Running head: OBJECTIVE #6B JUSTIFICATION PAPER
Objective #6B Justification Paper
Stephanie Shaffer
McDaniel College
Author Note
Stephanie K. Shaffer, Graduate Studies in Human Resources Development, McDaniel
College.
Correspondence may be directed to Stephanie K. Shaffer, Graduate Studies in Human
Resources Development, McDaniel College. Email: sks009@connections.mcdaniel.edu
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As human resource professionals, we are faced with several types of constraints that are
imposed by legal, organizational, cultural, and social environments. For me, some of my best
learning experiences have resulted from overcoming constraints. At G2, we have been faced
with several legal constraints imposed on us as government contractors. Within the last 2 years,
we have been coping with and strategizing to handle the constraints that sequestration have put
on us. This professional experience proves that I am confident in the sixth objective of
McDaniel’s HRD program.
As a government contractor, G2 provides software, systems, and security engineering
services to its customers. These are highly technical skillsets across over two dozen contracts
which are focused on solving issues of national consequence. Each of the seventy technical
employees that work on these contracts for G2 earn revenue for the company by working billable
hours. These billable hours are charged to the government as fees for the services rendered by
the employees. G2’s main customer is the U.S. Department of Defense (DoD).
In March of 2013, the government started the sequester process to “automatically cut the
federal budget across most departments and agencies” as a result of Congress’s inability to agree
on a budget (USA.gov, 2013). The budget cuts experienced by government agencies were
passed on to contractors. To pass it on, the government compressed the rates for which
contractors could charges for services. From 2012 to 2013, “DoD’s contract spending fell by 16
percent, from $373 billion to $314 billion,” (McCaney, 2014). G2’s average bill rate was
reduced by over $10 per labor hour. That reduction in bill rates meant a reduction in profits of
7% since 2012.
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As a result of sequestration and the reduction of funding on contracts, some employees
were removed from contracts. We spent weeks, and sometimes months, finding work for them.
Sometimes, we found work for them but it wasn’t the most ideal work. But, instead of laying off
highly valued employees, the ownership chose to invest in them by continuing to pay their
salaries. We asked that some of them took their accrued PTO. And, we asked that they broaden
the contracts and labor categories that they would be willing to work on. While it may not
always have been the “right” job, it was a job during a time when the employee needed
employment and G2 needed to earn revenue. However, we did make some layoffs. The
employees that were laid off were considered low value and low performing. They were given
plenty of notice and severance packages as they departed.
The other way that G2 experienced sequestration was through escalation elimination and
de-escalation. Historically, contracts that were awarded for 3-5 years would have escalation
included in the contract. This escalation would increase the rate for which the contractor could
charge for services over the course of the life of the contract. An average escalation would be 23%. The escalation on contracts would help to pay for annual salary increases for the staff
working on those contracts. When sequestration occurred, many contracts eliminated escalation,
and some even instituted de-escalation to reduce the rates in the out-years of the contract. The
impact of eliminating escalation, or de-escalating, is monumental for recruiting and retention.
From a compensation perspective, we had to adjust our pay bands because of the escalation
issues brought to us by sequestration. There were several individuals that were outside of their
pay band after we made the sequestration adjustments. Some of these individuals understood
that it was a market-wide issue, while others left the organization to find a contractor who could
afford higher salaries.
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One of the biggest impacts of sequestration to G2 was to the company’s culture. G2 was
founded, and operated for years, on the premise of fun and communication. During the difficult
times brought to G2 by sequestration that culture suffered. We, the entire leadership team,
became increasingly focused on protecting jobs. This meant we worked to ensure everyone was
billing to a contract, recruiting was working to find new employees to place on contracts, and we
were trying to organically grow the footprint that we had with the customer. In those times, our
communication became more transactional and less about employee growth and advancement.
We weren’t focused as much on meeting the needs of the employees beyond ensuring they had
work. We also weren’t focused on having fun. The days of enjoying a beer with the employees
at a G2 sponsored happy hour came to an end. We didn’t have the budget for fun activities. Nor
did we have the budget for large human resource initiatives that were the pinnacle to our success.
We pinched pennies, cut benefit programs, and even shared the cost of healthcare with the
employees for the first time ever to save money when we received the recent healthcare renewal
rates. This cultural impact put a larger stressor on us than we knew at the time. Today, we are
trying to unwind the last 2 years and regain the culture that we once had. We are making
investments in the employees and the culture that we missed since sequestration. I would say
that we are striving to do an even better job than we did in the pre-sequestration days.
There is concern that the effects of sequestration will last for a long time; not just for
contractors, but for the mission too. According to the Navy, sequestration’s wake “could spur a
litany of additional problems, including slowed modernization growth and a subsequently
diminished technical edge to field emerging capabilities for future fights,” (Lyle, 2015). With
G2’s mission being focused on solving issues of national consequence, we are certainly deployed
to help the US military continue to fight the battles that lie ahead. While the sequester’s impact
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would linger, we will continue to assist wherever we can to keep our country safe from its
adversaries. Just because we have corporately suffered, we are still as committed to the mission
as we were prior to sequestration.
As an HR professional, these may have been the toughest times that I face in my career.
The constraints and struggles brought to us by a real, unavoidable problem were unlike anything
I could have imagined. I worked many nights and weekends helping the team to strategize on
how we could make ends meet. For months, our main goal was to keep every technical
employee billing. After one year of subpar, negative financial performance, we have finally
turned the corner. It has not been easy, but we have outlived several of our competitors. I
believe that our willingness to work as a team was at the center of our success. There is still a
long road ahead of us to return back to normal, but I believe we can get there. I was able to
watch G2 prosper during good times, help during the bad times, and now assist in the re-building
of a company and mission I believe in. For that, I am forever grateful for this experience. I am
confident that this professional experience has helped me to master the sixth objective of the
program.
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References
Lyle, A. (2015). Sequestion threatens readiness, modernization. DoD News: U.S. Department of
Defense. Retrieved from http://www.defense.gov/news/newsarticle.aspx?id=128298
McCaney, K. (2014). Report details sequestration’s impact on DOD contractor spending.
Defense Systems. Retrieved from http://defensesystems.com/Articles/2014/10/17/CSISDOD-spending-sequestration.aspx?Page=1
USA.gov. (2013). What is sequestration? News From Our Blog. Retrieved from
http://blog.usa.gov/post/44071444149/what-is-sequestration