Dr. J. Robert Beyster gave employees ownership in SAIC—and it was a formula for success.
By Scott S. Smith
Founder and former chairman and CEO of Scientific Applications International Corporation, Dr. J. Robert Beyster published his memoir—The SAIC Solution: How We Built an $8 Billion Employee-Owned Technology Company—last year. Before that, the inside story of how the company became so successful was a bit of a mystery.
After all, there was no marketing department until recently, and the company employs engineers and scientists, people for whom marketing might be something of a quantum leap, right?
Beyster says that when he started the firm in 1969, he had several ideas about how to build a successful technology company. First, he didn’t want to take venture
Science Applications International Corporation (SAIC) is a Fortune 500 scientific, engineering and technology applications company that works in fields including national security, energy and the environment, critical infrastructure and health.
capital, because it would require giving away big chunks of the firm right off the bat. He also did not want to go public, because pressure to meet Wall Street’s quarterly income expectations would keep SAIC from investing in long-term growth. So, he decided to take $20,000 from friends who wanted stock, investing $50,000 of his own and taking a $30,000 loan.
He had an idea that if employees were financially vested in the company, they would care more about their work—but allowing employees to own stock through retirement plans wouldn’t be enough. The employees would need a high level of control in what happens at SAIC.
Beyster hoped that this would result in a better retention rate, which would give the company an added advantage over competitors.
Beyster’s ideas were successful. The young company had ample time to grow with the full support of its employees.
As a result, it took in almost $9 billion in revenue last year.
Before the company went public in 2006, all SAIC stock was private, which can make it difficult to trade. To aid its employees in utilizing their internal stock options, the company set up Bull, Inc., which was regulated by the Securities and Exchange Commission and allowed internal trading of stock certificates.
Beyster then began using the company’s highly valued internal stock to turn his technical workers into a sales force. By using bonus shares as a reward for bringing new contracts, scientists responded by becoming surprisingly entrepreneurial marketers. They began to look at their customers’ needs and to use their technical expertise to come up with creative solutions that became new products and services.
“We were looking to not only hire really smart people, but those who also had initiative,” Beyster says. “For managers, this meant that they could design their organization in whatever way they wanted, and pursue almost any area that interested them as long as it stayed within corporate support parameters.”
He encouraged cutting-edge research into the Internet (in its early days), global positioning systems, cargo inspection, counter-terrorism, alternative energy and even HIV treatments. “People are eager to work on something that really matters because it gives them pride in time well-spent,” he says.
As the company moved forward, Beyster introduced a “culture of freedom with strings attached,” making each person not only responsible for results, but also challenging them to think about how their actions would impact the whole company. “Employees were expected to weigh financial, customer, organizational and ethical considerations,” Beyster says. This atmosphere allowed the management of SAIC to be more horizontal and decentralized than that of other companies. For example, individual managers were given authority to hire and fire as they deemed necessary, without having to consult a second-guessing bureaucracy.
Beyster’s initiatives worked, and by 2004, when he left the company, it was worth billions. He sums up his secret in few words: “By its very nature, an employee-owned company recognizes the importance of workers having a say in how it operates. That is what leads to success.”
THE BEYSTER INSTITUTE
Dr. J. Robert Beyster established the Foundation for Enterprise Development in 1986 in La Jolla, Calif. The foundation has worked in 40 countries to encourage entrepreneurship and employee ownership in science and technology companies. In 2002, the foundation’s U.S. division became the Beyster Institute (beysterinstitute.org), and it teamed up with the Rady School of Management at the University of California, San Diego.
The Institute publishes an online magazine, does hands-on training from Salt Lake City to Cairo, funds research, sponsors conferences and provides free consulting to start-ups on a broad range of business skills and issues.
