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Capstone Corporation Featured in Black Enterprise Article

Friday, 01 February 2013 16:31

The following article by Alan Hughes of Black Enterprise interviews Bill Moore, President & CEO of Capstone Corporation on how Capstone plans to revamp and redefine the company in the face of sweeping changes within the industry.

BE logo corner2While the future leadership of the United States was decided with the presidential election, the government services industry continues to operate under a cloud of uncertainty amid budget pressures in Washington. For William J. Moore III, president & CEO of Capstone Corp. (No. 52 on the be industrial/ service companies list with $67.9 million in revenues), this makes for a challenging business environment. And now Moore and his team are answering the question many companies have had to ask themselves over the past few years—how can we revamp and redefine the business in the face of sweeping changes within the industry?

How Capstone Corp.’s CEO is redefining his business in response to changes in government spending

There’s no question that the government services industry is undergoing significant changes as every cent the administration spends is scrutinized by the public as well as the political opposition. The Senate hasn’t put out a new budget for three years; we’ve continued to act on what’s referred to as a continuing resolution, meaning just continuing on whatever the previous year’s budget was,” says John C. Hagan, managing director and head of Aerospace, Defense & Government Services Group for BB&T Capital Markets. “This, budget cuts, and the threat of sequestration [a financial policy adopted by Congress to tackle the federal budget deficit has had a chilling effect on the overall industry.”

And Capstone is neck-deep in said industry. Founded in 1986 in response to a Department of the Navy request for part-time information technology consulting services, Capstone turned into a full-time venture in 1988, and shortly thereafter revenues reached the $1 million mark. One of Capstone’s significant early contracts was with the Navy’s Space and Naval Warfare Systems Command (SPAWAR), Code 30, based in Charleston, South Carolina. Awarded in 1995, the $4.1 million, three-and-a-half-year contract included program and contract management, and financial and administrative support services.

These days, the company’s business is divided into three areas:

The Military/Civil Operations business unit that, among other things, coordinates emergency responses to threats or anomalies and supports design operations for exercises to train personnel in the field about the conditions they will confront during combat or other military operations. Clients include the U.S. Army and the Department of Homeland Security. This unit contributes about 40% to Capstone’s bottom line.

The Enterprise Systems Support unit handles most of its IT work, which includes enterprise networks for government agencies or support in specific areas such as mobile device support or training. This represents about 45% of the company’s revenues.

The Training & Administrative Support unit is Capstone’s newest. An example of the work done by this unit is at the Joint Personal Effects Depot in Dover, Delaware, where Capstone employees assist in preparing the personal effects for those who have fallen in service to the country. This unit generates about 15% of Capstone’s revenues.

And while the company has grown over the years, Moore, a former systems analyst, admits that changes in government spending have affected Capstone. Margins are often squeezed as the government watches every dollar. “It’s often not that difficult to have 10 or 12 technically acceptable responses [to a request For proposals], but they’re going to take the lowest cost rather than perhaps the person who has the most expertise or the most innovative idea or who can provide the best value long term or who has the workforce with the most experience,” Moore says. “So, that paradigm has been something that everyone has had to react to because we’ve had to think about how we can provide value, but at the same time, a cost that is acceptable… a technically acceptable response with a cost that is low enough to win. If you can’t do that, you’re not always going to win the work.”

To contend with such changes, organizational modifications are under way. “The company is now very functionally oriented, meaning that folks with military skill sets are focused that way, and folks with technology skill sets are focused that way,” says Moore. “But what I would see going forward, because of the nature of needing to be low cost but high quality and to be extremely productive, is that we would look across the organization and apply the best resources, wherever they may be, to the task at hand.”

For that to be successful, the right people need to be on board, and talent acquisition for a smaller player in the industry is always a challenge. “How can we get the best people to come on board and entice them to stay with us when we’re not one of the billion-dollar first-tier contractors here?” he asks. “It makes us look at every aspect of how we do business in order to see how we can come through this period of technically acceptable low cost. Things happen cyclically. So this technically acceptable lowest cost cycle will become something different eventually, but not now. This is what we deal with now. And we have to be competitive in this market.”

Julius S. Caesar, a retired rear admiral of the U.S. Navy, believes that Moore has the leadership skills to lead his company through its changing industry. “He’s grown the business from a small company to on the other side of $50 million, $60 million or so, and that’s because of his leadership,” says Caesar, who worked with Capstone during his tenure at the former U.S. Joint Forces Command in Suffolk, Virginia, now a part of the Joint Sta... “His people were just fantastic. You could tell that under his leadership, the guidance, and the environment, his people enjoyed coming to work.”

Looking ahead, Moore projects revenues of $65 million to $70 million for 2012. “There are clearly opportunities for us but not in the ways that we saw before,” he says. “We need to change, but we would have had to do that anyway.”

Article written by Alan Hughes, featured in Black Enterprise January/February 2013 magazine.