There's no "I" in this team: CEO Bob Beyster steers SAIC through recession and terrorist attacks, but it's not easy running an employee-owned company in the wake of Enron's collapse - Profile

Chief Executive, The, March, 2002 by Diane Lindquist

J. Robert Beyster has led Science Applications International Corp. through many economic vacillations since launching the company 33 years ago. Yet SAIC, the United States' largest employee-owned research and engineering firm, has sustained revenue and earnings growth throughout its remarkable history. A major reason, says its founder and chief executive, is that when times get tough, employee-owned companies get tougher.

"Anybody can manage a company during good times," Beyster says. "But when things are really going well, people get carried away by their own importance. When they're running a little bit scared, it tends to work better."

The 77-year-old executive is considered the country's premier advocate of spread-the-wealth management. He believes employees contribute the smarts and effort that make a corporation survive and grow; therefore, they should reap the rewards of the company's successes. Beyster prefers to have his workers second-guess him than stock market shareholders and New York analysts, who he says force public corporations to focus on short-term profits and the hottest sectors. "They tend to tell companies: The health business is so much better, the dot-com business is so much better, the Internet business is so much better; why are you spending so much time on that?" he says. "In our case, that would be the end of this company. The analysts would kill us."

Few stock analysts would advise giving workers the substantial corporate role Beyster has. Virtually all of SAIC's more than 41,000 employees, no matter what their level or position, own shares in the $5.9 billion enterprise through an elaborate system of stock ownership. Several hundred are millionaires. Many more are likely to become rich.

It's been pointed out that if Beyster kept ownership of SAIC, he'd be a billionaire several times over. Yet he holds only 1.3 percent of the company's stock.

Workers also guide the firm's strategic decisions. Five sit on a board of directors that includes such luminaries as retired Navy Admiral Bobby R. Inman, ATT President David W. Dorman, GEICO's Louis A. Simpson and Dresdner Kleinwort Wasserstein Managing Director Wolfgang H. Demisch.

"Clearly, it's an enterprise that realizes the value is in the employees, in their hearts, souls and minds," says Demisch. "It's as impressive a talent pool as I've seen in the industry. It's a remarkable company that's an outgrowth of a remarkable man."

Over the past decade, the corporation's annual percentage growth has ranged between 7 percent and 53 percent, with a yearly average of 15 percent. SAIC's successful track record demonstrates that employee-ownership creates an environment and incentive for continued success despite economic ups and downs. Last year, it jumped 17 notches on the Fortune 500 list, moving from No. 312 to No. 296.

Beyster, in a rare interview at the corporation's tiny headquarters tucked in a quiet La Jolla, Calif., commercial and residential neighborhood, says, "Having everybody own part of the company is a big step forward. It tells them you're not afraid to have them participate. And it signals your desire to let them be heard."

Since starting SAIC in 1969 in a nearby office next to a ballet school, the nuclear physicist and World War II Navy lieutenant commander has built a workforce of professionals who respond quickly and intelligently to customer needs. They toil in a rare corporate culture in which owners and workers tend to see eye-to-eye, because they are one and the same. Teamwork is an asset and the focus is on building the company for the future.

Business diversity helps in downturn

Beyster claims SAIC's diversity insulates it from the harsh effects of a struggling economy. "What's helped us during downturns is that there is usually some business area that we're in that's doing pretty well," he says. "When the dot-com era took a kind of tailspin," for example, "our defense business with the government picked up considerably. So we've been able to fill in with that." Indeed, government contracts accounted for more than half of SAIC's sales last year.

If SAIC had heeded critics, it would have abandoned its defense activities in the early 1990s when U.S. government budget cuts prompted other companies to refocus or stop operating. But SAIC continued to make significant contributions to government programs. Besides, Beyster says, employees didn't want to forsake such forward-looking projects as those involving high-tech intelligence and responses to biological warfare.

When SAIC provided technical expertise to the investigations of the World Trade Center bombing in 1993, executives believed terrorism probably would be the dominant national security problem of the next generation. In 1997, SAIC formed its own Center for Counterterrorism Technology and Analysis, and named David Kay director. Kay joined the firm that year after serving as one of the United Nations' chief nuclear weapons inspectors following the Gulf War. The center offers preparedness planning in which it can assess the vulnerability of facilities, such as ports or critical government buildings, and provide contingency planning, including recommendations to reduce the threat of nuclear, biological or chemical attack. As a result, when the September 11 terrorist attacks and subsequent anthrax cases occurred, SAIC experienced a business surge.