Books: Proof that employees make the most patient investors

Like John Lewis or Arup in the UK, SAIC cites employee ownership as a reason for its sustained success. For its founder, this was just one precept.

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Last Updated: 31 Aug 2010

Of course, it's really all down to his wife, Betty. Over Robert Beyster's office desk hung a poster - a present from Mrs Beyster - bearing a message that summed up the ethos of his business: 'None of us is as smart as all of us.'

Beyster founded Science Applications International Corporation, or SAIC, in 1969, borrowing $30,000 from the bank and securing the loan on his house. Nearly 40 years later, the technology firm employs 43,000 people at 150 locations worldwide, and is turning over $8 billion a year. Not bad for a little start-up from the small town of La Jolla in southern California.

This book is Beyster's own account of his remarkable success. He stepped down as head of the company in 2004, and now feels able to talk. And what he gives us is one great big good-news story.

As a hack, my initial instinct is to declare, like any hard-bitten news editor: 'Good news is no news.' But we must try to overcome the cynicism, because there are important lessons to be learned here.

And, in fairness, Beyster does not pretend to have been some sort of saint-like, gentle leader of his company. 'I was a demanding CEO,' he concedes at the outset. 'I gave my managers as much autonomy as they could handle, but I also expected results, and I constantly monitored performance metrics and kept my finger on the pulse of every part of the organisation, no matter how small or how far flung. My job was to be the catalyst that energised the corporation - to set the bar high, to keep people on their toes, to model (and insist on) the highest ethical standards, and to hold people to their promises.'

Beyster founded the business because of his love of science, not money. 'I wanted to create a company that would attract talented scientists and engineers who would tackle nationally important scientific issues,' he says. 'Our goal was to grow a company that would be stable - where the staff stayed with the company, even in hard times ... and creative research would be considered important, regardless of the size of the contract.'

His timing was good. The Cold War was at its height, and the US 'military industrial complex' needed high-tech solutions. SAIC began a relationship with the US government that has proved extremely lucrative for it ever since.

Defence work, not to mention surveillance, seemed to come naturally to the firm. We have already heard how Beyster kept a close eye on his managers, but how about this? 'It became a responsibility of all employees to be alert for co-workers who were not contributing, and to either help them remedy this situation or ensure that management was informed.'

Claustrophobic, or merely benign paternalism? Beyster certainly took a keen interest in his new recruits, putting most candidates through at least five interviews before making a job offer. But this attention to detail was all part of the strong SAIC culture, which was based on the principle of widespread employee ownership.

Long-time colleague John Glancy is quoted in the book explaining how this works in practice. 'Giving a person one share of stock made them 100% different,' he says. 'With stock, they felt like they were involved, and an owner. If you weren't performing, you weren't just hurting the company - you were hurting yourself.'

Beyster is a long-time proponent of the virtues of employee ownership. 'I have found,' he says, 'that employees are more patient investors than the public.' So deeply entrenched was this culture that the firm even established its own internal stock market.

Beyster's book is structured around his 12 core principles, the ideas that lie behind SAIC's success. The principles are:

People first: SAIC hires smart people and lets them focus on customers, rewarding them for their entrepreneurial flair.

Freedom (but with strings attached): staff are free to pursue work they are passionate about, but follow company practices for bidding and contracting, and adhere to the highest ethical standards.

From science to solutions: a firm commitment to science and research.

Employee ownership: the glue that keeps people on board.

Participation in decision-making: Decisions made and problems resolved at lowest appropriate level.

Organised for growth: entrepreneurial culture, few administrative restraints.

No grand plan: Organic growth.

Everyone a salesperson: smaller overhead, less on marketing, everyone looking for work all the time.

Extensive feedback and lessons learned: quarterly 'meetings week' and healthy feedback loops.

Experiment constantly: Discretionary money allocated to managers at all levels - unprecedented in the defence industry (and rare in any).

Expect reasonable profit, but with stock price growth: not going for big bucks fast.

Governance - sustainability or transition?: SAIC board aiming for both short- and long-term goals.

Maybe The SAIC Solution isn't for everybody. There have been rumblings in the US media - especially in the March 2007 edition of Vanity Fair - of how well SAIC has done out of the 'war on terror'.

But now you know the company's secrets, what's stopping you from launching your own billion-dollar business yourself? - The SAIC Solution: How we built an $8bn employee-owned technology company; J Robert Beyster and Peter Economy; Wiley £18.99.

- Review by Stefan Stern a contributing editor to MT.

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