The good news: a seat on a corporate board is still a prestigious—and often profitable—career milestone. The bad news: as a director today, your actions, responsibilities and liabilities are under the microscope. The rules and regulations have changed in recent years, as have expectations.

“When I was first invited to serve on a corporate board in 1984, it was a country club environment, where like-minded people of like backgrounds and like experience got together to nod favorably at what management was doing and encourage them to keep doing it,” says Admiral Bobby R. Inman, USN (Ret.), BBA ’50. Inman is currently the lead director at Massey Energy and has served on numerous public and private boards. During those “country-club” days, most CEOs wanted feedback from boards only to reinforce their own thinking; attempts to offer direction on strategy were perceived as “intruding on the prerogatives of management,” notes Inman, who is on the faculty at the LBJ School of Public Affairs.

Fast-forward 25 years, and C-level executives like Lynn Utter, president and COO of Knoll North America, now look to their boards for exactly that type of guidance. “I view our directors as an excellent sounding board and source of counsel. Some of our most valuable board meetings occur when there is open discussion and debate,” says Utter, BBA ’84, who serves on the board of WESCO International.

Today, directors inhabit a dual position as both cheerleader and watchdog, helping to guide the health of companies, shape fiscal and corporate strategy, and, in the case of public companies, protect shareholder interest. Boards have become more diverse and more powerful; are more likely to consist of independent directors and contain more committees; and face more rules and regulations than ever before.

But with all these changes—and considering that board composition varies depending on the size of a company, whether it is public or private, and the industry it competes in—the basic essence of a director’s role remains largely straightforward.

“The fundamental responsibilities of a board include hiring a CEO, evaluating senior executives, approving compensation programs, working with external and internal auditors, and approving corporate strategy and mergers and acquisitions,” says William H. Cunningham, a professor of marketing and former president of the University of Texas at Austin, who is also chairman of the board of Lincoln Financial and presiding director at Southwest Airlines.

STRATEGY VS. COMPLIANCE

This top-level strategic role is sometimes diluted by the need for directors to focus on complying with myriad regulations, which include tightened controls enacted by the SEC in 2009 after the meltdown of the financial markets, and the Sarbanes-Oxley Act, which was passed in 2002 in response to the infamous failures of Enron and other high-profile companies.

Among other things, Sarbanes-Oxley introduced new standards of accountability for boards of directors at public companies, making them susceptible to large fines and prison time for accounting crimes. The legislation also added significant bulk to directors’ auditing and internal control responsibilities.

“Sarbanes-Oxley has created a lot of changes in board service,” says James Huffines, BBA ’73, an executive with PlainsCapital Bank and chairman of The University of Texas System Board of Regents who has served on corporate boards for more than 25 years. “Board members are forced to focus more of their attention on disclosure, compliance and risk management. And there is more scrutiny on board activities, including how often the board and its committees meet, the charters of those committees, and the type of information that is shared. It can be a struggle to focus on long-term planning and adding value for shareholders and not getting bogged down with day-to-day numbers and compliance,” Huffines says.

Many veteran board members say that both the day-to-day compliance and the strategic roles of board service post-Sarbanes-Oxley have become much more time consuming. The increased use of committees to drill down on specific business functions and ensure compliance means directors who sit on those committees devote even more hours to board service.

“It used to be that the general board made all the decisions,” says John Massey, LLB ’66. “But today, one board may have several sub-committees—audit, compensation, compliance, investment, risk management, legal and governance, among others. Sometimes you spend more time on committee work than you do on the general board meetings.”

Massey is a senior executive with asset management firm Neuberger Berman and has served on more than 40 different corporate boards since 1973.

“Because of the complex regulatory environment boards face today, directors have a lot more work to do, which limits the number of boards that active executives have time to serve on,” adds Cunningham.

Gone are the days when active CEOs could rack up directorships, he says, noting that while he was president of UT Austin and chancellor of the UT System in the ’80s and ’90s, he served on four large, publicly traded boards—something that would not be possible now. C-level executives of public companies today usually serve on only one or two outside boards.

That is the case for Sue Gove, BBA ’78, who is executive vice president and COO of Golfsmith International and a member of the board of directors of Autozone, where she serves on both the audit and nominating committees.

“Most quarterly board meetings for public companies require a minimum of two full days now,” Gove says. Being an audit committee member means additional meetings because the committee frequently examines press releases and earnings statements, as well as quarterly and annual SEC filings. “It is quite a juggling act to balance today’s board responsibilities with the pressing issues you face at your own company,” she says.

As a result, many boards now include more directors with flexibility—such as retired or semiretired senior executives who might be consultants or fund managers—than active C-level executives.

However, Gove believes it is important for boards to maintain a balance. “As an active COO, I bring a unique perspective to the board because I am face-to-face every day with Sarbanes-Oxley and other business issues that are relevant to Autozone,” she explains.

INDEPENDENTS DAY

One of the biggest changes to come from Sarbanes-Oxley is the increased presence of independent directors—those who are not employed by the company on whose board they are serving. Publicly traded companies must now have more than half of their board members designated as independent, and non-independent (or inside) directors may not serve on the compensation or audit committees.

“It is very rare to find more than a few inside directors on a board now,” Inman says. “At Massey Energy, CEO Don Blankenship and president Baxter Phillips serve on the board, and the remaining seven directors (including me) are independent outsiders.”

It is also not uncommon to have the CEO be the only insider, he adds, citing SBC, Fluor and Temple-Inland as companies that adopted this model while he served on their boards.

The idea is that independent directors bring an outside perspective to the board and are better equipped than inside directors to be objective about business concerns since their livelihood is not directly tied to the corporation.

“The role of an independent director is to push insiders hard and make sure shareholders are getting the right answers and that strategic plans are all in alignment,” Huffines says.

There are, however, other considerations to the independent director trend—something academics are currently researching.

“While many institutional investors and corporate oversight bodies feel that independent directors provide superior oversight, these directors also need the detailed information that inside directors possess from their involvement in the firm’s activities,” says Laura Starks, chair of the Finance Department and an independent director for TIAA-CREF. “In addition, outside directors may not have the same time and commitment as insiders because of their other responsibilities.”

Researchers are also debating just how “independent” independent directors really are. “A lot of directors who on the surface are independent may have long-term connections to senior management—maybe they went to business school together or belong to the same golf club,” says Jay Hartzell, associate professor of finance.

It’s perfectly reasonable to tap people you know for board service, he says, but scholars want to determine whether those directors who are “networked” to top management have a positive or negative impact on the board’s effectiveness.

“It is possible that corporate managers may be more forthcoming about company details when their board is populated with directors they are comfortable with. But on the flip side, it could be harder for directors with close ties to management to be objective about CEO compensation or succession planning,” Hartzell says.

Independent directors are under the microscope today for all these reasons, but many active board members see it as a nonissue.

“Independent directors take their role very seriously, whether they are connected to the CEO or not,” says Huffines.

In addition, the increased practice of having nominating committees fully vet potential board members before bringing them to the full board has cut down on the clubby atmosphere of old.

“CEOs are still able to recommend board candidates—and there is nothing wrong with that—but the standard practice now prevents undue influence over director selection,” says Cunningham, who notes that John Hancock recently added three directors to its mutual fund board, two of whom were recommended by an independent consultant and had never met Cunningham or any of the other directors.

RISKY BUSINESS?

Not everyone, however, believes a seat on a board of directors today is a markedly more complex and risky place. While all directors have undoubtedly felt the impact of Sarbanes-Oxley, some veterans say it is not such a big game-changer.

“Conventional wisdom says directorship is a lot more complex now than it used to be, but I just don’t buy that,” Massey asserts. “The duties, responsibilities and functions of a board member were just as serious when I began serving 37 years ago as they are today.”

A public company director’s primary focus is protecting shareholders—and that has always been the case, adds Starks. “The recent SEC regulations have imposed a number of new requirements for boards, but they have not changed the fundamental fiduciary duties of a board member, which is to watch out for shareholder interests,” she explains.

In some senses, the changes enacted by Sarbanes-Oxley and the SEC merely put into law strategies that smart businesses were already employing. The majority of public companies functioning in an honest and forthright fashion have not had to scramble to comply with new board mandates, Cunningham says.

“For example, the audit and compensation committees must now be made up of all independent directors; you can’t make loans to the CEO; you can’t backdate stock options—most good companies had these protocols already,” he explains.

The consensus as to whether the risks for directors have increased—and indeed whether they are real or just perceived risks—seems to be a gray area. Could decisions made during a contentious merger result in a director losing his or her seat? Do directors face reputation risk because of increased scrutiny? Will directors and operators insurance protect them from potential litigation?

“Directors are much more accountable now than in the ’80s and ’90s,” Inman believes. “If a company experiences a significant, unexpected drop in performance over a quarter, it is likely to get an instant class-action lawsuit from shareholders.”

Most litigation against directors stems from violations to fiduciary responsibilities. Generally, directors may be sued for taking advantage of their position on the board to benefit ahead of the shareholders—by, say, trading on insider information. But this isn’t new.

“If you’re a crook, they’ll get you—and they would’ve gotten you before,” says Cunningham.

Although Cunningham agrees that the SEC and the Justice Department are definitely watching boards with a sharper focus, he still feels the risks are less dramatic than some people claim. “If you make every effort as a director to make the best decisions possible, you should not be that prone to risk,” Cunningham says, adding that he has never been sued successfully.

DO YOU HAVE D&O?

If the fear of lawsuits has not necessarily sent directors running for the hills, it certainly has them scrambling to make sure they are well protected by directors and officers (D&O) insurance, a type of coverage that handles the financial risks directors face if they are sued.

“I’ve heard veteran directors say that the first time someone is asked about being on a board today, their response should be, ‘How good is the D&O policy?’” says Hartzell.

But this cynical view about the need to protect oneself does not jive for Massey, who feels that directors do not face more risk today than they did in the past.

“I don’t agree with that viewpoint. The most I ever got sued in my life was serving on boards in the ’70s and ’80s,” Massey says.

His reasoning? Companies no longer tolerate some of the controversial practices—such as intentionally discriminating against minorities and women—that often resulted in litigation in the past.

Lawsuits have also decreased since the laws regarding stock buybacks (when a corporation buys its own shares to, say, reduce capitalization or provide shares for employee option plans) were settled.

“Back in the ’60s and ’70s, whenever a company announced a stock buyback it would almost always spark a strike suit against the directors, alleging some type of fraudulent motive or attempt at stock manipulation,” Massey explains. “When I was a director of Mary Kay Cosmetics in the mid-1970s, we were a frequent strike suit target. None of these suits had merit, and none of them would be filed today.”

Massey also feels that the level of risk and complexity on boards today has not changed because of Sarbanes-Oxley or the SEC, but rather is subject to the changing winds of political and economic approaches.

“Board climates are driven by what has happened in the economy and by who is in charge politically and what they are trying to achieve. Depending on whether you have a right-wing or left-wing administration in power, the regulations can swing wildly in one direction or the other,” he explains.

Whether you embrace the theory of increased risk or not, the upside to serving on a board is still great. Compensation—often in the form of equity—is nice, but it is not what draws most executives to board service. Rather, it is the opportunity to engage in high-level strategy, make a difference in the welfare of a company and its stockholders, and gain valuable business experience and networks.

“My career has been dramatically enhanced by all of the boards that I’ve served on,” says Massey. “I am a much better businessman and I’ve been able to contribute more to society as a consequence.”

By Amy Partridge

Marcie, BBA '83 and Bob Zlotnik, BBA '75, MBA '80, established a $1 million chair in entrepreneurship at McCombs.

In conversations across campus—in classrooms, over coffee and in labs—new ideas emerge every day. With hard work and research, many of these ideas beat the odds and successfully find their market niche. With guidance from faculty and support from alumni and friends, the McCombs School is empowering entrepreneurs across the university to accelerate the pace of innovation on campus.

“The vibrancy we see in the system today is due to pioneering effort going back to the days of Dean George Kozmetsky and even before, which blossomed into initiatives across campus supporting innovation, creativity, entrepreneurship and commercialization,” says Dean Tom Gilligan.

The freshly minted Texas Venture Labs (TVL) is among the newest resources available to the university’s entrepreneurial community. TVL will serve as a hub for university entrepreneurship, connecting student and faculty innovators from schools across campus with resources within the university and the Texas entrepreneurial community.

Rob Adams, director of Texas Venture Labs and Venture Labs Investment Competition (formerly Moot Corp) and lecturer in management at McCombs, developed the Texas Venture Labs model through practice nurturing emerging companies through the early stages of their growth. “We’ve been running a skunkworks [informal] version of this approach for years, and we know how to do it consistently,” Adams said. “This is the model we are expanding.”

More than $25 million has been raised over the last 10 years by new ventures launched through the entrepreneurial drive of McCombs School students and faculty. Eight of these companies raised $1 million or more in funding, and two were successfully acquired by larger companies.

Innovation for the Good of Business
One of these early success stories is Phurnace Software, a developer of software that simplifies the process of installing and upgrading Java applications for large companies. The company was co-founded by McCombs graduate Daniel Nelson, MBA ’06, and fellow Longhorn Robert Reeves, B.A. ’02, who went on to win the Global Moot Corp competition in 2006. Phurnace was acquired by BMC Software in January 2010.

“This is a great example of a company finding compelling market pain and aggressively pursuing it,” said Adams. “This was a true Texas-born and built success story.” Calling the school a “launching pad,” Nelson credits the McCombs School for arming him with the tools to make his idea a reality. “[McCombs] provided me with a framework…a structure under which to develop and plan and think about next steps and think about what it would take to be successful,” he says.

In an expression of their appreciation for the school’s support, Nelson and Robert and Maia Reeves, B.S. ’09, donated $100,000 in seed funding to TVL to ensure the continued growth and development of the spirit of innovation on campus.

Innovation for the Good of Students
Austin-based investment manager and entrepreneur Beau Ross, MBA ’88, has the real-world perspective to appreciate what TVL will mean for future graduates. Ross leveraged the skills he gained at McCombs to found, grow and eventually sell Premier HR, an SAP implementation company. Ross is now an active angel investor and partner in Eldorado Energy Partners.

Ross sees TVL as the next step in the search for innovative learning opportunities for students at McCombs. This spring, Ross and his wife, Kathryn, donated $100,000 in seed funding because he believes the impact of TVL is far reaching. By supporting Texas Venture Labs, he says, one can “help create real life opportunities for students to participate in investment deals with the objective of helping them get better jobs, with the positive byproduct of attracting the best students and new recruiters, thereby bolstering the entrepreneurship program.”

“Beau’s continued involvement in mentoring students, providing financial scholarship and helping endow programs that differentiate McCombs from other schools will benefit future MBAs for generations,” says Jim Nolen, distinguished senior lecturer in finance at McCombs.

Innovation for the Good of Texas
Husband and wife team, Bob, BBA ’75, MBA ’80, and Marcie Zlotnik, BBA ’83, combined their business acumen to found the Houston energy company StarTex Power in 2004. Bob serves as CEO and Marcie as chairman and COO. Together, they were finalists for the 2009 Ernst and Young Entrepreneur of the Year award. This spring, the Zlotniks gifted a lasting legacy in support of innovation at the McCombs School, establishing a $1 million chair in entrepreneurship.

To Bob, the value of innovation at McCombs extends far beyond the Forty Acres. “If people go to school in Texas, they’re more apt to stay in Texas. The better the university is, the better off the state will be,” he says. “If we can retain our students and keep them here, it will help raise the quality of life for all Texans.”
Recruiting and retaining top-notch faculty is key to the McCombs School’s continued success and competitive edge. Faculty members form the foundation of the school’s academic mission, and it is their work that both energizes students and facilitates innovation across local, state and national economies.

“The chair that was granted by Bob and Marcie Zlotnik will greatly enhance the ability of the state of Texas to maintain its strong entrepreneurship tradition,” says John Sibley Butler, director of the Herb Kelleher Center for Entrepreneurship, the IC² Institute and professor of management at McCombs. “Texas, as a state, is influencing other states and other countries and teaching them that entrepreneurship is a principle source of jobs, prosperity and wealth. The University of Texas at Austin stands at the very center of this mission.”

Retiring BHP director Eli Cox gets a $26,000 haircut from student giving co-chair Renee Chu

This spring, students joined efforts to continue improvements to student life at McCombs through the 2010 Student Giving Campaigns. The three returning student campaigns—MBA Legacy, BBA Legacy and BHP Make-A-Mark—achieved milestones with new and innovative ideas, and three new student campaigns launched in 2010: EMBA Legacy, TEMBA Legacy and MPA Legacy, broadening the scope of student philanthropy at McCombs and setting the stage for future achievements for these programs.

With high participation rates, students raised the bar for future student campaigns and for McCombs alumni, whose annual giving participation rate is only at 6 percent.

MBA Legacy Campaign
Since 1996, full-time MBA second-year students have combined their contributions into a class gift to the school. Class members submit ideas and then vote on the cause of their choice. Led by three cochairs, Shannon Emerson, Tate Forrester and Hanley Sayers, the 2010 MBA Legacy Campaign achieved a 99 percent participation rate and raised more than $153,000, the second-highest pledge total in the campaign’s history.

This campaign will help fund the newly launched McCombs Social Enterprise Fund to support first-year MBA students working in sustainability, non-profits and other social enterprises during their summer internships. This fund will help the school attract high-caliber students because the majority of top 20 schools offer similar support to students.

BBA Legacy Campaign
In its second year, the BBA Legacy Campaign continues to exceed expectations by involving students across undergraduate classes, not just graduating seniors. Led by co-chairs Reilly Milton, BBA ’10, Vic Ramon, BBA ’11, Jeff Stein, BBA ’11, Frances Smith, BBA ’12, and Emily Lu, BBA ’13, this year’s campaign raised $6,200 in pledges and garnered 13 percent participation among all classes, tripling last year’s rate.

The BBA Legacy Campaign Committee launched a cutting-edge marketing campaign, generating buzz on campus with their slogan “What’s the New Tradition?” (Watch the campaign video, with a special appearance from Dean Tom Gilligan.) Contributions went to the BBA Alumni Endowed Excellence Fund, which supports undergraduate student programs created and led by students.

BHP Make-A-Mark
The Business Honors Program (BHP) Make-A-Mark Campaign, led by Renee Chu, BBA ’10, and Adriane McAda, BBA ’10, raised $8,875 in student, faculty and staff pledges with a 70 percent student participation rate, a significant jump from last year’s 44 percent rate. Created in 2000, the campaign goes toward a scholarship fund for future BHP students.

To drive involvement, Beverly and Will O’Hara, BBA ’68 and part-time lecturer in accounting, offered to match student contributions two to one if the graduates reached 100 percent participation and if Eli Cox,
chair of the Marketing Department and retiring director of BHP, shaved his head and beard.

In light of the students’ recordbreaking participation, the O’Haras doubled all campaign contributions, donating an additional $17,350 to the scholarship fund, bringing the total to $26,225. During the BHP Make-a-Mark celebration, Chu and her BHP classmates enthusiastically joined in helping Dr. Cox shave his head.

“I owe so much of my enriching experience here at UT to my time in BHP,” Chu says. “Because the program has afforded me so many opportunities, I feel now it is more appropriate than ever to give back.”

Walmart executives gather with Dean Gilligan.

The world’s largest retailer, employing more than 2.1 million associates at more than 8,416 retail units in 15 countries worldwide, Walmart demonstrates a commitment to sustainability and diversity, exhibited by its involvement with the school over the past five years. In 2009 and 2010, Walmart will award the school more than $140,000 in support of sustainability, diversity and other key initiatives.

Walmart’s green leadership on campus is a reflection of the efforts the retailer has made to educate consumers on ways to minimize their carbon footprints. “We were probably one of the very early [corporations] to recognize that sustainability—not only was it important for the world we live in—we also realized very quickly it was important to sustain ourselves as a business,” says Charles Holley, BBA ’79, executive vice president of finance and treasurer of Walmart and a member of the Dean’s Advisory Council at McCombs.

Since 2007, the company has sent more than 20 professionals to speak in classes at McCombs and provided sustainability business cases as the lead sponsor of student case competitions. In October 2009, Lee Scott, chairman of the executive committee of the board and former CEO of Walmart, spoke as part of the school’s VIP Distinguished Speaker Series about leadership and sustainability. Additionally, Scott hosted a university-wide forum with top researchers from across campus to discuss critical sustainability issues. In 2009, Walmart awarded $50,000 in seed funding to help launch the school’s Energy Management and Innovation Center (EMIC).

“As perhaps the largest corporate consumer of energy in the world, Walmart has provided substantial leadership in areas that relate to energy efficiency and sustainability,” says Sheridan Titman, professor of finance and executive director of EMIC.

Diversity is also a cornerstone of Walmart’s business plan and an integral part of its corporate culture. To cater to a globally diverse customer base, you need “diversity of thought,” Holley says. “Diversity means many things, not just your ethnic makeup. It can be your background, your culture. It’s important that the way we think and manage the company reflects that.”

Walmart promotes these values through its engagement with McCombs. In 2009–10, Walmart donated $25,000 to graduate and undergraduate diversity scholarships and $15,000 to the Diversity in Business program. The firm, which has committed to continued involvement with The University of Texas at Austin for the next three years, provides some of the largest corporate scholarships to individual students, which has helped the school attract top talent to the MBA and BBA programs.

McCombs alumni at Walmart have also generously donated their time by participating in key diversity programs and speaking to student organizations, such as Graduate Women in Business and the Association of Latino Professionals in Finance and Accounting.

In April, Walmart received the school’s Outstanding Corporate Partner Award, which recognizes a company whose support and engagement extends beyond recruiting and reaches broadly across the school’s key areas for partnerships: priority initiatives, students, research and research centers, faculty and executive education.

Other award winners at the McCombs School Corporate Recognition Dinner include Chevron, the recipient of the 2010 Blazing Saddles award, which honors a company that has the most unique and innovative involvement with the McCombs School over the past year, and Tom Rizzoli with Shell, who was the 2010 Outstanding Corporate Champion, an award that recognizes an individual within a company who has made significant, ongoing contributions to the relationship between the school and his or her company.

“The big game changer this decade has been energy prices. We were built for $20 crude oil; we are not well prepared for $85 crude oil,” said Gary Kelly, BBA ’77 and executive chairman of the board, president and CEO of Southwest Airlines at the Access  McCombs event held in Dallas April 5. Kelly (second from right) joined Dean Tom Gilligan; Herb Kelleher, founder and chairman emeritus; Colleen Barrett, president emeritus; and Bill Cunningham, non-executive chairman of the board and James L. Bayless Chair for Free Enterprise at the McCombs School for a panel discussion. Rad (BBA ’98) and Ashley (BBA ’03) Weaver founded the series and hosted the first event in San Antonio with Red McCombs.

Learn about upcoming Access McCombs events.

Knowledge to Go: Corporate Culture, July 13
Marcie Zlotnik, BBA ’83, Chairman and CEO, StarTex Power

StarTex Power made the Houston Business Journal’s Top 10 Best Places to Work and is the 30th fastest growing private business in the U.S. How does one company satisfy its customers, employees and shareholders? Corporate culture plays a significant role in StarTex Power’s success.

How to Get the Visibility You Want, July 22
Neena Newberry, MBA ’92, Career Coach

Newberry will present a tasteful way to promote yourself and highlight your contributions to your company.

Visit http://www.mccombs.utexas.edu/alumni/ for more information and to register.

ALUMNI EVENTS

Alumni Barbecue, Sept. 25, 2010
All McCombs alumni are invited back to Austin for a pre-game reunion celebration at the business school. Get ready to watch the Longhorn football team beat UCLA by catching up with fellow McCombs alumni while enjoying delicious Texas BBQ.

MBA Alumni Reunion: Classes of ’95, ’00 and ’05, Oct. 22-24, 2010
Graduates from the classes of 1995, 2000 and 2005 are invited back to campus to reconnect with fellow alumni and the school. Activities include a Friday evening welcome reception at the AT&T Executive Education and Conference Center; a Saturday game-day tailgate, with fun activities for the kids; a tour of the school and an update from Dean Gilligan and Associate Dean of Graduate Programs Eric Hirst; and a Sunday farewell gospel brunch at Stubbs BBQ.

For more information, visit directory.mccombs.utexas.edu/events.

EXECUTIVE EDUCATION

Developing the Project Business Case, Aug. 30-31, 2010
Build a sound business case for pursuing a potential opportunity in the face of significant risk and uncertainty. Identify opportunities that succeed… or fail.

Advocacy: Championing Ideas and Influencing Others, Sept. 9-10, 2010
Enhance your communication skills and convince others of the value of your ideas while generating personal loyalty.

Planning the Successful Project, Sept 14-15, 2010
Develop a robust execution plan that captures the cost, schedule and resource requirements in the face of significant risk and uncertainty. Identify and address risks at the proper level using a comprehensive risk management process.

Building Engagement: What Leaders Do To Manage Talent & Build Allegiance, Sept. 16-17, 2010
Analyze what it takes to “make it” as a leader, and learn specific steps to enhance your interpersonal effectiveness and generate high levels of engagement among those who work with you.

Managing Across Generations: Boomers to Millennials, Sept. 23-24, 2010
Develop new insights into generational expectations to gain strategies for aligning generational expectations with your organization’s culture, policies and practices.

Strategic Decision Making, Sept. 28-29, 2010
Acquire a framework for analyzing decision problems by breaking them down into manageable parts. Examine tools and methods available for structuring and modeling decision problems.

Practical Negotiation Skills, Oct. 5-6, 2010
Gain your best possible outcome when facing daily negotiation challenges as managers and professionals.

Leading High Performance Teams, Oct. 7-8, 2010
Acquire a comprehensive tool kit of the major functions effective leaders perform to generate group cohesiveness, mutual respect and support and company loyalty.

Strategic Management, Oct. 14-15, 2010
Learn tools and techniques used in strategic analysis and increase your ability to set strategic goals. Learn how to think strategically and globally.

Keeping Your Customers in Challenging Times, Oct. 19-20, 2010
Know what customer focus means, why customer retention is vital to the firm and how to achieve customer loyalty and trust.

Managerial Accounting for Non-financial Executives, Oct. 21-22, 2010
Examine fundamental internal measurement and control systems. Discover what you need to know about decision making and control without excessively constraining your organization.

Accounting & Finance for Non-Financial Managers, Oct. 26-27, 2010
Become proficient in the language of business. Learn how to identify relevant information, apply analytical skills to make better business decisions and take maximum advantage of business opportunities.

Marketing Strategy, Oct. 28-29, 2010
Develop a thorough understanding of the concepts behind marketing strategy. Acquire a foundation for building internally consistent marketing campaigns.

Visit www.mccombs.utexas.edu/ExecEd or call Lynn Slattery at 512-232-9462 for more information about Texas Executive Education programs or to register for a course.

GMAT Prep
Executive Education offers GMAT Prep programs for students who need to prepare for the GMAT or who would like to improve their current scores to enter an MBA program. 

-Wednesdays, June 2- July 28, [6:30-9:30pm]
-Tuesdays, July 13- Sept 7, [6:30-9:30pm]

Visit http://www.mccombs.utexas.edu/ExecEd/gmat/ to register.

Social media marketer Sean McDonald, BBA ’86, MBA ’95, shared insight and tips on how businesses can use this powerful new phenomenon during a McCombs Knowledge to Go webinar March 9. McDonald spoke from his experience as a Dell marketing executive and principal strategist at social business firm Ant’s Eye View.

McDonald stressed the importance of building relationships with customers, not just blasting your message.

Businesses Value Transactions, but Humans Value Relationships

McDonald opened with the warning that customers are bombarded with thousands of messages everyday and yet trust in companies is at an all-time low. He added that 65 percent of marketing spending in 2007 had no effect on customers.

While of course companies want and need to make money, they need to see the value in having a relationship with a customer first, McDonald said. Relationships eventually turn into customers. And loyal customers at that.

“Think about the great businesses that have had real staying power—they provide a great product or service and you have a relationship, a connection with that brand,” said McDonald, adding that we tend to forget about brands we don’t have relationships with.

He also noted that social media is not just for marketing. Companies like Dell and Starbucks have successfully used it for R&D, gathering customer insights as input for innovation. Social media can support sales, customer service and operations as well.

The 4-Step Social Media Gameplan

So how can a company get started using social media?

McDonald offered this strategy:

• 1. Listen. Set up accounts on major social media sites like Twitter and Facebook and see what people are talking about. Use Google Alerts or any number of paid monitoring services to track what people are saying about your brand.
• 2. Engage. Start participating in social media. Follow people on Twitter, respond to mentions of your brand, ask questions.
• 3. Tell YOUR Story. Resist the urge to skip the other steps and start with this one. If you want your message to be effective, the community understanding and relationships need to come first.
• 4. Collaborate with Stakeholders. What projects and initiatives can your audience help you push forward?

6 Social Media Principles

McDonald closed by outlining six guiding truths of social media:

• Social media is a means to an end, not a solution.
• The act of being social requires you to give first and expect nothing in return.
• Social media can put relationships on a steroid program—meaning relationships, good and bad—will be amplified in social media communities.
• Technology is an enabler, not the solution or substitute for relationships.
• Marketing has always been about conversations, but the mediums did not always support it.
• Change management is necessary to operate social media alongside the rest of the enterprise, not to replace it.

Get slides and a recording of McDonald’s talk, including a social media case study with Dell and examples of small businesses using social media effectively.

Visit the Knowledge to Go website for details on upcoming webinars.

Home page illustration credit on home page: Matt Hamm

NEW COKE
Soda sippers revolted when Coke tinkered with its classic recipe.

WINDOWS VISTA
Many users opted to stay with XP instead of upgrading to the much-criticized Vista.

ENRON
Once an energy leader, it’s now synonymous with corporate fraud and scandal. 

TROPICANA PACKAGING
PepsiCo scrapped a massive Tropicana brand redesign when shoppers complained about the disappearance of the iconic logo, an orange punctured by a drinking straw.

EBAY-SKYPE ACQUISITION
A turbulent deal that included a lawsuit settlement that gave partial ownership back to Skype’s founders, along with two seats on the board.

Now it’s your turn. What do you think are the biggest business failures in history?

Related Article: The Upside of Failure: Turning Uh-oh into A-ha!

At age 53, John Brownrigg suddenly found himself unemployed. His gamble in the real-estate development world had failed as the company that wooed him with the promise of equity in the corporation suffered dearly in the real-estate meltdown. It left Brownrigg, MBA ’84, looking for work in an industry that was shedding jobs, not adding them.

Embarrassed by his job loss, Brownrigg at first kept a low-profile. But weeks turned into months. Frustration grew. And Brownrigg, with two children in middle school and at least another decade of work before retirement, decided to broaden his networks. He needed to find people who had jobs to offer, or knew people who knew people who were hiring.

So he became a blogger who wrote about his job search.

He began with the McCombs Alumni Network blog, which solicited commentaries from alumni who were out of work. His blog comments at McCombs caught the attention of an editor at The Wall Street Journal, which had mounted its own online feature, “Laid off and Looking.” She asked him to contribute, and Brownrigg went national with his insights into the world of job-seeking in the 21st century, joining 28 other unemployed MBAs who weighed in on their plight.

It took him 17 months, but Brownrigg is now among 20 of those contributors who have landed jobs.

Brownrigg was hired in February as associate director of facilities for Medpace, a Cincinnatti-based company that conducts clinical trials of new drugs for biotechnology and pharmaceutical companies. There, he’s in charge of the company’s real-estate operation, which includes construction of a new building and development of the company’s 29-acre property.

How did you get the job?
It was a referral from a good friend, who is a real-estate broker. He knew of the position, which was never listed. I sent in my résumé and was among those interviewed. And then it finally happened. It was my time to find something.

Did you have a good feeling after that Medpace interview?
During the process, which included about 20 job interviews, I learned to level out my emotions. I tried not to get too excited for this one. But I’d heard it was a growing company, I’d done my research, and I liked what I saw. One big plus was that I wasn’t going to have to relocate. While I was willing to move, I only found one company willing to pay for relocation.

Did you have trouble coming up with ideas for the blog?
I had plenty of time to think them up, and it was an interesting diversion. Around the holidays, for example, not having a job can be depressing, so I wrote one blog on being thankful for what I had.

Did any employers read your blog and contact you?
It never happened. That was one of the reasons I started writing for the McCombs blog. I was thinking I’d love to get back to Austin. I was hoping for some connections, and I got a few tips from the McCombs blog. I followed up on them, but nothing ever happened.

Did you list your blog on your résumé?
Maybe I should have. It seemed like the recruiters were encouraging me not to mention it. I mentioned it in some interviews. I’d talk about my communications skills and my ability to communicate with upper management, and I’d mention The Wall Street Journal.  It didn’t seem to be a big factor.

Did you learn anything about yourself through the blog?
It helped me realize I wasn’t alone, that there were others out there, either in better or worse situations. As I reflected on my situation, the blog helped me describe what I was feeling last summer, when I was home with the kids and it was a great opportunity to spend quality time with them. But I was grumpy because I didn’t have a job. On the flipside, from the comments made by readers, I saw that it helped them as well.

Was your blog edited?
My editor was good. But she took out the stuff that I thought was funny, like when I compared job hunting to the mishaps on FailBlog.org. The Wall Street Journal blog changed daily, and there was no set time when I had to respond. Occasionally she would write and ask if I had anything and tell me it was my turn again.

Was it therapeutic?
I liked to have a deadline, so it was good when I needed to submit the column by 5 p.m. When you are unemployed, there’s no set time frame. You apply for jobs, and unless you have an interview, with a set date, you wait. You miss the sense of urgency.

The wait must be frustrating.
A job is posted, you send in a résumé, you get no feedback, and you don’t know if you are close to getting the job. There was satisfaction with the blog. I posted a column, and people would immediately respond.

Did unemployment take its psychological toll?
It’s a loss you have to deal with. My father died at the same time. So there was denial for a while, and then you accept it, you are bitter and then you try to move forward.

Did you second-guess yourself?
I should have known better. In hindsight, I felt I should have stayed at my previous job at Cincinnatti Children’s Hospital, where I was in charge of real estate. It was a secure job, I could have been there forever. But then I got an offer from a real estate development company, with the promise of equity and all that blue-sky stuff. So I took the job, just as the real estate market imploded and the projects I was working on went away. It was the perfect storm.

Losing that job must have been tough.
You are humbled. You don’t have a job. You don’t have anywhere to go, and at times it seemed like nobody appreciated the value I could add. You get more worried. How is this happening to me? Is it my age? My career coach even asked me if I was overweight, which I am not. I was grasping at straws.

What was your strategy?
I needed to get over it. I needed to apply for jobs I was qualified for. So I’d read the job descriptions, learn about the companies. I’d use words from the job description in my cover letter.

How did online job postings change your approach?
Today, computer software programs do the initial review, using something called an applicant tracking system, which goes through your résumé, compares it to the job description and scores you on how it correlates. So for each job, I’d go back to my résumé and use words from the job description in context.

Did you use LinkedIn?
Lots of professionals use it, and it lets you see who is looking at your profile. Nobody seems to be asking for references anymore, so when they look at your LinkedIn profile, they can see your reference there. It’s also a way to check out the people who are interviewing you. You may know someone they know, or you may find an internal contact in that company.

You are in your mid-50s. How did you deal with the age issue?
The reality is that I’ve got plenty of years of schooling left for my kids, who are 10 and 14, so I need to keep working. People in our age group are more motivated to stick around. I value stability. I’ve learned what that’s worth. I’d tell them: “You take care of me, I’ll take care of you.”

What’s your advice to people out of work?
Just keep plugging along. You’ve got to light many fires, and keeping talking to people. You can’t give up.

By David McKay Wilson

***

Mishaps During the Hiring Process
An excerpt from LAID OFF AND LOOKING, posted Jan. 27, 2010

By John Brownrigg

Recently, I have dealt with a few failing job prospects, where yet another “perfect fit” didn’t work out. I met a company’s internal recruiter at an airport, where he was going to rent a car and drive me to the office for my interview. When the rental car personnel ran his company credit card through the machine, it was rejected. Assuming a malfunction, she called the numbers in, but the card was still rejected. I’m not sure why I didn’t turn and run, but I stepped in and used my credit card to rent the car. The hiring manager seemed perplexed at my story, and the interview did not go well. The recruiter disappeared by the next day, the hiring manager reluctantly took a couple of calls but then also disappeared, my expenses were never paid, and I didn’t get the job.

Another time, I found a position on a website. I read vigilantly through the job description and requirements. I met every requirement so I boldly hit the Apply Now button and began. I spent 20 minutes streamlining my resume to match the job description, and writing a clever cover letter. The application site was one of those “all about me” narcissistic sites where you download your resume, but it then enters your information onto their forms. Of course, it got jumbled; I had to re-enter all of my resume information onto their forms. This took an additional 20 minutes. Another five minutes to complete the diversity information and everything was good to go. The next screen was their response — it said something like “you did not meet the requirements for this position, your application will no longer be considered.” My candidacy lasted less than one second. Even though I was impressed with their efficiency, I called the company to follow-up. I was told that there was an additional requirement, which was not mentioned in the Web posting, and which I did not meet. I thanked them for their time (the phone call plus one second) and suggested that they divulge the secret requirement a little sooner in the process next time. This mishap set a record for the minimum possible time of rejection.

A third time, the HR guy met me at the front desk — I was 10 minutes early, he was 30 minutes late — and escorted me to his office, where he was just starting his lunch. While digging into his Big Mac, he started to describe the job in “his own words.” Struggling to focus, I began to realize that the job he was describing was not the job for which I had applied. I admitted my confusion and clarified the two positions. He was surprised at the error and scurried out of his office to find out what happened. Unfortunately, he ran into the hiring manager who had been waiting for me to start the interview. The HR guy didn’t bother to mention the mix-up; instead he introduced me to the manager and hastily left the scene. I told the manager of the problem, but the two positions had some similarities so we went ahead with the interview anyway. I didn’t get the job I interviewed for, and I didn’t get the job I applied for. It was like being jilted at the altar by a girl I didn’t even know and I had never asked to marry me, while my real love also said no. A truly huge mishap.

Photograph by Randal Ford

Suppose you are in charge of an organization that covers an area the size of Ohio.  Your 40 employees serve a customer base of more than 80,000, which is unevenly spread across 70-odd districts. Many of your employees travel inconvenient distances to cover more than one district, and more than half of your districts are bilingual, requiring employees who are fluent in English and Spanish.

While you currently have enough bilingual employees, there are clouds on the horizon. Forty percent of your workforce is hired on a temporary basis, with a maximum tenure of three to five years, and the median age of your permanent hires is 61. The supply for employees in this line is work has been dwindling for years, and, because of demographic and immigration changes, future hires are less likely to speak Spanish.

Your primary objective is to maximize employee-customer contact, while minimizing travel distances, but how are you to plan for the future? How can you best allocate a shrinking supply of employees to your customers in the long term given these variables?

THE BUSINESS BEHIND THE PULPIT

Leslie Maiman, Jr., then chancellor and fiscal officer for a Roman Catholic diocese in west Texas, faced this very problem. His organization, the diocese of San Angelo, comprised 37,433 square miles, 29 counties and 72 parishes. It included almost 25,000 families, with parish size ranging from as few as seven families to as many as 2,000. His employees for this vast district were 40 priests who led Saturday evening vigils and Sunday masses, the number of which varied by parish in accordance with church law and diocesan policies.

This dilemma reminded Maiman, MBA ’90, of resource allocation problems that he had seen as a student in the executive MBA program at McCombs. He knew there were optimization models for similar situations in the business world. So he contacted the professor of his Management Science class, Jim Dyer, whose research specialty is decision analysis.

Dyer recognized the particular form of the optimization model and enlisted two colleagues: Leon Lasdon, a professor of operations management and a specialist in optimization tools (he co-created the Solver optimizer tool sold today in every package of Excel); and John C. Butler, a decision analyst and Dyer’s former doctoral student, who is currently a clinical associate professor in the Finance Department and the academic director for the Energy Management and Innovation Center.

Lasdon programmed the model in the optimization code, while Butler created a user-friendly Excel interface. With Maiman’s input and insights, the foursome developed a powerful tool known as a “decision-support system” (DSS).

This particular DSS, known in the profession as a “mixed-integer programming optimization model,” first identifies the best way to allocate priests to reach the maximum number of parishioners with the least amount of travel. But, more importantly, the model allows for the evaluation of future scenarios based on varying criteria (e.g., number of available priests, languages spoken, changes in parish demographics).

This would allow the diocese to address larger, long-term issues, such as how the service of parishioners would be affected by a decline in priests, whether the diocese should invest in language training, which facilities should be refurbished or enlarged and which parishes might need to be closed (a worst-case scenario).

UNDERSTANDING THE OPTIONS

In a novel application of a business tool used for a religious institution, Maiman and the three professors analyzed hundreds of scenarios over several months, obtaining real answers for a host of issues: the most beneficial ratio of miles traveled to families served; the critical number of priests necessary to provide the minimal level of service; the number of parishes that will lack services as priest numbers vary; the optimal number of bilingual priests both in the short term and in the long term; and the point at which language training becomes prudent.

The diocese was delighted. As the Bishop of the Diocese of San Angelo, the Most Reverend Michael D. Pfeifer, noted in a letter included in an article the researchers published about their work, the priests were “particularly impressed” with a new pastoral planning tool that enabled strategic decisions based on objective and verifiable data.

Moreover, Pfeifer added, by turning what had heretofore been a “qualitative ‘working sense’” of the problem into quantifiable knowledge, the optimization tool essentially exposed the underlying dynamics of the priest supply system. According to the research team, the tool can actually “quantify the impact of…strategic change” given the constraints of the supply system.

MULTIPLE MODEL APPLICATIONS

The solution to this diocesan dilemma is more catholic (small “c”) than you might imagine.

Replace the variables for allocating priests with those for locating plants or warehouses (labor costs, environmental impact, stability of foreign governments), selecting vendors (particulars of job, timeliness, historically underutilized status), or determining the number of delivery trucks (miles traveled, distribution of locations) and you have the heart-blood of optimization tools that the business world relies on daily.

According to Lasdon, one of the earliest industries to use these tools was the oil industry.

“Oil refineries are pretty much run by optimization models,” he explains. They want to maximize net profit set against a “gazillion different variables” (type of crude oil, distillation technique and choice of end-product, such as jet fuel, gasoline, heating oil and tar) and with the price of crude changing daily. With the rise of computers in the late 1970s, these tools proliferated in the financial industry, in big supply chains such as WalMart and in the airline industry. In fact, according to Butler, the starting point for the priest model came from an airline hub location problem.

The public sector, too, benefits from such modeling. Where cities decide to locate EMS vehicles to ensure rapid coverage, how they distribute police across various beats or how they plan evacuation in the event of a hurricane are typical public-sector problems that computer models are tackling.

Even basics like drinking water are subject to their scrutiny. The Highland Lakes of Central Texas, for instance, simultaneously provide drinking water, recreational activities, hydroelectric power, flood control, crop irrigation and wildlife habitat. How do authorities find the happy medium between holding back too much water and releasing too much, especially set against a great uncertainty in the equation—the volatility of rainfall in the region? As it happens, Leon Lasdon co-developed an optimization model for this very instance [see “Stochastic Optimization of the Highland Lakes System in Texas,” Journal of Water Resources Planning and Management, March/April 2006].

As Dyer says, these models offer “valid, theoretically correct approaches” to modeling complex decisions, especially those that involve multiple criteria. Maiman, who is now executive director for the Diocesan Fiscal Management Conference, which is at the church’s national level, concurs. He feels that the real strength of these models is their “sensitivities,” that is, one can tinker with just one variable and see the immediate effect this has on the whole.

“Rather than guessing…you can know. You can know what the entire system is sensitive to. And you can know that in a way that is non-biased, which is always a sensitive issue, too, ” Maiman says. With a nod to theology, he cites Thomas Aquinas’ dictum “grace builds on nature,” which, in this context, he interprets as “prudent decisions…come from our brains and the tools God enabled us to discover in order to make them.”

Whether involving priests or refineries, evacuation routes or warehouses, police officers or dams, these models offer the advantage of accountability and transparency. They allow organizations to have a decision process in place whose mechanics are defined, objective and easy to see. They allow people to justify their recommendations, no matter how contentious. They ensure that strategic decisions, though perhaps divinely inspired, are not based on divination.

By Matt Turner