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We are Family
By Francis X. Gilpin
Associate Editor
After North Carolina technology entrepreneur John H. Sykes divorced in 1992, his two daughters wanted him to move closer to them in Orlando.
Corporate relocations sometimes turn on such personal considerations.
How Sykes Enterprises Inc. came to Florida was one of the stories that the retired company founder shared with a receptive University of Tampa audience April 15.
Sykes, 68, whose South Tampa home is practically within walking distance of the university, is always welcome on the Hyde Park campus. UT renamed its business school for Sykes, one of the university's most generous benefactors. Sykes chairs the board of trustees, too.
UT invited Sykes and his son, Charles E. Sykes, who succeeded him as president and chief executive of Sykes Enterprises last year, to talk about family and business in the latest installment of its Florida Entrepreneur Speaker Series.
"I went to Orlando," the elder Sykes recalled of his response to his daughters' pleas. But John Sykes wasn't impressed with Orange County. "I did not think it was good place for a corporation," he says.
A Sykes Enterprises director from Sarasota suggested that Gulf Coast city for the new headquarters. John Sykes ended up buying a condominium in Sarasota, but the company stayed away.
"It's a fine city," Sykes says. "But, again, it didn't have the travel and the international trips that Tampa did."
Tampa International Airport and what Sykes considers the city's welcoming attitude toward newcomers convinced him to move Sykes Enterprises from Charlotte.
"I just felt Tampa was the right place and it's proven to be that way," says Sykes, who also looked at Dallas and St. Louis, where son Chuck was living at the time. "In Charlotte, my hometown, there were cliques. If you were not part of those cliques and so forth, you really couldn't get involved unless they invite you."
Sykes suggests he wasn't in with Charlotte's business elite. "When I was growing up," he says, "I grew up on the other side of the railroad tracks, literally."
In the late 1970s, Sykes started his company as an engineering services outfit with $10,000 and six workers. A female banker with what is now Bank of America took a chance on him and arranged financing. Sykes Enterprises has since grown into an operator of tech-support call centers for Fortune 1000 companies around the globe.
Tampa's suitability for hosting a tech company weighed lightly on his decision, says Sykes. "We do very little business out of here," he says. "I felt that it was a community - and it's proven to be true - that if you want to be able to serve in this community, you can."
Sykes has shown his appreciation for his adopted hometown by becoming one of the Tampa Bay area's biggest philanthropists. The John H. Sykes Foundation, with more than $5 million in assets, distributed $224,287 during the 12 months that ended Aug. 31, 2003, the latest year for which Internal Revenue Service records are available. Recipients included the Judeo Christian Health Clinic, the Tampa Bay Performing Arts Center and the Florida Orchestra.
His company has made fewer friends among investors and officials of other cities where it has operated.
After going public in 1996, Sykes Enterprises stock floated above $50 a share at the height of the tech bubble. The stock later nosedived into single digits and has yet to recover. It closed at $7.19, down 14 cents, on the day that father and son Sykes spoke at the University of Tampa.
The company's method of recognizing revenue triggered shareholder litigation. "It was a very trying time for me, personally," says John Sykes.
Sykes Enterprises is now spending between $4 million and $5 million a year on compliance with the Sarbanes-Oxley Act of 2002. The company's 2004 annual report to the U.S. Securities and Exchange Commission was delayed last month due to the corporate governance law.
When the results finally did come out, they were greatly aided by a property insurance settlement that equaled about half of the company's annual profit. Excluding the one-time insurance gain, Sykes would have posted a 42% drop in net income to $5.4 million on lower revenue of $466.7 million.
For years, the company opened call centers in out-of-the-way places such as Morganfield, Ky., and Minot, S.D, unlike competitors that favored big cities. "We went into rural America," says Sykes. "We put $3.5 billion worth of salaries into rural America."
More recently, however, the company has been quietly phasing out the rural "customer contact management centers" in favor of offshore locations with even cheaper labor, such as Bangalore in India and Quezon City in the Philippines. "We try to work within the cultures of the people that we're in," says Sykes.
Small-town American officials feel betrayed because many used tax breaks and other subsidies to attract Sykes Enterprises to their communities.
Joseph E. McCann, dean of UT's Sykes College of Business, gently raised the subject of outsourcing with the company founder.
"Outsourcing has existed in this country since they built the railroad across the United States and the Chinese were brought in to build it," Sykes says. Coolie labor has its modern equivalents, he adds.
About 20% of El Salvador's gross domestic product is derived from the repatriated earnings of 2.2 million Salvadorans who perform jobs in the United States that Americans won't do, according to Sykes.
"Yes, jobs have been lost in the United States. But this is nothing new," says Sykes. "We go through these cycles. But each time, America is resilient and America steps up."
Both members of the Sykes clan described Sykes Enterprises as a family company - and not just because Chuck Sykes is following in his father's footsteps.
"When you're talking about a company with 18,000 employees all over the world, we use a lot of technology," says Chuck Sykes, who holds a mechanical engineering degree from North Carolina State University. "But the technology, for us, is just a means to the end. It's not what we're about. In the end, it's all about people."
John Sykes, who owned 36% of the company's stock at the end of 2003, says his son's ascension to CEO was never assured.
In 1999, when the older Sykes attempted to retire the first time, Chuck Sykes told his father that he wasn't ready to take over. So John Sykes went with an outsider, who didn't work out. Five years later, he and his son say the 42-year-old Chuck Sykes was ready.
"There is no father that would not want their son or daughter to follow them into business," says John Sykes. "I still refer to him as my boy. And he'll always be my boy. But now I call him my boss."
Chuck Sykes will take the company-as-family analogy only so far. "The only difference in our family, the only difference you feel from the love inside this company is that our love is conditional," says Chuck Sykes. "You do have to do a good job."
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