Tuesday, October 21, 2008

Booz Allen's Story of Resilience

Booz Allen Hamilton’s Dr. Ralph Shrader has the CEO look.

Neatly coiffed silver hair. Check. Well tailored dark suit, pressed shirt and bold tie. Check…check…check. Cufflinks embossed with the corporate logo. You got it…check.

Dr. Shrader is no mere figure head though. As chairman and CEO of Booz Allen Hamilton, he leads a professional services firm with $4 billion in annual revenue, more than 100 partners and 20,000 employees. The company provides program management, technology, strategy and operations consulting services to Federal civilian, defense, intelligence and homeland security government agencies.

Times are good for Dr. Shrader and Booz Allen Hamilton. The company’s top-line revenue will grow organically 20 percent this year and the firm sports a contract backlog of $2B.

Yet, the past few years have been anything but easy. In fact, during his recent presentation to the National Capital Chapter of the Association for Corporate Growth (ACG) Dr. Shrader dropped the word “resilience” about a dozen times.

This story of perseverance dates back to 1940 when the Secretary of the Navy asked the Booz Allen Hamilton to help the service prepare for the coming war. The firm’s government business prodded along for the next 60 years as a nice complement to its commercial consulting work.

That is until the terrorist attacks of September 11th led to a flood of funding for homeland security and defense programs. Booz Allen Hamilton’s government business exploded and grew to nearly 75 percent of total firm revenue.

Government work wasn’t the only thing exploding at Booz Allen Hamilton. Everything was different in public sector consulting. The length of contracts…the margins…the number of employees required to deliver service.

Booz Allen Hamilton had effectively morphed into two firms (commercial and government), each with its own distinct business model. Partners and line employees began to clash.

Dr. Shrader championed a “One Firm Evolution” reorganization in 2006 to try to bring the warring factions together. No dice. It’s safe to say that Booz Allen Hamilton was akin to a dysfunctional marriage bound together only by institutional history.

It was agreed the best path was to break the firm into two, yet a financial partner was required to fund the transaction. In stepped global private equity powerhouse Carlyle Group and the transaction came together with more than 99 percent of shares voting in favor.

Today, Booz Allen Hamilton and Booz & Company exist as separate firms that collaborate when appropriate. Dr. Shrader is now free to plot corporate strategy and manage growth, while fondly telling the firm’s story of resilience.

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