Booz Allen’s Shrader urges ‘lead from the center’

In such challenging times as these for the contracting industry, CEOs and other top executives should lead from the center, Booz Allen Hamilton Chairman, CEO and President Ralph Shrader, said today.

“I’m an engineer by training and it helps me to envision perhaps a gyroscope as my mental image of leading from the center,” he said. “As external conditions spin and swing, sometimes wildly, the center of the gyroscope – the rotor, as it’s called – remains balanced and in control.”

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Shrader said, “I believe it’s essential in times of dramatic change – in stormy conditions, if you will – to stay centered” even as the ship is tossed about with the winds.

“It’s important to hold to the center of what is essential and differentiated while being agile to seize the opportunities and meet the challenges of the future,” he said.

As an example, Shrader described how his vision of one company combining commercial and government consulting failed to take root.

That led to the subsequent divestiture of the commercial business into Booz & Company and the sale of a majority stake of the government business to the Carlyle Group.

“The forces pulling the center apart were stronger than the historical ties that were holding us together over our 90-plus years of existence and it became clear to me that our best path forward was a de-merger,” he said.

However, Booz Allen now is a Fortune 500 company listed on the New York Stock Exchange. It has about 25,000 employees spread across the D.C. metro area and at locations close to the clients they serve.

And the company’s May 2012 earnings call was the sixth straight quarter of top- and bottom-line growth since the IPO in 2010, he said.

“Nonetheless, like many of your companies, we are today facing the most challenging market conditions since I took office as CEO some 13 years ago,” Shrader told the audience at the Northern Virginia Technology Council’s Titans of Technology breakfast on July 13.

In January 2012, he said, Booz Allen made the difficult decision “to reduce our senior management ranks and take significant costs out of our overhead.”

Headcount was reduced by 2 percent overall, but the senior ranks were reduced by 10 percent. “These changes were not easy, and I assure you they were not taken lightly,” Shrader said.

“The cost reductions have given us greater flexibility and very importantly, they have freed up investment money for us to put into areas we believe have strong potential for the future growth of our firm,” he said.

Among those areas, he cited healthcare, cyber, cloud-based services and the new commercial and international businesses Booz Allen launched in the summer of 2011 after expiration of the three-year non-compete agreement with Booz and Co.

The present market environment is challenging, “lean and unpredictable,” Shrader said.

“The procurement process has changed and in many ways not for the better,” he said. “Technical clients whose missions we support are less and less in the driver’s seat when it comes to decisions around contracting. And the current emphasis on low-price, technically acceptable awards I believe do not provide our government clients with necessarily the best solutions or the best value.”

Such emphasis “inevitably leads to minimally acceptable solutions with significant mission risk and reduced innovation,” Shrader said.

“We simply need to find a better balance,” he said, “because it is innovation and creative solutions that will lead to improvement in quality and true long-term cost savings for our clients and the governments in this country.”

Nevertheless, Shrader termed today’s challenges “significant but not insurmountable.”

“I am convinced there are ways to make smart [cost] cuts and there are opportunities to help clients make smart cuts that still preserve their important core missions,” he said.

“Colleagues, these are indeed turbulent times. [But] these are the times that are given to us,” he said, citing Tolkein’s “The Fellowship of the Ring.”