As part of my series about the “Five Things You Need To Be A Highly Effective Leader During Turbulent Times,” I had the pleasure of interviewing Craig Scheef.
Craig Scheef co-founded Texas Security Bank in 2008 and serves as Chairman and Chief Executive Officer. He oversees and manages each department to ensure that the bank lives up to its mission — elevating the champions of free enterprise.
When the opportunity arose to create Texas Security Bank, Scheef knew that he wanted to focus on a grossly underserved market, owner-managed businesses. An entrepreneur at his core, Scheef, along with a trusted group of Dallas businesspeople, began writing a business plan, obtaining regulatory approval, and raising capital to start an independent bank. In May 2008, Texas Security Bank began operations with $26.5 million in new capital, which included Scheef’s life savings. Today, Texas Security Bank is a profitable independent bank with three locations and assets totaling $940 million. Under Scheef’s leadership, the bank is ranked as one of the healthiest banks in the country annually.
Prior to starting Texas Security Bank, Scheef was at Bank of Texas, a subsidiary of BOK Financial, where he served in multiple positions including President of Business Banking, where he was responsible for managing seven community banks in Dallas and Houston, as well as Community Bank President of the Swiss Avenue location. He also served as Vice President and Loan Team Leader of First Interstate Bank, a predecessor to Wells Fargo Bank where he managed a team of middle-market lenders.
Scheef has been recognized and honored by multiple organizations throughout his career. He is the recipient of the Milam Award which is presented annually to a distinguished ECU football alumnus who has excelled in his chosen vocation, ECU’s Distinguished Service Award, Entrepreneur of the Year Award from ECU’s Harland C. Stonecipher School of Business, and as a Distinguished Alumnus of East Central University.
Scheef earned his BBA degree in marketing at East Central University (ECU) and an MBA in finance from The University of North Texas (UNT). He graduated with high honors from UNT and ranked in the top five percent of his graduating class.
Thank you so much for your time! I know that you are a very busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Thank you. I began my banking career at First Interstate Bank, a predecessor to Wells Fargo, in June 1988 after receiving my MBA in finance from the University of North Texas. During the final five of my 15 years there, I managed a team of middle-market commercial bankers — middle-market being defined as companies with revenues of $20-$500 million.
In 2003, I accepted a position as president of the Swiss Avenue location of Bank of Texas. Bank of Oklahoma expanded into Texas by purchasing numerous community banks, including the Swiss Avenue State Bank. Community banks are a significant source of capital for owner-managed businesses and entrepreneurs, primarily because their lower capital amount limits the size of loans they can provide. Most owner-managed businesses and entrepreneurs do not have business degrees from universities, unlike most middle-market companies who have well-educated executives hired by the owner or board of directors. Nonetheless, I found these business owners exceptionally savvy, hardworking, as sacrificial risk-takers who are starved for business education. We found a great opportunity to add value to these inspiring entrepreneurs. Eventually, I was asked to lead three additional banks in Dallas and three in Houston.
In April 2007, I resigned from my position at Bank of Texas to write a business plan for a bank whose product and service offering would focus on elevating these champions of free enterprise. We were able to obtain our bank charter and raise $26.5 million in new capital. Our doors opened on May 5, 2008. Unexpectedly, this represented the beginning of the banking crisis and the Great Recession.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
Wow, there have been many mistakes. I began the process of forming a bank in April 2007. At that time, the U.S. was at the peak of the economic cycle. By the time the bank began operations in May 2008, the Great Recession began. This was not in our plans or projections. It was a scary time. One can imagine the anxiety of investors, bank regulators and other stakeholders. Oddly, in retrospect, 2008 was a pretty good time to start a bank. Of course, we had to be extra cautious. However, we did not have any bad loans (or any loans for that matter). Furthermore, the competitive landscape had changed. Banks who booked loans at the top of the business cycle, when pricing and loan structures are often weak, were now distracted with problem loans. This gave us many opportunities.
We learned that planning is critical, even though circumstances may seem to render your plans useless. Success is always protected by problems and issues. That perspective is very important — we must expect there to be problems. The bigger the objective, the bigger the problems. Adapt, pivot, innovate and move forward. We made a commitment to reach our goals this year — let’s get on with it. The strategy may have to change but the goals do not. I appreciate the saying, “Write your plans in the sand and carve your goals in stone.”
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
First and foremost, I would be remiss if I did not recognize the abundance of divine provision received along the way. Proverbs 16:9 states, “In their hearts humans plan their course but the Lord guides their steps.” There is just no denying it — our Lord is the Way-maker and Light in the darkness.
Speaking of divine provision — there are dozens of people for whom I am forever grateful. However, there are three that were pivotal. Chris Jones and I met when he was running Comerica’s largest middle-market banking group and I was running a middle-market group at Wells Fargo. Chris was a very well-respected banker from a young age. Subsequently, he ran a turn-around of a technology training company and later became president of a factoring company. We developed a partnership with this factoring company while I was at Bank of Texas.
Drew Keith and I came up through the First Interstate/Wells Fargo organization together. Drew began his banking career working out problem loans and later became one of the top producers within the Wells Fargo banking system. Drew was then hired as Chief Financial Officer of a publicly traded logistics company. I became his banker during this time. His performance in this role was exceptional.
Chris and Drew were two of the first people with whom I shared the original Texas Security Bank business plan. They both supported the business plan and provided much-needed encouragement. Their encouragement was not lip service. Chris and Drew became members of the bank’s organizing group and invested significant amounts of their own money in the bank.
Shon Cass is the third person who made our bank possible. Shon and I worked together at Bank of Texas. He was the branch manager at the location where I was president. Shon is the best customer service person I know. He is also a proven leader and problem solver. Shon is our executive vice president in charge of treasury management and deposit operations.
Chris and Drew are valued members of our Board of Directors. Chris is the Chief Lending Officer and Drew is the Chief Financial Officer of our bank. The Texas Security Bank Board of Directors leadership has been invaluable to our success.
Extensive research suggests that “purpose driven businesses” are more successful in many areas. When your company started, what was its vision, what was its purpose?
This is a good question. Mark Twain said, “The two most important days in your life are the day you are born and the day you find out why.” Knowing one’s purpose is everything. Why were we born? Sadly, there are a lot of us who don’t know the answer. I will be bold and venture a purpose. We were born to discover our divinely inspired gifts — the things that we are naturally good at — and spend the rest of our lives giving them away in service to others. We are born to add value to others’ lives. Period. Isn’t it painful to see someone come to the end of his or her life who never “gets it?”
The inspiration for Texas Security Bank came to me while working with entrepreneurs and owner-managed businesses. The stories of these champions of free enterprise still take my breath away. Most people have no idea the risk business builders take, nor do they understand the sacrifice and hard work it takes to survive — never mind being successful. These men and women go years without vacations. They empty out their 401K to make payroll. Often, in the beginning, they pay themselves less than their team — if they pay themselves at all. They miss dance recitals and little league games. Talk about turbulent times? Every day represents turbulent times to the entrepreneur. When the champion of free enterprise is successful and his or her dream and vision appears on solid ground, people often enviously look and say, “must be nice,” foolishly assuming it has always been this way.
We must consider what the champions of free enterprise contribute to society. According to the Small Business Association, 64% of all new jobs in this country are created by small businesses. Likewise, small businesses pay most of the federal income tax, payroll tax and property tax in this country. As Winston Churchill said “Some regard free enterprise as if it were a predatory tiger to be shot. Others look upon it as a cow they can milk. Only a handful see it for what it really is — the strong horse that pulls the whole cart.” We are proud to be counted the “handful.”
So, this was and will forever be our purpose — to Elevate the Champions of Free Enterprise. We accomplish our mission in several ways. We maintain an exceptional and verifiable customer service reputation, with a Net Promoter Score of 84.5% compared to an industry average of 34.2%. However, the primary and truly unique way Texas Security Bank Elevates the Champions of Free Enterprise is through continuing education not only for our bankers, but also business owners and their key players. The TSB Speaker Series and TSB Academy provide exceptional training for the Champions of Free Enterprise.
Thank you for all that. Let’s now turn to the main focus of our discussion. Can you share with our readers a story from your own experience about how you lead your team during uncertain or difficult times?
We started Texas Security Bank in very turbulent times. Over the past thirteen years, our team has been conditioned to understand that regardless of how well we plan, we cannot predict all of the specific problems that will fight to keep us from achieving our objectives for the year. We must expect this. When challenges and issues arise, we look at each other and say, “Well, we didn’t see this coming, but we knew something was coming.”
Let me first say, I am one person on a leadership team that runs the bank. These professionals make my life easier. They are so solid; it gives the entire team great confidence.
Our current situation is a good example of leading in turbulent times. As a bank, we have Pandemic Response Procedures (PRP) that are part of the bank’s Disaster Recover Policy. Annually, management is required by policy to conduct table-top exercises presenting several possible disaster scenarios and management must document their responses. Our last PRP table-top exercise was in November 2019. Fortunate timing or divine provision? Either way, our leadership team’s preparedness made a huge difference.
When the pandemic hit, we followed PRP procedures by convening a weekly status meeting of the leadership team and other department heads. The action items produced by these meetings were cascaded to the entire team. Frequent, consistent and quality communication is critical in uncertain times. Our communication and preparation provided our team with confidence. Ultimately, we moved to 80% of the workforce working remotely, which is where we currently stand.
While we were transitioning to 80% remote, our entire customer base was gasping for air (cash flow) because of the shut-down. Prior to the announcement of the Paycheck Protection Program (PPP), our leadership team began strategizing on a way to help our business owners with “lifeline loans.” When the government began planning PPP, our bankers immediately got ahead of the information curve. We conducted regular and frequent virtual meetings with hundreds of business owners, both customers and non-customers, to provide updates on the program; how to complete the application, how to calculate the loan amount, necessary supporting documentation and how to submit the application to the bank. We quickly realized that we were going to be inundated with PPP loan applications.
To handle the deluge of applications, we reengineered numerous bank processes and trained personnel from unrelated departments to assist with each loan subprocess and avoid bottlenecks. The loan process is typically a very linear process; receive application>>underwrite loan>>approve loan>>prepare loan documentation>>close loan>>onboard loan>>fund loan. This process was modified such that when an application was received, all of the subprocesses commenced nearly simultaneously. On average, our team was able to fund a PPP loan within 2–3 days. Bankers worked late night and weekends for three weeks to save businesses. The more word spread about our ability to execute and the more the big banks stumbled, the more applications we received.
In the end, we funded 944 PPP loans for a total of $245,918,333 — while 80% of the team worked remotely. Approximately 46% of these loans were to companies who were not previous customers of Texas Security Bank. The customer goodwill created is incredible. Today, we are very busy converting the 46% to full-time customers. I am incredibly proud of our team. Through a combination of innovation and brute force, we succeeded.
Over the past three years, our strategic planning contemplated a slowdown in the economy. However, we did not know when the inevitable slowdown would come, its severity or cause. We certainly did not predict a complete shutdown of the economy. It is worth noting that our 2020 budget and strategic objectives have not changed. Every boxer enters the ring with the goal of winning while knowing full-well they are going to get punched in the mouth. The strategy and plans may need to change, but the goals do not change.
Did you ever consider giving up? Where did you get the motivation to continue through your challenges? What sustains your drive?
Absolutely not! It was a blast. Very fulfilling. This is the perfect example of why Texas Security Bank exists. We learned a lot about our team and each other. Elevating the Champions of Free Enterprise is our purpose. A purpose that makes it easy to get out of bed.
What would you say is the most critical role of a leader during challenging times?
Keep the main thing the main thing. The “main thing” is winning by adding value to other people’s lives. Stay focused on where you are going. Your team needs to know that you are prepared and able to navigate the unexpected in a calm, clear-eyed manner, and that you will win, while communicating transparently and frequently.
When the future seems so uncertain, what is the best way to boost morale? What can a leader do to inspire, motivate and engage their team?
First, during challenging and difficult times (which are to be expected), leaders can inspire by rolling up their sleeves and joining the fight. When times are difficult, leaders must become a player-coach. Second, recognizing and celebrating the incremental wins is great for morale and shows that we are progressing and moving forward. Last and most important, during challenging times, leaders must remind the team “why?” This gets back to purpose. As humans, it is natural to seek comfort and complacency. Our vision is the countermeasure to comfort and complacency.
What is the best way to communicate difficult news to one’s team and customers?
Communication must be frequent and honest, even when we do not have all of the answers and circumstances may be fluid. It is a good idea to share what we do not know while also sharing what we do know and working towards answering the question. It’s important to communicate that we are still committed to our goals. Having a destination — even if the course may need to be reset — steadies the ship.
How can a leader make plans when the future is so unpredictable?
Strategic planning becomes of greater importance in an unpredictable volatile world. Remember, strategic planning is a skill that teams must develop. We get better by doing planning year in and year out. Often, increasing the frequency and cadence of strategic planning is appropriate. Effective strategic planning includes many exercises of “What we do if …?” Contingency planning, before the bullets start to fly, produces confidence.
Is there a “number one principle” that can help guide a company through the ups and downs of turbulent times?
As discussed, we operate in a volatile, uncertain, complex and ambiguous world. During your planning process, you and your team must embrace this fact. Nobody should be surprised when things do not go as planned. They will not. This does not make planning any less important. It makes it more important. The “main thing” is knowing the goals for the year do not change. How are we going to adjust, pivot, innovate and respond to reach our goals?
Can you share 3 or 4 of the most common mistakes you have seen other businesses make during difficult times? What should one keep in mind to avoid that?
Clearly, the mistakes would be the opposite of some of the items we have discussed.
- Good leaders are candid with the team regarding their plans and strategies. Things will change. We may get punched in the mouth. Success is protected by problems and issues. When they show up, we should not be surprised. We will become experts at adapting, innovating and adjusting.
- Do not abandon the goal. All coaches go into a game with the goal of winning and a strategy to win the game. There may be adjustments in strategy based on the circumstances. Your team must see that you are committed to the goal.
- Plan, prepare and practice for the unexpected. Strategic planning exercises will include asking the question, “What would we do if …?” Amid difficult times, confidence is indispensable. Preparedness and attention to detail build confidence.
Generating new business, increasing your profits, or at least maintaining your financial stability can be challenging during good times, even more so during turbulent times. Can you share some of the strategies you use to keep forging ahead and not lose growth traction during a difficult economy?
We find great benefit from executing the EOS model by Gino Wickman and popularized in his book Traction. Achieving weekly performance metrics for each functional area of the enterprise, specifically business development activities, enables the team to stay on track.
Here is the primary question of our discussion. Based on your experience and success, what are the five most important things a business leader should do to lead effectively during uncertain and turbulent times?
Most of my thoughts on leading during uncertain and turbulent times come from VUCA, a popular acronym used to describe today’s connected, fast-paced, constant and unpredictable business environment. VUCA was first developed by Warren Bennis and Burt Nanus (Harvard Business Review) and popularized by the U.S. Army War College at the end of the Cold War. VUCA is as follows:
Volatility - Volatility is the speed of change in an industry, market, politics or the world in general.
Uncertainty - Uncertainty refers to our ability or inability to predict the future. It represents our inability to understand what is going on. Uncertain environments are typically the ones where there are not many historical precedents to draw comparison and guidance.
Complexity - Complexity represents the number of factors we must consider and the relationship between these factors. It can become impossible to fully analyze the environment, never mind come to conclusions.
Ambiguity - Ambiguity is the absence of clarity regarding how to interpret information. For example, a situation is ambiguous if the information is incomplete, inaccurate, contradicting or vague.
So far, all that I have accomplished is to further describe our turbulent and uncertain world. Nevertheless, doing so better positions us to respond to the question of “what are the five most important things a business leader should do to lead effectively during uncertain and turbulent times? In other words, what are the antidotes to VUCA?
1.) The first antidote, previously mentioned, is we must assist our organization with accepting the world in which we operate. We should expect surprises, issues and problems. Certain people operate better than others in a VUCA world. Either way, as leaders, we are obliged to communicate this reality.
Bob Johansen, fellow at the Institute for the Future and author of Leaders Make the Future, submits that leaders with companies who thrive in a VUCA world are characterized by four countermeasures he calls the VUCA Prime: vision, understanding, clarity and agility.
2.) Vision of where we want our organizations to be in three to five years helps us better weather volatile environmental changes. We must make decisions to counter the turbulence in the short run while keeping the organization’s vision in view. Keep the main thing the main thing.
3.) Understanding beyond our functional areas of expertise can make sense of volatility and help us lead with vision. This requires communication and collaboration across all levels in the organization. Communicate truthfully, empathetically and frequently. Glance back, look forward while continuously testing to better understand.
4.) Clarity of the minutiae associated with chaos can result in quicker, better and more informed decisions. Collaboration, simplification and a fresh set of eyes produces clarity.
5.) Agility enables leaders to remain flexible and move quickly to apply solutions, while maintaining foresight. As a team, we must increase listening and awareness, share lessons, optimize the decision process to facilitate rapid redesign and value the incremental wins.
Once again, a good example of our team effectively operating in a VUCA world was our response to the recent economic shutdown and the PPP loan program.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
“The two most important days in your life are the day you are born and the day you find out why.”
- Mark Twain
Knowing your purpose is everything.
How can our readers further follow your work?
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