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Market Research
New Study Finds Lack of Business Acumen Among Organizational Leaders
Agatha Gilmore
Talent Management Perspectives
March 2008
The Customer Connection: The Global Innovation 1000
Barry Jaruzelski
Kevin Dehoff
BoozAllen strategy+business
Winter 2007
Behavioral Finance- Benefiting from Irrational Investors
Julia Hanna
HBS Working Knowledge
June 2007
The 3 Financial Styles of Very Successful Leaders
Strategic Approaches to Identifying the Growth Drivers of Every Company
By E. Ted Prince
352 pages McGraw-Hill
Review by Leslie Johnston
Leaders have widely different approaches in how they deal with money and how they approach the building of value. These personal financial traits, which constitute a financial signature, can be linked to company outcomes and to the company's market value, according to leadership expert and executive coach Ted Prince. From his research with more than 130 CEOs, Prince has identified nine financial signatures. Each of the financial signatures represents a financial mission. The financial mission indicates the way leaders' personal financial traits drive them to create value for their companies. These nine financial missions can be further reduced to three basic financial styles-Surplus, Deficit, and Puzzler.
While all three can be successful in the short term, they provide varying results long term. Surplus-style leaders are consistently profitable in the long term. Deficit leaders are consistently unprofitable in the long term, and Puzzler leaders generate zero earnings over the long term. These categories are based on two drivers-resource utilization propensity and value adding behavior-and a level of intensity-high, medium, or low. Even in the short term, leaders' financial signatures either improve or weaken any company's sales, products and services, and operations and each of the missions has a characteristic effect on competitiveness, quality, and customer satisfaction. Not surprisingly, an organization's culture is a reflection of its financial mission.
The evolution of leaders is the evolution of their financial mission. If leaders are fortunate enough to have a Surplus financial signature, they are already on the path to success. But, if they do not (and most leaders do not), they must learn to compensate. The difference between average and very successful leaders, Prince found, is how well they compensate for their financial signatures. While market value is the primary outcome of leadership, attaining market value is not simply a technique. It comes from having the right financial mission aligned with the organization and its strategies.
Different types of organizations require different financial signatures, and organizations at different stages of evolution require different financial signatures. Organizations in different markets have different financial signature needs as well. By identifying gaps between leaders' financial signatures and their organizations' needs, approaches to optimizing the financial performance of the organizations can be identified. While financial signatures cannot change, financial missions (behaviors) can be changed, although it is difficult. Many leaders will attempt to "correct" their financial signature to match it to their organization's needs.
Leaders have a variety of ways to make a profit. The methods they choose depend upon their financial signatures. While their method may deliver the desired profit, the method may not fit the needs of the organization. For example, a medium margin/low cost combination may achieve the same profit as another approach, it will create a different organizational effect and a different kind of valuation than a high margin/medium cost approach. The various combinations available to CEOs to deliver a profit result in different market value quality, or sustainability. Market value quality, therefore, is highly dependent upon leaders' financial signatures.
If the market stage is early, for example, the company needs a high level of value adding and a low level of resource utilization. As the market consolidates, organizational requirements change. Once competitors begin appearing, the company needs a high or medium level of value adding and a medium to low level of resource utilization, and as the company matures, it requires a leader with a medium level of value adding and a low level of resource utilization. Most organizations, however, attribute poor or less than desirable performance to the difficulties of starting or growing a business rather to mismatched leaders and organizational needs. Whether leaders' behavior-their financial mission-changes, and to what degree, depends upon the leaders themselves.
Recent Updates
The Three Financial Styles of Very Successful Leaders
by E. Ted Prince
Published by McGraw Hill
Now available as a Chinese language web site
(佩斯领导力研究院 ) and book in both Traditional Chinese and Simplifed Chinese from McGraw Hill Singapore/Taiwan
Integrity Research
"Research - The Radical Fringe"
Business Finance Article
"Six Degrees: Analyzing Your Financial Traits"
Chief Learning Officer Articles
"A Crisis in Leadership"
"How Corporate Culture Impacts the Bottom Line"
"The Valuation Approach to ROI"
Business Book Review™
"...a new tool for analyzing the effect leaders and teams have on the market value of the organizations they lead."
Harvard Business School
"Working Knowledge" does review of The 3 Financial Styles of Very Successful Leaders
Notes from the Field
Engagements: Ongoing engagements in several industries including telephone, restaurants, real estate, insurance, technology and others involving C-level and other executive teams and individual programs with senior executives.
Partnerships: Sequent in Columbus, WJM Associates in New York, Shi Bissett Consulting and KBC Seminars in Shanghai, Ewin Publishing and BMR Magazine in Beijing, Work with Peking University's China Center for Economic Research.
Marketing: Ongoing program with HR and leadership development conferences. Continuing development of partnerships and clients in China. Initial marketing in Brazil and India.
Research: Active areas include links between executive's behaviors and financial outcomes, psychological drives of financial outcome, cultural differences in financial style and long-term financial impact of intervention programs.
Published Articles: Articles published by Perth and forthcoming in several industry and academic journals. Strong publishing program in China including in Business Management Review journal in Beijing. Publications in India with Indian Chartered Financial Analysts Institute.
White Papers: Several white papers including the impact of a recession of leadership development and the financial psychology of the three Presidential front-runners.
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