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    You are at:Home»Execs to Know»GUEST COLUMN: How Sequestration is Affecting Federal Contractor CEOs
    Execs to Know

    GUEST COLUMN: How Sequestration is Affecting Federal Contractor CEOs

    By Jeremy KingMay 7, 2013
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    Jeremy King, Benchmark Executive Search

    In April, 2013 Benchmark Executive Search principal Packard Fancher phone surveyed 50 CEOs of innovative companies under $100M in revenue (both products & services) to determine if/how sequestration has impacted their businesses.

    One thing is for certain: sequestration, or “see-frustration” as one CEO put it, is bad for business. A majority of the CEOs surveyed noted they have seen adverse effects in the areas of compensation, growth and overall workforce psychology.

    Among the 71% of polled companies that will be hiring in 2013, 80% are looking to improve their core capabilities by bringing on specialized engineers and are less inclined to expand their sales and BD teams. When asked about compensation trends, the majority of CEOs cited “downward pressure on salaries.” Companies focused on “butts in seats” contracting models are going to see a continuing decline in contractor salaries due to the draw-down in Afghanistan and the resulting flood of intelligence analysts into the employment market. The companies that will be paying higher salaries next year are focused on cyber security, big data, analytics and cloud computing – areas where the talent pool is shallow and the services are mission critical. The priorities within compensation packages are changing as well. A growing segment of the work force is choosing to give up high salaries for better fringe benefits such as more comprehensive health insurance, shorter commutes, flexible hours, and job security.

    Among the 60% of polled companies feeling the effects of sequestration, there are 3 trends that emerged. First is a general rampant uncertainty, a “paralysis” and delays in decision making. Second is the highlighting of the difficulty in doing business with the government. Third and most important, is that the psychological impact on the people far outweighs the economic impact. CEOs said this atmosphere creates bad morale within the government agencies, hampers communication, and creates unnecessary stress. Finally, given Congress’ inability to resolve their differences in an effective way, sequestration has forced cautious talent to choose employment in the reemerging private sector over the now perceived riskier public sector.

    Almost all those polled said that the main problem with sequestration is that it creates uncertainty in the market and delays contract awards as well as start dates. To survive, it helps when companies are small and able to shift focus to counteract the lack of progress with the federal government. Those best suited for success are small to mid-sized cyber security/engineering/analytics companies with a mix of government and commercial customers.

    Below are the full results from the Benchmark Executive Search survey, conducted in April 2013.

    Question 1)  In the last  12 months, did your company focus more on RECRUITING new talent, TRAINING current talent, or RETAINING current talent?

    Answers 1) Effect on hiring

    A: Hiring Trend Last year: 80% of companies were hiring last year | 20% were flat

    B: Hiring Trend this coming year: 71% plan on expanding next year (26% of that group will be aggressively hiring) |29% will stay flat

    ___________________________________________________________________________________________

    “The uncertainty is worse than if the money just went away.” – Michael Cadenazzi, VisualDoD CEO

    ________________________________________________________________________________________________________

    Question 2) In the last 12 months, what have been the hottest jobs in demand at your company? (ie, network engineer, cyber, analyst, HR, BD, PM, exec, etc)

    In the next 12 months, what do you forecast will be the hottest jobs in demand at your company? (ie, network engineer, cyber, analyst, HR, BD, PM, exec, etc)

    Answers 2) Type of Talent being hired this/next year

    26% of companies hiring sales people
    9% of companies hiring BD folks
    79% of companies hiring engineers (computer sci, data sci, cyber, ruby on rails)
    12% of companies hiring Services (cloud, big data, big data scientists)
    21% of companies are hiring analysts (intel, linguists, cyber, data, geospatial)
    Misc: 02% of companies hiring either Sr. Mgmt, PMs, interns

     

    Question 3)   With over 1 million military veterans entering the workforce over the next 5 years, do you plan to aggressively hire from this unique and capable talent pool?

    If so, what is your recruiting strategy to source, attract, and hire these veterans?

    Answers 3) Vets in the workplace

    74% have a specific plan to go after vets and/or vets have the necessary skills for the jobs
    21% have capabilities that are generally not taught in the military but they like vets for leadership purposes
    05% while sympathetic to vets have no room to hire vets
    ________________________________________________________________________________

    “We need to break smartly with stale tribal norms and start celebrating entrepreneurship and re-imagine what”s possible at scale”- Will Grannis, What’s Next CEO

    ____________________________________________________________________________________________

    Question 4)  In the last 12 months, what trends have you seen in compensation at your company? (ie, increased/decreased bonus payouts, layoff packages, freezes or salary increases)

    In the next 12 months, what trends do you forecast in compensation at your company? (ie, increased/decreased bonus payouts, layoff packages, freezes or salary increases)

    Answers 4) Effect on compensation

    A: Last year compensation trends

    15% saw lower pay (downward pressure on salaries)
    10% saw lower pay in exchange for fringe benefits, better commute, or stability/security)
    65% saw no noticeable change in comp
    10% saw increased salaries

    B: Next year’s projected compensation trends

    25% expect lower salaries no matter what
    08% expect lower salaries in exchange for benefits, commute, stability
    48% expect salaries to be flat
    20% expect higher salaries

    ___________________________________________________________________________________________

    “Introducing innovation will be important to realize savings through technology and process efficiencies” – Sheryl R Schwartz, Blue Canopy COO

    ___________________________________________________________________________________________

    Question 5) How has sequestration directly impacted your company?

    Answers 5) Effect of Sequestration in General

    A: Yes, 60%

    i) inherent flaws with doing biz with govt, radically change the way we do biz, creative destruction
    ii) human impact worse than $$, low morale, cautions candidates, govt POC unavailable
    iii) guessing game, increased risk, waiting, more risk management, caution, what’s it all mean?, contract office in disarray, uncertainty/less predictable, customer won’t spend, uncertainty and delay, bad expectations, uncertainty worse than no $$.

    B: No, 40%

    i)customer slow, customer quiet, small delay/mostly customer, only their prime slower.
    ii)cyber, niche product, mission critical, cyber, cyber, cyber
    iii)minimal, kind of slow, no impact (about 7% of companies surveyed have little or no negative effects)
    Previous ArticleRemarkableHire Co-Founder and CEO Jamey Jeff on How to Recruit Top Talent, Trends in the Industry and Advice for Job Seekers
    Next Article FOSE 2013 to Include Sessions on Big Data and Business Intelligence

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