William McCormick
Doug Wagoner, president and CEO of LMI and a three-time winner of the prestigious Wash100 Award, recently spoke with ExecutiveBiz regarding the company’s recent announcement that it would be split into two separate organizations under the LMI brand to drive growth and greater care for its employees and overall workforce.
“The bottom line is that LMI has its sights set on growing and diversifying our customer base as our top priority as we move forward,” Wagoner explained during the latest Executive Spotlight interview.
You can read the full Executive Spotlight interview with Doug Wagoner below:
ExecutiveBiz: Congrats on the recent split of LMI into its two distinct organizations. What can you tell us about the restructuring of the company and how that will drive new opportunities and growth towards your 2025?
Doug Wagoner: “Back in 2020, LMI created a strategy focused on growing our company to $750 million by the end of 2025. There are some other aspects of the strategy focusing on data analytics and care for our workforce. Employee care was a big part of our shift to solution development and providing solutions.
This was a shift that has been part of our plans since the Board of Directors started this back in 2017 or 2018. The intention was to begin to operate more like a business than a traditional nonprofit because we have a lot of great capabilities. There are a lot of talented people here at LMI and there is so much more we could be doing if we took a more business-minded approach.
In addition, we’ve made some significant investments in business development. LMI has also started hiring a different type of executive with years of experience across the marketplace in a for-profit environment versus nonprofit. That was the start of a growth trajectory for LMI into today.
As the transformation and growth began, LMI just did less and less on the staff augmentation side of our business. As I joined the company about two years ago and we headed toward our $750 million target, we realized that we could hit that mark. However, we were constrained and that as a nonprofit, we had limited access to capital, therefore limiting the potential for acquisitions.
We had good cash reserves and generations of expertise in the management consulting space, but LMI would still need to borrow money and you just can’t have a financial partner and charities can only really borrow so much. We thought that given where technology and the fight for talent was headed, we needed more investment and to grow faster.
LMI needed to provide new opportunities, or our turnover rate would heavily increase despite being one of the top places to work. We realized a lot about the ‘mid-tier’ squeeze, but there’s a lot of work in the markets that is set aside for certain small businesses that also have similar demographics.
Of course, you have larger companies and organizations on the other end that creates a squeeze with companies in the middle. As a company in the middle of the pack, the challenges are keeping a lot of the smaller businesses away from their work and competing for bigger deals with much bigger organizations who just have a greater cost structure advantage.
LMI and our team saw all of this happening in our market, and we said that it’s time for us to really break through and do something big to drive the kind of capital we needed to spend for profit operations as well as the operations from our nonprofit.
Honestly, we’ve spent a year and a half thinking through our new structure as well as our options and who we want as our financial partner. The leadership team at LMI sat down and asked ourselves “what are the qualities and what are the best qualities of a financial partner?”. In addition, we also questioned what the new nonprofit would do and what makes it different from what LMI has already been doing.
Going forward, that is still our strategy and our goal. We will have a higher probability of getting there because we can acquire more companies over time. I think we will hit our $750 million certainly by 2025. I believe we’ll hit that mark sooner rather than later.”
ExecutiveBiz: How will splitting LMI into nonprofit and for-profit organizations impact your senior leadership team and help drive collaboration with investing parties and value your customers?
Doug Wagoner: “Our chairperson Lisa Disbrow said the new structure and split was a force multiplier. What she meant was that LMI was one organization, and we were tripping over each other and would get tangled up at times because there are nonprofit rules and going after profit can also limit the nonprofit side.
After this move, we’re going to have two very well-funded organizations that will still focus and implement the original charter when LMI was founded back in 1961 to make everyone better at using technology to, in turn, make the government better.
The NobleReach Foundation™ has a unique perspective and they’re in stealth mode. Out in Silicon Valley, a lot of the companies that are getting started are well funded. They hire a few people, and they have some key employees, including the board of directors that originally led LMI prior to the sale.
Right now, NobleReach is in listening mode and they have their thesis of what they’re going to do and how they’re planning to do it. The organization is now looking for feedback from senior officials at the Pentagon as well as the intelligence community and across government that will help them move forward with the most effective business model possible.
The proceeds from the sale didn’t involve any money because it’s a charity and so that’s where all the money went with this move, investing directly into NobleReach. NobleReach is very well funded to do some amazing things from a nonprofit and completely independent perspective of our business.
The changes following the evolution between the two organizations are going to be very minimal. In order for NobleReach to be the successful entity we envisioned, we had to have the most senior leaders to stay with that organization. It’s more than their background – it’s more than what they want to do with their career.
There are also two or three other managers who are going over for the same reason. NobleReach isn’t starting completely from scratch and we’re very fortunate to have a strong run of success with them internally. The entire employee base of more than 2,100 people are going to stay with the for-profit entity, LMI.
As far as changes at the senior leadership level, I’ve been joking around that the only person who is getting a new boss is me. We’re constituting a new board for LMI as we move forward under the new structure.
All the contracts are coming over to the for-profit entity and there aren’t going to be any big changes. A bit down the line, there may be one or two strategic hires that we’ll look into eventually, but we were going to be making those hires even without this transaction.
The next order of business is to bring in some new blood and work with the new hires that we’ve brought into LMI. There really won’t be any further significant changes; we’re just going to have greater access to a lot more capital to grow faster.”
ExecutiveBiz: With roughly two-thirds of your customers being in the defense sector and parts in the federal civilian business, how will LMI continue to serve your public sector clients as well as address the challenges impacting the healthcare and national security, and intelligence industries?
Doug Wagoner: “At LMI, we have always had very disciplined acquisition filters. At the end of the day, we are buying capabilities over market access and then the company must have certain qualities and cultural aspects to match LMI. Those were our filters in regard to our critical acquisitions.
On the capabilities side, we need to expand. I think we have a very good data analytics and AI practice that we can use, but we need a lot more experience as well as in digital transformation, low-code, no-code, and cybersecurity. Those are the skill sets and capabilities that we would be very interested in growing into and expanding for LMI.
On the market access side, we did the Suntiva acquisition last year, which was very helpful in getting us into public health at the FDA and got us involved with the NIH. If the right healthcare opportunity presents itself, we would buy another healthcare company to continue to expand our capabilities in that specific market.
The top priority for LMI right now is in the national security, intelligence, and space sectors. At the moment, we have a good intelligence business, but it’s highly concentrated with a single customer. We really want diversification, and we feel, especially in the logistics business, that we have a lot to offer the intelligence community and space from our expansive logistics portfolio.
It’d be great to make that acquisition to gain that market access for us to sell our current set of capabilities that many people and organizations need in our industry. We’re heavily concentrated on the U.S. Army as well. If you look at work within the Department of Defense (DoD), it would be fantastic to have a more balanced portfolio with the U.S. Navy and Air Force.
We’d also love to expand with the Department of Homeland Security (DHS). We had a very high concentration, but it would be great to diversify. The bottom line is that LMI has its sights set on growing and diversifying our customer base as our top priority as we move forward.”
