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Smith, Joshua 1941—

Joshua Smith 1941

Entrepreneur, executive

Studied Business Management

At a Glance

Formed MAXIMA

A New Focus

A Hands-On Philosophy

Recommended SBA Changes

Sources

Chief executive officer of the MAXIMA Corporation, one of the largest minority-owned businesses in the United States, Joshua Smith has been widely praised for his entrepreneurial and business skills. Yet it is his outspoken and often unpopular views on the role that business plays in the struggle for equality that have earned him the most recognition. The downfall of the black community is that it hasnt gotten out of the Civil Rights Movement, he told J. P. Donlon of Chief Executive magazine. Civil rights without economic strength is a borrowed event. It can be taken away at any time. Economic rights assure civil rights.

Smith is quick to point out, however, that the blame cannot be laid solely on the black community. He firmly believes that the government and other businesses, especially financial institutions, need to do more to promote minority businesses. Smith told Sharon Bernstein of the Los Angeles Times that he believes the biggest concern of minority businesses is the frightening lack of access to capital.

Smith himself was able to build his multimillion-dollar data processing and computer services company from a small personal investment. Many people believe, however, that Smiths charisma, political savvy, and determination have been more critical to his destiny. He has been touted by many for his unique insight into the realm of entrepreneurial possibility. In fact, it was his interest in the unknown that got him started in the world of business.

Smith was introduced to information technology during the 1960s while he was teaching biology and chemistry at the University of Akron in Ohio. I was intrigued because the notion of applying computers to informationnot just numberswas within its first ten years, he told Errol Lewis of Black Enterprise. His intense curiosity about the world of computers led him to serve as an administrator at the school in the hopes of automating certain information systems.

Studied Business Management

It was not long before Smith left the university to take a job in his new field. In 1969 he became manager of the data book division of Plenum Publishing in New York, and the following year he took a job at the American

At a Glance

Born Joshua Isaac Smith, April 8, 1941, in Garrard Co., KY; married Jacqueline Jones (divorced); children: Joshua I. Smith II. Education: Central State University, B.S., 1963; University of Akron School of Law, graduate studies, 1969-70; studied business at University of Delaware, 1975, and Central Michigan University, 1977.

Professor of biology and chemistry, University of Akron; Plenum Publishing, New York City, manager of data book division, 1969-70; American Society for Information Science, Washington DC, executive director, 1970-76; Herner & Co., vice-president, 1976-78; the MAXIMA Corporation, Lanham, MD, president and chief executive officer, 1978. Chairman of U.S. Committee on Minority Business Development, 1989-92.

Awards: Special Recognition Award for Valuable Commitment, U.S. Department of Commerce Minority Business Development Agency; Distinguished Corporate Award, U.S. Department of Commerce Minority Business Development Association; named minority businessperson of the year, Small Business Administration; MAXIMA named company of the year, Black Enterprise magazine, 1986; named minority entrepreneur of the year, U.S. Department of Energy, 1986.

Addresses: Office MAXIMA Corporation, 200 Parliament Place, Lanham, MD 20706.

Society for Information Science in Washington, DC, of which he would eventually become executive director.

As Smith was trying to apply the science of information technology to the world of business, he realized that it would also be necessary for him to learn more about business management. As a scientist he understood the mechanics of computers, but what he needed to learn was how and why things are progressed in the business world. Along with informal on-the-job training, he returned to the world of academia to find out more about business management. He took courses in association management at the University of Delaware and business management at Central Michigan University.

In 1977 Smith left the American Society of Information Science to take a job with a consulting firm. As a vice-president at Herner & Co., Smith further expanded his knowledge of the business world and the role of computers therein. After a few years, he began to notice that local governments and federal agencies had special needs when it came to information technology, especially as it related to data management. Smith realized that he had enough knowledge and experience to provide these governmental agencies with the services they needed.

Formed MAXIMA

With $15,000 he had received in a divorce settlement, Smith formed the MAXIMA Corporation in the summer of 1978. He explained his reasoning behind the name to Chief Executives Donlon. The companys name is a compression of maximizing information for effective decision making. As the companys lone employee, working in a one-room office in Bethesda, Maryland, Smith knew that the companys success rested on his shoulders.

The first thing that Smith did was register with the Small Business Administration (SBA) in hopes of winning government contracts under a special program called 8(a). The 8(a) program, which began in 1968, served the laudable purpose of encouraging minority entrepreneurship, long held back by discrimination, Gerald Lanson wrote in INC. While other companies had to endure the arduous process of bidding on governmental work, 8(a) firms could grab contracts through person-to-person negotiations. What seemed to guarantee a companys success in the program was its ability to sell, something for which Smiths outgoing personality was ideal.

Though the program was criticized by both business and government leaders for not encouraging the participating companies to develop skills that would allow them to succeed on their own, Smith knew that if he could get accepted into 8(a), he would have little trouble turning his dream into a reality. He was certain that his company could surpass the computer services provided by most of his colleagues at the time. Rather than offer his clients just one part of the technological processbe it computer hardware or software or servicehe felt it was key to provide all three elements.

Unfortunately, certification did not come easy. After two months passed without his being accepted into the program, Smith began to stop by the offices of the SBA district office in Washington, DC every morning to try and get an answer. When no program officer would meet with him, Smith would follow staff members into the bathroom to make his voice known. I would stand behind them, Smith told Lanson, then I would say, I know you wont answer my phone calls, but I want to tell you something. I am not going away. I am not going away until I am certified [as an 8(a) contractor]. Eventually, his tenacity paid off; after nine months, he got the certification he so desperately wanted.

Once Smith was accepted into the 8(a) program, his company began to make a profit almost immediately. In 1979 the MAXIMA Corporation had revenues of $321,000 and by 1985, annual revenues had climbed to $28 million. Not only was the size of the company growingit boasted over 1,200 employees in 1985so was the list of MAXIMA clients. The company provided some of the largest governmental agencies with data management services, including the navy, the air force, and the Department of Energy.

But not everything was proving as successful as Smith had envisioned. In 1982 he launched his first commercial venture with Library Resources Corporation of America. He figured that since he could help governmental agencies computerize their record-keeping systems in an efficient and economical manner, he could be equally successful offering libraries similar services as they tried to move away from card catalogs to computerized data recall.

Unfortunately, after only a year, the company folded due tolackof interest in its services. MAXIMAS $300,000 loss in the venture, coupled with slow payments from the government, forced Smith to sell 18 percent of his company to Martin Marietta Corp. in 1984 for $1 million. Regardless of the financial problems the company faced, Smith was nonetheless proud of his firms growth. In fact, he was quick to point to an 85-page book that listed all the projects he had worked on from 1978 through 1984. It may look like a smorgasbord of capabilities, he told Black Enterprises Lewis, but its all by design. There are very few companies in the world that are designed to do what we do.

It was not long before the companys success began to attract notice. In 1985 the MAXIMA Corp. was named one of the fastest-growing privately held companies by INC. magazine, as well as being named federal government contractor of the year by the Commerce Departments Minority Business Development Agency. It was also singled out as one of the fastest-growing companies by Black Enterprise magazine for several years and named company of the year in 1986. And to top off Smiths good fortune, he was selected as the first minority entrepreneur of the year by the U.S. Department of Energy.

The company was proving to be so successful that Smith pushed for the purchase of other, smaller companies to broaden MAXIMAS base of operations. Within a couple of years it had purchased a computer manufacturing company, a computer supplies distributor, a direct mail operation, several retail computer stores, and a company involved in the scientific and health information management fields. However, Smith and his top leaders at MAXIMA soon realized that they were headed for trouble.

1986 proved to be a pivotal year for Joshua Smith and the company he founded. The biggest setback came early on when the SBA announced that the MAXIMA Corporation had grown too large and was making too much money to be eligible for further 8(a) contracts. Smith was not surprised by the announcement because the government had formulated such restrictions of the program in 1981, but he thought there was still time for one more round of big contracts. His managers had been laboring to build a backlog of contracts to ease the transition to the harsh world of competitive government and commercial bidding, Lanson wrote. They had won promises of some $100 million in contracts that would have lasted five years, the maximum time allowed.

A New Focus

The SBA, however, refused to approve any of the contracts. Still, Smith was able to convince many of his clients that the urgency of the work his company was doing would be inhibited if another company was allowed to take over. In the end, MAXIMA was able to save about $70 million in contracts.

MAXIMAS departure from the SBAs 8(a) program was followed quickly by a planning session to refocus the company. Along with several of his top managers, Smith outlined his vision for the companys future. MAXIMA would position itself to be a nationally known, publicly owned provider of information products and services by 1988, Smith told Lanson. MAXIMA would offer everything from data collection, analysis, and retrieval to hardware, software, and the integration of both in a system.

For a few years annual sales continued to rise. But when the United States became mired in a recession in the late 1980s, MAXIMA was forced to compete with companies with more money, more experience, and more political clout. And as Robert Pierre and Michelle Singletary of the Washington Post reported, The company wasnt ready for its graduation from the 8(a) program. As usual under the program, it was barred from renewing its 8(a) federal contracts. It was as if the government told MAXIMA to get rid of all its old customers and start over again from scratch, new Rolodex and all.

Almost immediately, Smith took control of the situation by making drastic changes. He cut his staff by 400, including the president and chief operating officer. He moved the company headquarters from Bethesda to a smaller space in a less costly area closer to Washington, DC. He secured a loan from National Westminster Bank and sold a 22 percent stake in the company to Edelson Technology Partners. But most importantly, he changed his business strategy to focus more on county government than the federal government.

A Hands-On Philosophy

Smiths determination to make his company profitable again did not come at the expense of his management style. His employees call him demanding, yet responsive and are quick to point out how friendly he is. Smith, known to his employees as Josh, is respected for his open-door policy and his ability to relate to every employee. For Smith, there is only one way to run a company. I subscribe to a hands-on philosophyone that especially applies to the CEO, he told Donlon. You shouldnt send your best salesperson or your best marketing person to make a deal or propose a bid. You must send the top decision maker.

Though his business was weathering a difficult period, Smith accepted an appointment by President George Bush in 1989 to chair the U.S. Commission on Minority Business Development. Along with 13 other business and governmental leaders, he was charged with studying federal programs aimed at promoting and fostering minority business, especially those managed by the SBA.

The commission spent the next few years traveling the country to investigate the issue. [Smiths] commission held 18 hearings, covered 42 states, 100 cities and appeared before more than 25,000 people, Jet reported. When an interim report was released in March 1991, the commission noted that their findings were based on information gathered outside the hearings. They had also considered comments from business and political figures at both the national and local levels, information gathered from federal programs, government studies, and opinions from minority business owners who did not attend the hearings.

Smith told Rudolph A. Pyatt, Jr., of the Washington Post: What we found is mass confusion about the role of minority business. Too often, attempts by minorities to become successful entrepreneurs are confused with controversial social and racial issues in the workplace: affirmative action, alleged reverse discrimination and so-called hiring quotas.

Recommended SBA Changes

When the final report was released in July of 1992, the commission urged Congress to implement several key solutions. Their biggest and most controversial recommendation called for the restructuring of the SBA and the creation of a new agency to help minority-owned firms. According to the Washington Post, an executive summary of the report proclaimed that the SBA has gravitated away from its chief purpose ... and that it has become lost among a patchwork of legislative and administrative efforts that seem more rooted in politics than economic policy.

The report also faulted the SBA for taking too long to approve minority firms for accreditation in the 8(a) program and for lacking the necessary management, marketing, or technical-assistance credentials to adequately aid its participants. Since Smith had experienced these shortcomings firsthand, he was quick to agree. The lack of business qualifications is so pervasive, its gross, he told Washington Post contributor Singletary.

Though Smith felt victorious in his appeal to put the plight of minority businesses into the national spotlight, he was experiencing continued problems with his own company. Annual revenues reached an astonishing $59.4 million dollars in 1989, but the company actually lost $1.1 million that year. The next few years proved equally disappointing, with only a $104,000 profit for 1990 and a $406,000 profit for 1991.

Smiths biggest disappointment, however, came in 1994 when three employees, including his son Joshua Smith II, were accused of misappropriating $650,000 in company money to start their own business. Though Smith was deeply upset by his sons actions, he managed to put his companys well-being at the forefront of the dilemma. It is very, very unfortunate and disheartening that one of the named individuals is my son, admitted Smith, as reported in Jet. However, make no mistake, as chairman and CEO of the corporation, I first have the fiduciary responsibility to MAXIMAS shareholders, employees, clients, investors and partners.

The dedication that Smith shows to his company will hopefully lead him to his ultimate dream. Id love to form the largest U.S. information systems corporation owned or controlled by African Americans, he revealed to Donlon. Whatever the future holds in store for Smith, he will undoubtedly continue to push for new leadership in minority communities, a leadership that is based in business rather than civil rights. I think you have to look to a new leadership, a leadership that understands [entrepreneurship] and is comfortable with it, he told Los Angeles Times writer Bernstein. I dont think in the civil rights groups it has been a primary issue. You hear them say, We need a law, we need a program. You dont hear We need businesses.

Sources

Black Enterprise, June 1986, p. 130; January 1989, p. 14; May 1994, p. 15.

Chicago Tribune, April 28, 1990, sec. 2, p. 1.

Chief Executive, October 1993, p. 42.

Essence, August 1992, p. 46.

INC., May 1987, p. 104.

Jet, August 14, 1989, p. 37; April 8, 1991, p. 15; August 17, 1992, p. 4; January 24, 1994, p. 18.

Los Angeles Times, October 7, 1990, p. D7.

New York Times, December 1, 1991, sec. 3, p. 11.

Wall Street Journal, October 14, 1993, p. B12; June 21, 1994, p. 56.

Washington Post, July 15, 1991, p. WB7; August 19, 1991, p. WB7; June 1, 1992, p. WB7; June 16, 1992, p. C1; April 11, 1993, p. B13; January 8, 1994, p. D1; January 28, 1994, p. G3; February 14, 1994, p. WB1; March 7, 1994, p. WB3.

Joe Kuskowski

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