Can GTSI's new CEO save the company?

In part one of a two part interview, GTSI's new president and CEO, Sterling Phillips, discusses what GTSI has weathered so far. How have customers, employees and partners reacted?

Sterling Phillips assumed the roles of president and chief executive officer at trouble-plagued GTSI Corp. just a week ago, two months after the Small Business Administration suspended the company from further government contracting. SBA later lifted the suspension when GTSI agreed to take certain remedial steps. But the SBA probe of GTSI continues.

In this his first public interview, the long-time IT executive discusses candidly the company’s recent problems with Associate Editor David Hubler. Here is the first of a two-part interview.

Q: Let’s talk about your new job at GTSI. Some would describe the terms of the agreement with the Small Business Administration to lift its contracting suspension as quite onerous. Did that agreement affect your consideration about accepting the GTSI leadership?

Phillips: It definitely was. I’m fortunate in that I have known the directors of this company for many years and have personal knowledge of their integrity and commitment to operating at a high ethical level. And so, while we’ve had a crisis with the SBA and the [investigation] process is still under way, I believe that the company is committed to doing the right thing, to reinforcing our commitment to operate in an ethical and compliant manner, and charging me as the new CEO with ensuring that that’s the case. So I am certain I will spend more time with lawyers and regulators in the coming weeks and months than I ever wanted to, but my mission from the board is to remedy the situation and make sure that all aspects of the management team and our culture and our business processes are supportive of seeing that this never happens again.

Q: Where does the SBA continuing investigation stand at the moment?

Phillips: We reached an agreement with the SBA that lifted the suspension. As part of that agreement, there is a long list of things to do, including we’re providing the SBA additional information with certain delivery dates for that information, the documents, etc. That’s the process that’s under way. That’s where we are. We have met our commitments so far and we have staged deliveries of documents. We’re on schedule. The next delivery – I’ve forgotten the exact date – is within the next two weeks. So we’re on track and presumably they will review the information we’re providing and determine whether any additional discussions are necessary. But that’s where we stand right now.

Q: So that will be the last delivery of documents?

Phillips: I think the best way to view it would be that’s the last delivery of documents that has been requested so far. I think it would probably be premature to believe that other questions might not arise and other requests might not be made. But I would also tell you that it is my goal to be compliant with this process and move through it as quickly as we can. I don’t know what future requests will be made, but the company is committed to setting things right and operating in the right manner going forward, and to that end we’re going to do what we can to expedite the process and satisfy the requests that are made.

Q: How has the SBA action affected daily workings of the company?

Phillips: I would characterize it in a couple of ways. One, the employees, the vast majority of whom operate day in and day out in a highly ethical and compliant manner, have been surprised by the allegations, surprised by the incidents and the SBA action. There certainly has been a hit to morale as a result of that. I think it’s human nature for folks to say, “Gee, if something was done that’s wrong, that’s not me. That’s not how I want to work and I am embarrassed and disappointed and discouraged by that.” So I’d say there certainly has been an impact on morale. The SBA charges were made at the end of September so we’re now 60 days later, so that [morale] has begun to recover a little bit.

Q: And the effects on the business?

Phillips: There has been some impact on the business. We were in the middle of competing for some new work and I don’t have a quantification on this at my fingertips, but some amount of new sales for which we were in a competitive process have been lost because customers heard of this allegation and just immediately reacted by saying, “well, you’re out.” Coming from a broader point of view, I would say there certainly [have been] missed things, the brand and the image that we as a company want to portray, and so there will be some amount of time, effort and money required once this is all resolved to restore the brand and the image of the business to the high level that we aspire to.

Q: What are you personally doing now to restore that morale and get those customers back?

Phillips: I don’t want to dodge the question, but this is Day 5 for me, so my track record is somewhat limited at this point and you’re my first interview. I don’t have a lot of progress to report personally at this point. But what the company has been doing – first off, we isolated individuals who were in any way associated with the allegations made by the SBA and those parties are no longer with the company. There’s been an initial round of communication with the employees not only to tell them what transpired but to reinforce to them what is expected of them in terms of compliance and ethical behavior going forward. We have national strategy meetings starting tomorrow [Dec. 7] where we will have the whole sales force in for the next three days and, as part of that, there is going to be one session on compliance and ethics that all employees will go through and then a second, more detailed session that all the sales and delivery people will go through. We’re taking that opportunity to reinforce to everyone the expectations on behavior and making sure they understand where the boundaries are on behavior. We also, as part of that, will have motivational speakers. We’ll have some networking sessions, some social sessions really to try to get folks back together and sort of rejuvenate a little bit the company spirit. This whole SBA thing has been a wet blanket on the company now for a couple of months.

Q: And as regards your customers?

Phillips: There was some portion of the customer base that was upset with the suspension [and] came back or was willing to do business with us when the suspension was lifted. There is some portion of the customer base that is still upset or disenchanted, however you want to categorize it, but somehow are not happy with us because of all of the allegations, etc., and either might not come back or will take longer to come back. And then, frankly, there was some portion of the customer set that wasn’t particularly affected by it at all. As you know, there have been a number of contractors over the years that have had one instance or another that has led to a short-term suspension or debarment, so there’s some number of customers that have said, “This happens from time to time” and who don’t read anything particularly strategic or enduring into it. So we’re continuing to compete, we’re continuing to represent the company as best we can, and if time passes as it usually does with these things we’ll encounter fewer customers who are put off or upset or who would rule us out as a competitor because of these events.

Q: I see you have an undergraduate degree in psychology from UNC Chapel Hill. How has that helped you in your career in the federal IT arena?

Phillips: It has made absolutely no difference. We’re probably the last generation to get the advice that in college you should get a well-rounded education, a little of everything. I went to work for IBM right out of school and they spent the first year teaching me to be a programmer. And I never looked back. I’ve been in the computer field my entire career.

NEXT: In part 2, Sterling Phillips discusses how he intends to lead GTSI’s efforts to grow rapidly as a services provider and its troubled relationship with the Alaska Native Corporation Eyak and their joint venture Eyak Technology. Click here.