Interviews at The Entrepreneur Center @NVTC

An Interview with Ernst Volgenau, Chairman, SRA International
October 23, 2006

Ernst Volgenau has long been associated with business ethics. As founder of SRA International in 1978, he repeatedly invoked the company motto, ‘honesty and service.’ It’s on coffee cups, annual reports, and plaques hanging in the company’s Fairfax office. The government contractor is nearing 5,000 employees and posted $1.18 billion in fiscal 2006 revenue. A Naval Academy graduate who spent 20 years in the Air Force, Volgenau, 73, handed over the reins of SRA to Renny DiPentima at the beginning of 2005. Now as chairman, he works three days a week and spends the rest of his time writing a history of people and technology, as well as on philanthropy focused on the environment and education.

Tania Anderson for Bisnow on Business: Are you concerned about the state of business ethics?
The excesses of the 1990s that led to Enron and Worldcom and other fiascos and ultimately the Sarbanes Oxley law surprised me. I don’t understand why business executives don’t emphasize ethics more. It appalls me that some businesses are just profit driven. When I see a business like that I say, ‘Boy, that’s headed for trouble’ because people are going to start taking short cuts.

Are CEOs with strong business ethics the rule or the exception?
Most of the executives I know in large and small companies are quite honest. They want their companies to get ahead and succeed. But what I don’t understand is why more executives don’t go beyond the minimum requirements of the law. When capitalism is operating at its best, companies and executives have a sense of social responsibility. They have an ideal of serving society in addition to being profitable.

How do you teach your employees to be ethical?
You must stand for something as an individual and as a company. Once you stand for something then you develop values and a culture to go with it. In the case of SRA our ethic was honesty and service. We say this again and again to one another and it becomes a mantra. And walk the talk. People see right through you if you don’t do what you say.

How often have you had to terminate an employee for violating ethics?
Not often. Maybe several times through the last decade. When you emphasize ethics continually, there’s far lower chance of a violation.

When you’re interviewing someone for a job at SRA, how can you tell if they’re ethical?
There’s no way in an interview to determine the character of someone. You have to use reference checks. You can’t simply think that you’re going to outwit some clever talker.

What was the local tech community like when you first launched SRA?
There were many computers beginning to take over the work of some of the big mainframes. Microcomputers such as the Radio Shack TRS80 and the Apple were emerging. AT&T was still the dominant telecommunications company. Data communications was small compared to voice. The Internet was a government network. There were far fewer startups each year than there are today. There were many civil servants who were doing systems analysis and programming. A lot of that has now been outsourced. All of the big technology companies were much smaller — Computer Sciences, SAIC and what eventually became IBM Global Services.

How do you make a company profitable every year?
You have to bid and bid properly. Then you have to perform the work well and control indirect costs. Indirect costs seem to grow particularly when you’re growing rapidly. One doesn’t pay attention to indirect costs. Then when growth slows down as it does for everybody, the indirect costs keep growing.

What is the biggest mistake you’ve made in business?
Our most important decisions have involved people. Some of my greatest accomplishments at SRA were because we chose really good people. But some of our biggest mistakes have involved the wrong choice. Somebody who looks good on paper but can’t produce. Another problem is someone who has done well in one job and you promote to a higher job and he or she can’t perform it well.

What was it like handing over your baby?
It wasn’t hard at all. Over the years, I’ve gradually surrendered responsibility to others. There was a time perhaps the first five years of the company in which I absolutely insisted on interviewing anybody who entered the firm whether they were a senior person or a secretary or a clerk.

What kind of mistakes do you see young entrepreneurs making today?
The biggest mistake I see is lack of preparation. People sometimes start companies without a clear understanding of the market or a plan for exploiting it. Successful business requires careful planning, attention to detail.

What are some of the best lessons you’ve learned?
Resist hiring family and friends unless they’re qualified. Have high standards that include good ethics. Avoid markets you don’t understand.

Were you entrepreneurial as a kid?
No, I was too busy working. I grew up on a small farm in western New York. It was during World War II when I was young and my father was fighting in the Pacific under General MacArthur and my brother enlisted in the Marines. And I was left taking care of a farm at age 11. I milked three cows a day and took care of other animals and the garden. In the summer I worked on nearby farms and caddied. I didn’t have a single minute to start a company. It never even crossed my mind. Kids today have more time to think about that.

Was the farm your family’s income?
My father was in the Army. They’d lost everything during the Depression. But he was called into active duty and ended up being a major. For a long time it was a very important supplement to whatever part-time jobs he could get before the war. I don’t remember that part but I certainly remember the farm work.

If you hadn’t gone into technology, what would you have done?
If I hadn’t been an engineer, I would have been a quantum physicist or a biologist or a writer of history and fiction. I like too many things.  :)