The SAIC Story
Employee ownership, ethics, innovation, technical competence, and superb customer service have been the cornerstones of SAIC since its founding. "As we move into a new era of growth and success with both our government and commercial customers, these fundamental tenets will continue to serve as our strength and foundation," says Kenneth C. Dahlberg, who became the CEO and president of SAIC in November 2003 and chairman of the board in 2004.
Founded by Dr. J. Robert Beyster and a small group of scientists in 1969, SAIC, now ranks as the largest employee-owned research and engineering firm in the United States. SAIC and its subsidiaries have more than 44,000 employees with offices in over 150 cities worldwide.
The setting for SAIC's startup in 1969 was not much different than that of many companies that begin with a few dollars and a good idea.
Dr. Beyster admits he had no grandiose plan when he started Science Applications Incorporated (later changed to SAIC) on February 3, 1969, with a handful of government contracts for nuclear power and nuclear weapons effects study programs. . "It was just supposed to be a good place to work... ," he says.
To win contracts in the early years, SAIC scientists wore many hats. They were the marketing people who sold the ideas to the government to win the contracts and the scientists and engineers who performed the work.
Initially, employees gained the right to buy stock if they brought in new business. This was critical in the early days because SAIC was a small company trying to build critical mass. The goal was to get stock in the hands of people who helped build the business. Dr. Beyster believed that those who contribute to the company's success should own the company and benefit from that success. By providing his employees with an ownership stake in the early stages of the company's growth, Dr. Beyster hoped he would be able to attract and retain sought-after professionals.
By the end of the first year, Dr. Beyster had diluted his ownership from 100 percent to about 10 percent. Employees understood that that the company would continue to issue shares to qualified employees so employees had an imperative to grow the company in order to create value for the shareholders.
It didn't take long to realize that one of the main issues the company had to address was creating liquidity for the employees. Dr. Beyster didn't want to go public because he wanted for SAIC to control its own destiny rather than have to bow to the short-term pressures of equity analysts and outside investors.
So, in the early 1970s, SAIC set up a wholly owned broker dealer to enable workers to buy and sell stock. The stock system let people trade their stock four times a year on an internal market. This way, when employees needed liquidity, they could sell some of their shares fairly easily and not have to worry about holding on to an illiquid asset for an indeterminant period of time.
In 1973, the company achieved $10.3 million in sales. By its 10th year, SAIC passed the $100-million mark. As SAIC grew, its needs changed. The ownership system became more complex. Company management introduced additional stock incentives such as bonuses and options as rewards for performance; a qualified stock purchase plan; and an employee stock retirement plan. They found that SAIC's stock system was effective in recruiting, retaining and motivating key employees. They company also developed an extremely effective rabbi trust program to give significant deferred equity compensation awards to future leaders in the company.
Today, as a Fortune 500 company, SAIC's system enables broad participation in ownership by almost all employees. But its primary goal continues to be to give stock awards to those who are most responsible for SAIC's growth and success. That way, company leaders are able to avoid an entitlement mentality. And the system has proved flexible enough to handle the growing complexity of its corporate structure.
Very few companies have been employee owned longer than SAIC. Its employee ownership system has been tested and refined for over 35 years, proving its value in many different business and political environments.
"I don't know where the company would be today without employee ownership," says Dr. Beyster. "Maybe it would be a $50-million company or a $100-million company. But I am convinced that it would not be where it is today."
On July 16, 2004, Dr. Beyster retired from his position as SAIC's chairman of the board of directors. He leaves behind a lasting legacy - a company with over $6.7 billion of revenues and 44,000 employees that, since its formation 35 years ago, solved some of the most important and technically challenging problems facing its customers and this country.
Related Article: Creating Entrepreneurial Employee Ownership at SAIC
|
