost of  services
increased  only 9 percent  and  decreased  as a  percentage  of  revenue to 79.6
percent.  This decrease  primarily  reflects the changing mix of the business as
Consumer  Services  increases in size in relationship to the overall business of
the Company as well as productivity  improvements and the successful integration
of acquisitions at Consumer Services. The Consumer Services businesses generally
operate at higher  gross  margin  levels than the rest of the  business but also
incur  somewhat  higher selling and  administrative  expenses as a percentage of
revenues.

Selling and administrative expenses increased 16 percent due to general business
growth and  acquisitions,  and  decreased as a percentage of revenue to 11.9% in
1998 from 12.4% in 1997.  This  decrease as a percentage of revenue is primarily
attributable to the addition of ServiceMaster  Employer  Services and efficiency
gains at Consumer  Services,  offset in part by the changing business mix of the
Company noted above.

Interest  expense  increased over the prior year primarily due to increased debt
levels  associated  with the  repurchase  of  ServiceMaster  shares from WMX and
acquisitions.  Interest and investment  income increased due to gains on sale of
marketable securities at American Home Shield in 1998.


FINANCIAL POSITION
------------------

Net cash  provided  from  operations  of $13 million was below the first quarter
level in 1997. The decrease  primarily  reflects the timing of interest payments
relating  to the  public  debt  issued in August of 1997,  the  acceleration  of
prepayment collections at TruGreen-ChemLawn into the fourth quarter of 1997, and
the current year  funding of seasonal  investments  for the  acquired  lawn care
operations.  Due to the seasonality of the lawn care and pest control  operating
cycles,  the Company's  working  capital needs are the highest  during the first
quarter.  Management  believes that funds  generated  from  operations and other
existing  resources  will  continue to be adequate  to satisfy  ongoing  working
capital needs of the Company.

Federal  taxes on the  Company's  earnings,  while  accrued in the  consolidated
income  statement,  will not have to be paid until the first quarter of 1999. At
that time,  the Company will be  responsible  for its 1998  obligation  and will
begin making estimated payments for 1999 as well.

Accounts  and notes  receivable  grew over year end  levels  reflecting  general
business growth,  increased  seasonal activity in the Consumer Services segment,

                                       8
<PAGE>

and acquisitions. Inventories also increased over year end levels as a result of
normal seasonal build-ups in the pest control and lawn care businesses.

Prepaids and other assets have increased from year end because of seasonality in
the lawn care business.  The lawn care operation defers certain  marketing costs
that are  incurred  during the first  quarter but are directly  associated  with
revenues  realized in subsequent  quarters of the current year.  These costs are
then amortized over the balance of the current lawn care production  season,  as
the related revenues are recognized.  Deferred revenues also grew significantly,
reflecting  strong  growth and increases in customer  prepayments  for lawn care
services as well as increased volume of warranty  contracts  written at American
Home Shield.

Property  and   equipment   increased  due  to  general   business   growth  and
acquisitions.   Capital  expenditures  grew  primarily  due  to  investments  in
predictive dialers at TruGreen-ChemLawn  and computer system upgrades throughout
the organization. The Company has no material capital commitments at this time.

Intangible assets increased from year end primarily reflecting the effect of the
acquisitions,  which included  Rescue Rooter (a plumbing  business),  commercial
landscape companies and other smaller Consumer Services companies.

Accrued  liabilities  increased  from year end reflecting  seasonal  activity at
Consumer  Services.  Debt levels  increased  due to the  seasonal  nature of the
Company's  operating  cash flows,  combined  with the  effects of  acquisitions,
property additions and share repurchases.  The Company is a party to a number of
long-term debt agreements  which require it to maintain  compliance with certain
financial covenants, including limitations on indebtedness, restricted payments,
fixed charge  coverage  ratios and net worth.  The Company is in compliance with
the covenants related to these debt agreements.

In February,  the Company  completed a $300 million  dual-tranche  debt offering
consisting  of $150  million,  7.10  percent  notes  due  March 1, 2018 and $150
million,  7.25 percent  notes due March 1, 2038.  The net proceeds  were used to
refinance  borrowings  under  bank  credit  facilities,   thereby  reducing  the
Company's exposure to short-term interest rate fluctuations.

Total  shareholders'  equity increased to $549 million in 1998 from $524 million
at December 31, 1997 reflecting  earnings  growth,  as well as the shares issued
for   acquisitions,   partially  offset  by  distributions  and  treasury  share
repurchases. The Company continues to repurchase shares in the open market or in
privately  negotiated  transactions  pursuant  to the  authorization  previously
granted  by  the  Board  of  Directors.  Cash  distributions  paid  directly  to
shareholders  totaled $22 million or $.12 per share. The 9 percent decrease from
the prior year  primarily  reflects the April 1997  repurchase of  ServiceMaster
shares  from WMX offset in part by a 6 percent  increase  in  distributions  per
share.

In  April,  the  Company  filed  a Form  S-3  registration  statement  with  the
Securities and Exchange  Commission to offer up to 10.6 million shares of common
stock which included  approximately 7.6 million shares to be newly issued by the
Company and the remaining 3 million shares to be sold by existing  shareholders.
Due to  strong  investor  demand,  the  selling  shareholders  component  of the

                                       9
<PAGE>

offering was  increased  from 3 million to 6.55 million  shares,  including  the
exercise of the over-allotment option by the underwriters. On May 11, the public
offering of  approximately  14.15 million shares was priced at $28.75 per share.
The net  proceeds to the Company  after the  underwriting  discount and offering
expenses are approximately  $209 million and will be used to reduce  outstanding
debt under existing bank credit  facilities,  thereby reducing  interest expense
and increasing the Company's financial flexibility.

                                       10

<PAGE>


                                      SIGNATURE


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

Date:  May 15, 1998


                          THE SERVICEMASTER COMPANY
                          (Registrant)

                          By:                    /s/Steven C. Preston
                          ---------------------------------------------------
                                                    Steven C. Preston
                          Senior Vice President and Chief Financial Officer





                                       11