A world of knowledge

RTI International thinks it can continue to flourish by using minds over matters.
By Edward Martin

*Corrections appended

clientuploads/Archive_Images/2012/11/RTI-illustration.gifOutside Wayne Holden’s window, in a laboratory a few hundred yards away across a piney campus, Dave Dayton uncaps a vial. “Smell,” he says. Inside is what appears to be crude oil with the scent of a campfire. Surrounded by tanks, vats, instruments and stainless-steel tubing, he and fellow researchers use heat and pressure to mimic nature, creating a liquid that can be blended in refineries with the petroleum it replicates. Made from nonfood organic materials such as sawdust, it has vast commercial potential: an eco-friendly biofuel priced competitively with gasoline and diesel.

In a different lab is Peter Stout, another of Holden’s scientists. “One of the big things now,” the forensics expert says, “is touch DNA. Touch DNA might be the trace I leave behind when I bite something or when my lips touch a cigarette butt.” That’s not all he and his colleagues explore. Last year, for example, they certified labs that tested 7½ million people for drug use.

Not everybody works in a lab. Some chart the repercussions of eating too many Big Macs, calculating obesity’s impact on the nation’s economy. Others sample public and scientific opinion. Designers work with psychologists to create shocking images of disease to dissuade tobacco users. Half a world away, teams guided Iraqis learning to govern themselves. Scientists coached China on how to manage air pollution during the 2008 Beijing Olympics. Their forerunners identified toxic chemicals bubbling up around a Niagara Falls, N.Y., school in the 1970s. That was Love Canal, which triggered environmental awareness in many Americans.

In many ways, Holden seems as incongruous as the organization he heads. In March, he became RTI International’s fourth president and CEO since it was created in 1958, as Research Triangle Institute, for the nascent research park being built between Durham and Raleigh. A robust 6-foot-8, he’s by training a child psychologist, a former professor who left academia to work for an opinion-research company. One night, bolting upright in bed, he moaned to his wife: “Oh, my god, I left a tenured position to do this.” She laughed. “Most people don’t know what tenure is,” she told him. “This is the real world.” When he left to join RTI in 2005, he was the company’s president, overseeing 900 employees and a $140-million-a-year budget.

Holden, 55, now runs one of North Carolina’s oddest enterprises, with more than 4,000 employees in 40 countries, 2,200 of them full-time and based here. More than half its researchers have advanced degrees in some 120 fields and work on 1,200 or so projects as different as seeking new cancer drugs, improving public health in Madagascar, developing nanofibers and creating cheaper and more durable highway pavement. They tackle real-world problems, and now they’re facing one of their own.

Can a brainy cohort that thrives on what private industry would deem a laughably unfocused mission — in essence, “Make things better for folks everywhere” — go corporate without selling the soul that has made it one of the world’s most-respected research organizations? “It’s a real challenge,” says Bill Moore, chairman of Raleigh-based Lookout Capital LLC, which invests in small, growing companies. As chairman of RTI’s board, he headed the search team that selected Holden for his new role. “RTI has been incredibly successful, but we certainly don’t have just a smooth, unblemished, wonderful future ahead.”

The man charged with shaping that future agrees. “Our success, particularly in the last 15 years, has been in being very, very good at understanding the federal procurement system, writing good proposals for research problems and getting federal funding,” Holden says. In its fiscal year that ended in September 2011, RTI had revenue of $777 million. That was a record, up from $759 million the year before. He estimated it decreased to about $720 million in the year just ended. Commercial clients include industrial giants such as AstraZeneca PLC, the London-based drugmaker; San Francisco-based Cisco Systems Inc., the computer-networking company whose plant in Research Triangle Park employs more than 4,500; and The Shaw Group Inc., the Baton Rouge, La., builder of nuclear plants, which has about 1,400 employees in Charlotte. But nongovernment projects made up only about $83 million — 11% — of revenue in fiscal 2011.

In a weak economy, with politicians campaigning on promises to slash spending and some fretting about a growing anti-intellectual, anti-science movement, RTI’s dependence on public money is cause for concern. “It’s a bad time to be in business with the government,” says Jonathan Morris, an East Carolina University political scientist who focuses on election politics and Congress. “I’d certainly be uneasy if 85% of my funding were government. Contracts aren’t written in stone. You know if they’re going after entitlements and defense, they’re definitely going to be looking at contracts that fall under discretionary spending.”

An executive in the institute’s early days as Research Triangle Park’s initial tenant described the 180-acre campus outside Holden’s window as “nothing but pine trees and possums.” If he saw it now or any other part of the 7,000-acre, world-renowned research and industrial park, he wouldn’t recognize it. But Holden sees something else. “Any organization that’s successful,” he says, “runs the risk of being trapped by its success.” He doesn’t intend to let that happen to RTI.

When the wind was right the aroma of cured tobacco drifted across Duke University, another legacy of benefactor James Buchanan Duke, whose company’s cigarette factories dominated downtown Durham. In Raleigh, N.C. State University was still a college. Over in Chapel Hill, bluesman Peg Leg Slim, popular with UNC students, would wail all night for a bottle of gin.

North Carolina was different back then, more than half a century ago, its agricultural heritage fading as the low-wage, low-skill manufacturing economy that supplanted it eventually would. In 1954, Greensboro contractor Romeo Guest, meeting with Gov. Luther Hodges, noted that the three schools formed a triangle. Guest, who had attended Massachusetts Institute of Technology, was impressed by businesses springing up along the beltway around Boston and its universities, what would one day become the Route 128 high-tech corridor.

Near the center of the triangle formed by the three schools was the tract of scrub pine that became the park. Though the universities gave their support, some of the strongest proponents were the gritty titans of Tar Heel textiles, tobacco and furniture, who foresaw automation and other factors crippling the state’s traditional industries. The effort got an unexpected boost in 1957 when the Soviets launched the first satellite, starting the space race. Science’s status soared. Research Triangle Institute was allocated $500,000 — about $4 million in today’s money — from a $2 million fundraising campaign for the park headed by Archie Davis, chairman of Wachovia Bank and Trust Co. in Winston-Salem. When RTI opened in 1958, its first director, George Herbert, worked out of a second-floor office in downtown Durham. The following year, it moved to temporary offices in a poor section of town because rent was cheap there.

Initially, RTI did statistical research — its first contract was for $4,500 to study death rates — but within a few years, it was working on projects dealing with radioisotopes, organic chemistry and polymers, the last of crucial interest to the state’s textile industry. That would establish a pattern that remains: eclectic, seemingly scatter-gun research based on demand and the creativity of its staff. Needing to become self-sufficient quickly, RTI took a big step in 1960 when it landed a statistical-research contract with then-New York-based Union Carbide Corp. The following year, it signed one with Nigeria to do an agricultural census, its first international contract.

Tim Gabel is executive vice president for social, statistical and environmental sciences, RTI International’s largest division. With an MBA, he has the job Holden held before becoming CEO. He has been at RTI since 1983, when it had about 1,200 employees. “It was an everybody-knew-everybody place. The softball field was where everybody congregated. We had a big softball league. Still do. It all felt very academic. Over time, we’ve become a little more corporate and focused on the business side of our research. As a company, we’ve come up the maturity curve.” A company? “There was a time everybody just said ‘the institute.’ But to be successful, sustainable, we’ve had to become more business minded. As they say, no margin, no mission.”

Its formal mission is: “Improving the human condition by turning knowledge into practice.” Government contracts have produced healthy margins, despite a laid-back attitude toward intellectual property that would make tech giant Apple Inc. patent lawyers shudder. In the 1960s, for example, researchers isolated camptothecin, now a mainstream cancer drug marketed as Camptosar and Hycamtin. Later, scientists laid the groundwork for Taxol, a treatment for ovarian, breast and lung cancer. The drugs are worth an estimated $3 billion a year to commercial drug companies.

The lackadaisical approach to commercialization is understandable. RTI is a nonprofit, and most of its work is done on the public’s dime — what it gets from licensing, Holden says, barely moves the revenue needle. His predecessor made commercialization of its research and discoveries a higher priority by, among other things, hiring RTI’s first legal officer. “We were sitting on a wealth of intellectual property we weren’t doing anything with,” says Victoria Haynes, who became CEO in 1999. But the organization was so successful doing what it had done for decades that change was incremental. In the last budget year before she handed the reins to Holden, contracts with the U.S. Agency for International Development and U.S. Department of Health and Human Services brought in about $530 million, 68% of RTI’s budget. Those from other federal agencies totaled $130 million — an additional 17%.

No question they were admirable projects. Soon after the war began in 2003, it landed contracts to run a program for USAID in Iraq that would total $400 million before winding down in 2011. Maria Powers, who came to work at the institute in 2000, volunteered as the project’s home office manager. Though she has a biology degree from UNC and is not a specialist in any field, her management skills were needed. “It was a rare opportunity, and I felt like I could actually contribute something. Our program was designed to work with local government officials, helping them understand what it takes to run a town or city. It would be as basic as how to provide water, power and sanitation services or simply how to hold a town meeting.” Often wearing flak jackets and accompanied by armed guards, RTI teams sometimes lived in shelled buildings and huts. “It’s amazing what you get used to, what becomes the new normal,” Powers says. “Instead of being bothered by helicopters flying over at 4 in the morning or having scorpions in your room, you say, ‘Well, that’s OK.’”

https://asoft10294.accrisoft.com/businessnc/clientuploads/Archive_Images/2012/11/RTI-Holden.gifHolden doesn’t want to give up such work, but he’s well aware RTI must increase its volume of other kinds of contracts. In October, he created a new position, chief operating officer, and named Jim Gibson, chief financial officer since 2000, to fill it. He wants Gibson, a lawyer rather than scientist, to strengthen RTI’s business operations, including its commercial ventures. “The piece of the pie that’s federal is probably going to drop to 70% or 75% over the next six or seven years and in 10 to 15 years probably even lower,” Holden says. The future he foresees will increasingly underscore the international in its name.

The world outside his window moves at a blur. Inside, not as much. Herbert, the institute’s first president, remained on the job from 1958 until 1989, when he stepped aside to become vice chairman. Only two others held the job before Holden, who had been at RTI about seven years before taking over in March. He had led the division that generates more than half the institute’s money and illustrates its diverse nature — conducting surveys and research in health, social policy, epidemiology and other fields.

He took the long road here. His family moved to Columbia, S.C., from Chicago when he was about 10. “My father went to high school a week and quit, and my mother dropped out in the 10th grade. They did OK. We were a lower-middle-class family with both of them working.” His dad was a sales manager; his mom, an accounting clerk. “But they made it clear that the four of us were not going to do that.” He was the second-oldest, with two brothers and a sister. All of them earned a bachelor’s degree or higher. His height helped get him a basketball scholarship to the University of South Carolina at Spartanburg, now USC Upstate. “I was a reasonably bright guy,” he says with a shrug. He took a psychology class, liked it and went on to earn a doctorate from USC Columbia in 1985. A summer as a camp counselor led him to pursue a career as a pediatric psychologist.

In the late 1990s, Holden, then in his early 40s, was an associate professor in the pediatrics department of the University of Maryland School of Medicine, but restlessness took hold. “I realized I’d been either a student or faculty member all my life.” He joined ORC Macro, a division of Princeton, N.J.-based ORC International Corp., in 1998. “The projects I took over were very unstable and out of control,” which was what led to his bedtime epiphany. Weathering his doubts and rising to the top, he found the pendulum swinging too far from academia and public service. “We were owned by a publicly traded company, and in a for-profit environment, it’s always pretty clear what your priority is. When RTI approached me in 2005, I decided I wanted to come to a place like this.” Now it’s his pragmatism that helps him mesh with the heady scientific atmosphere he inherited.

Gabel describes the juggling he, Holden and others do. “As a manager, what keeps me up at night is knowing that we’re an innovative organization that wants to attract the best and brightest and keep them challenged while we become more corporate. I borrowed this from somebody else who said, ‘My job is to protect good researchers from bad bureaucracy.’” One of those researchers is Dayton, the 49-year-old director of biofuels research, an example of RTI’s scientific capitalism.

He presides over a humming, hissing lab that resembles a fastidious, small refinery. He has designed and machined much of the equipment to fit his research, in which organic material is heated in an oxygen-free chamber in a process called pyrolysis to produce a liquid that petroleum refineries can seamlessly blend with gasoline and diesel fuel. He plans to build a small pilot plant soon. Dayton seeks research contracts like this himself. “I don’t have to, but it makes sense to go after projects I’m interested in. It works both ways. I have ideas I’d like to see through, and RTI provides me the platform for going after the funding dollars, as well as the infrastructure to do the work. In turn, my funding helps support the future development of RTI.”

Far from navel-gazing, his scientists race for research funds against not only rivals such as Menlo Park, Calif.-based Stanford Research Institute International but even Duke, UNC and N.C. State, the institute’s founding universities. “The proposal process is really competitive,” Dayton says. “On a good day, your chances might be 10% to 15% of success. On a bad day, 1% to 5%. You have to come up with how you integrate your idea with the needs of the client — the federal government or industry.”

Across the campus in his office, Holden, wielding a balance sheet, shows how right Dayton is. “We submit about 2,200 proposals a year, and our success rate, based on dollars, is about 40%. We usually bid close to $2 billion a year in work, and our revenue this fiscal year should be about $720 million.” But RTI faces self-imposed limits on science as a business, restrictions private research organizations don’t have. There are no line items for conscience or integrity, but they loom large, often determining the size of the deposit when it goes to the bank.

In 2000, the federal Bureau of Justice Assistance paid RTI $300,000 to study the impact of Drug Abuse Resistance Education — DARE — a wildly popular program that hundreds of school systems and police departments had poured millions of dollars into nationwide. Its finding: Not only does DARE have zero impact, it siphons money and effort from more-effective programs. “Of course the client wasn’t happy,” Holden says. “That was not what they wanted to hear. Sure, there was some backlash. But then there was also a reverse backlash from the research community, saying, ‘This is what you should expect from a research effort. You don’t spin it.’”

Moore, Holden and others describe an organization that tiptoes though public-relations and human-rights minefields, vetting potential moneymakers early in the bidding process to determine their potential for embarrassment. Even so, the unexpected can happen. In October 2007, an Australian military contractor RTI had hired to provide security for its personnel in Iraq shot and killed two women in Baghdad, shortly after guards from then-Moyock-based Blackwater Worldwide, since renamed, gunned down 17 civilians.

Calling on its experience with the Olympics, RTI in 2011 opened a corporate office in Beijing to chase social, scientific and environmental projects in China. It, too, was not without butterflies. “We struggle with those issues, now that we’re expanding more internationally — issues of values and customs,” Holden says. “Should we pursue work and funding in a place where, for example, there might be gender inequality promoted? Should we accept funding from the central government of China?” Elsewhere there’s less anxiety. When Liberia emerged from almost 20 years of civil war in 2011, RTI teams were there to launch a USAID project to foster higher education, particularly in agriculture and engineering. They’ve developed better biomass cook stoves to limit health hazards in countries such as Sri Lanka where dried dung is sometimes used as fuel.

In the morning quiet of his sixth-floor office, Holden repeats a question to himself before answering: Is there anything RTI won’t do? “We don’t do weapons. That’s simply not consistent with our values.” Though $24 million, about 3% of last year’s revenue, came from the Department of Defense, those projects were in social-science, health, engineering and other nonweapons work. Under a contract with the Department of Homeland Security, RTI biosurveillance scientists have developed methods of detecting lethal gasses and biological agents released by terrorists, systems already in use in several cities.

Even without crises of conscience, Holden has his work cut out for him as a scientist-executive. With hundreds of well-paid, brilliant but sometimes maverick minds researching everything from better livestock nutrition to the social and economic consequences of a proposed uranium mine just across the state line near Chatham, Va., management is akin to herding cats. Average pay is more than $73,000 a year. What keeps them on track?

In his lab, Stout, the senior research forensic scientist, flits from one lab apparatus to another, coming to rest at the screen of a spectrometer, a machine that uses light to identify materials. Under various contracts, his team performs dozens of chores, from helping a crime lab in Alabama better analyze bullet fragments to making tens of thousands of samples that local forensics labs use to test their workers. With a flood of designer drugs as near as corner convenience stores, analyzing and cataloguing them is crucial to law enforcement and medical care. “We’ve seen more new drugs in the past six months than in the last 30 years,” Stout says. “European reports have pegged it as something like 110 new ones in the last year. It’s a constant cat-and-mouse game trying to catch up with what they’re doing.”

Though scientists like Stout with disjointed projects and goals could make RTI unmanageable, what they share helps keep it on track. “The common thread is passion for the mission,” Holden says. “That mission is improving the human condition. Sure, some say it’s too broad, but everybody seems to gravitate to it. You get the project, you do the project science, and other things don’t get in the way much.”

Outside his window, lunchtime walkers wind beneath pines along a paved pathway between RTI’s offices and laboratories. Fifty-some years ago, the politicians, industrialists and academics who charted its path saw RTI helping lug the state out of its fading past with a bright infusion of education and technology. Wayne Holden, its fourth leader, sees a path that stays that course but increasingly follows it farther afield, both here at home and abroad. There may be peril, such as in RTI’s new venture in China. “But the flip side is maybe we help change.”

*A previous version of this article incorrectly stated the number of full-time employees RTI International has in North Carolina, the types of degrees earned by most employees, Tim Gabel's academic credentials and where Wayne Holden's office is located.