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.

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.