The tale of Apex Systems Inc., an IT staffing firm based in Richmond, Va., is the stuff of legend and a terrific example of a company using the principles highlighted in the book Breaking Through: Leadership Disciplines of Top Performing Staffing Firms, by Mike Cleland and SIA President Barry Asin. Founded in 1995 by three Virginia Tech fraternity brothers — Brian Callaghan, Win Sheridan and Jeff Veatch — Apex Systems started with revenue of $980,000 in its first year. The next year, revenue grew to $5.1 million. Year three: $15.3 million; year four: $28 million.
This upward trajectory continued until revenue hit $700 million at the time of its sale in 2012 to On Assignment, now ASGN Inc., a publicly traded company headquartered in Calabasas, Calif., providing IT and professional services in a number of segments including technology, digital, creative and healthcare technology. ASGN is the 10th-largest staffing firm in the United States, according to Staffing Industry Analysts. Current revenue of Apex Systems stands at nearly $1.53 billion.
Through its journey, Apex earned numerous laurels while keeping true to its philosophy about hiring the best and giving these workers the opportunity to build long-term relationships with clients and candidates.
Asin, along with editor & publisher, media products, Subadhra Sriram, caught up with Sheridan, now on the board of ASGN, to talk about the highs and the lows of running the company.
Tell us about the founding of Apex. What were you looking to accomplish when you launched it?
We were working at Allegis Group during some of their early growth years. And Jeff, Brian and I got sent out to different offices. A few months into it, we thought we could do this better on our own. And we wanted to take that shot.
What was your ambition when you launched the business?
We wanted to build something big. We wanted to be a national company and we wanted to compete with Allegis. Of course, we had a noncompete (with Allegis) and we abided by all of that.
What were the biggest challenges that you faced initially?
We knew the front-office part of the business, but it was balancing that with the back office — the payroll, the billing and collection and the budgeting of the business. We started the company with about $150,000 in loans, and we wanted to be conservative. As it turns out, we were overly conservative — we did a lot more business than we anticipated in a shorter period. But not knowing the back-office part of the business and collections … almost caused us to fail because we were running out of cash. We had to work hard to catch up with that.
How did the responsibilities of you and your co-founders evolve over time?
To start, we wanted to make sure the sales and the recruiter roles were balanced out among us. As we grew the business, we took on other roles that best suited our strengths.
I was in charge of the sales and recruiting operations. Brian oversaw corporate, training and development, HR and the organizational stuff. And Jeff was in charge of national accounts.
We had to make all those things work together. We had different titles throughout, but ultimately, we came back to founders and co-CEOs.
Was it challenging to get consensus among the three of you on the strategic direction?
We decided early on it would be the majority rules, but we were all heard. It wasn’t like we were trying to jam something down the third person’s throat. If he didn’t want to do it, we really tried to figure out a consensus.
The vast majority of staffing companies never make it beyond the $5 million mark, but you hit $37 million in year five. What was your biggest constraint to growth?
Our biggest constraint was getting the right people into the company. We didn’t really have our hiring processes built out at the beginning — not the way that we ultimately were — getting the right people in, putting them in the right seats on the bus and getting them up to speed quickly. That was the biggest constraint. It was always about the people. It wasn’t cash.
Did you have a system for this?
It was an ad-hoc referral system. And I think most of our first 50 people that came on board, we knew directly or we knew through one degree of separation. And when you know the people that well and you can build a foundation like that, it’s a pretty solid foundation. We were really lucky with it.
A lot of our early years were mostly — if not all — college (recruiting). We still do a lot of college campus recruiting but we’re trying to get people now preferably with one to two years of sales experience — not staffing experience, but sales.
Is it fair to say to say you actively discouraged hiring somebody who had staffing experience?
Yes. That’s fair to say because what we found is then you had to re-engineer the people and that just rarely ever works out. There are exceptions, but they’re few and far between.
Describe some transitions as you grew from $100 to $500 million.
We had gotten to a point where we realized learning how to run a new company every three to six months because of our growth wasn’t the best thing for the company. We had an advisory board that we’d put together early on [composed of] local Richmond [Va.] businesspeople who were from outside the staffing business, who helped us navigate our growth because they had all done it.
Then, in 2006 we brought Rand Blazer, former CEO of BearingPoint, onto the advisory board. We felt he could really help us get our business to where we wanted it to go and beyond, so in 2007 we made him our chief operating officer.
Was your vision always in IT?
Early on we flirted with IT and telecom. But it became more IT … and so we said, “We’re IT.” And we were selective. We didn’t chase the Y2K business, for example. We knew that it had passed us by. We were also very careful with many of the dot-coms. We stuck to our disciplines as far as working with them as clients because we just felt it was very volatile. … And we didn’t chase the solutions business either.
We were happy just being an IT staffing company. We’ve since expanded in today’s environment — we’re doing some more SOW because it’s what our clients ask for.
What role did major accounts have in the growth of the company?
We were “an inch deep and a mile wide” — we had a lot of accounts but we didn’t have really any meaningful market share in any of them. So, we really had to work hard at creating what we call our Top Accounts Program.
We started out by focusing on our top 15 accounts — and I’m making up some numbers, here — and how we were going to do more with them. And then we would evolve that to our top 28 accounts, and then in time it grew to top 43 accounts. And we would just identify accounts where we could be a tier-one vendor or a prime vendor. The only thing holding it back was putting more people on it, being more productive, and delivering for the clients. The only way we’ve ever grown with our clients is organically and the only way we’ve ever grown at Apex — not On Assignment, obviously — is organically.
What was your take on VMS business?
We recognized early on it would be hard to [grow significantly] without doing VMS business. We were probably like any other company. We wanted to fight that at first because we liked it when you could just walk into a company and work with John Doe or Jane Doe manager and they could give you the business. But the industry became much more sophisticated — the vendor managers, the VMSs and the MSPs. And we learned early on you have to respect that, and they are the customer or the partners of the customer that you need to work with.
How would you describe the culture of Apex when you founded it and how it has changed over time?
Culture starts with the people that you hire. When we thought about the characteristics of the people that we wanted to hire, they were a lot like us — you’d be hard-pressed to find three people that are as competitive and have the will to win as much as Brian, Jeff and myself. And that just got passed down.
All the things that you need to do [in the industry require] extroverted, customerservice- oriented people. I think if you don’t hire those people then it’s going to be a lot harder to build that culture. And from there on, you build upon the culture with the training you give them, the development, the management, the standard practices of every branch.
We wanted it to be like if you walked into any of our branches and you didn’t know where you were, or what city you were in, you wouldn’t be able to tell the difference. You’d say “This is an Apex office.”
Apex’s reputation was that you tended to hire college athletes. Would you say about 80% of the people you hired played college sports?
I wouldn’t say it was 80%, but we probably looked at a large number of athletes. … They had to have other qualities as well … but we did like the competitive spirit, the work ethic [required of] college athletes. But they also had to have the personality, the communication, all those other things that were critical. If we found that right combination, we paid attention to trying to hire college athletes.
What role did compensation play in your culture in order to tie people into the growth?
You’ve got to mold compensation to fit with the culture. We wanted people to come in and perform so we created a performance-based compensation. I don’t think our base compensation is much better than any other industry. But our commission plans and bonus plans, the upsides were much greater.
And that fits with the culture. We wanted a hard-driving culture. We wanted somebody who wanted to win. We wanted somebody who wanted to build great, long-term relationships with our clients, get the business and be able to deliver on it. As the spread grows and grows, their compensation grows exponentially.
You don’t want people so focused on today to the detriment of long-term goals. Was that reflected in the plans?
One of the greatest things we did early on was create an incentive stock option plan in 1998. We would give stock to the key people in the company, those we thought would help us to grow. We wanted to have that ownership component in the culture and we did that. And we still do it to this day as a publicly traded company.
After 10 years of the ISO, we created a long-term incentive plan — “LTIP” — that was more cash-based bonuses.
If you had to go back and do one thing differently, what would it be?
I’m as nitpicky as they come. Brian, Jeff and I were our own worst critics. We were always much more keenly aware of climbing the next mountain than enjoying what we had accomplished. Maybe that was part of our success, but it was hard to go through.
So, I wish I had enjoyed it a little bit more and balanced it out a little bit more. But then, where we are today may be because of those sacrifices that we made.
From 1996 to 2012, Apex grew from zero to $700 million organically. And then from 2012 to 2016, Apex — just Apex, and still organically — went from $700 million in revenue to $1.525 billion. I’m proud of both those sets of numbers.
What is the key factor that led to the growth to $1.53 billion?
I think it’s all those years of building out these systems and processes, like the Top Account Programs and the hiring. I also think it’s Apex firing on all cylinders.
I think it’s people, especially our key leaders, and being motivated and inspired that we made this. We sold the company, but we didn’t sell it without keeping them front of mind. We had two longstanding goals. First, build a great, world-class company that was a leader in the IT staffing industry. We did that. But the other was to take care of the people that helped us to build it.
What advice would you give somebody inspired by your story?
If you would have told us, in 1994, when we just graduated from college, “You’re going to be in the IT staffing business,” I’d have said, “I don’t even know what that is.” Yet I got into the business and I love it.
I had a client tell me, “You provide me the most important thing that I need — qualified IT professionals. And you do it quickly and so effectively.”
And then I think about the contract employees; we’re providing them one of the most important things in their lives, and that’s job opportunities. Quality job opportunities because of the relationships that we have with our clients … there’s great purpose to what we’re doing.
We are in the people business of all people businesses. That’s what we do day in and day out. Think about our core values at Apex including things like will to win, professionalism and making others better. But there’s also a fourth one — “Do the right thing” — and that’s what we try to live by.
I love this industry, and like a lot of businesses, it’s more competitive than it was 25 years ago when we started. It’s still a great business to be in. I would encourage anybody to take a look at this business.
As far as starting a company, I’m all for it … we started the Apex Center for Innovation and Entrepreneurship at Virginia Tech. And in varying degrees, we do some venture capital work in early-stage companies. Part of the reason is we love the entrepreneurial journey. And this can still be a great industry to be in.
