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Can a Business Survive When Its CEO Runs it Like a Charity?

A Rockville IT exec is the most generous boss ever. How's that working out for her?
Can a Business Survive When Its CEO Runs it Like a Charity?
Parker serves a homemade lunch to employees at her Rockville IT company. Photograph by Vincent Ricardel.

After work on a Tuesday night this past summer, Sophia Parker pulls into her driveway and lugs a haul of groceries from her BMW to her stoop to her kitchen. It takes a few trips. In the kitchen, she puts an industrial wok on the stove and reaches for a shiny pot that’s too wide to wrap her arms around. She lives alone, but Parker will be up late tonight cooking for a big family: her employees.

Though the end of the fiscal year is approaching and she says she has “only been coming home to sleep,” this is a once- or twice-a-month routine for Parker, who has a staff of about 30 at the Rockville headquarters of her health IT contracting company, DSFederal. She’s been known to schlep a rice cooker of nosh to her 100-plus employees at various government sites, too.

The big shiny pot is for meat dishes; she makes one every time, even though she’s a strict vegetarian. “I don’t mind,” she says, “but I always need people to taste it for me.” Tonight it’ll be pork ribs. Tomorrow, after she wrestles the pot up the office elevator, one of her “kids,” as she calls her employees, will do the honors.

Home-cooked lunch isn’t just a quirky benefit of working for Parker. It’s more like a metaphor for the way she runs her seven-year-old company. Her matronly instinct guides her management decisions, too. Recently, after she learned that her yoga teacher couldn’t find a job with health insurance to cover his diabetes, she hired him. And while many smaller contracting shops regularly cycle through employees—staffing up when they win a project, making layoffs when that cash flow ends—she’s been known to assign idle workers to redesign websites for charities and nonprofits.

“When I look at people—there’s a Chinese virtue called ‘piety,’ ” Parker says of her hiring criteria. “I look at their characters. I look at how they interact with their friends, how they talk about their parents.”

She takes an equally quixotic approach to her government contracts: Her favorite projects to bid on aren’t the multimillion-dollar jobs in cybersecurity and data analytics that make IT one of the most lucrative corners of the federal procurement world. She needs those, certainly, but she tends to think of them as the means to a more rewarding end. A way to subsidize her real interest: contracts with a humanitarian mission, such as a training video to help schools plan healthy lunch menus (for the Agriculture Department) or an app that helps firefighters assess the severity of a blaze so they can quickly get the support they need (for FEMA).

“When I hear that, I don’t care—I don’t care whether I make money or not,” Parker says. “These are all small projects—$150,000, $200,000. Very small. But you can’t walk away from projects like this.”

And when each year ends, Parker takes 25 percent of DSFederal’s profits and puts it into a foundation she started four years ago. The money goes to women and children in war-torn parts of Afghanistan and an orphanage run by a friend in South Africa.

“Look at that brickwork, huh?” she says, beaming as she shows me pictures of a project DSFederal is funding at a school in Kabul. “I’m so personally attached to this bathroom.”

Parker gives away 25 percent of her firm’s annual profits, partly to a school in Afghanistan. Photograph courtesy of Sophia Parker.

It is, to put it mildly, an unlikely style of management: Hire people because you like their kindheartedness. Seek out contracts where you’ll make little money because they’re “meaningful.” Funnel your profits into do-good projects 7,000 miles from home.

Yet, year by year, Parker’s company has grown. In 2013, Inc. magazine ranked it the fourth-fastest-growing federal contractor in the country. This year, when the Small Business Administration bestowed its steeply competitive annual awards to outstanding entrepreneurs, Par­ker prevailed: She was named Maryland’s small-businessperson of the year.

It’s hard to say how much Parker’s largess contributes to her success. What seems clear is that DSFederal has thrived thanks to a particularly Washington way of doing business—Uncle Sam’s preferential procurement policies for firms owned by women, minorities, and disabled entrepreneurs.

What she has to figure out now is whether it’ll pay to be so altruistic once she graduates from the program.

• • •

Years ago, Parker would have been a good candidate for the charity she now doles out. She was born in Taiwan in 1957. As she tells it, her schizophrenic mother was institutionalized when she was a child, and she and her three younger siblings spent some of their youth at an orphanage. When Parker’s high test scores got her a spot in the best girls’ school in Taipei, her father agreed to have her come back home—on top of her studies, Parker also had to care for the family.

“She was like a mother,” recalls Carol Wang, a friend from high school. Among other things, Parker learned to cook in large quantities.

In high school and college, Parker studied literature and became proficient in English. At home, she watched American TV shows like Bonanza and began to dream of moving to the place she saw onscreen. In 1978, she went to the US mission and read list upon list of American universities. She was a good writer, so she applied to communications programs—“one on the East Coast, one on the West Coast, one in the middle.” She chose Illinois State.

Parker (above, top row, far right) left Taiwan in 1978 to study at Illinois State. Photograph courtesy of Sophia Parker.

One summer, Parker came to Washington. She found a tiny apartment on Calvert Street and two jobs: waitressing at the Georgetown Holiday Inn and hostessing at a Chinese restaurant at 18th and K. Near the end of the summer, she agreed to loan one of the waiters $6,000. She never saw the money again. Parker couldn’t afford a flight to Illinois, so she transferred to the University of the District of Columbia. A few months later, one of her former teachers from Taiwan set her up with a friend at the State Department who needed help with his Chinese. Within a year, they married. Parker became a Foreign Service wife.

Because her new family moved so often, she got certified as an accountant so she could work anywhere. But back in DC in 1999, Parker’s marriage failed. It was her CPA credentials that became the unexpected key to her life today: She took a job at SAIC, a major government contractor. Before long, she found herself running the help-desk software system for the National Institutes of Health. It was a crash course in both contracting and IT. “And I just blossomed,” she says.

The way Parker narrates her life story homes in not on the typical American theme of grit but on a central thread of serendipity—of chance that prepared and delivered her to a place she’s merely glad to be. “She doesn’t see herself as a successful executive,” says her son, Michael, who helped found DSFederal.

Parker left SAIC in 2004 to help family back in Taiwan, then returned to the States in 2006 and went to work at Northrop Grumman. But she felt the firm lacked some of the esprit of SAIC, and she began to tire of working for a quintessential Beltway bandit. After 18 months, she left to start DSFederal.

“I did not want to be part of another large company,” she says. “I didn’t want to be part of something I didn’t believe in.”

Parker seeks out IT contracts with a do-good mission and looks for hires who share her compassion. Photograph by Vincent Ricardel.

Though Parker had connections in the health world, government agencies are often loath to take a risk on a fledgling company. It took her three years to win her first contract, at the Department of Health and Human Services. By the time Parker won the job, she’d mortgaged her house, sold her family’s apartment in China, and cashed in her 401(k)—$600,000 total, factoring in an $80,000 penalty for early withdrawal.

“She struggled quite a bit initially,” recalls Mike Atassi, a friend who worked with her at Northrop. “She was without health insurance for a while. I kept telling her, ‘Sophia, this is too dangerous.’ She kept taking out loans on her credit card so she could pay employees.”

The first one was her son, Michael, then a recent college graduate earning minimum wage and miserable as a paralegal. He says they worked so hard in the beginning that at different points both collapsed from exhaustion and separately had to go to the hospital because of stress.

“If you see your mom, she has no money left—that’s very motivating,” says Michael, now 30 and halfway through Columbia University’s MBA program. “You have to win. There’s no option. Because you’re going to lose your house.”

Atassi says Parker’s track record was good enough that she could have gotten another big Beltway contracting job without trouble. He kept thinking, “When is she going to pop the question, ‘Can I come back [to Northrop]?’ ” he says. “But no.”

• • •

One night a few years ago, Parker was trying to learn bridge from her friend Rose Wang’s 82-year-old father. “She could not learn the basic rules,” Wang says. “My dad is a retired engineering professor. He said, ‘You have no logic in your bones—I cannot teach you a logic game.’ ”

Wang is also an IT contractor—she founded a Washington company called Binary Group—and tells the story, affectionately, to illustrate how opposite her friend’s approach is from her own.

Today Parker has contracts with a long list of federal agencies: HHS, Homeland Security, Transportation, Defense, Agriculture. Her revenues have notched up steadily, from $9 million in 2011 to $11 million in 2012, $14 million in 2013, and $17 million last year.

This success, it seems fair to say, might not have happened outside Washington. The federal government has certain goals for purchasing from historically disadvantaged companies—service-disabled-veteran- or woman-owned businesses, for example. For minorities, the advantage is institutionalized in a special “set-aside” contracting program known as 8(a). To meet its procurement goals, the government basically opens up the bidding on certain contracts only to qualified minority-owned businesses. That means Parker has lots of opportunities where she doesn’t have to beat out the Northrops and IBMs of the world—she only has to compete against small firms like hers.

Since starting DSFederal, Parker hasn’t just benefited from the program; she’s become one of its rock stars. And the achievement seems to have a lot to do with her sui generis approach to management.

For one thing, her reputation is a magnet for staff: Parker says more than half of her employees were referred by family, friends, or current staffers. (Almost 65 percent of the staff is minority; 59 percent is female.) All of this matters because “the key to winning important work from the government is presenting good people,” says Joseph Hornyak, a lawyer with Holland & Knight who represents government contractors. “You submit proposals and say, ‘These are the résumés.’ ”

Sometimes Parker’s generosity cuts against her own interest in retaining stars. Her son tells a story of one young employee who picked up IT skills at DSFederal and has done well with the work but never went to college—Parker is paying for him to go to school part-time. When she hired her yoga teacher, Parker’s head of operations warned her that the man’s diabetes would drive up the company’s insurance premiums, she says, but she went ahead with it anyway.

“And he’s turned out to be such a good hire,” she tells me. Not only is he a whiz with the Drupal content-management system—he feng-shui’d his office with a little rock garden and initiated a twice-weekly yoga class for colleagues.

• • •

Now, though, Parker’s firm is about to move into an unprotected corner of the marketplace—something that will likely give her less wiggle room to combine her version of business and philanthropy. Every year, the government requires that 8(a) companies win a bit more of their work outside of the program, in “full and open” bidding—which means they have to compete with all kinds of companies. Mention of this prompts Parker to make a pained face and suck in through her teeth.

“It’s not easy,” she says. This year, the Small Business Administration required that 45 percent of her work be “full and open.” Next year, the bar inches up to 55 percent. Most daunting of all, the 8(a) program has a nine-year cap, and Parker has only two years left.

Insiders refer to the predicament as the “8(a) cliff.” According to the SBA, 91 percent of firms are still in business three years after leaving the program—but the agency told me it doesn’t keep track of how many survive beyond that.

“I can tell you right now,” says Rob Burton, an attorney at the DC law firm Venable and the former head of federal procurement policy, “91 percent do not survive the long haul.”

Parker needs to win a few big contracts that will last beyond her graduation date or else make it onto some lucrative contracting “vehicles”—also competitive—which some agencies use to preselect the companies they’ll allow to bid on work. Even the most loyal of employees will stay only so long if she stumbles coming out of 8(a).

“She needs a big win between now and 2017 to make sure it goes smoothly,” says George Stone, an adviser for DSFederal.

With an eye on the near future, Michael has been pushing his mom to work on one of her biggest weaknesses—firing underperformers. In fact, that’s not entirely a post-2017 concern: DSFederal didn’t win a single federal contract in the first half of 2015, something Parker says was related to poor staffing choices, though she won’t elaborate on the since-resolved specifics. (The second half of 2015 has been much more productive; the company says it’s won eight contracts totaling $7 million.)

Parker has started tweaking certain aspects of the way she runs DSFederal: “I try to every year give myself some lessons or a purpose that I need to work on. This whole year has been accountability.”

The biggest change so far has been to the company’s bonus system. In previous years, she would take almost 50 percent of her profits and divvy them up among the entire company, regardless of individual performance. The checks were regularly as big as $60,000. She’s now going to be tying bonuses to how much money an individual employee brings in.

She hopes this move will be part of a larger cognitive shift. “I want them to experience a lean year so they can make some choice: ‘Am I going to stay in this company, and if I stay and I want a big bonus, it’s up to me.’ ”

Tying bonuses to performance. Hiring and firing based on moneymaking potential. These things are Business 101—but they also seem to preclude the idealistic practices that have carried Parker so far. Will her staff volunteer as eagerly to make philanthropic mobile apps if they know that colleagues on other projects will make more money for the company—and therefore reap bigger rewards? Will they keep acting like a family around the pots of tofu and pork ribs if they learn to think about DSFederal in terms of its bottom line?

Parker is aware of the contradictions. She worries about sacrificing the personal culture she’s worked hard to create but also knows she must grow.

“If I don’t make it, it will affect a lot of people’s jobs,” she says. “But if we survive, if we sail through it, we can benefit a lot of people.”

Nora Caplan-Bricker (nora.caplanbricker@gmail.com) has written for National Journal and the New Republic.

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