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A photograph of a smiling young man standing beside a gas pump at a Spur Gas station in Henderson, Ky., sits in the offices of Gigi Lazenby, BA’67, MBA’73. The year was 1931 and the young man—her father, Paul Banks Jr.—would eventually work his way to President of that same company, Spur Distributing.

Years later, in 1988, Lazenby would found her own oil and gas production company, Bretagne LLC. A second photograph reminds her why she keeps going when prices sag and equipment breaks. In that photo, 40 oil field workers—blue-collar guys in overalls living off the sweat of their brow—look happily into the camera at lunchtime. “Without Bretagne, they wouldn’t have a job,” she says. “This is why I keep going.”

In addition to running her own company, Lazenby has a national advocacy role in the oil and gas industry, serving as Board Chair of the Independent Petroleum Association of America. Often the only woman in the room, she promotes understanding about industry concerns, including taxation, accessibility and regulation.

“My job is to help lead the organization so that we explain ourselves to the larger community and to Congress and presidential candidates in a way that helps them understand the importance of the industry,” Lazenby says. Policymakers, she explains, don’t always fully comprehend the risky nature of the business, like the fact that most exploration doesn’t lead to discovery.

The energy business is not for the faint of heart, as Lazenby and many other Owen graduates who’ve gravitated to the industry can testify. Cyclical by nature, it is filled with controversies, challenges and setbacks. Yet energy is also a dynamic and growing sector full of opportunities for the next generation of leaders, and Vanderbilt is a part of that—from the brain trust of students who formed the thriving Owen Energy Club to an impressive cadre of Vanderbilt alumni and friends who are leaders in the field.

Unlocking Reserves with New Technologies

Contributing to a domestic energy business boom are new technologies for gas drilling that have unlocked untapped gas reserves, including so-called “tight gas,” which is difficult to access because of the geology surrounding the deposit. The increase in production, jobs and profits has been accompanied by some controversy about pollution and public health, particularly in regards to hydraulic fracturing, or fracking. The process involves drilling a deep vertical well, followed by a horizontal well, and next injecting large volumes of water, sand and chemical gels into the ground to help break the rock apart and release the gas.

New technologies like this one are being used to unlock long dormant reserves across large swaths of the country, from the Marcellus shale covering parts of New York, Pennsylvania, Ohio and West Virginia to the Barnett shale in north Texas to the Bakken shale in North Dakota.

The current boom is creating new jobs and will ultimately lessen the United States’ dependence on foreign crude imports, says Tim Perry, MBA’81, Managing Director for Credit Suisse in Houston. The outlook for the energy industry in North America is “very bright,” he says, adding that North Dakota is a case study in how recent technology innovations can boost growth and lower unemployment.

“The Bakken reservoir is an old reservoir that many of us in the energy business have known about for 30 years, but it was considered too expensive to drill, and now it’s not,” Perry says. “As a result, there’s a huge amount of drilling going on there now and, with that, a substantial amount of job creation.”

Martin Craighead, IEMBA’98, agrees that the energy market has been permanently changed by technological innovation. “The reservoirs that our industry targets today are more challenging, the environments are harsher, and the technology required to produce oil and natural gas is increasingly more complex,” he says. “The term ‘unconventional reservoirs,’ specifically with regard to shale development, seems to be on the tip of nearly every tongue in the energy industry. The so-called ‘shale gale’ hit the U.S. about five years ago today. The combination of horizontal drilling and hydraulic fracturing technology has enabled operators to produce wells more economically, particularly in the U.S. and Canada. Now this revolution is spreading to China, Argentina and Europe. Even Saudi Arabia plans to exploit both shale gas and tight gas eventually.”

Craighead adds, “While the geology of these reservoirs is lower risk than traditional wildcatting, say in an offshore environment, many of the shale plays are difficult to reach—often lying more than a mile underground—and even more difficult to produce. Hydraulic fracturing is simply a method of stimulating the reservoir to enhance oil and gas production.”

Craighead, who grew up in Pittsburgh near some of the world’s largest gas reservoirs, in 2012 became President and CEO of Baker Hughes, a leading supplier of oil field services, products, technology and systems to the oil and gas industry. Baker Hughes allocates nearly 3 percent of revenue toward research and development annually.

“We spend about $400 to $500 million annually on R&D, and our facilities are some of the best in the world,” he says. “When Baker Hughes goes on campus to recruit, we invite students to our research centers around the world and show them what we’re doing. Our ability to attract brilliant young minds to our industry has never been greater because helping the world find and produce the energy it needs is a very noble cause, and people want to be a part of that—maybe now more than ever.”

Craighead was a self-described “expat” living in Venezuela when he enrolled in Vanderbilt’s short-lived but visionary International Executive MBA program in Miami, flying in every third weekend to take classes. “I didn’t appreciate it as much then but it had a real international bias to it,” he says. “For the energy sector, a key criterion for success is having global-minded executives.” Last year Vanderbilt launched a successor program, the Americas MBA for Executives, which also has an international focus.

Perry also took a nontraditional road to Vanderbilt and the energy business, enrolling in the MBA program immediately after receiving a degree in finance from the University of Arkansas. When he left Owen in 1981, the U.S. economy in general was sluggish, but Texas was booming. While many of his fellow commercial banking aspirants gravitated to New York, he headed for Texas, to smaller but fast-growing banking opportunities.

“It wasn’t planned out when I was at Owen, as happens in most careers,” Perry says. “I gravitated from general corporate banking into energy corporate banking and from there into energy investment banking,” where he’s been for two decades. He is one of two energy heads for Credit Suisse, heading up operations in North and South America.

Making Connections through Owen

Jeff Olmstead, BE’99, MBA’06, for a long time resisted the call of oil and gas that was in his blood. Last year, however, he took Dallas-based Mid-Con Energy public as its President and Chief Financial Officer.
Olmstead’s father, Mid-Con CEO Randy Olmstead, got into the oil business in the early 1980s, working as an independent CPA but managing about 15 rotary rigs on the side. His son grew up helping with grunt work in the summers, building fences and painting alongside the guys in the field. “Having worked in the hot sun and watched my dad’s fortunes go up and down, I wanted to do something different,” Olmstead remembers.

The younger Olmstead majored in engineering at Vanderbilt and put that degree to work for several years in telecommunications before getting interested in the finance side of the energy business. He returned to Nashville for his MBA and then went to work for Bank of Texas, where he was an oil and gas lender. One of his customers, Primexx Energy Partners LLC, hired him as Chief Financial Officer in 2010. It is a family-owned company but many times bigger than the company his father began.

“I had intended to make a career there (at Primexx) but by that time Mid-Con, as it neared maturity, had entered its first round of private equity funding. Having the opportunity to work on an IPO with your dad is pretty unique and special,” Olmstead says. Going public was quite a ride, he admits, and there were parts of the process “I’d be happy never to do again.” On the upside, he says, a smaller company such as Mid-Con has the opportunity to make meaningful smaller acquisitions and even delve into some innovative research and development opportunities.

For example, the company has formed a partnership with researchers at the University of Oklahoma who have developed a surfactant—a surface active agent that makes it easier for water to interact with oil—to use in individual oil wells to increase production. The technology works, Olmstead says, but is not yet economically viable. Currently most of Mid-Con’s properties produce oil using a secondary method called water-flooding—injecting water in oil and gas wells and filling up the space voided by previous production to repressurize the reservoir. The process is not new or unique, he says, and the time from acquisition to production can take several years.

Representing a new generation of industry leaders, Tracey Gilliland, an MBA candidate for 2013, approached Olmstead when he visited Owen and asked him if he would consider hiring an intern for the summer. He accepted, and she soon was plunged into assignments that ranged from preparing investor relations reports to writing press releases to putting together an evaluation of a potential acquisition in the wake of the public offering.

The internship gave her renewed appreciation for her core curriculum at Owen. “My boss asked me to do a regression analysis and all I could think was, ‘Thank God for Bruce Cooil and statistics.’”

Like Olmstead, Gilliland initially resisted joining her family’s energy business, planning a career in government after graduation from the University of Texas at Austin. She spent two summers working for the U.S. Department of Homeland Security in Washington, D.C., before being pressed into service at her family’s power plant development company, Federal Power Company LLC. After a year, she helped work through the company’s sale to Australian-based Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services. Gilliland then spent the next three years working for Macquarie. Her decision to go back to school for her MBA “was about me taking control of my career,” she says.

She chose to pursue her MBA at Owen rather than a Texas school because, she explains, “at Vanderbilt I would have to choose to stay in energy.” Her choice seems clear now. She’s vice president of the Energy Club and in that role helped plan Owen’s first Energy Trek to Houston, along with Peter Veruki, Director of Corporate Relations, and Sylvia Boyd, Assistant Director of Employer Relations. The trip was part of a targeted effort to link the large Vanderbilt energy alumni network in Texas with current Owen students. The first stop was Gilliland’s former employer, Macquarie Group. The student group also visited Baker Hughes, JPMorgan Chase, Exxon Mobil and Credit Suisse.

The Right Kinds of Energy Leaders

Exxon Mobil has long been a pipeline for Vanderbilt MBA graduates, and there are numerous connections between the school and the oil and gas company. In fact, Mary Humphreys, daughter of Exxon Mobil’s Senior Vice President and Principal Financial Officer Donald Humphreys, is an Owen student on track for graduation in 2013.

Donald Humphreys has been with Exxon Mobil for 36 years and relishes being part of an industry that produces something people need. “It’s an industry that’s not always loved, but there’s a lot I can help people understand,” he says of his regular interaction with business students, including those at Vanderbilt.

People often are surprised by the analytical nature of the oil and gas business, he says. “We have a lot of MBAs at Exxon Mobil, but a lot of the MBAs have engineering, science, business and financial backgrounds,” he explains. As the energy sector’s workforce ages, Exxon Mobil and other companies, large and small, will be seeking out a new generation of leaders.

While he’s weathered some definite highs and lows during his long career, Humphreys has never seen a period as dynamic as the current one. Technology innovation has been a huge factor, but he also credits the industry consolidation that took place in leaner times for increasing efficiencies.

He predicts increased domestic energy production will have a continued positive impact on manufacturing and job growth. A next focus for energy companies, he says, will be advocating for “reasonable regulation” to protect jobs and balance of trade.

Perry agrees. “We literally could become energy-independent in this country, given less government regulation,” he says.

Meanwhile Lazenby is among those knocking on doors in Washington on that score. The industry has a responsibility to have a place at the table, she argues. “You have to be an advocate, you have to be a manager, you have to be able to explain what you do, have the facts, be civil,” she says. “You have to understand world finance and economics. That’s one of the exciting things about this industry—that you’re not insular. You have to understand what’s happening in the world, in politics, in regulation, in government. You can’t just plunk your oil well down and calculate your numbers.”

Her workers operate “stripper wells,” which produce less than 15 barrels a day by injecting nitrogen into the wells, letting it soak with the oil and then “puff” it back out. It’s slow going, but as much as 18 percent of the oil in the United States is produced in such a fashion, she says, adding that she sometimes begins presentations by jokingly referring to herself as “queen of the strippers.”

While a technological background would be beneficial to the next generation of industry leaders, Lazenby, Humphreys and Craighead say that the ability to think critically and strategically is the most beneficial. Perry notes that the energy business currently is experiencing “a real shortage of people” due to recent growth, but some of this, according to Craighead, can be attributed to the fact that the industry is looking for just the right kinds of leaders.

“There’s going to be a need going forward to develop leaders who can think critically and who are sensitive to more issues than just an income statement,” Craighead says. “We want leaders who are willing to do the right thing and who are open and transparent with the communities in which they live and work.”

Public scrutiny of the oil and gas industry has only heightened since the BP oil spill in the Gulf of Mexico in 2010, which exposed the dangers of deep-water drilling. (For more about the spill and other energy controversies, see the sidebar.)

The nature of the energy business is that there’s always going to be constant change and the potential for surprise, both of which Olmstead likes. “Most exciting is what some of us like to call the stumble factor,” he says. “Many times, you might be drilling a well and happen to drill through something you didn’t know was there and you make a new discovery. It can happen anytime, anyplace.” He chuckles and adds, “You try to keep it quiet so you can lease everything around it, but suddenly 10 of your best friend competitors are trying to beat you to it.” That, too, is the nature of the business.

Olmstead advises new graduates to be willing to start at the bottom. “There are so many things you would miss otherwise,” he says. It’s important as well to understand and embrace the risks. “There are plenty of booms and busts, and lots of very good business people get caught on the wrong side of a cycle, and it will happen again. It always does.”

Starting at the bottom is a humble lesson that Lazenby will never forget, thanks to her father. “You can always work—he always told us that,” she says. “You can find something. You should never stop trying.”

His persistence and dedication are characteristics that Lazenby has taken to heart in her own career, and one doesn’t have to look very hard to recognize the same traits in her fellow alumni in the energy business. Bust or boom, they will tell you that it’s important to carry on with what you believe in because you never know when you might hit pay dirt.

When investment banker Rob Louv, MBA’97, met with a Texas entrepreneur in 2008 about selling a company, neither was aware that they shared an important common link: Both had graduated from the Owen School. The entrepreneur, Jack Long, MBA’83, had contacted Louv’s San Francisco firm, Montgomery & Co., on reputation alone, but the coincidence helped him make up his mind about using Louv to shop his company to potential buyers.

After Montgomery & Co. successfully sold 70 percent of the equity in Long’s company, Louv and Long sealed a second deal soon thereafter—one that was arguably more significant than the one they had just finished. Together with Long’s wife (and fellow Owen graduate) Carolyn, MBA’83, they established the Long and Louv Summer Enterprise Entrepreneurial Fund, which aims to help aspiring entrepreneurs at the Owen School. The fund provides a $15,000 stipend to students who want to pursue an entrepreneurial idea rather than a traditional corporate internship during the summer between first and second year.

With the help of the fund, Thomas Bernstein and Miguel Coles, BS’02, both MBA candidates for 2010, have established their own marketing company, Great Glass Media LLC (www.greatglassmedia.com), to launch an iPhone application aimed at young people looking for the perfect nightspot. A third student, Andrew Bouldin, also an MBA candidate for 2010, used the fund over the summer to continue work on his own company, My College Road Trip (www.mycollegeroadtrip.com), a travel Web site designed for students.

These are just the sort of big ideas that Jack and Carolyn hoped to encourage by establishing the fund. Giving a leg up to budding Vanderbilt entrepreneurs made perfect sense to the couple, since they themselves had used the skills they learned at Owen to launch two successful companies. Their decision to honor Louv in naming the fund was an easy one as well. After all, he brokered the deal to sell their company. He also was the one who encouraged the Longs to give back to Vanderbilt in the first place.

Lone Star Overnight success

Vanderbilt holds a special place in the Longs’ hearts. Both of them come from a long Commodore tradition. Carolyn’s father, grandfather and great-grandfather all graduated from Vanderbilt, as did Jack’s mother and uncles. Jack and Carolyn also owe their marriage to the Owen School. They met as first-year MBA students in 1981 and married four years later.

After graduating from Owen, Jack and Carolyn went to work for Texas Commerce Bank (now part of J.P. Morgan Chase) in Houston, but Jack knew all along that he wanted to own his own company someday. In 1989 First American Bank recruited Carolyn, and the couple returned to Nashville, living off one salary until Jack came up with a business idea.

“Jack got a little office, his own desk and a nameplate and he sat there like Pooh Bear so he could think, think, think,” Carolyn says. “He thought about carpet fiber. He thought about rural post office development. He thought about cattle futures trading. Those were just some of the ideas that didn’t work.”

In the process of searching for undervalued businesses to acquire, Jack looked at an air-freight company that was for sale in Houston. He realized, though, it was more of a freight courier, hiring independent contractors to pick up and deliver. “It was a big business, but it wasn’t attractive to us because it was basically a brokerage,” he says.

That experience started the wheels turning for Long and his business partner Gary Gunter. They were fans of the Southwest Airlines concept of keeping things smaller and cheaper. Long and Gunter decided to start their own business, a package express company serving only the state of Texas. They set up headquarters in Austin, and Lone Star Overnight was launched in 1990. That same year, the Longs’ first child, Adam, was born. Within a span of five months, Jack and Carolyn had started a family, started a business, moved to Austin and purchased their first house.

The years that followed were equally busy and exciting for the Longs. Their daughter, Carlen, was born in 1993, and three years later Lone Star Overnight made the Inc. 500 list of the fastest-growing privately held companies at No. 331. Carolyn, meanwhile, began fundraising and serving in leadership roles for various Austin nonprofits.

In 1997 the Longs and Gunter sold Lone Star Overnight for a nice sum. Jack, ever the entrepreneur, began looking for ways to invest that money in the next big opportunity. In 2000 he settled on the idea of starting a new company once again. Partnering with Jeff Carpenter, he launched PeopleAdmin, a software technology company aimed at creating tools for human resources at colleges and universities. The company grew quickly. In 2007, with total revenues of $10 million, it made the Inc. 500 list at No. 419.

PeopleAdmin had tapped into a very hot area: software as a service. Long began to field dozens of phone calls a week from companies interested in investing or buying. That’s when the decision was made to hire a small- to mid-size investment bank focused on emerging-growth technology. After vetting numerous candidates, the Longs went with Rob Louv and Montgomery & Co.

The entrepreneurial side of banking

Like the Longs, Louv’s connection to Vanderbilt began before he was born. His father, Art Louv, JD’72, graduated from Vanderbilt Law School, and his mother, Barbara, had Rob while she was a student at Peabody College. Although Rob grew up in Florida and attended the University of Florida, his Vanderbilt roots drew him back to Nashville for graduate school.

“When I went to Vanderbilt, my career objective was to go into investment banking. I thought I would end up in the South, but through the alumni network I was able to set up some interviews in New York,” Louv says. Director of Corporate Relations Peter Veruki, then working in the career center, encouraged him to get some internship experience in New York, even though his original plan was to live elsewhere.

“My Citicorp internship was directly linked to an Owen alum going to bat for me,” says Louv, who before that summer had never been farther north than Washington, D.C. The internship opened doors for him and led to a career opportunity in investment banking with Chase Securities, later J.P. Morgan. But Louv, with no signing bonus and no paycheck until he passed the company training course, was cash-strapped.

That was when a favorite professor from Owen, Ron Masulis, stepped in. Masulis, Frank K. Houston Professor of Finance, was starting a mergers and acquisitions course and needed background material—case studies, detailed articles and trend pieces. “It was perfect for me,” Louv says. “I got paid a fair hourly wage to do interesting work and used what I learned to better prepare myself for my M&A career.”

Masulis says Louv was among his best students at Owen. “I was very pleased to have him help me research potential topics and cases for the new course I was developing,” he says. “His research was very solid and led me to use several very interesting cases in the course.”

Louv bootstrapped himself through the J.P. Morgan system and became Vice President of Global Mergers and Acquisitions in New York before moving to San Francisco to lead the firm’s West Coast merger and acquisition efforts for the information technology services and Internet sectors. With significant M&A deal experience representing $150 billion in transaction value, he then joined Montgomery & Co. in 2004 as the Co-head of the Technology Banking Group and a member of the firm’s Executive Committee.

Recently Louv and several senior partners at Montgomery & Co. split off from the firm to establish a new investment bank called ArchPoint Partners, also based in San Francisco. The separation was amicable, as ArchPoint continues to execute deals that were engaged under the Montgomery platform. Louv and fellow Managing Partner John Cooper are the owners of the new bank. “I am now like my clients—running a startup,” Louv says.

Louv sees M&A as the entrepreneurial side of banking—one that doesn’t depend on anyone else’s balance sheet. “When I went into finance, I was always thinking about building a practice. I never thought of myself as a kind of large cap banker on a large platform. I saw myself on the entrepreneurial side,” he says.

Culture of giving

The sale of PeopleAdmin “was a long, tedious process,” remembers Carolyn Long. Several deals got close and fell apart before an agreement was signed with Summit Partners of Boston in summer 2008. “Rob stuck with them and kept working on all the details,” she says. “Throughout this process, Jack and Jeff never got to the point of throwing their hands up because Rob never did either. He kept working on it.”

A member of the Owen Alumni Board, Louv saw an opportunity to leverage his hard work in a positive way. Prior to the close of the deal, while hashing out some final fee matters, he approached Jack with a proposition. Louv told him, “Since we know that neither one of us would be here if it weren’t for Owen, what if, in addition to compensating Montgomery & Co., you also compensate Owen for the value it added to our lives?”

Long was intrigued by the idea. Between the sale of Lone Star Overnight and the launch of PeopleAdmin, he had been involved in establishing an entrepreneurship program at the University of Texas, but the bureaucracy of the large state school had cramped his style. In 2002 he and a group of professors left the university and formed the Acton School of Business in Austin to teach an entrepreneurship-only program.

The thought of doing something to encourage entrepreneurship at his alma mater was an enticing prospect. He called Carolyn to get her opinion. “Carolyn and I had not been active alumni up to this point,” he explains. “But one of our motivations for selling the business was to pursue some philanthropic objectives while we were still young enough. After I talked to Carolyn, I called Rob back 10 minutes later and said, ‘Deal.’ ”

Louv was grateful but surprised when the Longs decided to share credit with him in naming the fund. “That was not expected or requested. I was taken aback,” he says. “I give Jack all the credit. It was his generosity as much as mine that really drove the gift to the school.”

Jack, though, is just as quick to compliment Louv. “Even though the donation is coming from us, we want it to be more about Rob,” he says. Carolyn agrees, adding, “Rob and his team did so much work. He had the idea (to create the fund). He asked for it. It makes perfect sense for us to view it as a joint gift.”

Tricia Carswell, Associate Dean of Development and Alumni Relations, acknowledges that the credit should go to all three. “It’s been such a pleasure working with three alumni whose culture of giving is obvious, who know how blessed they are and want to give back,” she says. “These are people whose personal successes and whose value systems are aligned. They are true philanthropists, and it was a privilege to be at the table with them.”

Confidence boost

Louv and the Longs hope other alumni will be inspired to give to the new fund. They also hope the fund will help spark an entrepreneurial focus at Vanderbilt without eschewing the traditional business curriculum.

“Most important is it adds value for the students,” Louv says. “Over time an entrepreneurial bent could differentiate the Owen brand and improve the experience for all of the students.”

Most MBA programs are designed to train students going to work for a large Fortune 500 company, says Germain Böer, Professor of Accounting and Director of the Owen Entrepreneurship Center. “It’s not that the content of the courses doesn’t fit the needs of an entrepreneur,” he says. “You still need to know the same stuff. It’s just that the examples all tend to be from big companies. If I could dictate how we’d do it, I’d say every course would have to have a case or two about how to operate a startup company.”

The classroom learning experience is bound to be greatly enhanced for students able to kick-start a business with a boost from the Long and Louv Fund, Böer says.

“When you start a business, you have to learn about every piece of the business. It’s a really good educational experience to try to put a company together and learn how to motivate people,” Böer says. “It’s excellent training even if they work on a business idea and they get all the way to the point of launching and find some critical factor that keeps it from working.”

Andrew Bouldin, one of the beneficiaries of the summer stipend, has always seen himself as “an entrepreneur-type guy.” He grew up in Nashville, running a lawn-care business through high school and college. He also participated in the Accelerator program at Owen and spent another summer working for Silicon Valley-based Uloop.com, a craigslist-type site aimed solely at college students.

While planning a trip with friends a few years ago, he realized “sites like Travelocity or Trip Advisor are oriented toward businesspeople or moms,” he says. “I couldn’t find anything that would tell me the best restaurant and things to do in an area for a college student.”

Recognizing this market need, he developed a travel site that would appeal to college students and launched it in January 2009 using Vanderbilt as a test school. Immediately 2,000 students signed up. The Long and Louv Fund allowed him to spend the summer focused on the company, building relationships with others in the Web-based travel industry, doing some traveling himself and meeting other students to find out what their specific needs are.

Meanwhile Thomas Bernstein and Miguel Coles, the other recipients of the stipend, spent the summer launching a marketing platform to kick-off their mobile phone application, Nashville Pulse. Their original idea was to install low-cost digital media screens in residential elevators, but they ultimately redirected their energies toward consumer mobile phones.

Bernstein and Coles hired three Vanderbilt undergraduates—Will Green, Mike Slade and Riley Strong—to help shape an application that delivers event information, including descriptions and coupons, to smart phones using GPS-tagging capabilities. “A student down at Broadway and Fourth leaving a restaurant and looking for a music venue would find out there are 15 bars around playing great music. They could access our tool to see which three have deals. It’s a powerful tool because you’re delivering the message at the moment and location of the sales decision,” Bernstein explains.

Bernstein says more important than the grant money is the confidence boost they received from their idea being selected for the stipend. “When you’re sitting there with what you feel is a great idea and plan, but with no money to fund it, you can’t help but doubt your ability to make your vision a reality,” he says. Coles adds, “This experience has been much better than any internship I could imagine.”

Testaments like these remind the Longs and Louv why they decided to create the fund in the first place. Just as Owen has left a lasting impact on their own lives, their gift is now doing the same for others. Although it is only in its second year of existence, the stipend program is already putting students on a bridge to entrepreneurial success.

Or as Coles puts it: “It moves us into a different dimension of creating jobs rather than seeking them.”

Grounded. In airplane parlance, it’s an ironic way to describe someone who oversees the fifth largest airline in the country, but that’s exactly how friends and colleagues of US Airways Chairman and CEO Doug Parker, MBA’86, view him. While he’s adept at managing the 30,000-foot view, they say he remains one of the most down-to-earth people they know—even as his embattled industry confronts soaring costs and plummeting customer satisfaction.

Parker, who steered America West Airlines from bankruptcy to profitability in the ’90s and then engineered a successful merger with US Airways in 2005, launched his career in the airline industry with American Airlines. The Dallas-based company offered him his first post-MBA job during a recruiting visit to the Owen School.

“The fact of the matter is, I don’t think I would have been in this business if it weren’t for Vanderbilt,” he says from his company headquarters in Phoenix. “American Airlines recruited only MBAs, and they did so only at a very select group of schools. Because of the Vanderbilt connection, I was able to get hired.”

In recent years Parker’s strong views about the value of mergers and consolidations in restoring the industry to profitability have earned headlines. A bid for Delta Air Lines, initiated in late 2006, was rebuffed (a Delta-Northwest merger was announced earlier this year), and talks with United Airlines stalled. But Parker remains characteristically optimistic, despite cost-cutting imperatives driven by rising oil prices.

Team Building

Parker saw the merger of America West and US Airways as a mechanism for building on the best of both worlds. The two airlines had similar cost structures and together created a larger customer base and more business markets. “We didn’t raise prices; it was about making us both more efficient,” Parker explains.

The merger, though profitable, wasn’t without snags, including the headaches of integrating two information systems. There have also been new challenges, such as skyrocketing oil prices and growing problems with customer satisfaction, which US Airways has tackled with spectacular success, going from last place to first in on-time arrivals during the first six months of 2008.

Even after 20 years in the business, Parker maintains a relish for grappling with complex problems that his classmates remember from his days at Owen. “We’ll figure out a way to make this industry profitable again, even if the oil prices remain high, but it will be a different industry,” he says.

No doubt he will lead the company toward making necessary innovations a reality with a focus on team building, his signature management style.

Parker’s team-centered leadership style harkens back to his days playing high school and college football, says Elise Eberwein, Senior Vice President for People and Communications at US Airways, who has worked with Parker for five years.

“He is completely ‘relatable’ to employees of all levels and backgrounds. By relatable, I mean he laughs at the same jokes, is so incredibly down-to-earth, and cares about things that matter to our people as opposed to just the 30,000-foot view. Don’t get me wrong—he cares about that, too—but he is very connected to the emotional things that matter to people day in and day out at their jobs,” says Eberwein, who estimates Parker spends 50 percent of his time getting to know employees at all levels.

She says he truly wants divergent views at the table and has created a culture where differences in opinion are handled respectfully. “I’ve worked for several CEOs and been around a lot of high-level executives. Doug is by far the best team builder and ‘head coach’ I’ve seen,” she says.

Parker made news after the US Airways-America West merger when he refused a bonus based on America West’s performance the previous year because he felt it was unfair to US Airways employees whose salaries had been cut. More recently, he made a large personal investment in company stock.

A Reflection of His Character

It did not surprise any of Parker’s Owen friends to see him step up and make a large investment during a dark time for the industry, according to David Hornsby, MBA’86, Owner of Executive Travel and Parking in Nashville.

“Doug has always had this ‘never say die’ optimistic bent. … That’s just the way he’s always been,” says Hornsby, who has remained close to Parker since their days at Owen. Hornsby and others describe Parker as a fun-loving guy and a generous friend who is always punctual, neat and full of ideas.

“Doug has always been extremely analytical. He was always coming up with a ‘system’ for everything. We put a lot of faith in Doug’s systems, and I’m sure he is a master of systems at US Airways,” Hornsby says.

Owen School Dean Jim Bradford says Parker’s focus on finding systems that work rather than copying existing operations was a huge factor in the success of the US Airways-America West merger. “It’s a reflection of his character, organization and strategic initiative that when he rebuilt America West, he didn’t just copy a successful airline like Southwest; he made strategic changes that saved costs but with an ultimate focus on customer service,” Bradford says.

Parker and Hornsby are part of a tight-knit group from the MBA Class of 1986, and Parker says the strong friendships he made at Owen were the most important part of his graduate school experience.

Bradford recalls how well Parker’s friends from Owen have helped keep him grounded, particularly right before the airline executive was slated to speak at a class reunion gathering: “Here’s a successful guy speaking at a ‘no-risk’ conference. One of the things his classmates did the night before he was speaking to the entire group was pepper him with really nasty questions they were pretending to prepare for the next day. Of course, they love him to death. It was funny to watch him get a little nervous.”

Parker met his wife, Gwen, a former flight attendant, through mutual friends while living in Dallas. It was a courtship witnessed by Owen classmate Jim Loftin Jr., MBA’86, who also worked for American Airlines after graduation.

“I knew when Doug had found his bride,” says Loftin, now President of JDL Management and Consulting in Dothan, Ala. “I was visiting him in Dallas and, for the first time I had ever seen, he was particularly interested in attending a specific party. Doug was always a go-with-the-flow kind of guy. When we arrived, I noted Doug had a bit of uneasiness I had never witnessed before. On more than one occasion that evening, Doug would say, ‘Hey Jimbo, come on, let’s go over here.’ It was always within 10 feet of Gwen. She paid him no attention that evening, but it was only a matter of time before those two would tie the knot.”

The Parkers are the parents of three children—Jackson, 13; Luke, 10; and Eliza, 8—and live in Paradise Valley, Ariz.

“Doug’s a great dad and husband,” says Andy McCain, MBA’86. “He’s managed to balance that pretty well with being CEO in an industry that’s had more difficulty than any other that size.” McCain, who is Vice President and Chief Financial Officer of Hensley & Co., is another member of that tight-knit group from the Class of 1986. He lives in Phoenix and is one of Parker’s closest friends.

One Crisis After Another

Parker spent five years at American in Dallas, holding a variety of financial management positions, before joining Northwest Airlines in 1991. His titles at Northwest included Vice President and Assistant Treasurer, as well as Vice President of Financial Planning and Analysis.

“Northwest was going through an LBO (leveraged buyout) and looking to hire new management to improve their team,” Parker recalls. “I loved my time at American, but I was ready to do something where I could make even more of a difference by building some things really from scratch.”

After four years with Northwest, he was recruited in 1995 at age 33 to become Senior Vice President and Chief Financial Officer at America West, based in Tempe, Ariz. “It was a smaller airline going through similar things Northwest had gone through a few years before. The new management was trying to build a new team. It was a great opportunity for me that I couldn’t pass up. I’ve been here ever since,” Parker says.

He was named CEO of America West on Sept. 1, 2001. “It was a good 10 days,” he says wryly.

The industry, already troubled before the Sept. 11 disaster, lurched into crisis mode after those events. Parker led his company through a loan guarantee process that helped turn it around by 2005, the same year America West initiated a merger with US Airways, then in bankruptcy and in danger of shuttering its operations. By 2007 the combined airline, with Parker in the leadership role, earned $427 million in profits.

Unfortunately those profits are now being eaten away by huge increases in oil prices. The company is predicting that spending on fuel alone could increase by $1.8 billion dollars in 2008 over the previous year. Fuel prices now represent a staggering 40 percent of the operating budget, Parker says.

Although the current obstacles are daunting, Parker recalls that in 2001, many pundits similarly believed America West “was done.”

“Survival’s a great motivator,” he says. After Sept. 11 the airline was forced to better understand customers’ needs, making changes accordingly, and to redefine the airline with a low-cost structure.

But America West executives knew the operational turn-around might be tenuous. “So as we looked at America West, we were very concerned about our viability because we had an airline that never had the same revenue generating capacity” as other airlines, he says. “We made up for it with lower cost structure, but we had cause for concern.”

The merger with US Airways was an opportunity to expand into more business markets and afforded a larger customer base.

“I recall vividly when we were putting this merger together that there was concern about oil prices, which were then $50 a barrel,” he says. Company managers were confident that they could succeed despite the high costs of fuel. “But when oil prices jump from $90 to $145 in a matter of months, that has a profound impact on our business. There’s a lot of financial turmoil in the business that we’re not immune to.”

Tackling Problems Head-On

Parker, always one to see the silver lining, says soaring oil prices have similarly forced the industry to address airport capacity issues. “Six months ago we were spending a lot of time working on how to fix the congestion issue,” he says. “It was much of what everyone was talking about. The fact of the matter is, oil fixed that. We were forced to take 10 percent of capacity out right away. It will come back one day, but the impact of oil overwhelms everything else.”

The new US Airways is aggressively addressing the issues it can, as evidenced by the dramatic turnaround in on-time arrivals in 2008. Parker credits this accomplishment in part to several key hires, including Robert Isom, recruited from GMAC Financial Services less than a year ago as the airline’s Chief Operating Officer. Parker and Isom worked together both at Northwest and America West before Isom left the industry for GMAC. Suzanne Boda, another key hire, joined US Airways in January as Senior Vice President for the East Coast, where airline congestion has been a particular challenge. Boda is also a Northwest Airlines veteran.

A mark of Parker’s style is that he stayed in the background as the turnaround was announced and let his executives take the lead. In July, an article in The Wall Street Journal trumpeting the airline’s new data never mentioned the CEO’s name, quoting Isom and Boda instead.

“If someone suggested we’d go from 10th to first in a year, I would have thought it was too much, but we’ve done it and it is a credit to all our people,” Parker says.

The company accomplished the performance turnaround in part by focusing on getting planes out of the gate on time, rewarding employees for better service, and investing millions in capital improvements.

A major challenge was integrating the communications systems more effectively, something that took time and led to frustrations for travelers after the merger.

“In our case, through that operational integration, we’d gotten ourselves into running a much worse operation than we wanted to run,” Parker says. “We knew the problem would get fixed when integration took hold, but we also knew we needed to take additional action because of what those problems meant from a customer perception standpoint. We had to win customers back. We put a tremendous amount of focus on it, including bringing in new people who knew what to do.”

Meanwhile, the airline is finding other ways to adapt to rising costs. Among those in the news are such changes as per-item charges for baggage and other efforts to “de-bundle the product,” such as charging for drinks. US Airways also announced it would stop giving bonus miles to frequent fliers and begin charging between $25 and $50 for booking award tickets, calling the cost-saving measures “necessary realities.” Other airlines announced similar cost-saving measures.

“We want to concentrate on providing great service on our core product, which is getting our customers from point A to point B on time,” Isom explains.

Isom says while people in the industry have been talking for months about how to confront the cost issue, he enjoys the culture at US Airways, which is focused on tackling problems head-on. “None of us are people who are going to wait around without charging ahead,” he says. “The worst thing you can do is sit back. It’s time for bold measures.”

Isom worked indirectly for Parker during his first post-graduate job. “I can credit Doug with getting me into the business and pulling me back in after I got out,” Isom says. “Not only is he a really good friend, but he’s a charismatic guy whom you want to work with.”

In His Element

“Every organization has its own cul-ture and feel,” agrees Bradford. “When you’re around Doug, you recognize the quality of this human being. He genuinely wants what’s best for the company, and he treats the school the same way.

“What really comes across with Doug is that here’s a very accomplished business guy who values integrity above all things and is a real family man,” Bradford says. “His success hasn’t gone to his head. He’s firmly grounded in his value system, and his leadership comes from that value system.”

While Parker strongly believes that the industry won’t be able to avoid looking at the efficiencies of combining airlines in the coming years, he predicts the current environment of skyrocketing oil prices will freeze any movement in that direction during the coming year, and maybe longer, except for the recently approved Delta-Northwest merger.

“The airline industry is very fragmented,” he says, citing the fact that American Airlines, for example, has less than 20 percent market share. “It’s hard to find businesses like that outside the airline industry. The fact that we’re highly fragmented is a lot of the reason we go through this turmoil. It’s just so hyper-competitive.”

Parker predicts that the Delta-Northwest merger will be fraught with hazards similar to those faced by US Airways and America West. “There will be hiccups. There is so much to integrate from an operational standpoint. You can’t turn it on overnight and not have consequences to deal with.”

Although he knows the industry is in for a bumpy ride, he wouldn’t change the course of his career. “I love it. It’s a great business. It’s extremely dynamic. If you’re looking for a business that runs itself in a steady state, that’s not what this is. But I like that part,” he says.

“It’s not for the faint of heart,” he says, as he shuffles through papers on his desk for his next meeting and prepares to deal with tomorrow’s chal-lenges. “There are times when you wish for some level of normalcy. But if I had some level of normalcy, I’d probably be bored. I enjoy the challenges.”