Management Tips From Tommy Valenta, Former CEO of TXI’s Chaparral Steel

photography by Jeremy Sharp

Late last year, a headline in the business section of The New York Times breathlessly screamed, “CEO Evolution Phase 3” atop an article about the start of a New Age for American CEOs. While the 1980s and ’90s “empire builders” had given way to post-9/11 “fix-it” chief executives, the story said, the next era would be dominated by “team-builder” CEOs.

The article advised companies like Merrill Lynch, Citigroup, and Time Warner—which all had lost high-profile CEOs after less-than-stellar performances—to find team captains to head their firms, bosses who “possess the vision of the empire builders without their overpowering egos, while also bringing more personal warmth to the corner office.”

Those companies should be beating a path to Tommy Valenta’s door. He’s only about 37 years ahead of them.

That’s how long the now-retired Valenta worked for Texas Industries, the big, Dallas-based company that produces construction materials like cement and steel. Valenta’s first management job at TXI (that’s its New York Stock Exchange ticker symbol) was as a general manager at the tender age of 28.

From the very beginning, Valenta remembers, he saw forming inclusive teams as a  key part of his job. “I quickly realized I didn’t know how to be a general manager, so I went to the people who knew what they were doing and said, ‘You’re going to have to teach me how to be a GM,’” he says. “It was the three best years of my life. We learned a lot, had fun, and made money for the company.”

Jim Hoak, chairman of Chaparral Steel, a one-time TXI subsidiary where Valenta eventually served as president and CEO, recalls him as “the opposite of Herb Kelleher,” the flamboyant, highly visible former CEO of Southwest Airlines. “Tommy is selfless, a hard worker, and the best as a mentor and team builder,” Hoak says, adding, “He was a great delegator and very supportive”—a view that’s seconded by other members of the Chaparral board, Chaparral’s employees, and Valenta’s friends.

If Valenta sounds too good to be true, he has a simple explanation for his approach: flexibility. Valenta says he got plenty of practice assembling and motivating teams at TXI because, although he was there “forever, I had a new job every three years, so I always had a new adventure.” In fact, shuffling people from assignment to assignment became a hallmark of TXI’s—and Valenta’s—management philos­ophy. He credits the CEO of Thailand’s Siam Cement for the initial insight into the value of such an approach, and for promoting “the value of cross-trained people versus individuals” with a vertical career track.

“We started reviewing the top few hundred people in the company, got feedback from their supervisors and others, and sat in a very casual and, here’s the key—undocumented—environment, so that people could talk freely,” Valenta says. “We talked about who was a rising star, who was competent but had gone as far as they would go, and who was competent but could do more. Then we color-coded them so we could visually see what the talent in the organization looked like.

“We needed to make sure that the rising stars had opportunity,” he adds, “and wouldn’t be blocked by people who had gone as far as they could.”

Valenta and his colleagues tweaked the system as they went along. “I learned that everyone doesn’t want to be a boss,” he says. “So we put a safety net in place, and if someone got moved up, they could have their old job back if they didn’t like the new responsibilities.”

Valenta, who turns 59 this month, says that building a team requires trust and “opening yourself up,” both as an individual and as a company. In the late 1990s, for example, TXI opened its books to its own employees, a tactic famously advocated by Jim Collins in the Good to Great book series. That way, employees could see what, and where, the return on investment was at every stage of the company’s progress. This was “part of challenging the status quo at every step,” Valenta says.

The results were startling. At TXI’s river-gravel plant, for example, heavy-equipment drivers withdrew a request for more equipment after seeing how much it would cost, and how much the expenditure would reduce the company’s ROI. As a result, they came up with different ways to deploy the equipment they already had. The same process was applied in every nook and cranny of the company. After noting that the steel plant used recycled steel—which consists in part of cars squashed and shredded by a giant machine—Valenta remembers that “some employees created a patent to retrieve the coins in the cars. We found an average of 51 cents per car, and [eventually] became the largest supplier of mutilated coins to the U.S. Mint.” 

Bob Alpert, a director for TXI, says the results of such scrutiny spoke for themselves. According to Alpert, Valenta “developed a bottom-up company where everyone understood all the processes—operations, finance, marketing—and Tommy taught everyone all the various parts as he learned them himself.”

While all public companies preach a devotion to increasing shareholder value, few have instilled that dedication as thoroughly and as deeply as Chaparral. “One of the guys in the recycling unit said to me, ‘One of our goals should be to make our shareholders rich,’” Valenta recalls. Chaparral employees also thought like owners, Valenta says, because they owned stock in the company through their 401(k) plans.

SERVANT LEADERSHIP
Valenta may be the ultimate example of one who practices what he preaches. After moving over from TXI into a leadership role at Chaparral, he began analyzing the global steel industry. “It was clear we were a well-run and profitable company, but the industry was consolidating,” he says. “We were fairly small at $2.5 billion of market capitalization, and we would have needed to grow to $10 to $12 billion. I didn’t think there was much chance of that without risking significant shareholder value,” he says.

As a result, Valenta called in Goldman Sachs, and Chaparral, which had been spun off from TXI as a separate entity in 2005, was sold to a Brazilian company called Gerdau Ameristeel Corp. two years later. The sale unlocked billions of dollars in value for Chaparral shareholders. “Tommy was very willing to put himself out of a job,” recalls Hoak. “He was selfless, and he never said, ‘What’s in it for me?’”   

That approach surprised few who worked with Valenta. His personal style, they agree, is to be a great listener and to exemplify accountability.

A strong advocate of “servant leadership”—an approach stressing the leader’s role as a steward of the company’s resources—Valenta dismisses the kudos. “We were very lucky, and luck is where proper preparation and opportunity intersect,” he says of Chaparral’s success during his years there. “We had been preparing since the late ’90s, and then the market changed, and we didn’t have to add head count to add capacity. The result was one of the highest operating margins for steel in the world.”  

 Valenta says he never thought about “being a CEO,” only about doing a good job. But today, after nearly four decades in business, he has a few nuggets of advice for budding chief executives just graduating from colleges and business schools like the Cox School at Southern Methodist University, where he studied.

Among Valenta’s hard-won lessons:
›› “Common sense is usually the right answer.”
›› “Never compromise your values. If you wouldn’t want to read about it on the front page of the local newspaper, don’t do it.”
›› “Treasure your friends. We have lots of associates, but if you have a handful of true friends in your lifetime, you’ve been blessed.”
›› “There’s no such thing as a perfect strategy. If your strategy is 80 percent correct and violently executed, which means aggressively, you’ll beat the guy with the perfect strategy and half-hearted execution.”

Meanwhile, if Merrill, Citi, and Time Warner don’t come calling anytime soon, Valenta’s plans are “to continue volunteering at the Salesmanship Club in Dallas. My wife and I are also involved in mission trips to Honduras,” he says. “The first year, I worked in the pharmacy there. It was fun and it was indoors. After that, I did construction work. I’d like to work indoors in the pharmacy again.”