Texas CEO Magazine Q2 2022 by txceomag

Q2 2022

Bob Jordan Takes Flight Southwest Airlines’ New CEO Is Feeling the Luv

THE UNIVERSITY OF AUSTIN Can Higher Education Be Fixed?

BUSINESS BANKING IN TEXAS From Credit Unions to Crypto

We help our clients change the world One leadership team at a time®

www.heidrick.com

Eﬀective economics, accessible analysis The Perryman Group provides the economic insights you need for the board room, the courtroom, the hearing room, or any other room where decisions are made.

Our in-house professionals bring expertise in economics, finance, statistics, mathematics, real estate, systems analysis, technical communications, and marketing. Dr. Ray Perryman, President and CEO, has more than 40 years of experience in developing systems, analyzing complex problems, and communicating effectively. Our clients include two-thirds of the Global 25, over half of the Fortune 100, the 12 largest technology firms in the world, 10 US Cabinet Departments, the 9 largest firms in the US, the 6 largest energy companies operating in the US, and the 5 largest US banking institutions.

Economic Analysis

Expert Testimony

Economic Data

We have developed and continually maintain an extensive set of economic impact evaluation models that can be applied in a variety of contexts.

We help clients analyze and communicate complex information in common-sense terms through comprehensive, objective analyses and clear, concise expert reports and presentations.

We have published annual economic forecasts for almost 40 years and maintain a comprehensive set of national and regional models.

Visit PerrymanGroup.com for more information on our services, publications, and clients.

FEATURES

Q2 2022

BOB JORDAN TAKES FLIGHT

Publisher Donna Bragg Editor Aaron Hierholzer

Joel Trammell

Operations Tamara Trammell Graphic Design Michele Rodriguez

THE CHANGING FACE OF BUSINESS BANKING IN TEXAS

Jeff Bounds

Contributors

Wade H. Allen Jeff Bounds Gordon Daugherty Charles Denyer Joyce Durst M. Ray Perryman Mason Rathe Jim Skaggs Joel Trammell

To subscribe to the print or digital edition of Texas CEO Magazine, please visit our website: TexasCEOMagazine.com and click subscribe. POSTMASTER Please send address changes to: The American CEO, LLC dba Texas CEO Magazine 8012 Bee Caves Road Austin, TX 78746

A PEOPLE-FIRST ENTREPRENEUR A Conversation with Brandi Harleaux

HIGHER EDUCATION IS BROKEN. CAN THE UNIVERSITY OF AUSTIN OFFER A BETTER MODEL?

A Conversation with Pano Kanelos

Texas CEO Magazine // Q2 2022

© 2022 The American CEO, LLC dba Texas CEO Magazine. All rights reserved. The Content in this issue may not be reproduced, distributed, or otherwise used without the prior written consent of the American CEO, LLC. The various contributors own their respective Content that is published in this magazine. The beliefs, content, comments, opinions, statements and viewpoints (collectively, the “Content”) published in this issue are those of the respective contributors and we do not necessarily agree, endorse, support or verify such Content. The Content presented in this issue is for informational purposes only and is not advice of any kind. Your use of the Content is at your own risk. The Content is provided on an “AS IS” basis, without any warranties of any kind, either express or implied. Neither The American CEO, LLC nor any person associated with us makes any warranty or representation with respect to the completeness, reliability, quality, or accuracy of the Content. Without limiting the foregoing, The American CEO, LLC does not represent or warrant that the Content will be accurate, reliable, error-free, that errors will be corrected, or that the Content will otherwise meet your needs or expectations. The American CEO, LLC disclaims all warranties of any kind, whether express or implied, statutory or otherwise, including but not limited to any warranties of merchantability, non-infringement and fitness for particular purpose. The foregoing does not affect any warranties which cannot be excluded or limited under applicable law.

INSIDE 7

LETTER FROM THE OWNER Joel Trammell

TEXAS CEOs ON THE MOVE

NEW CEO APPOINTMENTS ACROSS THE STATE

BLAST OFF!

TEXAS SURGES AHEAD IN THE NEW SPACE RACE Dr. M. Ray Perryman

STARTUP SUCCESS: FIVE STARTUP-FRIENDLY PLANNING TOOLS

Gordon Daugherty

CEO READING LIST: 6 BUSINESS BOOKS TO READ THIS SUMMER

HOW SMART CEOs AVOID COMMON DIGITAL TRANSFORMATION TRAPS

HOUSTON DEAL HIGHLIGHTS:

Q1 2022 VENTURE REPORT Mason Rathe

KEEPING TEXAS POWERED

Joyce Durst

A CONVERSATION WITH THOMAS MCANDREW

TEXAS ECONOMIC INDICATORS

FROM LOST GIRL TO TEXAS SUCCESS STORY A CONVERSATION WITH REBECCA CONTRERAS

THE DIRTY SECRETS OF THE DARK WEB Charles Denyer

Federal Reserve Bank of Dallas

YOU CAN MAKE IT HAPPEN

SENDING OFF JOHN ROACH, TEXAN PIONEER OF PERSONAL COMPUTING

THE CANDIDATE’S MINDSET HAS CHANGED—HAS YOURS? Wade H. Allen

Jim Skaggs

92 18 52 Q2 2022 // TexasCEOMagazine.com

For data-driven critical thinkers who are fed up with the opinion and bias of today’s news media. Get unvarnished, concise facts and knowledge about current events.

Subscribe Today www.citable.com

Use coupon code 22TEXASCEO to receive 50% off your subscription order.

We are reengineering the news.

Letter from the OWNER If you’re like me, the last couple of years have made you wonder about how to have a positive impact in the world. Just when you think things can’t get any crazier, something else happens that makes you feel helpless. But we all know that leadership matters—and never more than when chaos is breaking out all around you. In 2022 so far, we have seen how the leadership of a single individual can change the course of world events. There can be little doubt that when Vladimir Putin decided to invade Ukraine, he gave scant thought to how Volodymyr Zelenskyy might react. He probably assumed that the former actor would flee the country at the first sign of danger. Little did he know that Zelenskyy, through courageous leadership, would become an international hero and the symbol of free people everywhere. While most of us will not face life-and-death decisions of the kind being made in that corner of the world, there are many lessons of leadership to take from the crisis. To me, the biggest is how the world has changed from a mere twenty years ago. With the ubiquity of cell phones, social media, and satellite communications, it is impossible for anyone to control the flow of information even using a powerful military. Leaders who believe they can create an alternate reality and operate without anyone challenging them are deceiving themselves and setting up their own demise. Not only will the truth come out eventually, but it will probably rear its head in the next few hours for everyone to see. Bob Jordan, the new CEO of Southwest Airlines and the subject of our cover story this quarter, fortunately doesn’t have anyone shooting at his planes. But he does face his own challenges as he takes over the helm of an iconic Texas company. A career Southwest employee who got his start as a computer

programmer, he is now taking over as fuel prices reach record highs and travel is only slowly returning to normal. Flip to p. 22 to hear more from Jordan on what it’s like taking over the CEO role from his 30-year mentor, Gary Kelly, and how he managed his sevenmonth transition period. Also in this issue: Pano Kanelos draws back the curtain on what it’s like to start a new university from scratch (p. 82), in this case the University of Austin, which Kanelos and his cofounding trustees like Bari Weiss and Niall Ferguson intend to counteract a new wave of what they see as illiberalism in the United States. Brandi Harleaux, trained in psychology with a corporate pedigree that includes Northrop Grumman and Disney, shares what it was like to return home to Texas and take over her family’s metal recycling business (p. 60), and how she’s driven to be an entrepreneur by the tangible impacts her company has on people’s lives. We also take a look at the changing landscape of commercial banking in Texas (p. 46)—including the effects of emerging technologies like blockchain and crypto—and how banks and companies can form mutually advantageous partnerships. As always, we like to hear from our readers. Email us anytime at info@texasceomagazine.com if you have feedback, story ideas, or anything else. We hope you have a great Texas summer and stay in touch. Joel Trammell

Owner Texas CEO Magazine

Learn more about Joel and the rest of the team online at TexasCEOMagazine.com/about.

Q2 2022 // TexasCEOMagazine.com

THE SPACE ECONOMY IN THE UNITED STATES CURRENTLY SUPPORTS ALMOST 350,000 DIRECT JOBS, WITH SPILLOVER EFFECTS PERMEATING THE ENTIRE SPECTRUM OF BUSINESS ACTIVITY.

BLAST

OFF!

TEXAS SURGES AHEAD IN THE NEW SPACE RACE Dr. M. Ray Perryman

Space has captivated the imagination of humankind since history began. Early societies tracked planetary movement and oriented buildings and other structures accordingly, navigators relied on the stars to make their way across oceans, and myths were written around constellations. As space travel became a realistic possibility, a “space race” developed during the Cold War era, with the United States pitted against Russia to be the first to achieve milestones such as orbiting the earth and landing on the moon. Americans were glued to television screens in July 1969 as Neil Armstrong became the first human to step foot on the moon, and every previous and subsequent milestone has been the subject of intense interest among people in all walks of life. Texas was an integral part of this phenomenon, and it left an indelible imprint on the culture and personality of the state. The Houston Astros, whose name was changed from the Colt .45s just as space travel began, are an ongoing reminder of this linkage, and “Houston, we have a problem!” is now a part of our vernacular. For those of my generation, it was an all-consuming passion. In the past, activity related to space was largely confined to the public sector, with the federal government supporting all research and development and operations. This

Texas CEO Magazine // Q2 2022

basic research enabled development of key knowledge, technologies, and materials, and the industry has reached a point where it is feasible for private firms to be more fully involved in the entire spectrum of space-related operations. The race has changed, with publicprivate partnerships and an expanded range of possibilities generating massive investments and new developments.

THE SPACE ECONOMY

The “Space Economy” spans elements of many industrial sectors, with major components including the manufacture of space vehicles, propulsion systems, satellites, communication systems, navigation and guidance equipment, and associated parts. It further includes satellite communication, the transportation of people and cargo, and extensive technological research and development by scientists and engineers. The Space Economy in the United States currently supports almost 350,000 direct jobs, with spillover effects permeating the entire spectrum of business activity. The Perryman Group estimates that when multiplier effects are

considered, the current annual impact of the Space Economy on US business activity includes over $204 billion in annual gross product and 1.7 million jobs.

TEXAS’ ROLE

As noted, Texas has long had a presence in space-related industries. For more than 60 years, the Lyndon B. Johnson Space Center (JSC) has been engaged in key missions for the National Aeronautics and Space Administration (NASA). JSC is the site of mission control and astronaut training, as well as numerous other initiatives. Some 11,000 people work at the 1,620acre complex near Houston, and the related museum draws over a million visitors per year (including 33 percent from other states and 33 percent from other countries). Private-sector firms are also expanding space operations, with a significant presence in Texas. These companies are investing not only in the largest metropolitan areas, but also in small communities around the state. They are developing capabilities across a spectrum of businesses including cargo, transport, and satellite. SpaceX, founded by Elon Musk, designs, manufactures, tests, and launches satellites and spacecraft for orbit and cargo transport and has been awarded contracts by NASA for development of a lunar lander and other components. For more than a decade, it has been operating

a rocket development facility in McGregor, and has recently been expanding that facility to include a $150 million factory for its Raptor 2 rocket engines. Other SpaceX operations in the state include a commercial rocket launch site in Boca Chica. Blue Origin, founded by Jeff Bezos, is focused on systems for human spaceflight including space tourism. The company’s facility near Van Horn is used for flight testing and launches. Blue Origin is also involved in partnerships with NASA and has begun space tourism flights. Boeing, which has long had operations in the state, is also working on various systems for NASA. Midland International Airport became the first airport in the nation to also be issued a commercial spaceport license by the FAA. It is now known as the Midland International Air and Space Port, and a variety of related businesses are developing in the area. The Houston Spaceport has also been approved by the FAA and work is underway, with a variety of firms planning locations in the area. These are only a few of the companies and developments across the state.

TEXAS PRESENTLY IS HOME TO ABOUT 6.75 PERCENT OF US SPACE ECONOMY JOBS.

ECONOMIC BENEFITS AND THE FUTURE OUTLOOK

Texas presently is home to about 6.75 percent of US Space Economy jobs. Although this percentage is less than the state’s share of overall jobs in the economy (which is about 8.5 percent), the state’s importance in the arena has been expanding markedly of late. High-profile activities and underlying investments are notably accelerating the pace of development. The Perryman Group estimates that the current impact of the Space Economy on Texas includes an estimated $11.7 billion in annual gross product and over 102,000 jobs (including multiplier effects). Many of these jobs are concentrated in value-added manufacturing industries, which in turn can serve as a catalyst for further development over time. Space-related industries are expected to see substantial growth in the future, driven by their ability to enhance security, communications, and other aspects of the economy and society. The Perryman Group estimates that the Space Economy in the United States (as measured by gross product) will likely expand its output (gross product) by approximately 120 to 200 percent by 2040, potentially becoming three times its current size. In Texas, the Space Economy is expected to expand about 120 percent faster than in the nation, raising its share of the US total to almost 15 percent. Based on current major industry forecasts, The Perryman Group estimates that by 2030, the total impact of the Space Economy on US business activity could rise to between $298 billion and $344.7

billion in annual gross product and 2.2–2.5 million jobs, including multiplier effects (depending on whether the lower bound or median of the forecasts is assumed). For Texas, the Space Economy and related spillover effects generate a projected $23.6 billion to $27.3 billion in annual gross product and between about 175,300 and 202,700 jobs as of 2030. By 2040, impacts rise substantially, supporting up to 3.3 million US jobs and nearly 433,500 Texas jobs (including multiplier effects).

CONCLUSION

The Space Economy is a substantial and growing source of business activity. It is also essential to security, communications, and solutions to major problems such as climate change and resource limitations. In addition, the research and development it involves generates new discoveries that enhance daily life and wellbeing. Texas already plays an important role in space exploration and related industries. With a major public-sector presence, large and growing private-sector initiatives, and aggressive development efforts, the state is likely to significantly increase its share of the Space Economy. This growth will help to further solidify Texas as a major global technology hub and assure that, for decades to come, “Houston, we do not have a problem!” Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (PerrymanGroup.com), which has served the needs of over 2,500 clients over the past four decades.

Q2 2022 // TexasCEOMagazine.com

THE BEST STARTUPS DO MOVE FAST AND BREAK THINGS. BUT THEY DO SO WITH A GENERAL STRATEGY, AND ASSOCIATED PLANS, IN PLACE.

STARTUP SUCCESS

FIVE STARTUP-FRIENDLY

PLANNING TOOLS Gordon Daugherty

IF YOU FAIL TO PLAN, YOU’RE PLANNING TO FAIL, EVEN IN THE STARTUP STAGE Many startups have, mistakenly, been led to believe they should simply move fast and break things on their way to building a great company. Forget spending valuable time on strategy and planning—why not just start putting puzzle pieces together, then adjust and adapt based on what develops over time? I strongly disagree with this approach. The best startups do move fast and break things. But they do so with a general strategy, and associated plans, in place. This enables them to move fast in a specific direction and helps them best learn when things do break. Ben Franklin is quoted as saying, “If you fail to plan, you are planning to fail.” That is as true for startups as it is in our personal lives. In this issue of Startup Success, we will review five of my favorite startup-friendly tools for strategy and planning.

1. STRATEGY HORIZONS

As a startup founder, you will regularly be asked to foretell your future as a set of milestones extending over a certain amount of time, such as one year or three years. This likely puts you in the mindset of building out a timeline and dropping in various important strategic events and accomplishments you see happening in the future. But even if you try to limit yourself to just the next several months, you might struggle with the perceived expectation to show things happening in certain months or even on certain dates. Investors especially appreciate startups that are able to successfully predict what they are going to accomplish in the future. This is so amazingly difficult to achieve that even accomplishing 80 percent of the prediction is rewarded with respect. And that considerably increases the odds of gaining an investment.

Q2 2022 // TexasCEOMagazine.com

As you aim to plan realistically, forget the detailed timeline. Instead, show each of your important milestones as happening in one of three strategy horizons. Each horizon can represent whatever time range you feel is most appropriate. For example, a one-year projection might be broken into the next 3 months, 3–6 months, and 6–12 months. With such a framework, all you need to do is decide which category to drop your various strategic milestone events into. Will it happen, for example, in the next 3 months, in between 3 and 6 months, or in between 6 and 12 months? This is much easier than committing to specific (and perhaps arbitrary) dates, yet it still conveys a general timeline that prospective investors, board directors, strategic partners, or candidates for executive employment positions can digest with clear understanding. If you are familiar with McKinsey’s three horizons model for corporate innovation, this is similar. But the strategy horizons described here don’t relate to types of improvement versus innovation. Instead, they serve as a visual evolution of your business plan as it is successfully executed. Below is an example to show how simple, flexible, and effective this tool is to use.

2. CASCADED GOALS

Many people have been exposed to goal setting, whether related to education, sports, career, relationships, or just about anything that involves aspirational achievements. But applying the concept of goal setting to a company is fairly more involved and nuanced. That’s because the ultimate objective is to set goals for the company as a whole and then best ensure all managers and employees in the company row on an oar in the same direction so the goals are actually achieved. Setting top-level company goals isn’t usually that difficult, especially with involvement from seasoned company executives or advisors. But the magic really happens when the goals are cascaded down throughout the entire organization. Imagine the positive impact that results from an entry-level employee not only knowing what their personal goals are for a given calendar quarter, but also

Texas CEO Magazine // Q2 2022

how achieving those goals will help their department meet its goals. Additional enlightenment comes from understanding how the department goals help contribute to the top-level company goals. It’s basically a big puzzle with all of the pieces fitting nicely together. Many employees and first-line managers suffer from not understanding how their contributions affect the overall performance of the company. That disassociation alone can create risk of underperformance and attrition. Instead, cascade your goals from the toplevel down through each level of your organization. This doesn’t work well for small startups with 10 or fewer employees. But at about 25 employees, and especially as the organization grows, it really helps ensure needed alignment and accountability throughout. Below is a simple graphic to show the cascading concept. In the early days, functions 1 and 2 might be performed by a single person, but that’s OK. Set goals for each function anyway so that this practice, and its associated benefits, are ingrained in your culture.

3. THE NOT LIST

Steve Jobs is quoted as saying at Apple’s 1997 Worldwide Developer’s Conference that “people think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are.” Startup founders regularly hear concerns about not being focused enough. Their advisors and investors might even refer to the issue as shiny object syndrome. One of my favorite tools to help achieve focus is the Not List. Explained simply, it is a list of things the company will not do. How many times have you been in a meeting where a serious debate ensued? During the debate, the group likely argued about many ideas, and ultimately a decision was made around the best path forward. That means that the team decided, directly or indirectly, on certain things you would not do. The Not List gives you a consolidated place to keep

a record of these items to reference later. Often, the best additions to the Not List are generated when the stakes are really high, emotions are flaring, and voices are raised. Without putting those things on a Not List, you might be surprised how easy it is for your employees’ focus to drift back into unwanted territory, toward those other tempting possibilities, without knowing they are doing anything wrong—just like what Steve Jobs said at the conference. Just because something gets put on the Not List doesn’t mean it can’t ever be taken off. Such a removal just needs to be discussed and agreed upon.

4. THE DEATH CLOCK

A startup’s most valuable resource is time. That is because with enough time, they can adjust and adapt until they’ve achieved a viable, scalable, and sustainable business. So, imagine waking up every morning and seeing how much time your startup has left to live. Do you think that would provide enhanced levels of focus and priority? I do, especially if everyone in the company has the same visibility. If you are running a startup, you might think you are already doing this by messaging the company’s cash fume date to all employees once per month or quarter. The cash fume date is the projected date when the company’s bank account will run dry without extra funding or something positive happening that’s not currently in the baseline forecast. In the startup world, it is common for most employees to know the current cash fume date. The Death Clock takes the concept of a cash fume date to the next level by literally providing a live countdown timer based on certain assumptions. The assumptions aren’t intended to result in an exact analysis, but the benefits of the visual impact of a Death Clock can’t be disputed. You could create a custom clock that is tied to your company’s cash fume date, or you could simply use an online tool created by a few entrepreneurs at startupdeathclock.com. I love the quote from Dr. Samuel Johnson on display underneath the online clock: “Depend upon it, Sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.” Once you have the Death Clock in place, keep it visible to employees consistently. You can even keep it running on screen during weekly meetings, or display it on screens in common areas. You may be surprised by the sense of urgency and, again, focus it creates.

5. PRIORITIZING YOUR PRODUCT ROADMAP

If you already have an experienced product manager on your team, they are—I hope—following a well-established product management process. But what about the early stages of the company, before you have such expertise on staff? There are

always more ideas (features, capabilities, new products, etc.) than can be implemented in the desired timeframe. How do you prioritize the ideas to figure out which to focus on next? This prioritization tool involves creating various categories based on business goals and current priorities, and then placing each roadmap-related idea into one or more of those categories. The hardest part is coming up with the right goal/priority categories, but even that should not be terribly hard if you spend any time setting strategy and related plans. In fact, hopefully this article will help with that. Below are some examples of categories you might set around business goals and priorities. Notice how I reworded a traditional goal statement (“Win more deals”) into a benefit statement (“Helps us win more deals”), so that mapping features onto the priorities is made easier: • Helps us win more deals (i.e., new customers) • Improves customer retention • Helps us scale • Improves our profit margins Depending on your type of business and your businesslevel goals/priorities, you might have totally different categories, or maybe some of these are a good place to start. You might have a tendency to create a bunch of categories, but I find that using my So What rule can help get to the real root category. When you have too many categories, keep asking yourself “So what? Why does that matter?” about each one. Using this exercise, you can often get to a small set of root categories that describe the real priorities of the business. Below are some examples in which each instance of an equal sign coincides with asking and answering the So What question: • A feature that none of our competitors have = helps us win more deals • A feature that dramatically reduces our customers’ required administrative effort with our product = makes customers happier = improves customer retention • A new manufacturing process that allows us to reduce our price = makes us more competitive = helps us win more deals • A platform re-architecture that utilizes significantly less computing power and storage = reduces our costs = improves our profit margins • A capability that automates more of the customer onboarding process = improves our efficiency = helps us scale Q2 2022 // TexasCEOMagazine.com

that Feature 3 helps accomplish two different company priorities. That could be meaningful. Again, just seeing your product roadmap wish list in this visual manner can serve as a great tool. . . . .

If you can also decide which of the categories are most critical for your current planning horizon, then you can prioritize the categories. For example, in the graphic above, winning more deals is the most important category and improving profit margins is the least important. You can see that based on the number of stars designating relative importance. This doesn’t mean you should choose to implement everything in the category with the highest importance and totally ignore the things in the lowest-priority category. Rather it is just another visual tool to help with decision making. In fact, notice in the graphic above

Texas CEO Magazine // Q2 2022

As the leader of a startup, you feel the pressure to execute every single day. But if your daily actions are not aligned with strategy and plans, it will be hard to steer the ship in the right direction. I hope these five tools give you some quick, practical ways to integrate good planning into your operation, and to more effectively move everyone toward your long-term vision of success. Gordon Daugherty is a seasoned business executive, entrepreneur, startup advisor, investor, and the best-selling author of Startup Success: Funding the Early Stages of Your Venture. A proud native Texan, Daugherty graduated from Baylor University. He has vast experience with early-stage fundraising from both sides of the table, making more than 200 investments and raising more than $80 million in growth and venture capital as a company executive, fund manager, board director, and active advisor.

CEO READING LIST 6 BUSINESS BOOKS TO READ THIS SUMMER

A great CEO never passes up a chance to learn. Here are six books coming out soon, each with lessons for how to think about innovation, growth, and personal success.

Lynda Gratton

Redesigning Work: How to Transform Your Organization and Make Hybrid Work for Everyone Penguin Business March 2022 256 pages

Much ink has been spilled about how the COVID-19 pandemic changed the workplace. But here is the definitive look at these changes and what they mean for your organization. Gratton, an expert in organizational behavior, takes a rigorous yet practical look at how work best gets done in a changed world of WFH, hybrid work, deeper work-life integration, and more. She includes in-depth looks at the practices of real-world companies like HSBC, Fujitsu, and Telstra. Gary Hamel calls the book “thoughtprovoking, deeply researched, and invaluable.”

Jody Michael

Leading Lightly: Lower Your Stress, Think with Clarity, and Lead with Ease Greenleaf Book Group Press June 2022 248 pages “Leading lightly means that no matter what happens during your day, you have the capacity to approach everything with enduring easy and clarity,” writes psychotherapist and renowned executive coach Jody Michael in the opening pages of Leading Lightly. Combining insights on leadership, mental health, and overall wellness, Michael offers a perspective-shifting guide to leading and living with a lighter touch—even through profoundly heavy times.

Ric Edelman

The Truth About Crypto: A Practical, Easy-toUnderstand Guide to Bitcoin, Blockchain, NFTs, and Other Digital Assets Simon & Schuster May 2022 400 pages Does talk of blockchain, crypto, and NFTs tie your brain in knots? Author, radio host, and personal finance guru Ric Edelman is here to save the day. His new book is a plainspoken investor’s guide to these much-hyped innovations. Edelman explains them as new asset classes and shows the bounty of opportunities they offer to investors who are in the know.

Marlene Chism

From Conflict to Courage: How to Stop Avoiding and Start Leading Berrett-Koehler May 2022 256 pages

The job of CEO comes packaged with lots of unavoidable conflict. The most effective CEOs therefore learn to embrace that conflict rather than shunting it away, masking it, or passing it on to others. Chism, a longtime authority on workplace drama, offers inspiration and guidance for any leader who wants to learn the superpower of courageous conflict, a skill that banishes stress, builds trust, and leads to better business outcomes.

Bo Seo

Good Arguments: How Debate Teaches Us to Listen and Be Heard Penguin Press June 2022 352 pages All it takes is a quick visit to cable news or a dip into Twitter to see that the quality of debate in the modern age has declined precipitously. In this book, Bo Seo, debate champion and former coach of Harvard’s debate team, makes a passionate argument for the virtues of engaged, good-faith debate. It’s an endeavor that gave him confidence and direction as a Korean immigrant child struggling to learn English. And it’s also a skill that today’s CEOs can use to great effect, whether in persuasion, selling, or simply presenting ideas clearly.

NextGen Benefits Advisers, et al.

Life & Death Decisions in the C-Suite: How The US Insurance System Puts Your Employees’ Lives and Health at Serious Risk . . . and How You Can Fix It Bottom Line Solutions December 2021 282 pages Today’s large employers are tasked with the complex, frustrating, and—as this book argues— dangerous task of providing health insurance to their employees. This book collects the insights and expertise of leading US benefits consultants and advisors, including Daniel LaBroad, Jennifer Berman, Aaron Ault, and Nelson Griswold, to reveal the dysfunctions that plague the current healthcare system and offer C-suite leaders guidance on how to lower insurance costs while providing better care for employees across the organization. Q2 2022 // TexasCEOMagazine.com

HOUSTON DEAL HIGHLIGHTS Q1 2022 VENTURE REPORT Mason Rathe

Mason Rathe’s Texas Deal Highlights showcases the state’s vibrant tech and startup ecosystem, from fundraising to mergers and acquisitions to other major company announcements and news. Here, Mason looks back at some of the biggest venture deals in Houston from the first part of this year. For similar quarterly reports on Dallas and weekly updates on Austin, subscribe at texasdealhighlights.com.

Five! Count ’em, five straight quarters with over $300 million in venture funding in Houston!

Five! Count’em, five straight quarters with over $300 million in venture funding in Houston! Six years ago, we were barely cracking that $300 million number for the year, and now it’s below the quarterly average. My deal updates are a lot easier to write when we have major activity, and bringing in $348 million certainly fits the bill. I’ve said it before and I’ll say it again—these numbers are based on years of hard work from the organizations that have built the startup infrastructure in Houston. It’s amazing to see the company-building and value-creation that’s happening in that part of the state.

HOUSTON VENTURE ACTIVITY

Here are your 10 biggest venture deals of the quarter: 1. Encina, the Woodlands-based developer of technology designed to produce renewable products from waste plastic, raised $55M of venture funding from IMM Investment and SW Recycle Fund. 2. Avelo Airlines, a Houston-based airline, announced a $42M Series B round, led by Morgan Stanley Tactical Value. Avelo has now raised $167M since beginning service in April 2021. 3. Ecommerce Brands, a Houston-based e-commerce aggregator platform, raised a $40M round, including $10M in equity, led by Bearing Ventures. 4.MetOx, a manufacturer of high-temperature superconducting wire, raised $28M of Series A venture funding from Safar Partners and other undisclosed investors. 5. Zeta Energy, a Houston-based battery manufacturer, announced a $23M Series A round, led by Moore Strategic Ventures. Zeta has raised $27.2M to date for their novel lithium sulfur battery technology. 6.Stream Biomedical, developing neuroprotective and neuroreparative therapies for individuals suffering

Texas CEO Magazine // Q2 2022

as a result of neurologic trauma and/or degeneration, raised $21.5M Series A from undisclosed investors. 7. Zinnov, the Woodlands-based global management and strategy consulting firm, raised a $20M Series A from HKW. 8.Decisio Health, a clinical decision support platform designed to aggregate and prioritize real-time patient data, raised $18.5M Series B venture funding from Declatex, GE Healthcare, and UT Horizon Fund. The company has raised $31.5M to date. 9.Vivante Health, a Houston-based chronic disease management platform, raised a $16M Series A led by 7wireVentures. The financing round was joined by new investors Human Capital, Intermountain Ventures, SemperVirens, Elements Health Ventures, and Leaps by Bayer. Returning investors FCA Venture Partners, NFP Ventures, Lifeforce Capital, and Big Pi Ventures also participated in the round. The company has raised approx. $50M to date. 10. SiteAware, a Houston-based construction AI platform, announced a $15M Series B round, led by Vertex Ventures Israel. SiteAware has raised $26.5M to date with other investors, including Axon Ventures and Robert Bosch Venture Capital.

HOUSTON M&A ACTIVITY

As you can see below, Houston M&A activity in Q1 was the highest it’s been since Q3 of 2019:

Usually I break down the M&A activity strictly for software companies, but considering that there were 12 acquisitions in this sector and none of them decided to disclose the deal terms, that chart wouldn’t tell the right story. Houston is a huge economy, and as tech accelerates its momentum in the tech arena, there are other key industries that have made this the seventh-largest metro GDP in the country, at over $500B. Let’s take a look at the acquisitions that did occur in these other sectors.

As you can see, Q1 of 2022 was dominated by the energy industry, a common theme in Houston’s identity, which claims headquarters of major energy companies including Phillips 66, Baker Hughes, ConocoPhillips, and Halliburton. These companies also happen to be key customers for startups in the area. As venture-backed companies continue to build value in Houston, we will most certainly see more M&A activity and IPOs to follow. Stay tuned! Mason Rathe leads finance and operations at SchooLinks, a platform democratizing career resources for the broader population and solving the United States’ talent shortage problem. Prior to SchooLinks, he was an early-stage investor with venture capital firm LiveOak Venture Partners—currently on its third $210 million fund focused on Texas-based tech companies. His notable investments include Eventador (acquired by Cloudera), Homeward, Eventus, Rollick, and TalentGuard. Since 2017, he has released a weekly tech newsletter chronicling deal activity across Texas. You can send him deal insights at mason@texasdealhighlights.com.

Q2 2022 // TexasCEOMagazine.com

BOB JORDAN TAKES FLIGHT

Photography by Stephen Keller

Feature

Southwest Airlines’ new CEO is poised to pilot the company through uncertain skies ahead. Here’s how he got to his new role and what he sees for the future of the airline. Joel Trammell

On February 1 of this year, Robert “Bob” Jordan woke up as CEO of one of Texas’ most iconic brands. Seven months before, Jordan had been selected as the new head of Southwest Airlines. It would be his 15th role at the company, where he was first hired as a programmer in 1988. I spoke with Jordan at 8:00 a.m. on that first day and asked how it felt. “It’s funny,” he said, “it feels like a normal day. It doesn’t feel all that different.” Jordan attributes this sense of normalcy to the long transition period he went through with former CEO Gary Kelly, who has been Jordan’s mentor for decades. “I’ve had the greatest teacher in the world for 32 years with Gary Kelly. I just can’t thank him enough. He’s always sponsored and mentored me, and he did the same through the transition.” This year, Southwest will be one of about 50 to 60 companies in the Fortune 500 that experience a CEO changeover, a number that’s been relatively stable the past few years. For any organization, these transition periods pose certain dangers, and the colorful, Texas-born airline is no exception. But fortunately for all involved, Bob Jordan appears uniquely prepared for his new job. Among the reasons why are that lengthy planned succession that began in mid-2021, Jordan’s deep familiarity with Southwest’s business and culture, and—maybe most significantly—his previous success in heading Southwest subsidiary AirTran Airways.

ACQUIRING AIRTRAN: A KEY PROVING GROUND FOR THE FUTURE CEO

When Southwest acquired AirTran in 2011, it expanded the parent airline’s reach by 21 cities, including seven international destinations. And though Southwest saw the buy as a smart opportunity, to outside observers the AirTran acquisition was by no means a guaranteed win. Industry watchers wondered whether such a large-scale integration was possible without significantly raising Southwest’s operating costs. In addition to the usual cultural pitfalls of merging organizations, AirTran’s fleet would add new aircraft types to Southwest’s fleet of solely Boeing 737s; operating just one type of craft had given Southwest an advantage in efficiency. AirTran also used a “hub and spoke” route model, while Southwest famously ran on a “point to point” system.

Texas CEO Magazine // Q2 2022

Feature

Q2 2022 // TexasCEOMagazine.com

As new AirTran president, Jordan was tasked with overseeing these challenges. It’s the sort of “mini CEO” role that can be a proving ground for executives on their way to the corner office. And by nearly all accounts, Jordan did prove himself at AirTran, paving the way for his current role. “I was blessed to lead that acquisition,” says Jordan. “We knew the financial potential was there. You can tell that by reading a couple of pages. But it has to make sense culturally too. You can have a financial success but if it’s a cultural disaster, it’s just not going to work out.” Jordan led smart measures such as leasing out AirTran’s 717s to Delta, thus retaining the operational efficiency of flying a single aircraft type, the 737. But when asked about why the acquisition overall was a victory, Jordan focuses on the people side. “The culture of AirTran was very similar to the culture of Southwest Airlines,” he says. “It took me less than two weeks to understand that the AirTran folks loved to serve, love their company, just like Southwest Airlines folks love to serve and love their company. So we had a match in terms of culture, which was key.”

Texas CEO Magazine // Q2 2022

Feature Southwest was intentional in how it brought AirTran employees into the Southwest family. For a time, Jordan spent every week in Atlanta, at AirTran’s main hub, or in Orlando, at its headquarters—being visible, talking to people, helping them understand the common vision. He also oversaw an onboarding program in which each AirTran employee was paired with a Southwest employee. It was a measure that brought a personal touch to the integration of the two workforces and cultures, no small factor in the success of such an acquisition.

FILLING BIG SHOES

Despite his previous successes, Jordan has a lot of work on his hands at post-pandemic Southwest, and some big shoes to fill. Jordan is the sixth CEO in Southwest’s history, a lineage that includes cofounder Herb Kelleher, one of the country’s most well-known and respected CEOs and an undisputed Texas legend. The company’s founding story tells of Kelleher and a client of his law firm, Rollin King, talking over a business idea in San Antonio’s St. Anthony Club. Start an airline? Why not? Grabbing a cocktail napkin, King sketched out the primary routes he pictured, between Dallas, San Antonio, and Houston: the Texas Triangle.

Kelleher and Rollin incorporated Southwest in 1967, but it took four years of legal wrangling before their first flight. Competitors filed lawsuits, and Kelleher—offering to represent the company and pay legal fees from his own pocket—eventually triumphed before the Texas and US Supreme Courts. In 1971, Southwest’s first flight took off from Love Field, headed for San Antonio. Lamar Muse and Howard Putnam both held the CEO role early in Southwest’s history, but both had relatively short tenures. After Putnam’s departure for Braniff Airways, Kelleher himself took the reins for over two decades. It was during this period that Kelleher’s personality—outsize, outrageous, funloving—really imprinted on the company culture, setting the template for the airline we know today. Gary Kelly, who now serves as executive chairman of Southwest, was the next titan in the company’s history. He was promoted to CEO in 2004 after being mentored directly by Kelleher. Like his predecessor, Kelly began his CEO tenure with a legal fight, this time against the Wright Amendment. The bill, which was intended to protect then-new DFW International Airport from nearby competition, limited Love Field—and thus Southwest— from flying passengers beyond Texas and its four neighboring states (Louisiana, Arkansas, Oklahoma, and New Mexico). But with the help of the two US Senators from Texas, Kelly led the charge against the amendment, and it was eventually phased out. The whole country—and beyond— was now Southwest’s oyster.

THAT DOESN’T MEAN JORDAN DOESN’T FACE SOME DAUNTING CHALLENGES, BUT HE DOES HAVE AN ASSET IN HIS DEEP AND VARIED BACKGROUND AT SOUTHWEST. Q2 2022 // TexasCEOMagazine.com

Bob Jordan (right) with his predecessor, Gary Kelly

Texas CEO Magazine // Q2 2022

Feature

During his tenure, Kelly also modernized the fleet, introduced international flights, and added a connection to Hawaii in 2019. That last development was particularly critical because it allowed leisure travelers to spend points from the cobranded Chase/Southwest Rapid Rewards Visa card on vacations to Hawaii. Of course, Kelly also shepherded Southwest through the pandemic, which saw the first break in 47 years of unbroken profitability for the company. As the airline fights its way back from an industrywide crisis, it has seen travel demand resume and grow. In fact, it managed to open flights to 18 new cities during the pandemic. That doesn’t mean new CEO Jordan doesn’t face some daunting challenges, but he does have an asset in his deep and varied background at Southwest.

Q2 2022 // TexasCEOMagazine.com

“IT’S SURREAL”

Bob Jordan wasn’t born in Texas, but he got here quick. A native of Jeffersonville, Indiana, Jordan attended Texas A&M in the late 1970s and early 1980s, studying computer science and then getting his MBA. From there, he did a short stint at Hewlett-Packard’s offices in Cupertino, but was soon itching to come back to Texas. His introduction to Southwest came via a want ad for a programmer. “In a literal newspaper!” laughs Jordan. He got the job, moved to Dallas, and soon applied for a different finance role under then-controller Gary Kelly. I asked Jordan if he knew then what he ultimately wanted to do at this early stage of his career. “Pay off my student loans,” he jokes. But he goes on to say that, even from the start, he was never particularly ambitious about career matters. “I love working hard and being around great people, but I’ve never been a title-focused person,” he says. It makes sense that his favorite of the Southwest core values is humility.

Texas CEO Magazine // Q2 2022

“The idea that I would be a senior leader at Southwest, let alone CEO, was not even on the radar for me. To think that 34 years later, Gary and the board would ask me to help lead this company, it’s surreal.” Though Jordan began as a programmer, Southwest’s leadership—including Gary Kelly, who has mentored Jordan for over three decades—never put him in a box. “Gary and Southwest Airlines didn’t look at me as a programmer. They looked at me as somebody who could get things done, and they gave me a chance. That’s the beauty of this place. We’ve had executive vice presidents who started on the ramp handling luggage. They see you as a person. And they see your capabilities.” After applying for his first job under Kelly, Jordan never applied for a job again. “The other 14 of my 15 jobs here, Gary just came to me and said, ‘Hey, why don’t you go do this?’ He had a belief in me a lot of times when I didn’t necessarily have the same belief in myself.”

Feature Kelly notes that, compared with his own experience level going into the CEO role, Jordan has him beat. “It blows me away,” said Kelly.

WE’VE HAD EXECUTIVE VICE PRESIDENTS WHO STARTED ON THE RAMP HANDLING LUGGAGE. THEY SEE YOU AS A PERSON. AND THEY SEE YOUR CAPABILITIES.

MAKING THE MOST OF THE “GOLDEN PERIOD”

Former New York Times Company CEO Mark Thompson has called the period between the announcement of a new CEO and that CEO’s assuming the role the “golden period.” It’s a time when the incoming leader can learn, reflect, and get ready. Jordan says he is grateful for his own seven-month golden period and was determined to make the most of it. He carved out three priorities for the transition, the first being to simply get to know employees better. “They needed to see me,” he says. “I needed to see them. I needed to talk to them. I spent a lot of time in cities all over the system, in our training classes. It was a joy to be with our employees every single week.” His second focus was clarifying his message as incoming CEO. “I needed to be able to articulate our short-term and long-term plans in a way that made sense. So I worked on that.” This also

Q2 2022 // TexasCEOMagazine.com

THEY’VE BEEN UNDER STRESS. THEY’VE HAD TO WEAR MASKS ALL DAY. I THINK IT’S DISRESPECTFUL TO SKIP PAST THAT AND GO ON TO 2022. involved learning to use tools—like social media— that could help his message clearly reach all of Southwest’s more than 55,000 employees. Third and finally, he wanted to acknowledge the lasting impact of the pandemic. COVID19-related issues have been hard on both the company, including causing occasional staff shortages, and the employees personally. “For a lot of people, COVID wasn’t just the annoyance of not being able to go to a restaurant,”

Texas CEO Magazine // Q2 2022

says Jordan. “They lost family members. They’ve been under stress. They’ve had to wear masks all day. I think it’s disrespectful to skip past that and go on to 2022. I felt like we need to spend a lot of time loving on our employees and making sure they understand that we understand, because our employees are the essential difference here at Southwest Airlines.” Jordan says those months of preparation helped him wrap his mind around the role and start with the same confidence Kelly and the board have in him.

Feature

For Kelly’s part, he insists he’s not going anywhere— his new office is just down the hall from Jordan’s. But he is also committed to giving Jordan space to lead in his own way. “I think it’s very important that people know that Bob is the leader and there’s no confusion there,” Kelly told The Dallas Morning News recently. “I’ll be much more behind the scenes.”

SOUTHWEST’S FLIGHT PLAN FOR THE FUTURE

When you ask Bob Jordan what’s ahead for Southwest Airlines, it is clear that he did in fact hone his message. Like a good CEO, he repeats the company’s top priorities consistently, including reaching the benchmarks of 5,000 flights a day and 1,000 planes in the fleet. Southwest’s current fleet stands at about 735. Jordan also says he plans to restore Southwest’s full network of routes and continue hiring. The plan is to onboard 8,000 people in 2022 and bring most of headquarters staff back onsite.

“I think it’s critical to have people together,” says Jordan. “Do I think we will ever come back to a hundred percent in the office? That’s a reach, but can we get to 50 percent or so? I think we can. And I think we need to.” Additionally, Jordan is working closely with COO Mike Van de Ven, who also took on a president role last year, on modernizing the operation. “We’re nearly a technology company,” Jordan says. He wants to work on particular issues—though the most he will say is that they include having super-reliable WiFi on every flight. Whatever lies on the horizon for Southwest, Jordan repeatedly returns the conversation to the employees who make the company great. As any Southwest customer knows, the airline’s employees are known for their humor. The flight attendants are the in-flight entertainment, as people at the company like to say. In 2019, one Southwest gate agent went viral when he entertained delayed travelers with “gate games,” including a competition for worst driver’s license. Another favorite gag is a flight attendant hanging out in an overhead compartment as passengers board. But it’s not just about the jokes. “Our employees have a warrior spirit,” says Jordan. “They push through and making things happen. We owe them two things: the tools that they need to do their job in the best way possible, and the tools to be as efficient as we can.” The last question I asked Jordan was whether it’s tough being a CEO when everyone you meet has an experience with your company—perhaps not always perfect. “It’s wonderful to work at a company where, yeah, we make our mistakes and have our operational challenges but where our customers love us. When people see this heart pin,” he says, indicating his chest, “I don’t have to explain what it means. They say, ‘Oh, you’re with Southwest Airlines.’ The heart means we love to serve each other and our customers. “If I do meet someone who had a tough experience, I apologize. But the vast majority of comments I get are about how people love this company, and above all, about how they love our employees. And it’s those employees who really make the difference here at Southwest Airlines.” Joel Trammell is the former CEO of private and public companies, a CEO educator, and the owner of Texas CEO Magazine.

Q2 2022 // TexasCEOMagazine.com

ON SALE

NOW!

Available wherever books are sold online.

Funding the Early Stages of Your Venture.

If you’re new to the fundraising game, fear of the unknown might be keeping you awake at night. This book will help you navigate the fundraising journey while also helping make sense of the chaos and frustrations you will likely face during the process. The long list of valuable insights and genuine aha moments you’ll discover should dramatically improve your odds of fundraising success.

Texas CEOs

ON THE MOVE Here are a few recent CEO moves in Texas. Do you have a CEO announcement you’d like to have covered?

Email us at info@texasceomagazine.com!

Q2 2022 // TexasCEOMagazine.com

LAITH DAHIYAT Pingboard | Austin Laith Dahiyat has taken the reins of Pingboard, maker of employee networking and org chart software. Bill Boebel, the company’s founder, had been serving as CEO and will remain board chairman and an active advisor to the company. Dahiyat has long experience leading product management teams—a good training ground for the CEO as we discussed in our previous issue—and has held leadership roles at Weedmaps and Chargify.

CHRIS MORRIS Dave & Buster’s | Dallas In April, Dave & Buster’s announced it had acquired Main Event from from Ardent Leisure Group and RedBird Capital Partners. The deal ended with former Main Event CEO Chris Morris taking on the CEO role over the newly expanded Dave & Buster’s. “This is a transformational combination for both brands,” said Kevin Sheehan, Dave & Buster’s board chair and interim CEO.

ASHLEY ANDERSEN ZANTOP Cambium Learning Group | Dallas John Campbell, who has served as CEO of ed-tech company Cambium Learning Group for more than 18 years, retired in May. His role will be filled by Cambium’s former COO, Ashley Andersen Zantop, who will also become chairman of the board. Campbell will remain on the board. Andersen Zantop has held C-suite positions at GreaterGood and Capstone and serves on the government affairs council of the Software & Information Industry Association (SIIA).

DAVID FONSECA VelocityTX | San Antonio At VelocityTX, the nonprofit subsidiary of the Texas Research & Technology Foundation, has a new CEO in David Fonseca, who has been with the organization since 2017. His most recent title there was executive vice president. He takes over the role from Randy Harig, TRTF’s CEO. Before VelocityTX, Fonseca held positions at the International Business Innovation Association (inBIA) and Texas A&M University– Corpus Christi. He also serves on the boards of InBIA, HealthCell, Geekdom, and Alamo Angels.

MADISON MAUZÉ SecureVideo | San Antonio Madison Mauzé, a graduate of Texas A&M and Harvard Business School, is the new CEO of telehealth company SecureVideo, part of the the Dura Software portfolio of companies. Mauzé had also been CEO of another Dura company, Vertex Systems, and he will retain that job as he takes on this new one. SecureVideo’s cofounder and previous CEO, Jonathan Taylor, will now serve as chief product and technology officer.

Texas CEO Magazine // Q2 2022

OZAN DOKMECIOGLU Keurig Dr Pepper | Plano Keurig Dr Pepper, the seventh-largest food/beverage company in the US, is gearing up for a CEO transition to take place in July 2022. Current CEO Bob Gamgort was previously CEO of Keurig Green Mountain; when that company merged with Dr Pepper Snapple Group in 2018, he became CEO of the combined entity. KDP’s new CEO will be Cyprus-born Ozan Dokmecioglu, who currently serves as the company’s CFO and president of International. Dokmecioglu will also join the board in July 2022.

JENNIFER SCRIPPS Downtown Dallas Inc. | Dallas Downtown Dallas Inc., which describes itself as a “placemaking, advocacy, and economic development group” has concluded a national search by announcing that Jennifer Scripps is its new CEO. Scripps is a notable civic leader in Dallas, previously serving as director of the City’s Office of Arts & Culture and helping establish and then holding leadership roles at the Perot Museum of Nature and Science. She is a native of Dallas and holds an MBA from Harvard Business School.

PATRICK MANZO Kazoo | Austin Paul Pellman, a former Google executive, recently announced his retirement, leaving his position as CEO of employee experience platform Kazoo up for grabs. Patrick Manzo has now landed the role. Manzo is a licensed attorney and former officer in the US Navy. His most recent role was as chief revenue officer of Skillsoft.

STEPHANIE POPE Boeing Global Services | Plano Stephanie Pope has taken on a new role as CEO of Boeing Global Services (BGS). The BGS business unit opened in 2017, with a mission to meet aerospace and defense needs in supply chain management; engineering; aircraft modification; digital analytics and training; and professional services. Pope was with BGS when it opened, serving as CFO, but most recently held the position of CFO at Boeing Commercial Airplanes.

LUIS PATIÑO Austin PBS | Austin Luis Patiño, former president and general manager of Univisión Los Angeles, has been appointed as the new CEO of Austin PBS. Though he’d most recently been in California, this is a return to Austin for Patiño. He has previously been a leader at Univisión in Austin and San Antonio. During his time in Austin, he served on boards including those of Austin PBS, the Long Center for the Performing Arts, and the Mexic-Arte Museum. Patiño is taking over for the recently retired Bill Stotesbery, who had led Austin PBS as CEO since 2004.

MIKE RYPKA Torchy’s Tacos | Austin Mike Rypka has made an official return as CEO of Torchy’s Tacos, the company he founded from a food truck in 2006. Rypka previously served as CEO for 12 years, from 2006 to 2018, when industry vet GJ Hart took over the role. Hart, a former executive at Texas Roadhouse and California Pizza Kitchen, retired last November. Rypka had been interim CEO since then.

Q2 2022 // TexasCEOMagazine.com

HOW SMART CEOS AVOID COMMON

DIGITAL TRANSFORMATION

TRAPS Joyce Durst

Picture this: Your CIO comes into your office and says: “Boss, here’s the current status of our digital transformation plan.” You brace yourself for the onslaught of jargon as the CIO continues: “We’re behind on our Kubernetes containers implementation, so no microservices yet, and our primary applications are still monolithic. Our CI/CD pipeline and QA automation work hasn’t even started; it will be years before our ML or AI projects can begin because our data cleansing work isn’t effective. And please don’t ask about IoT, blockchain, or the status of the serverless plan for our cloud journey.” At this point, you ask the CIO to stop speaking. Someone must be pulling a practical joke. Are they even speaking English? This is where many of today’s CEOs find themselves when it comes to digital transformation: confused, lost, overwhelmed. But that doesn’t change the fact that digital transformation is an imperative for any business that wants to win the future. Let’s look at what exactly digital transformation is and how smart CEOs can help their organizations avoid common pitfalls around it.

WHAT IS DIGITAL TRANSFORMATION?

Simply put, digital transformation is the process of using technology to create new—or modify existing—business processes, services, and/or customer and employee experiences to meet changing business and market requirements. There is tremendous pressure across all industries to improve and simplify customer and employee experiences, and technology is one of the most promising vehicles for those changes. In particular, companies are redefining and reimagining their customer journey—all the cool kids are doing it. At the same time, more companies are looking to technology to increase operational efficiency as well. The pandemic accelerated digital transformation considerably, largely because these factors—customer/employee experience and operational efficiency— can decide a company’s fate in times of economic difficulty. Digital transformation isn’t just about being cool—it’s about gaining competitive advantage through smart, strategic deployment of technology. Global spending on digital transformation will top $2.4 trillion in 2024, up from $1.3 trillion in 2020.

DIGITAL TRANSFORMATION ISN’T JUST ABOUT BEING COOL—IT’S ABOUT GAINING COMPETITIVE ADVANTAGE THROUGH SMART, STRATEGIC DEPLOYMENT OF TECHNOLOGY.

DIGITAL TRANSFORMATION IS NOT AN IT-ONLY PROJECT—IT IS A TRANSFORMATION OF THE ENTIRE BUSINESS FOR THE BETTER. The financial industry is a good example of digital transformation. It’s much more than the shift to mobile banking. Consumers now use cash airdrops and make cardless payments through services like Apple Pay on phones or watches. Some have moved completely to so-called “bankless banking,” using upstart fintech services rather than traditional banking institutions. In retail, too, businesses are fighting to meet customer expectations due to the massive push toward e-commerce and the ease of doing business online. Even Walmart has undergone a transformation to keep up with Amazon and grocery stores by turning to things like online ordering and delivery services. Digital transformation is affecting these and every other industry, including the biggest and smallest players alike. Unfortunately, when a company embarks on a digital transformation project, it usually fails.

MOST DIGITAL TRANSFORMATION PROJECTS FAIL. WHY?

A study by Dallas-based consulting firm Everest Group found that a full 73 percent of digital transformation efforts fail to realize any business value whatsoever.1 Similar studies from Boston Consulting Group and others arrive at failure rates in that ballpark. For something as important as digitally upgrading an organization,

Texas CEO Magazine // Q2 2022

why do so many of these initiatives fail? Let’s break down the top three reasons into a more granular view. Reason 1: Misalignment of market needs and transformation focus • No alignment around the problem to be solved and the desired business impact • No clear map of the customer (and/or employee) journey Reason 2: Poor project management • No detailed plan with milestones; instead, trying to “boil the ocean” and solve all company issues at one time • No measures of success / desired outcomes Reason 3: A culture that does not embrace change • Lack of commitment of C-suite and lack of associated budget • Not enough technology expertise to tie technology projects to business outcomes

AVOIDING THE PITFALLS Now, how can you, through your leadership as CEO, help your organization digitally transform without becoming part of the 73 percent who fail? Here are seven considerations.

1. Don’t start with a buzzword. Many people go astray by starting a project stating they want to deploy machine learning or artificial intelligence or some other trendy term before they have an idea of what business problem they are trying to solve. Technology is just a tool, and you don’t want to choose a hammer when a screwdriver is needed. Ask yourself this question: Where does the company need to improve to get ahead of the competition, drive more revenue, and increase profits? For example, the goal might be to decrease customer churn by 10 percent, increase cross-sell of a product by 5 percent, or reduce inventory carrying costs by 20 percent. The goal should be stated in terms of dollar impact to the business, allowing you to set an ROI goal for each component of the digital transformation project. If you are going to be successful, you must have specific business objectives, a detailed plan, success metrics, and the right expertise or partners for each individual initiative. 2. Start with a detailed map of the customer journey. If you have not already mapped out your customer journey, start there and you will find a target-rich environment for inspiration around digital transformation ideas. As you identify transformation ideas, determine the tie to the key company objectives. You want to ensure a significant improvement in the endto-end customer experience that translates to significant business reward with high return on investment.

3. Once it is known that the company is investing in digital transformation, everyone will rush to get a project on the list. Resist the urge to try to do everything at once. Instead, let market demands lead the way. To begin the planning process, it is important to remember that digital transformation is not an IT-only project—it is a transformation of the entire business for the better, so diversity of thought, inclusion of key stakeholders, and engaged, ongoing support and advocacy of the C-suite is non-negotiable. Diversity matters when assembling the transformation team. The stakeholder team should include business and technical people, people new to the company and tenured people. Cross-functional teams must have representatives from all parts of the workflow that you are improving, and if the area has customer touchpoints, add a customer survey or focus group into the mix. 4. Once you have a detailed roadmap, it is time to review the key performance indicators (KPIs) and project outcomes. Put simply: What does success look like and how will you know when you’ve achieved your objectives? The metrics for success should be published weekly. Metrics will depend upon the specific project, but you are looking for metrics that will alert you quickly to whether the project is off track. 5. Peter Drucker once said that culture eats strategy for lunch. That is never truer than in a

transformation project. By definition, a digital transformation project requires large-scale organizational change and adoption of new technology, and it could alter long-established norms and workflows in the company. It is highly recommended to do Agile mindset training across the company, and once you have a definition of what success looks like, you must be ready to be agile! Be prepared to change direction based upon what you learn from stakeholders along the way. A culture that embraces change, collaborates, and conducts regularly scheduled retrospectives will greatly increase the organization’s odds of success. 6. The CEO needs to be the Chief Digital Transformation Officer. Transforming the business—and championing the necessary culture, process, systems, and people changes— begins with the CEO. Change is not comfortable. It’s our responsibility as CEOs to inspire the change we want to see so people embrace it. And to further increase the odds of success, the support and advocacy of the entire exec team is needed. The C-suite must be front and center in communicating how these changes will benefit both customers and employees and make the company more valuable. Leaders should focus on answering the “Why,” which will help with internal adoption. This way, digital transformation becomes one of the company’s primary goals that must be achieved for the company’s vision to be realized. Regular updates should come from the top.

CHANGE IS NOT COMFORTABLE. IT’S OUR RESPONSIBILITY AS CEOS TO INSPIRE THE CHANGE WE WANT TO SEE SO PEOPLE EMBRACE IT.

Additionally, the executive team must put the required budget behind the chosen priorities. Many projects fail due to underinvestment. Cutting corners and trying to save money and piece together the lowest-cost technology solution or the lowest-cost team almost never works. If you want big returns, you must invest in quality solutions and resources to get the work done. 7. Be realistic about the skills and expertise of your team. As you build your transformation roadmap, identify the skills needed for implementation, then make a plan for education and upskilling as part of the overall project. Investment in people is a key component of a successful transformation project. Digital upgrades require human knowledge and skill—don’t assume your team can just learn everything on the fly. ••• Transformation means changing the business for the better, futureproofing your company to be able to sail into whatever headwinds the world throws your direction. Be bold, yet practical, and resolute. Remember the saying “Rome wasn’t built in a day.” Nor will you transform your business in a day. The key is to have a grand plan and to take it one step at a time in priority order. Joyce Durst is a soughtafter speaker on leadership and women in business and the CEO and cofounder of Growth Acceleration Partners, a leader in digital transformation consulting. Based in Austin, GAP helps companies build a detailed roadmap to the desired future state. GAP’s depth of digital transformation expertise across industries, combined with fifteen years of building software and data analytics solutions, means its clients get a transformation plan that leads directly to implementation success.

Peter Bendor-Samuel, “Why Digital Transformations Fail: 3 Exhausting Reasons,” The Enterprisers Project, August 27, 2019.

Q2 2022 // TexasCEOMagazine.com

TEXAS

ECONOMIC INDICATORS from the Federal Reserve Bank of Dallas DallasFed.org

So far in 2022, the Texas economy has continued to expand. Here is a closer look at several underlying economic indicators.

The Dallas Fed’s Texas Employment Forecast is for 3.4 percent job growth this year (December/December).

LABOR MARKET Employment Growth Robust in Most Sectors Texas employment expanded an annualized 8.9 percent (92,960 jobs) in February after growing an upwardly revised 5.0 percent in January (Chart 1). Job growth spanned most sectors in February, except for other services and government. Oil and gas employment posted the strongest growth at an annualized 23.7 percent, trailed closely by the financial activities and leisure and hospitality sectors. Payrolls in the other services and government sectors contracted 6.7 percent and 3.4 percent, respectively. Unemployment dipped from 4.8 percent in January to 4.7 percent in February.

Texas CEO Magazine // Q2 2022

Goods-Producing Employment Trends Up In February, the robust growth in Texas employment was reflected in the goods-producing sector (Chart 2). Job growth in that sector edged closer to February 2020 levels as all three

subsectors increased. The energy subsector’s 23.7 percent gain (3,190 jobs) was the largest. Manufacturing grew 7.7 percent (5,540 jobs), and construction rose 4.1 percent (2,540). Still, employment in the goods sector remains 4.1 percent, or 78,200 jobs, below February 2020 highs. Meanwhile, employment in the service sector has fully recovered and is 2.3 percent (254,900 jobs) above prepandemic levels.

1.0 percent to $316,250, respectively. Fort Worth had the slowest rate of growth at 0.2 percent as the median price increased to $349,440. Year-over-year median house price growth remained the strongest in Austin at 18.4 percent.

DINING OUT HOUSING Existing-Home Sales Moderate Texas existing-home sales fell in February following a sharp increase the previous month. Sales were down in all major Texas metros. However, the three-month moving average of Texas existing-home sales stayed positive, and growth moderated to 0.3 percent in February (Chart 3). The three-month moving average of sales in Houston and San Antonio rose 2.0 percent and 0.5 percent, respectively, while Fort Worth, Dallas, and Austin saw declines of 2.9 percent, 1.8 percent, and 0.2 percent.

Home Prices Reach Record High The median sales price of homes across the state rose further in February (Chart 4). The Texas median price (adjusted for inflation) reached a record-high $333,720—a 0.5 increase from January. Among the major Texas metros, Austin experienced the fastest growth, with the median price rising 1.8 percent from January to $515,520. Houston was next, up 1.6 percent to $334,220. The median home price in Dallas and San Antonio rose 1.2 percent to $411,610 and

In March, the number of seated-diner reservations at restaurants remained above 2019 levels statewide but weakened nationwide, based on a seven-day moving average (Chart 5). The US figure faltered throughout March and inched down to 2.4 percent below 2019 levels on March 23. The Texas figure, which recovered in midFebruary from the COVID-19 omicron surge, was 15 percent above 2019 levels. As of March 23, Austin and San Antonio had the highest dining-out levels among the major Texas metros at 18.4 percent and 16.2 percent above 2019 levels, respectively. Dining out in Houston was up 8.6 percent, while in Dallas, it decreased 5.2 percent.

Subscribe to Texas Economic Indicators and other reports from the Dallas Fed at dallasfed.org/pubs/e-sub. The Federal Reserve Bank of Dallas promotes a strong financial system and healthy economy in the Eleventh Federal Reserve District, which includes Texas, northern Louisiana, and southern New Mexico. Through our offices in Dallas, El Paso, Houston, and San Antonio, we work for and with the people of our district to build an economy that works for everyone.

Q2 2022 // TexasCEOMagazine.com

W H AT A R E Y O U R O R G A N

WORKPLACE SAFETY GUIDE:

CONSTRUCTION Safety is a top-down activity in any business. As CEOs, it’s our responsibility to lead a safety culture that encompasses the whole organization. In this guide, we share some of the top hazards and controls in the construction industry—one that is currently booming across Texas. If you lead a construction firm, first ensure that your safety director understands these focus four, which are construction industry hazards so dangerous they have earned special attention from the Occupational Safety and Health Administration (OSHA). Collectively, the focus four account for nearly 60 percent of construction worker deaths. Eliminating these accidents would save 500 lives per year, according to OSHA. Here is more on each of the focus four in the construction industry, and how employers and workers can do their part to keep everyone safe.

HOW TO AVOID FALLS

Falls account for 40 percent of construction worker fatalities, making them the most dangerous of the focus four hazards. Fall protection. Use fall protection when working at heights of 6 feet or more. Remember that regardless of the fall distance, employers must provide fall protection when employees work over dangerous equipment and machinery. Inspect fall protection before each use for broken parts, stress cracks, frayed or kinked ropes and other damage. Scaffolds. Scaffolds should be designed by a competent person and include guardrails along open sides and ends. Inspect guardrails, connectors, fastenings, footings, tie-ins, bracing and planking for damage. Remove damaged scaffolds from service immediately. Housekeeping. A clean, orderly workplace promotes productivity and reduces the risk of slips, trips and falls. Keep walkways, stairs and exits clear of merchandise, supplies and cleaning products. Clean up spills as soon as possible, and use “Caution: Wet Floor” signs in the meantime. In wet weather, use slip-resistant floor mats to keep people’s feet on solid ground.

HOW TO AVOID STRUCK-BY INJURIES

There are four common causes of struck-by injuries: flying, falling, swinging and rolling objects. Flying objects. Any time workers use power tools and do tasks that require pushing, pulling and prying, they are at risk of being struck by flying objects. Controls include wearing eye and face protection when required, ensuring machine guards are in place, and reducing compressed air used for cleaning to 30 psi. Falling objects. We are at risk from falling objects when we work underneath cranes, scaffolds and other overhead work. Controls include wearing hard hats at all times, using toe boards and debris nets to catching falling objects, and not exceeding lifting capacity of cranes and hoists. Swinging objects. Mechanically lifted materials can swing, twist or turn and strike workers. To keep safe, stay out of the swing radius of cranes, backhoes, and other equipment; use a tag line if a worker on foot must control the load, and use extra caution on windy days. Rolling objects. One of the most common accidents involving rolling objects is when a worker is hit by a vehicle in a work zone. Never drive a vehicle in reverse with an obstructed rear view unless it has an audible reverse alarm or another worker signals it is safe. It’s also vital to set parking brakes when vehicles and equipment are parked, and to chock the wheels if they are on an incline. Workers should avoid vehicle blind spots at all times.

HOW TO AVOID ELECTROCUTION

The primary causes of electrical hazards are contact with overhead powerlines, contact with energized sources, and improper use of extension cords. Overhead powerlines. Overhead and buried powerlines carry high voltage that can cause electrocutions, severe burns and falls. Stay at least 10 feet away from overhead powerlines, use a spotter to look for powerlines, and

I Z AT I O N ’ S S A F E T Y R I S K S ?

always assume that overhead lines are energized. Ask the utility company to de-energize lines and identify buried powerlines in the area. It helps to use non-conductive wood or fiberglass ladders when working near powerlines.

SPONSORED CONTENT

THE RISE OF ESGIt’s Not a Passing Trend Cristina Silingardi In just the past year, Google searches for “ESG” have more than doubled. Those not yet acquainted with this acronym should get to know it. For those already familiar with ESG, you’re likely wrestling with it in different ways—namely, how to approach it and what it means for your business. Let’s take a closer look at this concept, and why it matters.

What Is ESG?

ESG stands for the environmental, social, and governance factors associated with business operations and asset management, and represents the three pillars of sustainability. While definitions of sustainability may vary from person to person, the 1987 Brundtland Report to the World Commission on Environment and Development framed it as “meeting the needs of the current generation without compromising the ability of future generations to meet theirs.” Although ethics-based, values-based, and responsible investing and operating approaches have been around in various forms and to varying degrees for many years, the term ESG was born of the 2005 Who Cares Wins conference in Zurich, which brought together a wide range of global finance professionals, research analysts, government leaders, and regulators to examine the applicability and role of ESG.

Why Is ESG Important for Businesses?

Some think of ESG as the proper balance of people, profits, and planet a company must attain if it wants to achieve sustainable growth. The ability to maintain that balance is certainly a strong indicator of an organization’s long-term success. Businesses should also embrace ESG initiatives because strong ESG performance is becoming increasingly important to consumers, investors, and other key stakeholders. Consumers are showing that ESG considerations are influencing their buying decisions more and more. A PWC review of ESG factors finds that consumers are more attracted to brands that live up to a purpose and values they can get behind.1 In 2021, approximately one-third of consumers demonstrated a willingness to pay more for sustainable products, with the average being willing to pay 25 percent more. Gen Z (32 percent of the global population) is willing to pay more than 30 percent higher prices for sustainable products and services.2 This is not a passing trend. Investors are also placing greater focus on ESG as a factor in what they put their money behind. They look to metrics like the SRI (Socially Responsible Investment) Score and a host of other indicators, such as whether the company has an ESG policy in place, any past legal issues associated with ESG factors, and specific attention to business ethics. A recent McKinsey study points out that investors “paying attention to environmental, social, and governance (ESG) concerns does not compromise returns—rather, the opposite.” Key factors cited include an increase in top-line revenues via new market segments, expense reduction through resource and process efficiency gains, government and community subsidies and support, and better utilization of capital with long-term investments.3

Are DEI Initiatives a Part of ESG?

DEI (diversity, equity, and inclusion) is indeed an important factor when it comes to ESG, especially for the social and governance components. American Century Investments notes that they factor DEI into their investment analysis because they “believe companies lacking transparency in this area or trailing their peers’ DE&I efforts may see negative impacts to their long-term competitiveness, brand reputation or financial condition.”4

Diverse organizations have better visibility into a broader array of community and environmental issues, tend to be much more transparent, and are better able to avoid and address conflicts of interest. This, in turn, leads to good governance and improved risk mitigation. DEI also supports better decision making, higher profitability, and long-term sustainability for organizations.

ESG Excellence Means Better Business

To paraphrase former Unilever CEO Paul Polman, companies can actually profit from solving the world’s problems, instead of creating them. ESG provides a framework that organizations can apply to achieve this aim. And in case the statistics cited thus far haven’t yet convinced you of ESG’s merits, consider a comprehensive review of the research by Arabesque Partners and Oxford University, which found that 90 percent of studies on the matter found that “sound ESG standards lower the cost of capital,” that 88 percent of studies show that “solid ESG practices results in better operational performance,” and that 80 percent of studies show that good sustainability practices influence stock price performance.5 Those are overwhelming findings that every CEO should take note of as they lead toward a profitable and sustainable future. Cristina Silingardi is Vice President with vcfo, a professional services firm making companies stronger by bringing the wisdom and experience of senior level Finance, HR, and Recruiting executives to each client engagement. Our team of consultants guides CEOs and business owners in making strategic decisions, optimizing operations, and providing people support. Since 1996, vcfo has supported more than 5,000 clients nationwide with offices in Austin, Dallas, Denver, and Houston. 1 PWC, “How Can Consumer-Facing Companies Weave Social Justice into Their DNA?” https://www.pwc.com/us/en/industries/consumer-markets/library/esg-metricsinfluence-buying.html. 2

Simon-Kucher & Partners, Global Sustainability Study 2021, October 2021.

Witold Henisz, Tim Koller, and Robin Nuttall, “Five Ways That ESG Creates Value,” McKinsey Quarterly, November 2019. 3

Hannah Herold, “How Diversity, Equity & Inclusion Informs ESG Analysis,” 2020.

Gordon L. Clark, Andreas Feiner, Michael Viehs, From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance, March 5, 2015.

ONCE THEY STARTED TALKING ABOUT BLENDING PEOPLE AND BUSINESS, THAT FELT RIGHT.

Feature

A People-First

ENTREPRENEUR After earning two psychology degrees, native Houstonian Brandi Harleaux found herself on the fast track to corporate success. Starting just out of college, she landed a string of high-level organizational development roles at companies like Target, Northrop Grumman, and eventually her dream employer: Disney. But, as careers sometimes do, Harleaux’s took an unexpected turn. She found herself getting an MBA from Pepperdine University, stepping down from her leadership role at Disney, and returning to Texas to take over the family business. Now, as CEO of South Post Oak Recycling Center, a metal

recycling company, she is continuing a legacy started by her father and mother nearly 30 years ago and applying organizational development and strategy skills honed in Corporate America to a smaller, “scrappier” venture that is ultimately focused on sustainability. In this conversation, we asked Harleaux about her singular career path and about her intensely people-focused approach to entrepreneurship and the CEO role. For Harleaux, business leadership is less about the limelight than the tangible impact her business has—on its employees, on its customers, on its community, and on the broader sustainability movement.

What made you choose to study

Houston. Once they started talking about blending people and business, that felt right. So I went to the University of Houston to study psychology and minored in business. After college I got a graduate degree in industrialorganizational psychology from Cal State University. There I learned I’m less interested in the I side of industrial-organizational psychology—

psychology? When I was at Lamar

High School in Houston, I took a psychology class and loved it. My high school counselor would bring in a different psychologist every month, a family practice psychologist, a child development psychologist, and so on. I kept saying, “Nope, not it.” The last one was an industrial-organizational psychologist from the University of

Q2 2022 // TexasCEOMagazine.com

I FEEL FORTUNATE BECAUSE I KNOW NOT EVERY FAMILY BUSINESS EXPERIENCES THAT IN A TRANSITION. GENERATION ONE SOMETIMES HOLDS ON SO TIGHTLY THAT GENERATION TWO CANNOT ADJUST. statistics, test development, analytics, the quant stuff—than the O side, organizational, which is more about what motivates people, how to design and develop organizations, as well as how to take people through organizational change. What was your first role out of grad school? I had my first opportunity

working at Target’s regional office in California. That was a great experience, but I knew I wanted to work for what I call a “fun company.” My sights were on Disney, whose offices in Burbank were an hour away. Driving into Los Angeles once, I passed the corporate offices off the 134 freeway and took a picture of the building with a large Mickey at the top. That picture went on my vision board. I was like, “I’m going to work there.” My strategy was to plug into organizations where I could network with leaders in organizational development, with a focus on Disney leaders. So, I joined the American Society for Training and Development and drove into Los Angeles once a month to network. There was no opportunity at Disney for me yet, but I got an offer at Kaiser Permanente. While healthcare is an essential industry, it wasn’t the kind of “sexy company” I wanted to work for, but it was a good job. Herein lies the first integrity lesson in my young adult life. After I got that

Texas CEO Magazine // Q2 2022

opportunity, the offer was rescinded. When I asked why, they said it was because I hadn’t “published” my dissertation—which was approved and completed but not published— so their conclusion was that I lied on my resume. I told them it was just going through the publication process, but that offer was no more. It was pretty devasting as a first career opportunity out of graduate school. I’m a firm believer that a setback can be a setup for a new opportunity. And that really was a blessing in disguise because I ended up getting an opportunity to work in the leadership and talent management department at Northrop Grumman for about $20,000 more a year with a great boss and mentor who set the tone for me in terms of my professional and executive development. Within a week or two at Northrop, I was told that I would be flying to Florida for a strategic planning offsite. Any idea where we might have gone? Disney? Disney! Again I was like,

“This opportunity is going to happen someday.” I spent a couple years at Northrop. I built my toolkit and worked closely with leaders across the company to practice what I learned in school. I received over 15 certifications and designations in areas that supported my role, such as personality and strengths assessments, plus additional training on leadership, the HR and

talent management space, and organizational design. At the age of 25 I was being flown around the US to train executives on things like executive presence and conflict management. Two years into Northrop, I get a call from one of the contacts I had cultivated a relationship with at Disney: “Hey Brandi, we think your dream job became available.” I had on my board that I wanted this crazy job title from one of their internal departments: GLOD, global leadership and organizational development. That was the managerial role available, and I got it. So I went over to Disney in the consumer products division. I grew there while internally consulting with the interactive media division and ultimately ended up in that division for seven years, eventually leading the Learning and Organizational Development department. Leading a team focused on organizational development, managing an executive coaching program, and doing talent management, consulting, organizational design and strategy—all that ultimately became the foundation that equipped me for my next chapter. How did you go from Disney to taking over the family business? Back when I

was at Northrop, I would be sitting on the 405 in traffic talking to my dad or mom. They founded South Post Oak Recycling Center in 1994 when

Feature

my dad realized he could feed his family on recycling aluminum. He’d say, “Brandi, I’m going to want to sell this at some point.” At the time I wasn’t enticed to get into scrap metal recycling, but the seed was planted. A few years later at Disney, one of the coaches I worked with, Peter Leets, told me something I’ll never forget: “Brandi, what’s next for you? I see you flourishing here, but there’s something in me that says there’s more in you.” I had always considered entrepreneurship and thought maybe I could open a franchise. I loved Smoothie King at the time. But Peter said, “Well, what about your family business?” I told him it wasn’t really on my radar, but he told me to think about it. He painted a picture I hadn’t

seen. He said, “It’s the sustainability space. It’s the future.” Between him and my dad, I did start considering it. I realized I was excited about making an impact in the sustainability space and putting my corporate experience to work in the family business. So in my last two years at Disney, I got my MBA at night from Pepperdine’s MBA program. Instead of doing market analysis, pulling industry data and valuations on companies I had no affiliation with, I did my analysis on South Post Oak Recycling Center. That analysis, coupled with ongoing conversations with my dad, equipped me with foundational industry and business knowledge to transition to COO of South Post Oak Recycling Center in March 2013 and eventually CEO in early 2020.

What was it like taking over leadership from your parents? When I came on

board in 2013, the business was nearing its 20th anniversary. Both of my parents were working in the business along with a tenured team. Like many entrepreneurs who grind and work six to seven days a week to grow a business, they were losing a little steam and zeal. We started family conversations about the business transition at least two years before I actually moved back to Houston from Los Angeles. Those conversations ranged from what I foresaw growth to look like, how that was different from the current strategy and trajectory, what each of our roles would be, how long my parents would stay in the business, and even the structure of the current team. There was definitely Q2 2022 // TexasCEOMagazine.com

IN THREE YEARS, I DON’T THINK WE’LL BE CALLING IT THE GREAT RESIGNATION. I THINK IT’S A BIGGER SHIFT IN HOW WE DO BUSINESS. an interest in transferring the reins of the business and taking it to the next level. That said, as with many family businesses, transitioning is a process. There are emotional attachments and other variables to contend with. Then there is actually creating processes, systems, and a team of experts and advisors to enable a successful transition. It was a growth process for us all! There was an ebb and flow of progress and staying semi-stagnant.

Texas CEO Magazine // Q2 2022

It included times of being slightly frustrated because things were going slower than I had envisioned. It included times where I took action, made some changes, or took a leap and waited for the results and impact to prove themselves, which then led to more acceptance of the changes. Most importantly, it included my dad being an advocate, champion, and coach for me since day one in this business. Why is that important? Because historically this has been a

very male-dominated industry, and one also dominated by people whose families have known each other for generations. So, to break into those circles and networks to cultivate meaningful and mutually beneficial relationships required a champion and advocate. I’m quite aware that’s not everyone’s experience in the industry, especially within a family business—for that, I am truly grateful. Those actions alone set the stage nicely for me to build relationships

Feature with buyers, vendors, mentors, employees, and our long-term customers, which all attributed to the growth we are seeing today. In hindsight, it has worked out just the way it was supposed to! Our family is still as strong and connected as we were before I joined the business. I feel fortunate because I know not every family business experiences that in a transition. Generation one sometimes holds on so tightly that generation two cannot adjust and/or further the impact. What kind of goals did you set initially?

One was to literally expand our footprint. We needed more space to process an increased amount of recyclable scrap metal projected in our growth plan. My parents already owned another acre and a half behind us that was not developed, so we expanded. Another growth goal was to diversify the customers we serve. When I came in, our product mix was about 75 percent of sales from households and contractors—people like you and me recycling cans or licensed electricians, plumbers, or HVAC technicians who had recyclable scrap metal from their job sites. The other 25 percent was more B2B—industrial and commercial accounts such as machine shops, HVAC companies, fabrication companies, and industrial corporations. My goal was to flip that ratio so we could do more high-volume business. Nine years later, we’ve nearly done it: 65 percent of our business is now B2B and B2G. The third growth goal was to diversify our product mix. My dad’s background was in aluminum, but soon after launching the business we moved from just aluminum to all non-ferrous or non-iron metals. While steel and iron were entry points for many legacy metal recycling companies, we entered

the market with everything except for iron. I felt very early on that we might be leaving money and opportunities on the table. We had customers who would recycle their non-ferrous scrap with us, but then they would go somewhere else to recycle and sell their iron. I knew that wasn’t the ideal situation. They would prefer a one-stop shop. Today, those growth goals are on track, even though we saw a 40 percent decline in revenue during the first year of COVID. We ended last year more than 65 percent over our projected goals, the highest revenue we’ve seen since the start of the business. That’s our Cinderella story. Coming from an organizational development background, how did you approach the people side of your job as CEO? Those are some of the

accomplishments I’m most proud of at South Post Oak Recycling Center. My dad always believed in hiring people most companies would not give a chance to. He had a “second-chance hiring program” where he would hire people who had some type of criminal record yet were looking for viable employment. That was just a part of what he did. I didn’t necessarily embrace that supplemental hiring strategy coming out of a corporate environment, but I quickly realized the value. After a couple years of interviewing candidates and asking a fairly common interview question— “Where do you want to be in three to five years”—and getting mostly blank stares, it became apparent to me that people needed to see more possibilities in life. A purpose bigger than growing a sustainable business was birthed. It became a passion of mine—not to build my whole workforce with secondchance folks, but to make it part of our ongoing recruiting model as well

as building a work environment that cultivated the “whole person.” We worked really hard on supporting our people in and out of work. Especially during COVID, we offered our employees training on personal finances through Dave Ramsey’s Financial Peace University. We’ve offered development opportunities in programs such as Vision 101, as well as information sessions with banks that support people with a challenged past. We’ve even implemented daily affirmations in our meetings to encourage a positive mindset at the onset of the day. Those elements are important to me because entrepreneurship isn’t just about quality of life and lifestyle attainment. I truly view entrepreneurship and business as a vessel, a vehicle that enables us to have an impact on people—our employees, the environment, and our communities. We do that by being part of the sustainability movement and educating our customers on how they can impact the environment through recycling. And we do that by giving people stable jobs in an environment where they can flourish. When we perform well as a company, we can take those profits and allocate them back to our employees, reinvest in our recycling business, and contribute to the community and organizations that are aligned with causes we are passionate about. What are your thoughts on the Great Resignation? Putting on your HR hat, what have you been seeing? It’s absolutely

fascinating. In many ways, the tables have turned from the employer’s advantage to the employee’s advantage. We’re coming out of an era where many employers felt like paying people a salary was sufficient. Now, people are Q2 2022 // TexasCEOMagazine.com

IT’S VERY EASY FOR THE CHARISMATIC PERSON WHO TALKS A GOOD GAME TO GET INTO THE ORGANIZATION, BUT THEN YOU FIGURE OUT THAT THEY HAVE DIFFERENT MOTIVATIONS OR THEIR VALUES AREN’T ALIGNED WITH YOURS.

Texas CEO Magazine // Q2 2022

Feature being challenged to be creative in how they take care of their people more fully. The forward-looking ones aren’t saying “Wow, this sucks” but “How can we embrace this challenge and evolve?” I’m glad to see people developing retention strategies—not just throwing money at people—and not waiting until after the fact. As part of the tables turning, you’re also seeing differences in how candidates go about the job search. We’re not exempt from the challenges many employers are facing! Last year, we saw the greatest number of no-shows for interviews we’ve ever seen. Even after job offers were extended, about 20 percent of the people who received an offer didn’t show up on their first day of work or even let our recruiter know they weren’t taking the job. I think there’s an upside to this Great Resignation though. It’s good that people are being more creative with cultures and benefits and work environments that people can thrive in holistically. In three years, I don’t think we’ll be calling it the Great Resignation. I think it’s a bigger shift in how we do business—specifically, it’s recognizing that people want to be in environments that have purpose and where they feel valued, challenged, kept in the loop, and have flexibility. You referred to this being a maledominated industry. How does that affect you? There are some women,

and the numbers have grown in the nine years I’ve been in the industry. However, I would say women are still a minority in this industry. The board of one trade association I’m involved in has over 60 people on it—and just three years ago there were only two women. I’m glad to say there continues to be progress, with seven women now serving on this board.

When I saw that women were calling for more female mentors, connections, and targeted development, I co-led the relaunch of a dormant women-in-recycling group. There was lots of support from men and woman but also some vocal naysayers who literally said, “What do we need that for?” Since then, we’ve launched mentoring programs to help women grow and lead in this industry. We’re also working with an organization called JASON Learning to educate kids K through 12 in STEMbased learning linked to recycling. This curriculum opens the door for a diverse group of youth to have exposure to careers in the recycling and sustainability space. I’m hopeful that we can expose people earlier on to those opportunities and increase the number of women and minorities in this space. What would you say to leaders who aren’t part of a minority group who want to help others who might be locked out of traditional systems of support and opportunity? One is to be an advocate

for people who you see talent and potential in, even if they aren’t part of your usual circles. The second is to be curious and go “fishing in other ponds.” For example, if you only recruit from the schools you went to and hang out with the same people who are part of your clubs, go find talented people at a different school and hang out with people outside of your network. It’s so easy and comfortable to tap into who and what we already know. Instead, try plugging into different groups and organizations and schools and explore talent outside the groups you may be most accustomed to. That’s helped me in my journey, just broadening my reach. It’s so important to be curious and open to new people and possibilities!

The more open you are, the more you become exposed to all different types of possibilities and opportunities, and you can actually start to advocate for others. That can help you both on the business and diversity fronts. When you seek talent, what traits do you look for to show that someone will be a high performer? This goes back to my organizational development training, but we use assessment tools to move beyond what our naked eye sees. It’s very easy for the charismatic person who talks a good game to get into the organization, but then you figure out that they have different motivations or their values aren’t aligned with yours. A couple of things that I’ll look at early on is, one, what motivates them? I ask things like “What’s important to you?” and “Where do you see yourself three to five years from now?” I’m listening for things like “My family is most important and I want to be in a place where I can thrive” or “I’m interested in the environmental or sustainability space.” Interest in the business and eagerness for personal growth, those are drivers and indicators for me. Is there anything else you want to talk about? Yes, one more thing: The

platform we all have as CEOs and entrepreneurs allows us to foster purpose and meaning in people’s lives. I’m glad to see so many people embracing entrepreneurship and their positions of influence to make a difference for people. We’ve moved into a more individualistic culture, so whatever I can do to keep great people around me, create better livelihoods, help people reach their fullest potential, and give people resources to have a positive impact in the area of sustainability—that’s what I’m focused on. Q2 2022 // TexasCEOMagazine.com

T S E V N I O REASONS T S R E G A N A M IN YOUR R E M M U S S I H T Is it time to give the supervisors in your organization fresh training on the art of managing people? Our team at Manager360 can upskill your managers in a 2-day retreat that includes materials, tools, individual consulting, and follow-through support via software. Here are three good reasons to invest in your managers this summer:

today for detail m o .c 0 6 r3 e g a Visit man g. r team’s trainin u o y p u t se to r o

You'll retain more talent.

Trained managers deliver business results.

You'll build team cohesion.

Employees stay longer with companies that invest in their career development. Don’t lose your best people to a competitor who will train them.

Several comprehensive studies have linked competent, well-trained managers with superior firm performance. Not only will the people they manage be happier—you’ll see the results in your bottom line.

Our approach to manager training is to give people a shared system to operate on, along with deep insights into each others’ working styles and personalities. That commonality creates a productive cohesion missing in so many struggling organizations.

HOW WE DEVELOP EXCEPTIONAL PEOPLE MANAGERS

Great managers can be a company’s competitive advantage. That’s why at Manager360, we don’t just do the same old boring seminars. We offer rich, ongoing support for your organization’s managers, tailored to your organization’s unique needs. Dynamic In-Person Training Set up a 2-day training retreat for your company’s managers at your office or at our state-of-the-art venue at stunning Texas CEO Ranch, 30 minutes outside Austin. We not only give them a clear, practical management system to start using as soon as they get back to the office—we have fun while we do it too. Attendees learn about themselves and their teammates through personality and working style assessments and hands-on exercises, and if you opt for the ranch, we’ve got hiking, fishing, pickleball, putt-putt and more!

Purpose-Built Software Our just-released app, conveniently in Microsoft Teams, is the hub every manager needs to excel in their role and keep key information right at their fingertips. • Manage the critical checkpoints of a high-performing boss: 1-on-1s, Team Meetings, Performance Feedback, and more. • Track team goals in real time: Get employees’ input on how key team goals are progressing. • Foster team connection and culture: See rich profiles of all team employees, their strengths, personality styles, skill sets, User Manuals, and more.

More Leadership Tools & Support We’ll never leave you hanging after training. We offer customized follow-up roadmaps, check-ins and coaching, and useful tools like our book, The Manager’s Playbook, 1-on-1 Meeting Cards, and a Leadership Journal. Your managers come away with a full toolbox for success. manage.lead.coach. I manager360.com

WHAT, REALLY, IS INTUITION? I BELIEVE IT CAN BE DEFINED AS THE SUM OF ALL YOUR EXPERIENCE COUPLED WITH THE ABILITY TO ACCESS AND APPLY IT.

It’s not what you are that holds you back, it’s what you think you are not. —Denis Waitley

You Can MAKE IT HAPPEN Jim Skaggs

This article is adapted from a speech Jim Skaggs first delivered in 1999.

NOT ALL EXPERIENCE IS EQUAL. THE PERSON WHO HAS THE EXPERIENCE MUST BE A PERSON OF TALENT, INTEGRITY, AND DRIVE AS WELL. As far back as I can remember, I have enjoyed a fundamental belief system that you can do just about anything you really want to do in life. If you want it, you can “make it happen.” This belief, or faith, has strengthened over the years as it has been affirmed again and again. First and foremost, you must believe it can happen in order to make it happen. As leaders in business, we are called to make things happen. We are tasked with building and growing organizations, providing livelihoods and purpose to our employees, and making a difference in our communities. And we must do all this while maintaining our personal integrity.

Texas CEO Magazine // Q2 2022

Making it happen as CEOs and leaders, especially when our companies are facing new obstacles, needing focus and redirection, can feel overwhelming. Sometimes the mission seems impossible. Yet you can make it happen. Over six decades, I have worked with organizations and teams that aimed to achieve big, “impossible” things and did. In the 1960s, I worked with NASA on the mission to put a man on the moon. I was one of the top six executives in the Apollo Program Management Office at age 29, the youngest man in the US government at that level of responsibility. We, with 450,000 NASA employees and

contractors, made those successful lunar landings happen. Many years later, I was asked to lead Tracor out of a jungle of problems. Tracor, the first company based in Austin to be listed on the New York Stock Exchange and on the Fortune 500, had been purchased in an illfated leveraged buyout in the frenzied period of such deals in the 1980s. Tracor was an electronics engineering, manufacturing and service company with a large defense business segment. Between a stock and bond market crash, the fall of communism, and the resultant reduction in defense budgets, it was suffering from steep debt and declining revenues.

I began as CEO of Tracor on March 1, 1990, and began forming a new team to lead it through restructuring. Through business sales, closures, and spinoffs, we reduced Tracor from $750 million in annual revenue to primarily a defense company with some $250 million in revenue for 1991. We then grew the company to a Fortune 100 fastestgrowing company in 1994 and achieved $1.3 billion in the year before Tracor was acquired by GEC-Marconi in June of 1998. The sale price was $1.4 billion or more than one times sales, very high for the industry at that time. Once again, we had made it happen. What were the common characteristics in these situations and several in between where similar successes were achieved? I have developed a list of six common characteristics that teams need if they are going to make it happen. They were developed to apply to the corporate context, though you may also see applications in your personal life. Regardless, if you want to make it happen, ensure that these six pieces are in place.

1. EXPERIENCED/ QUALITY PEOPLE

People with both experience and quality are indispensable in times of challenge and change. People who have experience without quality or quality without experience do not make the list. You need both traits. You need the right experience to do a tough, complex job. Money will not substitute for experience. I have seen many instances where inexperienced people threw money at a problem with little result. The difference between experienced people and inexperienced, even bright, people is very great, and it’s often the difference between failure and making it happen. You must have key people with applicable battle scars. By the way, I place as much or more responsibility on those selecting the

unqualified people as I do on the actual people who perform poorly when placed in a job for which they are not qualified. Also, note that experience is not the same as time. One can work 10 years in a job and have less experience than one working one year in a rich growth environment. Much management writing identifies intuition as a common characteristic of top performers. What, really, is intuition? I believe it can be defined as the sum of all your experience coupled with the ability to access and apply it. In other words: The greater your experience and your ability to reach within to bring forth and apply its lessons, the greater your intuition. NASA’s top executives recognized the need for experience and implemented a process for assembling a seasoned team that could make a lunar landing happen in a relatively short time. Some years later, the second and third teams at NASA didn’t have the same level of experience. I believe that we suffered the first Shuttle disaster because of it. Under this heading of experience, I include the effective use of the experience of your people. You achieve maximum value from a person only in their effective participation as a team member. I have been impressed again and again with the ability of teams to arrive at the “right answer” when the right experience is tapped. A true team member must fully respect the roles of all team members. I temper “experience” with “quality” for a reason I alluded to above: Not all experience is equal. The person who has the experience must be a person of talent, integrity, and drive as well. Once you bring quality together with experience that fits the mission, you have someone who can truly help you make it happen.

2. VISION

I believe that value starts with vision. Before you can make it happen, you

must know exactly what that “it” is. You must have a vision that is based on a thorough understanding of the company’s capabilities and the marketplace. The vision must be challenging but realistic and come with a master plan that shows how you will achieve it. The vision and plan should be jointly developed by the team and well understood and communicated to all levels of management and to all employees. Generally, the vision begins with the company’s strengths and builds from there. The vision and plan are not static or frozen. In a world of an increasing rate of change, you must be flexible and continually adapt as necessary. A major requirement is to make timely, key decisions that respond to major needs. Without decisions, one cannot advance. Vision is not a pie-in-the-sky dream without regard for the realities of the marketplace and your team’s capabilities. Many times, companies will form visions that are not founded on a thorough understanding of reality. Thus, they cannot build or implement a viable plan. These wishful thinking exercises will almost always fail, and be very costly. For example, Tracor struggled in the 1980s partially because it had made so many acquisitions. In each of those companies, we found substantial efforts to diversify into markets in which they had no experience. Not only were these diversifications failing in every case— they were also distracting management attention from major core markets and degrading overall performance. In each case, we stopped the diversifications and focused management on core businesses. Immediate, major improvements were experienced in sales, profit, and attitude. In establishing a vision, don’t fear risks, but understand them, for they are present in all aspects of life. The greatest economies in the world are based on taking risks. People are motivated to take responsibility and make risk Q2 2022 // TexasCEOMagazine.com

judgments and decisions because they are rewarded for success. In many cases, our government institutions are very inefficient because they do not reward success, which encourages risks. Instead, they reward the lack of failure. This affliction is not limited to government organizations but is found in many bureaucratic organizations. However, taking manageable risks is an important aspect in any person’s or venture’s growth and success. I have followed my own golden rule of risk throughout my career: Take prudent, manageable risks but never “bet the company.” In other words, don’t take moderate-to-high risks that could destroy your organization, but prudently take smaller risks that could pay off in the end.

3. COMMUNICATION

Good communication is vital to almost every aspect of leadership. Early in the Tracor restructuring, it was vital for us to recognize that we had several major constituents, any one of which could send us to liquidation. It was very important for us to maintain credibility with customers, employees, bankers, vendors, bondholders, and shareholders. We gained credibility and support from each of those groups primarily through frequent, honest communication—and by always doing what we said we would. Communication from the CEO is particularly critical for team members, who must feel part of a team to be of maximum value. Employees must understand their company’s objectives, their unit’s objectives, their own objectives, and such things as retirement plans, medical plans, and other benefits to be of maximum productivity. Abundant communication from leadership equips them with this knowledge, which enables them to perform. Good communication is also vital to effective teamwork, and teamwork is required to accomplish tough, complex

Texas CEO Magazine // Q2 2022

tasks. Individuals do not make it happen—teams do. And remember, team members don’t have to like each other, but they must respect each other’s role on the team. Communication is the best tool for working out this friction as it arises. Communication is two-way. You must be a good listener. You will get no input from your team if you “know everything” and are always on transmit. Always remember: There is no monopoly on good ideas.

4. FOCUS

As previously discussed in the vision section: Don’t dilute important management time, attention, and resources to ill-advised diversions unrelated to core business activities. At Tracor, all of our potential and completed acquisitions were trying to diversify because they thought it was appropriate to counter the declining defense budget. Everyone seemed to be telling the industry to diversify. So these companies were all dabbling in state and local government as well as the medical and telecommunications markets. They were not qualified for these markets, which are totally different from the US government market. We made Tracor happen because we stopped these distractions. Earlier, in the 1970s, there had been a concerted effort for such companies to diversify into the energy market. This was also a bust for most. Another “focus” challenge at Tracor was the need to run the company and address its performance issues even as we worked through a comprehensive restructuring. One action we took was to create two chief financial officer roles: one focusing primarily on company operations and one on the restructuring. This worked extremely well. Each CFO could harness focus on their respective area. At NASA, focus mattered immensely. We knew that if we were going to achieve

the lunar landing by 1969, we had to stop studying alternatives endlessly, select an approach, and move forward on it with intense concentration. Some of the scientists would have happily studied the problem for many more years without experienced, capable program management that pushed them to focus on a workable solution in the necessary time frame.

5. A FUNDAMENTAL MANAGEMENT PROCESS

Almost always, the first thing you find missing in a troubled company, program, project, or activity is a lack of fundamental management processes. There is no magical fix to tough, complex problems. The only true solution is the disciplined and structured application of the basic management processes that have been around for a long time. Whether at the level of a whole corporation, a major program, or a small project, you need a management process that includes the following five elements: a. Establish a baseline (what you say you will do). Describe what you are going to do. This is your plan, your goal. It can be expressed in documents, specifications, project budgets, schedules, etc. b. Measure progress. Measure progress against your commitments on a regular basis. Depending on the situation, it can be weekly, monthly, quarterly, and/or annually. c. Analyze and evaluate performance against the plan. Is the measured progress aligning with the vision? Is it getting you closer to making it happen? If corrective action is needed, examine alternatives.

ALMOST ALWAYS, THE FIRST THING YOU FIND MISSING IN A TROUBLED COMPANY, PROGRAM, PROJECT, OR ACTIVITY IS A LACK OF FUNDAMENTAL MANAGEMENT PROCESSES.

d. Select alternatives as necessary. If you determine a course correction is needed, determine the appropriate actions in a timely manner, make decisions, and communicate them widely. e. Update the baseline plan. Revise the baseline plan—what you say you are going to do—in a documented manner. Then, assure that everyone understands they are accountable to this new baseline. As you will note, the fifth step creates a closed-loop management process. This is a living process requiring discipline and continuous attention to detail. A similar closed-loop process can serve you in everything from the smallest everyday endeavor to the most complex, massive projects. And last, but by no means least important, you must:

6. OPERATE WITH INTEGRITY IN EVERY ASPECT OF THE BUSINESS.

In all dealings with all your constituents—customers, shareholders, vendors, employees, distributors, partners, the financial community, and the press—you must: • Operate in accordance with all laws and regulations. • Operate with the highest standards of ethics. • Maintain full, honest, and clear communications. • Operate with fairness, remembering that fairness is not always found in a procedure or policy. Sometimes rules and regulations are not fair. Search from within to find fairness. • Do what you say. • Be dependable and reliable. • Maintain credibility.

There is not much more to say about integrity. You know it when you see it. And leaders should hold on to it dearly because once it is lost, it is gone. ••• These underlying traits of leaders and businesses that make it happen are not particularly complicated. But when a group achieves something significant, especially in a time of transition or against the odds, you can be sure that these items are in place. A final thought: One underlying theme that emerges from these six principles is the importance of continuously creating a small-company atmosphere within a large company. These traits—vision, communication, focus, etc.—are often things lost as a company becomes bigger and bigger. No matter what size your company is, though, if you adhere to these six principles, you will create highly motivated teams that will make it happen.

Q2 2022 // TexasCEOMagazine.com

YOU CAN MAKE IT HAPPEN: Here are the key considerations for each of the six “make it happen” characteristics. Once you can answer “yes” to each of these questions, you will know your team is in a good place. EXPERIENCE 1. Does every team member have the necessary experience to understand their job and achieve their organization’s goals and objectives? 2. Is each team member’s capability and experience fully utilized? Are they respected for their role on the team and made to feel they are an important contributor? VISION 1. Is there a clear vision of where the company is headed and is there a tactical and strategic plan for achieving the vision? 2. Does each organization understand its role in achieving the vision? FOCUS 1. Is each and every team member focused on the priority activities necessary to achieve the goals and objectives? 2. Is their attention diluted by low-priority, tangential activities?

Texas CEO Magazine // Q2 2022

3. Do you verify that each major decision and activity is consistent with your stated strategy? 4. If not consistent, do you subject the decision or activity to the same rigorous assessment as your original strategy and then revise your strategy to reflect any change? COMMUNICATION 1. Does the entire team, down to the frontline level, understand the vision? 2. Do you have regular teambuilding sessions where the vision, with its goals, objectives, and plans, are discussed by the team? 3. Do other constituents—from shareholders to bankers to partners—understand the overall game plan? MANAGEMENT PROCESS 1. Does the company and each major element follow a disciplined management process? a. Have you defined your plan (what you intend to do)? b. Do you measure progress regularly?

c. Do you evaluate the results and determine the current or projected impact on the plan? d. Do you analyze alternatives based on the results and verify the plan or determine new actions to take and make appropriate decisions and plan revisions?

e. Do you effectively implement necessary revisions to the plan? INTEGRITY 1. Does the company operate with total integrity in its dealings with customers, shareholders, vendors, employees, distributors, partners, the financial community, and the press? Jim Skaggs is the chairman and CEO of Aminex Therapeutics. He was one of six top executives with NASA’s Apollo Program Management Office, and he has spent almost 50 years in corporate leadership positions in high-tech electronics systems, heavy infrastructure maintenance equipment manufacturing, and biotech drug development. Jim is retired chairman of Alamo Group, Inc. Prior to that, as chairman, CEO, and president of Tracor Inc., he led the turnaround and six times growth of Tracor in the defense electronics industry with 10,000 employees.

CMY

INTRODUCING CEOS

TM TM

CHIEF EXECUTIVE OPERATING SYSTEM Increased Valuation

A More Successful Team

Improved Confidence

Maximized Chance of A

Work-Life Balance

Successful Exit

MASTER THE CEO ROLE WITH OUR PLAYBOOK TAUGHT BY JOEL TRAMMELL SCHEDULE A CONSULT Learn about our proven system for repeatable success.

PICK A CLASS Based on your time commitments and learning style, choose a class.

TRANSFORM YOUR COMPANY Confidently deliver predictable performance and optimize your success.

3-DAY INTENSIVE

1-YEAR | MONTHLY MEETINGS

JUNE 8-10 Austin

BEGINNING MAY 5 In-Person, Austin

JULY 13-15 Austin JULY 27-29 Virtual SEPT 21-23 Austin

Meetings are on the first Thursday or Friday of the month.

BEGINNING SEPTEMBER 8 In-Person, Austin Meetings are on the second Thursday or Friday of the month.

TO APPLY OR GET MORE INFORMATION, VISIT AMERICANCEO.COM/APPLY

Dirty Secrets OF THE DARK WEB THE

Charles Denyer

AND WHAT CEOs CAN DO TO MITIGATE THEM

Ever wondered what lies deep beneath the Internet, deeper than the everyday search engines and websites that billions of people visit each day? While the honest citizenry of the world spend their time online visiting what’s generally known as the Surface Web—the troves of websites that are indexed and easy to find—other more nefarious actors are busy in the Dark Web. Drugs and firearms for sale. Stolen bank accounts and personal data files. Illicit activities, and more. It all lives on the deep, dangerous bottom layer of the Internet known as the Dark Web, and it’s getting more dangerous every day.

“DEEP WEB” VS. “DARK WEB”

The terms Deep Web and Dark Web are sometimes used interchangeably, but they are actually quite different. The Deep Web, also commonly known as the “Invisible Web” or “Hidden Web,” refers to anything on the Internet that is not indexed, with its content hidden behind login forms, and includes uses such as web mail, online banking, restricted-access social media pages and profiles, some web forums that require registration for viewing content, and more. Internet experts estimate the size of the Deep Web at between 96 percent and 99 percent of the Internet. The Dark Web is essentially a subset of the much larger Deep Web that is intentionally hidden and requires a specific browser to access. While no one knows for certain how big the Dark Web is, cyber experts estimate it to be at 5 percent of the total Internet. To access it, you’ll need to use an open-source browser and other related tools, and specifically, you’ll need TOR. And that’s where the danger begins for businesses. TOR stands for The Onion Router, so called because it uses the onion routing protocol for hiding information regarding user activity, location, and usage from anyone who conducts network surveillance or traffic analysis. TOR is often used by journalists, political dissidents, and criminals to keep their communications private. The development of the onion routing protocol was sponsored by the US Naval Research Laboratory in the 1990s, with TOR actually developed by the Navy and independent researchers in 2002. Fast-forward to 2022 and the TOR protocol is now supported by The Tor Project, a nonprofit organization.

CAUTION: DO NOT ENTER

Entering into the Dark Web can prove incredibly dangerous for anyone, and it’s why you should not even consider lurking in the realm of the Internet unknown.

Texas CEO Magazine // Q2 2022

According to a noted cybersecurity specialist at the FBI, the Dark Web is “messy, chaotic, full of scammers, dangerous minds, and even killers . . . that’s just for starters.” Once there, even if employees know what the Dark Web is, accessing and navigating it is no simple task, because once connected, it’s full of surprises, many of them not good. How dirty is the Dark Web? An international law enforcement effort targeting illegal drugs (marijuana, LSD, Ecstasy) and controlled substances distributed without a prescription (pressed Adderall, Xanax) on the Dark Web resulted in 150 arrests and seizures of more than $31 million in 2021—a mere drop in the bucket in terms of the illegal activities on the Dark Web.1 What’s worse, many small business owners have no idea the Dark Web exists, let alone the role it plays in exacerbating data breaches. Some small businesses might not even be aware they’ve been compromised until after their data has been bought and used by someone else. Just imagine if an employee got curious about the Dark Web while on the company network. They find their way in and fall upon a treasure trove of what seems to be innocent content. Next, they download the seemingly harmless files, only to now expose your organization to a rash of malware. Within minutes, the infected files have spread throughout your entire network. Databases are corrupted. Sensitive company IP starts vanishing. Ransomware notes appear on employees screens. Science fiction? you may wonder. Hardly—it’s happening every day in corporate America, and your company could very well be the next victim. I’ve always espoused the notion that the vast majority of employees are honest, hard-working, law-abiding citizens. For the fraction of those who are nefarious and deceitful, it’s hard—almost impossible—to fully stop their bad intentions. Here’s just a small list of what employees can do on the Dark Web: • Use corporate resources to purchase illegal goods and services. • Download underage pornography. • Join chat forums and groups that promote illegal activities. • Hire hackers for nefarious and illegal purposes. • Even worse, hire people to hurt, intimidate, or even assassinate someone. • Use corporate services to mine Bitcoins. The list of illegal and downright dangerous activities on the Dark Web are limitless, and as a business owner, you need to ensure that your employees do not have access to them.

How to Protect Your Business from the Dark Web 1. Block the Aforementioned TOR or “The Onion Router”: There are ways to greatly reduce—but unfortunately, not ever fully block—TOR. Speak with your IT staff about developing a blacklist, then creating an explicit outbound deny rule on your firewalls based on those specific sets of IPs. 2. Have a Clear Policy on Open-Source Browsers: TOR is free and open-source software for enabling anonymous communication, but it can be a tool that invites danger to an organization if an employee decides to delve into the Dark Web with TOR. Employees need to know that should they engage in questionable online activity while on the company network, there will be severe consequences, such as immediate termination. To be clear, the policy on TOR should be straightforward and stern: Download the TOR bundle on any company computer or use the TOR network and you are fired. 3. Offer Employees Comprehensive Security Awareness Training: While organizations can spend a king’s ransom on industry-leading security tools and solutions, all it takes is one wrong click of

the mouse to infect a network. The importance of comprehensive security awareness training for all staff cannot be overlooked. Employees who truly understand today’s growing cybersecurity risks and threats are an organization’s best line of defense in protecting your network and valuable assets. The more they know, the better guarded they’ll be, and that means they’ll clearly understand the dangers of the Dark Web. Charles Denyer is an Austin-based cybersecurity and national security expert who has worked with hundreds of US and international organizations to help them obtain a true competitive advantage with cybersecurity, data privacy, and compliance. He consults regularly with top political and business leaders throughout the world, including former prime ministers, vice presidents of the United States, White House chiefs of staff, secretaries of State and Defense, ambassadors, high-ranking intelligence officials, CEOs, entrepreneurs, civic leaders and others. He is an established author, with multiple books currently in print, along with being the personal biographer to three US vice presidents. Visit charlesdenyer.com to learn more. 1

“FBI and Partners Target Online Drug Markets,” video on FBI.gov.

Q2 2022 // TexasCEOMagazine.com

HIGHER EDUCATION

IS BROKEN. Can the University of Austin

OFFER A BETTER MODEL?

OUR IDEAL STUDENT IS INDEPENDENT, BRAVE, ENTREPRENEURIAL.

Feature

In November of last year, Pano Kanelos, former president of St. John’s College in Annapolis, announced a new venture on one of the most influential media platforms around: the Substack newsletter of journalist Bari Weiss. This new venture was the University of Austin (UATX), designed explicitly to counter current norms in higher education. “Universities no longer have an incentive to create an environment where intellectual dissent is protected and fashionable opinions are scrutinized,” wrote Kanelos. UATX positions itself as a much-needed corrective: a place where both students and faculty are encouraged to fearlessly pursue truth, engage in debate, and banish the censorship—of self and others—that some say has turned once-vibrant campuses into sterile echo chambers. In the past couple of years, stories of campus upheavals and excommunications have gone from occasional curiosity to daily fixture. UATX’s

founders—who include Weiss as well as historian Niall Ferguson, VC and Palantir cofounder Joe Lonsdale, and evolutionary biologist Heather Heying, herself ousted from a college in Washington State— hope to give free-thinking undergraduates a better (and more affordable) alternative to such campuses. At its core, UATX aims to be a place where pressure to conform does not stifle the ability to learn. Kanelos and crew are challenging a system that includes some of the most respected and entrenched institutions in American society, and their announcement drew applause from some corners and sneers from others. The latter doesn’t bother the founding group. “We welcome their opprobrium and will regard it as vindication,” Kanelos wrote in his Substack piece. We recently spoke to Kanelos about how the process of founding a new school has gone, what it will be like to attend UATX, and why they chose Austin, Texas, as the university’s home.

EVERYBODY KNOWS THAT THE FINANCIAL MODEL OF HIGHER EDUCATION IS BROKEN. EVERY YEAR TUITION GOES UP AND YET EVERY YEAR THERE ARE MORE AND MORE INSTITUTIONS ON THE BRINK OF CLOSURE. Being president of St. John’s College, you probably felt you had reached a pinnacle in your career. How did you get involved in starting a whole new institution? The first contact came

from the journalist Bari Weiss, who through a mutual friend learned that I was considering seeking people who would be interested in starting a new university. She knew I was thinking a lot about the renewal and reform of higher education. I remember that call very distinctly. It seemed like it was time to do this. It’s what Americans do—they build new things. That’s how we’ve come up with 4,000 institutions of higher learning in this country to begin with. I remember thinking that the best way for us to improve higher education wasn’t to fix it from within, but to create models of higher education that reflect the best of all possibilities. At the same time, I thought, Oh, man. They were asking me to do this and I had a job I love and a family I love, and I knew this would be very disruptive. But higher education is what transformed my life. I’m a firstgeneration college student from a Greek immigrant family. I know how much higher education has given me. And I thought maybe my calling is to find a way to give something back. Foolishly or not, I decided to jump in.

Texas CEO Magazine // Q2 2022

Many of our readers have started businesses, but starting a university is a different beast. Who did you look to for guidance and a model for starting a university? The last great flowering of

universities happened over a century ago, at the end of the 19th century, when Hopkins and Chicago and Stanford formed. Since then, a lot of schools have started up, but no schools of that stature. The real energy around new schools is for those with radically different formats, like online or for-profit education. But we were interested in a kind of old-school college campus, a nonprofit, four-year degree with comprehensive programs. Our models were, and still are, Hopkins and Chicago and Stanford. I have been looking back to the origins of those schools and thinking about the fact that when Stanford started, it wasn’t Stanford—it was 14,000 acres of semiarid land in the middle of nowhere. Somebody had a vision to plant a seed there. When you strip away everything that these great institutions have accumulated over the years, you realize the idea is actually simple. What is a university? It’s a school. What do schools need? A curriculum that makes sense, some buildings, qualified faculty, and students. So we’ve been thinking about how we’re going to put those pieces together. We have our ethos and

our first principles of open inquiry and civil discourse. Now, how do we build a school that exemplifies and preserves those principles? What does the business model of an independent private university look like?

Everybody knows that the financial model of higher education is broken. Every year tuition goes up and yet every year there are more and more institutions on the brink of closure. Many do close. I know because they call me up trying to convince us to buy their campus. So you have a model where tuition goes up, expenses go up, and schools falter. Only a handful of schools have a substantial endowment. Of the more than 4,000 institutions of higher learning in the country, it’s probably 1 percent—40—that have endowments that make them invulnerable to economic turbulence. Everybody else has to find a way to balance the books at the end of the day. One of the questions we’re asking is, Why is higher education in trouble? What’s wrong with the financial model? We’ve been analyzing that very carefully and we have a relatively complicated diagnosis, but there are three easy-to-diagnose parts. First, the pricing structure of higher education is all off. Tuition rises and rises, but schools give greater and

Feature greater discounts to become affordable. When families see the listed tuition, they have no idea how much they’re going to end up paying or how to shop correctly. It really disadvantages most schools and it disadvantages families. Pricing transparency, I think, is part of the solution. Another problem, which I call the silent killer, is the overbuilt campus. We’ve built campuses that are essentially cities, with police forces and medical centers and recreation facilities, yet they’re run by colleges and universities that don’t have expertise in running these operations. The solution there is rethinking what’s properly run by a college campus versus what is better handled by public services and private sector partnerships. For example, as we build our campus at UATX, we’re not going to build a massively expensive recreation center. We’re going to partner with private industry to build one right at the edge of campus and make sure our students have highly discounted memberships so they and the public can use it. That alone saves you tens of millions. The third issue with the business model of higher education is the cost of administration. On most campuses, about 40 percent of the space is allocated to administration. We plan on having almost all of our administrative functions in the virtual world. That cuts down the cost of building a campus by almost 40 percent, and lowers the expense of cooling and heating and supplying electricity to the campus. And by working with contractors in administrative functions like HR and payroll, we can further bring down the costs passed on to students. The tuition price point we’re looking at right now is virtually

half of what most private colleges charge. We’re targeting about a $30,000-a-year price point. That’s about what most public institutions cost for out-of-state students, so it seems to me like a fair price. One area you’re not innovating in is virtual instruction. You are building a physical campus. Was there any thought of starting out as a virtual campus? We

never considered that because we primarily see ourselves as serving undergraduates, though we will have graduate programs. And when you’re talking about educating 18- to 22-year-olds, it’s not simply about the transfer of information. It’s about transformation, a holistic education. That involves learning in a community, making connections, having mentors, learning how to discipline yourself to get up and go to class and be part of clubs and all the aspects that amplify the educational experience. I think we’ve learned from the pandemic that education for young people cannot be conducted sufficiently online. It just can’t. Is there room for supplemental online education? Yeah, I think so, as long as the core experience is in person. Is there room for adult education online? Sure, because the purpose of adult education is not the same as when you’re 20. We believe that providing an in-person community is the richest environment for the deepest learning. Being one of 4,000 universities, you’re not for everybody. Have you thought about what you would describe as your ideal student? Our ideal student is

independent, brave, entrepreneurial. We think the future belongs to the innovators and the builders. We’re trying to create an institution that will nurture that student. I

think we will attract that kind of student because we ourselves are an entrepreneurial institution. In many ways, what we’re doing is a critique of higher education, so the students who seek us out are the mavericks looking for a free-spirited education. Another quality that’s critical for us is self-awareness and self-reflection. Those are students who already have the seeds of wisdom. We’re also thinking about who’s influential in the world—who will be the great builders of state, the great innovators in tech, in business, in education, in politics. How do we train up students in a manner that produces these people? We want to create graduates who are very thoughtful about the path they’ve chosen and about what they’re going to do to make society better. How will you approach the admissions process? We’re thinking about it

right now. A few months ago, we announced our first academic program, a summer program called The Forbidden Courses. These are courses for kids from other colleges to take at UATX that they might not find at their home institutions, or that might be taught by people who are a little too spicy for the average university. We only had 80 spots for the summer and I was hoping to fill all the spots. Since our name is just getting out there, I wondered how many kids would be interested. Within a week and a half, we had over 14,000 inquiries, and the applications are still flooding in. What’s really interesting is that the preponderance of applications are from elite institutions. The single school we have the most applications from right now is Harvard. It’s also Princeton, Stanford, Duke, MIT, Q2 2022 // TexasCEOMagazine.com

and big state schools like UCLA and UNC. We have applications from Sorbonne University in Paris, from King’s College London, from Freiberg in Germany. The response has been tremendous. So, we’re suddenly having to think very carefully about admissions. These are very interesting and qualified students. And many of the students haven’t gone to elite institutions, and some of those are even more interesting. How do you decide? How do you measure these things we’re looking for in a student? We actually just brought out a statistician who’s finishing his PhD at Harvard. His life work is about figuring out how to engineer college admissions to match the best and brightest students with the institution they’re applying to. We’ve got him working on a whole set of metrics for this.

And on the other end, of course, you have to have faculty. How is that selection process going? Similarly,

we’ve been flooded with interest from faculty. Within a couple weeks of announcing the university, we had over 4,000 faculty inquire about jobs. We have an unconventional curriculum, so there has to be some discernment in who we bring on. We have some very senior people at institutions like Columbia and Berkeley who are eager to work with us. We’ll probably blend in some experienced, senior faculty with younger, newer faculty who will help us shape the institution. We’re not looking for a general pattern in faculty hires. We’re looking for a person who has a particular spark and a particular set of skills. Doing that in an individuated way is very, very

important. As president at my last institution, I was involved in hiring every single faculty member. I intend to do that with this institution as well. Last question. Why Texas and why Austin? I don’t think that you or any of the other founders had significant ties to Texas before this project. I think Austin is the most exciting city in the world right now. I see it as one big makerspace. It has a rich tradition of creativity and free-spiritedness. Now, people from all over the country and all over the world are coming here because this is where they feel like they can spread their wings. That’s having a multiplier effect in Austin. Every single event I go to, I meet amazingly interesting people from all different fields. And there’s always two or three people who just got here. I just feel totally thrilled to be here too.

THE PEOPLE BEHIND UATX The founding team of trustees and advisors of the University of Austin is a who’s who of notable thinkers, writers, and iconoclasts.

FOUNDING TRUSTEES

JOHN A. NUNES

GEOFFREY STONE

FORMER PRESIDENT OF ST. JOHN’S COLLEGE (ANNAPOLIS)

JONATHAN HAIDT

ANDREW SULLIVAN

NIALL FERGUSON

NADINE STROSSEN

DAVID MAMET

ROB HENDERSON

WILFRED MCCLAY

PANO KANELOS

HISTORIAN, THE HOOVER INSTITUTION AT STANFORD UNIVERSITY

BARI WEISS

JOURNALIST AND AUTHOR

HEATHER HEYING

Former President, Concordia College Social Psychologist, New York University Professor of Law, New York Law School; former President of ACLU Writer and Gates Cambridge Scholar, Cambridge University

EVOLUTIONARY BIOLOGIST AND BEST-SELLING AUTHOR

DORIAN ABBOT

JOE LONSDALE

SOHRAB AHMARI

CEO OF 8VC, COFOUNDER OF PALANTIR

BOARD OF ADVISORS ARTHUR BROOKS

Professor of the Practice of Public Leadership, Harvard University

AYAAN HIRSI ALI

Research Fellow, Hoover Institution, Stanford University

GLENN LOURY

Economist, Brown University

Texas CEO Magazine // Q2 2022

Geophysicist, University of Chicago Journalist and Author

Professor of Law, University of Chicago Author and Commentator Award-Winning Playwright and Author; Pulitzer Prize Winner Historian, Hillsdale College

DEIRDRE MCCLOSKEY

Economist, University of Illinois at Chicago

E. GORDON GEE

President, West Virginia University

JOSHUA KATZ

JONATHAN RAUCH

Classicist, Princeton University

LEON KASS

Economist, George Mason University

Senior Fellow, Brookings Institution Dean of Faculty, Shalem College

LARRY SUMMERS

President Emeritus, Harvard University

STACY HOCK

Philanthropist and Investor

TYLER COWEN

ANDREW YOUNG

Civil Rights Leader, Ambassador, and US Congressman

Keeping Texas

Powered

Houston entrepreneur Thomas McAndrew on the Texas power grid, the future of energy, and how his company keeps businesses up and running even through disasters.

PEOPLE DIE WHEN THEY LOSE ELECTRICITY IN THESE EVENTS. IF WE ELECTRIFY EVERYTHING— HEATERS AND CARS AND MORE— BUT THE GRID ISN’T RELIABLE, THAT’S A RECIPE FOR DISASTER.

Nearly a year and a half since it happened, Winter Storm Uri— which caused days of power outages and an estimated 246 deaths in February 2021—is still vivid in the minds of Texans. In the days and weeks after the calamitous freeze, many of the state’s utility operators and politicians came under harsh scrutiny for their lack of preparation and haphazard response. But over in Houston, one energy company did live up to the challenge: Enchanted Rock, which since 2006 has provided Texas institutions with reliable power from natural gas microgrids. As power plants across the state were knocked offline that February, causing millions to lose power, Enchanted Rock’s

Texas CEO Magazine // Q2 2022

microgrids supplied continuous power to its 143 customer sites, including grocery stores, water districts, and healthcare and manufacturing facilities. Enchanted Rock was even able to supply additional capacity aid to the main power grid. We wanted to know how this company passed the Uri test, and whether its success points toward reliable solutions in an increasingly uncertain energy future— so we talked to Enchanted Rock’s founder, president, and CEO, Thomas McAndrew. McAndrew began his career in the US Navy, operating and maintaining nuclear plants aboard two different aircraft carriers. McAndrew was born in New York but largely raised in Houston,

where he graduated from Klein High School before moving on to A&M. After leaving the Navy (and getting an MBA from Harvard), he grew his expertise in the energy industry until he eventually created an energy solution that offered reliable, clean, and affordable power to businesses and infrastructure. We asked McAndrew to share a postmortem on why the 2021 disaster happened as well as his insider perspective on the future of energy in Texas and the United States. Will nuclear be a thing? Is it really so bad that Texas’ energy grid is independent from the rest of the country? And how much is climate change affecting power grids? He wasn’t shy about giving his perspective.

Can you tell us about your background? I graduated with a mechanical engineering degree from Texas A&M. I was in the Corps at A&M and was then commissioned into the Navy. I went through nuclear power training and got to my first ship—a Nimitz-class aircraft carrier, the USS Eisenhower, where I did all my chief engineer qualifications. From there I went to another nuke ship, the USS South Carolina. I had just under six years in the Navy, and it was fantastic. Every day was exciting and challenging. I learned a lot about how to put together teams to tackle a challenge. Today at Enchanted Rock, we’ve integrated a lot of the culture of the Navy, especially the nuke Navy, into our own culture. That includes the way we design and operate high-reliability energy systems. We hire quite a few veterans too. We’ve established a reputation as a place for talented folks to go once they leave service. What made you decide to found Enchanted Rock? The first go-around was a company called Progressive Power Solutions in 2000, which we formed out

in California. At the time, commercial, industrial, and tech companies had to go out and buy their own backup generation in case of power outages. Then they had to pay someone to install and operate it. Our model was to outsource that service and reduce the customer’s cost by letting them participate in different types of electricity grid programs. We made good progress, but we were way too early in 2000. A lot of the control technologies we needed weren’t available or were too expensive. The electricity markets were still pretty immature as far as their ability to pay for the type of service we could sell back to the broader electricity grid. So we sold that business to [Houston-based electricity generation company] Calpine, but we knew that at some point it would make sense. In 2002, I started a consulting business because it was clear to me that there was an opportunity to help electricity consumers reduce cost, increase reliability, and decrease carbon footprint. That all sounds pretty obvious today, but back then it wasn’t yet. I formed Enchanted Rock in 2006. It was just me, and I didn’t have any idea

how to make money with the business yet, so I still did a lot of consulting. Then Hurricane Ike hit Houston [in 2008] and there was a very high failure rate—about 50 percent—of backup generators. There were power outages of two to three weeks in many cases. In some cases they lacked good fuel contracts, in others they had no maintenance plan for generators, and in others the generators were sized way too small for the facility. At that point, I’d added a chief technology officer, Clark Thompson, to Enchanted Rock. We said, “Okay, it’s time to resurrect that old Progressive Power Solutions business plan.” It was no longer too early. We now had last-mile connectivity, amazing control systems, and different types of software and hardware to install for our microgrids. And specifically in Texas, the marketplace would pay for that type of emergency response. So we launched the reliability-as-aservice business within Enchanted Rock. Today our biggest customer is H-E-B. Like most institutions, they don’t want to be in the backup generation business—they just want the store to stay operational Q2 2022 // TexasCEOMagazine.com

that, in my opinion, led to the situation. I was recently appointed to the Texas Energy Reliability Council, and we’ve been reviewing a lot of these reports and working with the Railroad Commission, the Public Utility Commission, and the state government to make sure that we have a plan going forward.

when power isn’t available. We can give them that affordably by selling back to the electric grid. And we do it all with the very high standards of the nuke Navy. How did you decide on the name Enchanted Rock? While I was developing the business plan, I spent a lot of time in the Fredericksburg area hiking Enchanted Rock. I thought, “I want to steal that name.” I checked with the lawyers, who said, “Yep, you can.” You’re a Texas-based company, but I assume you have customers outside of Texas, right? We do. Just yesterday we commissioned our first microgrid outside of the state, at a Marine base at Quantico in Virginia. Walmart is our second-biggest customer, and we’re working on sites in Louisiana and Mississippi and Illinois. We expect to see a considerable US expansion in the next two to three years, but our home base still is Texas. How did Enchanted Rock perform during the big winter storm of 2021? The 2021 storm was a great test for us, and we passed it. Our company came together and literally worked 24/7 to support our customers. Our microgrids, which are powered by natural gas and renewable natural gas, are designed to be reliable, so we had 97 percent availability. That’s

Texas CEO Magazine // Q2 2022

better than almost anybody in the industry. Most people were at 40 to 50 percent. We had a couple of stores that had issues, but we worked through those in real time. Do you have any thought on why outages were so widespread during and after that storm? The first thing is that in Texas, solar and wind have ramped up, causing overall energy prices to go down. A lot of traditional power plant owners didn’t have the cash flow to support weatherization and other preparations for this kind of storm. Many of them only had one or two years out of the last 10 that were profitable. The second is that there’s been a lot of electrification of heating, especially in North Texas. When we got to a certain temperature, the very efficient heat pumps couldn’t operate and they turned on what’s called resistive heating, which is just like a toaster. Once all those toasters switched on, that doubled or tripled the normal electricity consumption, causing this big spike we don’t normally see. Most folks were assuming a linear increase in demand with temperature, but that’s not how it worked. Of course, the wind and solar levels were very low during that period as well. So it was a combination of factors

Are we ready for future winters? It depends. We’re one of the few companies adding dependable capacity right now. There’s been a lot of solar added, but solar just doesn’t do much at five or six in the morning in February when there’s cloud cover for days. Given that there hasn’t been that much incremental investment, if we have another bad winter storm, it’s not clear to me that we’ll be ready. What do you think about President Biden’s energy plans? Let me back up and say that we’re focused on keeping local emissions as absolutely low as possible. We have the cleanest natural gas backup generator on the market. But we think you also have to be smart about decarbonization. The 2021 Texas storm is an example of not being smart about it, as well as things we’re seeing in California, China, the UK, where the energy transition is starting to hit the wall. Across the globe, you have a general lack of dependable capacity. Going on to Biden’s plan, I think the decarbonization objectives are noble, but I’m concerned about whether there’s enough focus on reliability. At the bottom of Maslow’s hierarchy of needs is life and safety. People die when they lose electricity in these events. If we electrify everything—heaters and cars and more— but the grid isn’t reliable, that’s a recipe for disaster. So we’re excited about accelerating decarbonization, as long as we’re smart about it. To a lot of people, nuclear energy is the future. Do you agree? I came from the nuke world and I still love that industry. I left it in 1992 because I just didn’t see a future. I was 28 years old and they were

talking about retiring nukes. But there’s so much potential in nuke power. It has two things that renewables don’t: One is dispatch ability, meaning it’s totally independent of the weather, and the other is amazing power density. It doesn’t cover fields and fields. If you’re going to electrify everything, you have to use nuke power at some point. But I doubt we’re going to roll out any new nukes in the next eight to 10 years— maybe we’ll get something just inside of 10 years. Over the next 10 to 15 years we do need solar and wind, and some battery storage and a lot of dependable capacity like what we bring to the market. Then I can see a phase-in of new types of nukes early to mid-2030s. I would love to see nuclear plants come down to a smaller level instead of these huge power plants we have in South Texas and Comanche Peak. Something small and available for local communities. Our biggest institutional investor, Energy Impact Partners, has launched a fund to focus on 10- to 15-year-out technologies and they’re specifically looking at nuclear fusion. I think it has to happen eventually. Just turning on a lot of wind and solar and four-hour batteries won’t provide for the basic needs of society. How is climate change affecting power grids? Do you think it’s getting worse? I live on Clear Lake and just anecdotally, I’ve had to evacuate a number of times over the last several years due to hurricanes. Whether it’s that or these huge pop-up thunderstorms, wildfires out west, the extreme temperatures on both ends—it’s all tremendously stressful for the physical infrastructure and load of our grid. And I think it’s trending worse. At Enchanted Rock, our microgrids rely on underground natural gas infrastructure, so we typically don’t have any pipes or wires above ground. That gives us more resiliency. Again, one reason nuclear is getting a strong look is that the fuel supply, whether fission or fusion, isn’t dependent on weather. There were some issues in the winter storm at South Texas Project

[Electric Generating Station] on the cooling side, but there are designs in the future for nuclear that can operate independently of any weather event. Isn’t France moving toward all nuclear energy? France’s trajectory has been interesting. They’re somewhere around 70 percent nuke. Over the last several years there was a movement to reduce that, because it became unpopular. But now they’re going to reinvest in nukes because they’re watching what’s happening elsewhere with reliability problems. France doesn’t have any issues right now with their energy supply. What should leaders in the private sector know about the Texas power grid? The nice thing about the Texas power grid is that it’s isolated from the rest of the country. I know folks think it should be interconnected, but I have a slightly different opinion. I think that actually can make things worse. Because our grid is independent, we have a lot more control over our destiny than other grids in the country. We have one Public Utility Commission, one independent system operator, and one state legislature, all over one grid. I believe that that situation will allow Texas to be the leader in showing that you can have a reliable grid and decarbonize at the same time. In other parts of the country, it’s so complicated—you have an independent system operator over eight or 10 states, with eight or 10 Public Utility Commissions, however many state legislatures, and all these other stakeholders. That makes progress difficult. But in Texas, we can identify our problems and say we’re going to solve them in a business-friendly way, with the right incentives for private industry, not through government mandates. I think we’ve learned a lot since the winter storm, and we will get it right. Does your personal leadership style draw on your military background? I’m not a hands-on manager, because I have a super strong management team. I do really make

it my business to understand what’s going on in all areas of the business though, and I try to lead by example. Because we’ve been growing, it’s a challenge to maintain the culture we started with, but we’re working hard on it. We’re starting to get recognized as a great place to work, which is exciting. I really love what I do every day and feel blessed to be around great folks. We have a business where we actually are changing the world, and it’s not a cliché. Helping customers in challenging times like the winter storm gives us a sense of purpose and mission. I keep hearing about how everybody’s quitting, but we just don’t see that on our team.

LIGHTNING ROUND: THOMAS MCANDREW

FAVORITE TEXAS PRODUCT? It’s got to be Blue Bell.

FAVORITE THING ABOUT TEXAS? The can-do attitude.

FELLOW CEO YOU MOST ADMIRE?

I think what Elon Musk is doing is incredible. I have a very small company and I think we’re changing the world, but he’s really changing the world.

SOMETHING YOU’RE AFRAID OF?

My job is to be paranoid. I’m worried about some of the monetary things we’ve done to get through the pandemic and about what the Federal Reserve is doing. I’m worried about what that might do to the economy when you start unwinding it.

NAVY OR A&M, IF THEY PLAYED EACH OTHER? I’ve got to go with the Aggies.

Q2 2022 // TexasCEOMagazine.com

WE’RE JUST COUNTRY BOYS IN THE COMPUTER BUSINESS.

Sending Off JOHN ROACH,

TEXAN PIONEER OF PERSONAL COMPUTING 1938–2022 “John’s vision and his ability to get early computers, like the TRS-80, into people’s hands through Radio Shack made him one of the true pioneers of this industry.” —Bill Gates

Last March, Texas lost an iconic CEO in Fort Worth’s John Roach. Roach played an instrumental role in the adoption of the personal computer and led Tandy Corporation, the parent company of Radio Shack, for many years as CEO. He was a humble leader who would sometimes joke, “We’re just country boys in the computer business.” John Roach was born in 1938 in the small West Texas town of Stamford. He attended Texas Christian University in Fort Worth, an institution he would support for the rest of his life. There, he earned a math and physics degree and, later, an MBA. In 1967, Roach landed a job as a data processing engineer at Tandy Corporation, which had begun as a leather goods company in 1919 but pivoted to electronics when it took over Radio Shack in the early 1960s. At Tandy, Roach lobbied hard for stores to sell fully assembled personal computers—devices that were at the time firmly in the realm of hobbyists, who spend vast amounts of time and money on assembling them. Roach’s vision was an out-of-the-box computer that would retail at about $600 (or a bit under $3,000 today) in Radio Shack stores. He sought out partners like Texas Instruments, who turned him down, so Radio Shack built its new computer—the TRS-80— itself. He also helped persuade the very young Bill Gates and Paul Allen to write code for the machines.

After its 1977 launch, the TRS-80, with initials standing for Tandy Radio Shack, quickly became the best-selling personal computer on the market—beating out Apple’s very first models—and revived Tandy’s flagging business. Roach was soon appointed chief operating officer and then, in 1983, CEO. He held that position until 1999, when he retired. The TRS-80 now sits in the Smithsonian. On his passing, Roach was remembered not only as a technology pioneer but as a pillar of Fort Worth. “For many years, he was Fort Worth’s most recognized business and civic leader,” said former mayor Ken Barr. “His extraordinary leadership was everywhere—at Tandy Corporation, at TCU, and throughout the business, civic, and cultural life of our city. We’re really going to miss him.” Q2 2022 // TexasCEOMagazine.com

NOW MORE THAN EVER, CANDIDATES TODAY WANT A FULL, ENGAGED LIFE BEYOND WORK.

The Candidate’s

MINDSET HAS CHANGED—HAS YOURS? Wade H. Allen

The world has shifted. COVID, although devastating in lives and businesses lost, opened the door to remote work becoming a norm. What didn’t seem like a viable work option to many businesses has been commonplace for over two years, and many people and companies like it. This shift is all about change—a scary word for most people—and this is major change, one that brings worry and fear as people are forced to figure out a new norm or possibly lose their job. And change has a ripple effect, so other things must also change to accommodate this significant shift in where and how people work. What is the domino effect of remote work for companies? It has already been significant, particularly in the realm of recruiting new talent and holding on to the talent you already have. Here are three key dynamics Texas CEOs must understand going forward as they recruit and retain talent: • What candidates want today • How your business aligns with those desires • How your interview process must change

WHAT CANDIDATES WANT TODAY

Now more than ever, candidates want a full, engaged life beyond work. This may have seemed like an unrealizable pipe dream 24 months ago to some people, but for many it’s now a reality beyond what they could have imagined. What was promoted for years as “work-life balance” is but a pittance compared to what they’ve tasted during COVID.

Texas CEO Magazine // Q2 2022

The typical family’s schedule pre-COVID was: get up no later than 6:00 a.m., grab a cup of coffee and a bite, get the kids ready for school, rush them to their destination by 7:15, and get to work by 8:00. Then, they work eight to 10 hours; perhaps their spouse picks up the kids; and they get home by 6:00 to start the evening routine of feeding and bathing the kids, doing schoolwork, getting them to bed, checking emails, and going to bed—exhausted—by 10:30 . . . if they’re lucky. Rinse and repeat! Even though we complained, people accepted that this was the norm. But COVID forced things to change, and that change was scary both personally (“Will I catch COVID?”) and professionally (“Does working from home actually work?”). The ripple effect hit everything—we learned how to school and watch the kids while we worked, how to keep a supply of clean facemasks handy, how to find a location in the house conducive to working, and how to get the technology necessary to perform our work duties from home. Working from home, a.k.a. WFH, has worked well for a considerable percentage of the population. Once the scariness of the initial change diminished, many found it a pleasant surprise. There was less rush in the morning, no commute, and relaxed attire, except for that professional top over your shorts for Zoom calls. All that adds up to reduced wear and tear on cars, less gas consumed, less dry cleaning, less stress, and perhaps 30 minutes to two hours gained in your day to use any way you want. For many, these gains were well beyond that work-life balance pipe dream they had years ago! The change affected almost every knowledge worker—from the junior assistant to the CEO—and it turned out to be a welcome shift after the scare was gone. So, now the question is: How do I keep this newfound freedom as many businesses want employees back in the office? According to a recent Harvard Business Review article, 76% of the workers polled believe that employees will be more likely to prioritize lifestyle (family and personal interests) over proximity to work and will pursue jobs in locations where they can focus on both— even if it means taking a pay cut.

We’ve hit what has been called the Great Resignation—a term credited to business and management professor Anthony Klotz, who used it in interviews and opinion pieces about the phenomenon in May 2021. People are willing to quit their job because they can find positions at other companies, perhaps competitors, that are more flexible and better fit to the lifestyle they have just begun to enjoy. Even before the Great Resignation took full force, 19 million workers quit their jobs between March 2021 and July 2021. That trend has only sped up since.

HOW YOUR BUSINESS ALIGNS WITH THOSE DESIRES

The top-level question for CEOs is: Which side of the fence do you want your company to be on during this Great Resignation? This surge is not a tiny, isolated phenomenon. It is real—record numbers of people are quitting, and that number is growing each month. Your employees have options and feel more empowered than ever to make a change. They, not their employers, currently own the process. Salaries and benefits and WFH options are escalating to attract talent. Perhaps it’s a one-time technology allotment to set up a WFH space and a monthly amount to cover high-speed Internet. Maybe it’s going to a four-day workweek or every other Friday off. Perhaps it’s only requiring people to be in the office once or twice a week. Aggressive companies are making changes, and it isn’t just the small to medium businesses—it’s Fortune 500 companies like Google and Facebook setting the trends. WFH is here to stay, but the “right” percentage of time for employees to spend in the office will probably swing like a pendulum for several years as companies and individuals try to reach the right balance. And that balance can be different by industry, area of expertise, location, and other factors. How do you compete to retain and acquire top talent as this process continues? Let’s be clear: Your best employees have always been targets for other companies to lure away. Doing nothing now may make it that much easier for your best people to leave. Have you looked at where you align with their needs and what you can do to meet them better? Are you open to change, or will you wait until all your top talent has left? Some things you might not be able to compete with, such as aggressive cash offers. Last year, we replaced a client’s CTO because a Fortune 100 company offered the CTO twice their salary. The common assumption is that salary is an employee’s number-one interest, and indeed sometimes you cannot meet a candidate’s salary range. But research shows flexibility as most employees’ number-one criteria—much higher than compensation. Many employees will in fact take a pay cut for a job that offers them more flexibility, including in how they can work from home. Taking a lackadaisical attitude toward these changes is like ignoring the tides in the ocean. You will wander around

only to get swept out by the undertow. Instead, examine what your organization currently offers employees and candidates and what changes you can afford to make, or perhaps more appropriately stated, what changes you can’t afford not to make.

HOW YOUR INTERVIEW PROCESS MUST CHANGE

The remote-work revolution has also changed how interviews work. Lengthy, drawn-out interview cycles are a turnoff, especially when other companies have streamlined their processes and are willing to make decisions quickly. For example, do you need eight people to interview each candidate in person, which may take a week or two for schedules to align? People have options, and the progressive companies, the ones with their act together, show they want someone by being decisive. Think about it: Do you like being put on hold? Video technology like Zoom and Teams is now a fully acceptable medium for conducting business. You probably already use it regularly, even daily. Do you use it for interviews? You may be able to get in that initial interview at 5:00 this afternoon or over the lunch hour tomorrow, versus finding a time to meet in person next week. And if the VP they need to interview is on the road this week, why should that slow you down? They’re available via video. Your competitors are leveraging the heck out of their excellent solutions for work-life balance, even in the interview process, before they’ve hired the candidate. Streamline your interview process. Listen to what candidates want. Tell them about the flexibility you currently offer, and show them you are open to change. Only companies that put in the work here will consistently land in-demand talent. • • • This change is real. Having a full life outside of work has become a priority for many. Although paychecks provide food and housing, personal fulfillment is now critical in the employee’s selection criteria, and you must have options that meet their needs. Note that candidates won’t know about any of your great perks unless you tout them. Be different. Be willing to try things. Stand out. No, everything can’t happen overnight, but you must establish open lines of communication and show that positive change is happening—particularly when it comes to the freedom to work when, how, and where the employee wants. Wade H. Allen has been president and CEO at the executive placement firm Cendea for over 27 years. Since 1994, Cendea has provided seniorlevel executive search solutions for businesses with high goals that require Impact Leaders to take them to the next level. You can reach Cendea at TxCEOMagazine@Cendea.com.

Q2 2022 // TexasCEOMagazine.com

THE PERFECT SPOT FOR YOUR NEXT LEADERSHIP TEAM RETREAT OR PERSONAL GETAWAY IS RIGHT HERE IN THE HEART OF TEXAS 15 bedrooms | 15.5 baths | 1,000 sf conference room | pool & heated spa

Nestled on 150 acres just 30 minutes east of the Austin airport, this one-of-a kind ranch facilitates the ultimate executive retreat. With 15 bedroom suites your group will enjoy immersion in nature without sacrificing any modern comforts. Miles of wooded trails span around majestic, oversized pines, lush fields, coastal and native grasses, and wildflowers along with two fishing ponds stocked with sunfish and largemouth bass. Spectacular amenities include a 9-hole putting green, golf simulator, pickleball court, 1,000-square-foot conference room and more. A true Texas getaway awaits. AMENITIES: • • • • • • • • • • • •

High-definition TVs and work desks in each room Dedicated home theater Commercial hi-speed Internet with WiFi Courtyard with pool, hot tub, and outdoor kitchen Pickleball court Chargepoint electric vehicle station Eight electric bikes included Running stream with meditation area Golf facilities, including large artificial putting green, driving range, and golf simulator Three-hole frisbee golf course Catch-and-release fishing—fishing gear provided Additional concierge services available on request

Book Your Stay!

Call:

512-412-3127 Email: texasceoranch@gmail.com In response to the COVID-19 pandemic, we have implemented heightened safety and housekeeping procedures.

FRIDAY, SEPTEMBER 30, 2022 10:00AM-3:00PM CST AT&T STADIUM | ARLINGTON, TEXAS

We hope you’ll join us at AT&T Stadium—home of the Dallas Cowboys—for the 2022 YTexas Summit. Experience the scope and scale of our $1.8 trillion economy while learning about global powerhouse brands and networking with over 3,000 business professionals.

Attend | Speak | Exhibit | Sponsor ytexas.com/2022summit

get your tickets

Thank you for making us the most trusted bank in America.

Because of your confidence in us, Newsweek named us America’s #1 Most Trusted Bank. To our employees, clients and investors, we are grateful. We are excited about continuing to build our future together. To those we have yet to work with, we welcome the opportunity to earn your trust.

Texas Capital Bank

Member FDIC

NASDAQ®:TCBI