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Beyster outlines what went wrong with SAIC's employee-ownership model

Robert Beyster, the founder of Science Applications International Corp., has never made it a secret that he didn’t agree with the decision for SAIC to become a publicly-traded company after he retired in in late 2003.

He also didn’t agree with the decision to split SAIC into two companies – Leidos and SAIC – in 2013.

Robert Beyster

Robert Beyster, founder, SAIC

But in an updated edition of his book, the SAIC Solution, Beyster gives a clear-eyed analysis of what he thinks went wrong and offers advice to any leader who wants to preserve the culture and legacy of an organization they have built.

It’s remarkable to me how quickly SAIC became a different company after Beyster left. He founded the company in 1969 and ran it for 34 years. He built an $8 billion employee-owned company. Two years after he was completely separated from the company, SAIC was publicly traded.

But things started to unravel even before Beyster left, and he shoulders the blame in his book because of poor decisions around succession planning and the make-up of the company’s board of directors.

Beyster is a staunch advocate of employee-ownership, and the tagline on his book is “Built by Employee Owners.” He also started the Foundation for Enterprise Development, which later became the Beyster Institute. It is part of the University of California-San Diego. The institute fosters entrepreneurial employee ownership through training, education and consulting.

Employee ownership was central to SAIC’s culture, and support of employee ownership was a requirement to be a member of the company’s board. Apparently, not all of the board members were all-in on the concept, however.

“Some board members were not committed to employee ownership preserving our culture. And unfortunately, I didn’t figure this out until it was too late,” Beyster writes.

He takes the blame for this. While he writes that he believes he did a good job creating support for employee ownership among SAIC staff and managers, “I did not do as good a job at the board level.”

Beyster describes how he wishes he had done more to ensure that the board was as fully vested in the values and importance of employee ownership.

The disconnect between some board members who didn’t fully embrace employee-ownership and Beyster’s desire to preserve SAIC’s culture came to a head around the succession plan as Beyster moved toward retirement. There also was disagreement with how to handle the growing number of retiring SAIC employees who were cashing out their company stock.

He writes:

“By the late 90s, I knew that I had a succession issue. The challenge was twofold. On one hand, I knew that maintaining the company’s strong leadership and keeping our unique employee culture in place was absolutely critical to SAIC’s ongoing and future success. However, it was difficult for me to find the right successor and to wind down my own position of leadership with the company I had founded and poured so much of my working life into. I believe that letting go of the reins is a common challenge for many company founders, and I can confirm that it was a particularly difficult challenge for me personally.”

That paragraph is somewhat heartbreaking to me, but it gets worse as Beyster describes how the majority of the board forced him into retirement and set the course for taking the company public.

“As I look back to that dark time for me personally, I can now clearly see the lessons I learned from this experience,” he writes.

Beyster offers five lessons:

The importance of succession planning. He writes that he tried to find the right person, “but I didn’t commit myself to making succession happen, so it didn’t happen in a way that would preserve our unique culture.”

Board make-up. Beyster says he should have more aggressively put in place a board that represented the company’s employee-ownership culture, perhaps by having nonexecutive employee-ownership representatives or employee-ownership experts from academia. Another possibility would have been appointing CEOs from other successful employee-owned companies or senior non-executive SAIC employees to the board.

Creation of a management committee. A management committee on the board would have been charged with “preserving, promulgating and communicating SAIC’s core values, cultural attributes and operating philosophies that emanated from our unique system of employee ownership.”

SAIC leadership. The leadership team should have been more thoroughly and deeply committed to the long-term values of employee ownership.

Resolving liquidity issues. Beyster writes that he wishes that he had taken care of the problem of cashing out retirees earlier and not left it to the board. He believes if there was a commitment to employee leadership, other resolutions might have been possible besides a traditional public offering.

“To make a long story short, I learned that you can spend a lifetime with a management team and tens of thousands of employees building a successful employee-owned company, but that everything you’ve built can be put in jeopardy if you don’t manage the succession and governance and culture issues far in advance,” he writes.

That last phrase – “far in advance” – echoes in my mind as I read it. That’s Beyster’s clear-eyed hindsight and painful recognition that he could have done things differently. He trusted the wrong people, he struggled with letting go, and he failed to put in the mechanisms necessary for SAIC’s continued success as an employee-owned company.

And sadly, as he writes in his book, he didn’t recognize those things until it was too late.

Beyster also says that he has come to terms with what happened. But it had to be a bitter pill for him to swallow.

You can’t read his updated book and not come away admiring what he built at SAIC, as well as his honesty in examining how things went wrong at the end.

His legacy as a leader and innovator remain intact, and he serves that legacy well with this updated version of the SAIC Solution.

More information on the book is available at www.saicbook.com.

Posted by Nick Wakeman on Jul 22, 2014 at 1:16 PM


Reader Comments

Tue, Aug 26, 2014

I was laid off just 3 months shy of 31 years at SAIC, then Leido's. I loved my job at SAIC and was proud of the important work we did for our country. Once we went public, my pride in the company diminished year by year under the greedy senior management and board members who walked away with unearned millions while the true workers lost their jobs.

Thu, Aug 21, 2014

I joined SAIC in 1998, my first job fresh out of college. Those were exciting times at SAIC. There was a feeling of energy, excitement and community. The entrepreneurial spirit of the company filled the hallways like a thick fog. We were fierce competitors – not only with companies who stood in our way of a prime contract – but internally as well, with our SAIC brothers and sisters. But the competition was good. It wasn’t something that management forced into us; it was the recognition that if we worked hard and won new work that we could grow our own business segments within the company. We embraced the opportunity to go out and win new contracts, attract top talent with the allure of employee-ownership, and grow largely autonomous divisions and operations under the vast SAIC umbrella. Sixteen years later at Leidos…there are still many positives to reflect upon – an ethical employee culture, expansion into new technology and markets, and unwavering dedication and patriotism to our country and its U.S. Armed Forces – to name a few. But the spirit of the old SAIC is long gone. We are now slaves to profit, quarterly earnings, and analyst expectations. And for what? Even with our focus squarely on stock performance, our return to investors is dismal. We are a company that is led by strategic vision from a small few at the top, as compared to the bottoms-up creativity, inspiration, and internal competition that built our company under the leadership of Dr. Beyster. And particularly painful are the perpetual internal reorganizations and revolving door of mid and senior level managers that are a constant distraction to our employees and customers, to say the least. Mr. Krone has a tough challenge ahead of him as our new CEO. Will he follow in the footsteps of his predecessors (Dr. Beyster excluded) and drive down both the intrinsic and extrinsic value of our company? I remain cautiously optimistic, to echo the words of our recent CEO John Jumper. Leidos is still a great place to work – don’t get me wrong. But it pales in comparison to the old SAIC. I think our present senior leadership team would be wise to reflect upon the entrepreneurial spirit and corporate culture that were once prevalent in the days of Dr. Beyster and the employee-owned company that he founded.

Mon, Jul 28, 2014

While I am not a "silverback" I have been here long enough to know the difference between the two eras of management. Today's crop of carbon copy "what's in it for me" managers are confusing tactics with strategy. Their tactics are to cut and hand out layoff notices every few months. That is not a corporate strategy, that is a means of maintaining their bonus structure. So sad!!!

Mon, Jul 28, 2014

Under Dr. Beyster's Leadership, I was given an opportunity to embark on a career after the Military. I was a novice with only a security clearance to offer as an attribute. SAIC, of old, took me in, trained me, provided opportunity, and left me with 15 years of great memories and life lessons unmatched since. In fact there has been no peace since my last day in 2011. Some have good things to say about the new crop of leaders at SAIC/LEIDOS, some not so good. I am of the opinion that they are narcissists who can't get past their own selfish ambition. In retrospect, I cannot call them leaders at all, simply Corporate Raiders. When I talk about the career possibilities for my children, the Beyster model is a shining example of what can and has been achieved.

Fri, Jul 25, 2014

Dr. Beyster was indeed a sage. I spent 12 years with the company, the first seven under his leadership, and the next five watching it unravel under a series of self-focused CEO's and Group Managers. They were not greedy people... but they were remarkably immune to infection by ideas that were not their own. I recall one particular occasion briefing Dahlberg (CEO after Beyster) and presenting him a new market opportunity that would open across all four services for a new unmanned aircraft. His circle of "yes men" and his bent toward other ideas made it impossible to prevail with new thinking. Later, all four services bought the aircraft, for which SAIC could have been the early developer and adopter. That same CEO was convinced that an IPO would stabilize the company, despite the 30,000+ employees who had come there to be part of an employee-owned culture. Resistance to outside ideas broke Dahlberg and his followers. I dreamed often of a leader instead of a manager, a person who listened twice as much as he spoke. When we had 50 Business Units and a crazy-competitive culture of entrepreneurship and self-determination, those were the days that created the best memories of my career. I moved on, like many of my friends, but will never forget the lessons I learned under Dr. Beyster, whether painfully grilled by him on a review panel, or through watching him build an empire of opportunity for people willing to work hard, building their "own business within a business." Fair winds and following seas, Dr. B. We miss you, and you made us all better for having been part of your team.

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