Perth Leadership Outcome Model - Perth Leadership Institute

Copyright Perth Leadership Institute 2009

Business Acumen Programs

Dr. E. Ted PrinceFounder and CEO


Shareholders Want Leaders Who Achieve Higher Financial Returns

More leaders failing financially Financially savvy leaders in

short supply


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


Under-Performing Leaders Often Attribute Poor Results to External Factors

Economy Market Product Customers “Unrealistic” expectations


But We Don’t Recognize Issue of Managerial Behaviors and Financial Culture…


Conventional Leadership Models Focus on Soft Skills

Personality approaches Competencies Lack specific focus on

financial impact and performance!


Unconscious Financial Drivers Lead to Unintended Financial Results


What is Business Acumen?

Behavior that directly results in positive financial outcomes. How can they be

measured and improved?


Definition of Business Acumen

Behavioral propensity to create capital


What is its Relationship to Business Literacy?

Business Literacy Knowledge of how

business works. High business literacy rarely

leads to wealth


What is Impact of Business Acumen on Business Outcomes?

How does business acumen affect:

Product innovation? Product quality? Sales performance? Operations performance? Earnings performance?


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?


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?


How is Business Acumen Related to Innovation?

How to make innovation profitable?

How to identify high-leverage innovators?


Why is Business Acumen Related to Business Transformation?

Change that creates capital Capital that sustains

transformation


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?


Our Research Has Been Published


In Financial and Leadership Publications


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


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™


The Message - A “Nose” for Profit

Only a minority has it


We All Have Personal Financial Traits

Innate calculus Reflected in all our financial

decisions Wide variation between

individuals


We Have Two Financial DriversWe Have Two Financial Drivers

The propensity to add value The propensity to use resources


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


We Can Measure Financial Signature Psychometrically


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


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


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


Alignment vs. Performance


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