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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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Copyright Perth Leadership Institute 2009
Business Acumen Programs
Dr. E. Ted PrinceFounder and CEO
Copyright Perth Leadership Institute 2009
Shareholders Want Leaders Who Achieve Higher Financial Returns
More leaders failing financially Financially savvy leaders in
short supply
Copyright Perth Leadership Institute 2009
High Business Acumen in Leaders Helps Avoid Market Traps
Following the crowd Senseless financial trends and
fashions “Exotic” strategies that create
and contribute to system risk
Copyright Perth Leadership Institute 2009
Under-Performing Leaders Often Attribute Poor Results to External Factors
Economy Market Product Customers “Unrealistic” expectations
Copyright Perth Leadership Institute 2009
But We Don’t Recognize Issue of Managerial Behaviors and Financial Culture…
Copyright Perth Leadership Institute 2009
Conventional Leadership Models Focus on Soft Skills
Personality approaches Competencies Lack specific focus on
financial impact and performance!
Copyright Perth Leadership Institute 2009
Unconscious Financial Drivers Lead to Unintended Financial Results
Copyright Perth Leadership Institute 2009
What is Business Acumen?
Behavior that directly results in positive financial outcomes. How can they be
measured and improved?
Copyright Perth Leadership Institute 2009
Definition of Business Acumen
Behavioral propensity to create capital
Copyright Perth Leadership Institute 2009
What is its Relationship to Business Literacy?
Business Literacy Knowledge of how
business works. High business literacy rarely
leads to wealth
Copyright Perth Leadership Institute 2009
What is Impact of Business Acumen on Business Outcomes?
How does business acumen affect:
Product innovation? Product quality? Sales performance? Operations performance? Earnings performance?
Copyright Perth Leadership Institute 2009
What is Impact of Business Acumen on Market Value?
How is business acumen related to capital creation?
How do financial behaviors relate to market value?
Copyright Perth Leadership Institute 2009
What is Impact of Business Acumen on Business Strategy?
How is business acumen related to: Phase of evolution of
company? Level of maturity of
market and product? Competitive performance
and dynamics?
Copyright Perth Leadership Institute 2009
How is Business Acumen Related to Innovation?
How to make innovation profitable?
How to identify high-leverage innovators?
Copyright Perth Leadership Institute 2009
Why is Business Acumen Related to Business Transformation?
Change that creates capital Capital that sustains
transformation
Copyright Perth Leadership Institute 2009
What is Impact of Business Acumen on Market Value?
How is business acumen related to capital creation? How do financial behaviors relate to market value?
Copyright Perth Leadership Institute 2009
Our Research Has Been Published
Copyright Perth Leadership Institute 2009
In Financial and Leadership Publications
Copyright Perth Leadership Institute 2009
Our Work is a New Contribution to Behavioral Finance
Industry players just becoming aware of implications: HR/leadership development Investment bankers Analysts Private equity
June 2008
“How the Financial Styles of Managers
Impact Financial and Valuation Metrics”
E. Ted Prince
Copyright Perth Leadership Institute 2009
LEADERSHIP OUTCOME PROFILESubset of Behaviors Direct / Measurable Impact on Business
LEADERSHIP OUTCOME PROFILESubset of Behaviors Direct / Measurable Impact on Business
EXPLORE NEW WAYS OF OPERATING AS LEADEREXPLORE NEW WAYS OF OPERATING AS LEADER EXPLORE NEW WAYS OF OPERATING AS LEADEREXPLORE NEW WAYS OF OPERATING AS LEADER
LEADERSHIP LEADERSHIP OUTCOME OUTCOME
TYPETYPE
FINANCIAL FINANCIAL SIGNATURESIGNATURE®®
COMPANY OUTCOMES
WAYS OF OPERATING
FINANCIAL BEHAVIOR &
DECISION-MAKING
VALUATION VALUATION PROFILEPROFILE
EXECUTIVE OUTCOME
ASSESSMENT™
FINANCIAL OUTCOME
ASSESSMENT™
CORP FINANCIAL OUTCOME
ASSESSMENT™
Copyright Perth Leadership Institute 2009
The Message - A “Nose” for Profit
Only a minority has it
Copyright Perth Leadership Institute 2009
We All Have Personal Financial Traits
Innate calculus Reflected in all our financial
decisions Wide variation between
individuals
Copyright Perth Leadership Institute 2009
We Have Two Financial DriversWe Have Two Financial Drivers
The propensity to add value The propensity to use resources
Copyright Perth Leadership Institute 2009
Resource Utilization
Value-Adding
Venture Capitalist
Industrialist
Conglomerator
Profitmaker
Consolidator
Marketmaker
Breakthrough VAMinimal RU
Minimal Intensive
Current
Break Through
Breakthrough VA Intensive RU
Discounter
Current VAMinimal RU
Current VAIntensive RU
Trader
Arbitrageur
The 9 Financial Signatures
Copyright Perth Leadership Institute 2009
We Can Measure Financial Signature Psychometrically
Copyright Perth Leadership Institute 2009
We Can Measure and Predict Valuation Impact Using Financial Statements
Measurement VA - % gross margin levels RU - % indirect expense
levels
Definitions Gross Margin= Sales less
COGS Indirect Expenses
S&M, R&D, G&A
Financial Statements
Valuation Prediction
Copyright Perth Leadership Institute 2009
Each Signature Has a Different Market Value Impact
Resource Utilization
Value-Adding
Venture CapitalistMarketmake
r
IndustrialistDiscounter
Trader
Conglomerator
Arbitrageur
Profitmaker
Consolidator
ABOVE-MARKET PERFORMANCE
BELOW-MARKET PERFORMANCEMinimal Intensive
Current
Break-
Through
VALUE-CENTRIC STYLE
RESOURCE-CENTRIC STYLE
BALANCED STYLE
Copyright Perth Leadership Institute 2009
RESOURCE UTILIZATION
VA
LU
E A
DD
ING
MARKETMAKER PROFITMAKER VENTURE CAPITALIST
DISCOUNTER TRADER INDUSTRIALIST
CONSOLIDATORARBITRAGEUR CONGLOMERATOR
This Results in 9 Valuation Trajectories
Minimal Intensive
Current
Break-
Through
Copyright Perth Leadership Institute 2009
Alignment vs. Performance
Copyright Perth Leadership Institute 2009
Their Financial Behavior Their Financial Behavior CanCan be Changed! be Changed!
Financial Signature is innate
It cannot be changed
Financial Mission is learned
It can be changed
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