Profile: Ernst Volgenau | Few failures, plenty of challenges
Ernst Volgenau and SRA create legacy of ethics and success
- By Tania Anderson
- Sep 01, 2006
Ernst SRA International Inc. has grown steadily since Volgenau founded it in 1978. Today it's a $1.2 billion company selling technology and strategic consulting to the government.
Ernst Volgenau is hard pressed to find any failures in his career. There were moments in his company's 28-year history when he was concerned, maybe even lost a wink or two of sleep. But SRA International Inc. has grown steadily since Volgenau founded it in 1978. Today it's a $1.2 billion company selling technology and strategic consulting to the government.
But the past three decades have been eventful ones for Volgenau, 72, and SRA.
There was the year early on in Fairfax, Va.-based SRA's existence when the company couldn't get its bank credit line re-approved. And the time a few years later when SRA hit a period of flat revenue growth, forcing Volgenau and other leaders in the company to question its direction and focus. And let's not forget the dotcom years when SRA tried to cash in on the Internet boom.
Volgenau planned the launch of SRA nearly a decade before the company was born. After growing up on a farm in western New York state, he joined the military and was an Air Force officer in the late 1960s and early 1970s. While working for the assistant secretary of Defense for systems analysis, he saw many of his co-workers leave to start their own companies and realized he could do the same.
SRA's first piece of business came as a subcontractor for American Management Systems Inc. The founders of that company worked with Volgenau at the Pentagon and decided to help his fledgling company get started.
Soon after it was formed, however, the company saw its first challenge: Volgenau struggled to get a bank loan to pay employees and other expenses.
Bank officials "really didn't understand the business no matter how I tried to explain it," he said.
Volgenau and his wife had to put up their home and the four townhouses they owned as collateral before the bank would approve a loan and promise to lend more as the company's credit rating increased. Four years later, the company was able to borrow money, this time against its receivables.
SRA was in a comfortable routine of renewing its credit line annually until 1984 when a new bank officer took over the company's account. The next year's line of credit was denied and Volgenau feared he would have to sell the company.
"We didn't want to sell the company and certainly not at the price we'd have to sell it for," Volgenau said.
So he did what any entrepreneur would do. When one bank says "No," find another that will say "Yes." Volgenau established a credit line with another bank that still services the company today.
The years that followed were filled with contract wins, steady revenue growth and a growing roster of employees. But in the early 1990s, Volgenau hit another rough patch. Between 1989 and 1991, revenue was at a standstill, stuck in the $40 million range. The slump forced Volgenau and his executive team to question the company's direction.
"For us, even though we grew, we said, 'We're never going to get out of the 40s,' " Volgenau said. "We went through some really rigorous self-examination, but it turned out that there really wasn't anything wrong."
The rough patch smoothed out in 1992 and revenue jumped to $66 million. Volgenau, who says he still doesn't know why the company had flat growth, breathed a sigh of relief and told his managers to focus on fundamentals: marketing, customer service, sales and good hires.
Volgenau tested the dotcom waters of the mid- to late 1990s when the Internet boom was in full swing. Between 1993 and 2000, SRA created five Internet companies, the most successful being Mantas Inc., a behavior detection software developer that recently announced it is being acquired for $122.6 million.
When in 2001 SRA was eyeing an initial public offering, investment bankers advised the company to get out of the Internet business and focus solely on government and technical services. The company's dotcom dabbling had yielded only $25 million in revenue.
"In retrospect, if we had focused totally on our real strength, we might be more ahead than we are now," he said.
Aside from hitting more than $1 billion in revenue, Volgenau said his biggest legacy is that he created an organization that stands for something beyond profit. SRA management is vocal in its advocacy of honesty and service and ensures that new hires understand and subscribe to the importance of ethics in the company.
Long before the outcry that accompanied disclosures by the Enrons and Worldcoms of the world, Volgenau was known in the government IT community for his unyielding business ethos.
"He and early partners in the firm viewed the company with a corporate and interpersonal ethic that SRA is famous for," said Stan Soloway, president of the Professional Services Council. "It's a highly regarded company both in terms of work and corporate character."
Observers attribute SRA's success in large part to its ability to hire the best talent. The company now employs more than 4,000 people.
"When government people retire, given a choice, they want to work for SRA," said Tom Hewitt, CEO of Global Governments Inc. "It's more than a job, it's a passion for doing good work for the government."
Since handing over the leadership reins to Renato DiPentima in January 2005, Volgenau has focused on the three-day-a-week job as chairman of SRA, philanthropic endeavors and sitting on other boards. He's also doing some writing and reluctantly talks about writing a book on the history of people's interaction with IT.
And what about retirement?
"To me a good life would be to work until you die," he said.
Tania Anderson is a freelance writer in Arlington, Va.