Perth Leadership Outcome Model - Perth Leadership Institute

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The Perth Leadership Outcome Model is a leadership model that aims to characterize leaders by the financial outcome of their leadership, as distinct from the two traditional leadership models of focusing on either the leader's personality or behavioral skills and business competencies. It was developed by Dr. E. Ted Prince over the period 2002-6.

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  • A valuation trajectory can be forecasted for each Financial Signature
  • Perth Leadership Outcome Model - Perth Leadership Institute

    1. 1. Business Acumen Programs Dr. E. Ted Prince Founder and CEO
    2. 2. Shareholders Want Leaders Who Achieve Higher Financial Returns <ul><li>More leaders failing financially </li></ul><ul><li>Financially savvy leaders in short supply </li></ul>
    3. 3. High Business Acumen in Leaders Helps Avoid Market Traps <ul><li>Following the crowd </li></ul><ul><li>Senseless financial trends and fashions </li></ul><ul><li>“ Exotic” strategies that create and contribute to system risk </li></ul>
    4. 4. Under-Performing Leaders Often Attribute Poor Results to External Factors <ul><li>Economy </li></ul><ul><li>Market </li></ul><ul><li>Product </li></ul><ul><li>Customers </li></ul><ul><li>“ Unrealistic” expectations </li></ul>
    5. 5. But We Don’t Recognize Issue of Managerial Behaviors and Financial Culture…
    6. 6. Conventional Leadership Models Focus on Soft Skills <ul><li>Personality approaches </li></ul><ul><li>Competencies </li></ul><ul><li>Lack specific focus on financial impact and performance! </li></ul>
    7. 7. Unconscious Financial Drivers Lead to Unintended Financial Results
    8. 8. What is Business Acumen? <ul><li>Behavior that directly results in positive financial outcomes. </li></ul><ul><ul><li>How can they be measured and improved? </li></ul></ul>
    9. 9. Definition of Business Acumen <ul><li>Behavioral propensity to create capital </li></ul>
    10. 10. What is its Relationship to Business Literacy? <ul><li>Business Literacy </li></ul><ul><ul><li>Knowledge of how business works. </li></ul></ul><ul><li>High business literacy rarely leads to wealth </li></ul>
    11. 11. What is Impact of Business Acumen on Business Outcomes? <ul><li>How does business acumen affect: </li></ul><ul><ul><li>Product innovation? </li></ul></ul><ul><ul><li>Product quality? </li></ul></ul><ul><ul><li>Sales performance? </li></ul></ul><ul><ul><li>Operations performance? </li></ul></ul><ul><ul><li>Earnings performance? </li></ul></ul>
    12. 12. What is Impact of Business Acumen on Market Value? <ul><li>How is business acumen related to capital creation? </li></ul><ul><li>How do financial behaviors relate to market value? </li></ul>
    13. 13. What is Impact of Business Acumen on Business Strategy? <ul><li>How is business acumen related to: </li></ul><ul><ul><li>Phase of evolution of company? </li></ul></ul><ul><ul><li>Level of maturity of market and product? </li></ul></ul><ul><ul><li>Competitive performance and dynamics? </li></ul></ul>
    14. 14. How is Business Acumen Related to Innovation? <ul><li>How to make innovation profitable? </li></ul><ul><li>How to identify high-leverage innovators? </li></ul>
    15. 15. Why is Business Acumen Related to Business Transformation? <ul><li>Change that creates capital </li></ul><ul><li>Capital that sustains transformation </li></ul>
    16. 16. What is Impact of Business Acumen on Market Value? <ul><li>How is business acumen related to capital creation? </li></ul><ul><li>How do financial behaviors relate to market value? </li></ul>
    17. 17. Our Research Has Been Published
    18. 18. In Financial and Leadership Publications
    19. 19. Our Work is a New Contribution to Behavioral Finance <ul><li>Industry players just becoming aware of implications: </li></ul><ul><ul><li>HR/leadership development </li></ul></ul><ul><ul><li>Investment bankers </li></ul></ul><ul><ul><li>Analysts </li></ul></ul><ul><ul><li>Private equity </li></ul></ul>June 2008 “ How the Financial Styles of Managers Impact Financial and Valuation Metrics” E. Ted Prince
    20. 20. EXPLORE NEW WAYS OF OPERATING AS LEADER LEADERSHIP OUTCOME PROFILE Subset of Behaviors Direct / Measurable Impact on Business LEADERSHIP OUTCOME TYPE FINANCIAL SIGNATURE ® COMPANY OUTCOMES WAYS OF OPERATING FINANCIAL BEHAVIOR & DECISION-MAKING VALUATION PROFILE EXECUTIVE OUTCOME ASSESSMENT™ FINANCIAL OUTCOME ASSESSMENT™ CORP FINANCIAL OUTCOME ASSESSMENT™
    21. 21. The Message - A “Nose” for Profit <ul><li>Only a minority has it </li></ul>
    22. 22. We All Have Personal Financial Traits <ul><li>Innate calculus </li></ul><ul><li>Reflected in all our financial decisions </li></ul><ul><li>Wide variation between individuals </li></ul>
    23. 23. We Have Two Financial Drivers <ul><li>The propensity to add value </li></ul><ul><li>The propensity to use resources </li></ul>
    24. 24. The 9 Financial Signatures Resource Utilization Value-Adding Venture Capitalist Industrialist Conglomerator Profitmaker Consolidator Marketmaker Breakthrough VA Minimal RU Minimal Intensive Current Break Through Breakthrough VA Intensive RU Discounter Current VA Minimal RU Current VA Intensive RU Trader Arbitrageur
    25. 25. We Can Measure Financial Signature Psychometrically
    26. 26. We Can Measure and Predict Valuation Impact Using Financial Statements <ul><li>Measurement </li></ul><ul><li>VA - % gross margin levels </li></ul><ul><li>RU - % indirect expense levels </li></ul><ul><li>Definitions </li></ul><ul><li>Gross Margin= Sales less COGS </li></ul><ul><li>Indirect Expenses </li></ul><ul><ul><li>S&M, R&D, G&A </li></ul></ul>Financial Statements Valuation Prediction
    27. 27. Each Signature Has a Different Market Value Impact Resource Utilization Value-Adding Venture Capitalist Marketmaker Industrialist Discounter Trader Conglomerator Arbitrageur Profitmaker Consolidator ABOVE-MARKET PERFORMANCE BELOW-MARKET PERFORMANCE Minimal Intensive Current Break- Through VALUE-CENTRIC STYLE RESOURCE-CENTRIC STYLE BALANCED STYLE
    28. 28. This Results in 9 Valuation Trajectories RESOURCE UTILIZATION VALUE ADDING MARKETMAKER PROFITMAKER VENTURE CAPITALIST DISCOUNTER TRADER INDUSTRIALIST CONSOLIDATOR ARBITRAGEUR CONGLOMERATOR Minimal Intensive Current Break- Through
    29. 29. Alignment vs. Performance
    30. 30. Their Financial Behavior Can be Changed! <ul><li>Financial Signature is innate </li></ul><ul><ul><li>It cannot be changed </li></ul></ul><ul><li>Financial Mission is learned </li></ul><ul><ul><li>It can be changed </li></ul></ul>

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