Mark Leslie - Leadership and The Virtuous Cycle

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Transcript of Mark Leslie - Leadership and The Virtuous Cycle

  • 1. Leadership and the Virtuous CycleOr How I Made 40 Quarters in a Rowmark lesliemleslie@leslieventures.com 650/561-1228

2. Veritas Software 1990 - 2001 $95K $1.5 Billion Revenue 12 6,000 employees 0 $20 Billion Market Cap Startup Fortune 1000 --In 11 yearsCopyright M. Leslie 2 3. The Virtuous CycleExceed Revenue ExpectationsGrow the companyExceed Profit ExpectationsIncrease Stock Price Increase Stock Multiples Copyright M. Leslie 20083 4. The Virtuous Cycle Exceed the Sales Expectations Set the goals realistically on an individual basis Manage the quotas such that ~70% of populationachieves > 100% Create a culture of success Buildan industry reputation for salessuccess and for paying well Attract and retain the best talent in thebusinessCopyright M. Leslie 2008 4 5. The Virtuous CycleExceed The Revenue Expectations When sales over-achieves Avoid EOQ / EOY discount pressures And channel stuffing Plan manufacturing capacity in advance Build a backlog for next Q Avoid the temptations to take the first steponto the slippery slope of ethical / legalmisconductCopyright M. Leslie 2008 5 6. The Virtuous Cycle Exceed The Profit Expectations When the revenue is above expectation Manufacturing efficiency is improved Discounts are shallower If there is a channel distribution, yields higher street prices Which increases channel loyalty Operating expenses are at lower % of revenue Excess GM falls to bottom line Which can be reinvested in the business Or made a permanent improvement in thecompanys operating modelCopyright M. Leslie 2008 6 7. The Virtuous Cycle Increase your Stock Multiples When the profit is above expectation Growthin profit will exceed expectation Greater absolute profit and greater growthin profit and consistency of performance willresult in a higher multiples Greater multiples yield higher stock pricesCopyright M. Leslie 20087 8. The Virtuous CycleIncrease your Stock Price Higherstock prices Build the public reputation of the Company Provide shared rewards for the employee base Create culture of success across the company Copyright M. Leslie 20088 9. The Virtuous Cycle Higher Stock Prices Recruit / Retain the industrys best Everyone wants to join the HOT company Rapid growth in stock prices allows for smalleroptions with bigger bang Stock options lock down the best and the brightestCopyright M. Leslie 20089 10. The Virtuous Cycle Higher Stock PricesIncrease Market Share Invest more rapidly than competitors to take share Now - Distribution (sales and marketing) In the Future - Product (engineers) Use high multiple stock to strategically acquire /consolidate key technologies High stock multiples will allow you to win acquisitiondeals competitivelyCopyright M. Leslie 2008 10 11. The Virtuous Cycle Higher Stock PricesReduce the companys cost of Capital Higher stock multiples reduce the companys cost of capital Raise Equity / Convertible Debt Build a War Chest Note to Self KEEP THE CASH! You never know when you will need it Never do a share buy back unless you are COMPLETELYBANKRUPT of ideas! Except to extinguish stock option dilutionCopyright M. Leslie 2008 11 12. The Virtuous CycleExceed Revenue ExpectationsGrow the companyExceed Profit ExpectationsIncrease Stock Price Increase Stock Multiples Copyright M. Leslie 200812 13. LeadershipHow the CEO Can Createand Foster thisVirtuous Cycle? 14. ML Definition of Leadership Creating the environment, where You can attract the best and the brightest Who can exercise autonomy and judgment, Whilefurthering the mission of the organization, Andget a sense of personal achievement and satisfaction over and above financial rewards Copyright M. Leslie 200814 15. LeadershipLeadership is holistic Creatingthis particular Virtuous Cycle is asingle dimensionCopyright M. Leslie 2008 15 16. It Starts with the Forecast Difficult to have much effect on the revenue line The further out in time, the more the company can affectthe revenue plan New products New Markets Strategic Partnerships Leveraging industry trends / changes But these initiatives are measured in years, notmonths! Copyright M. Leslie 200816 17. It Starts with the Forecast Only Tactical programs affect the next 12 months revenue Limited effect Often borrowing from the future Critical to ACCURATELY FORECAST Conservative High likelihood of over achieving - A Lay UpCopyright M. Leslie 2008 17 18. Grounded in Realism Externally pressures of the business are antithetical Internally everyone is gaming the system Tempting to set high goals and inspire all to be heroic Success brings Temptation to believe in your own omnipotence Indulgence in wishful thinking The most important thing is to be realistic andobjective! Copyright M. Leslie 2008 18 19. Grounded in Realism Determine the correct operating plan The operating plan is where all the ambitions and the constraints ofthe company (and each department) come together It is a battle for resources Determine the most important corporate priorities andeach department priority Determine a realistic / honest revenue number Iit will most certainly be less than the sum of the individualquotas This is called an over-assign ( we did 20%)Copyright M. Leslie 200819 20. Grounded in Realism Set each of the operating function expenses at aproportional share of the revenue dollar This will tighten expenses, drive up productivity Iterate through the negotiations to an agreed upon plan Which needs to be eminently achievable Copyright M. Leslie 2008 20 21. A Little Review - Do the Math Startwith realistic number Over-assign the goals by 20% (The total of the SR goals is equal to 120% ofthe corporate number) 70% + of the sales force makes their goal Guess what happens Copyright M. Leslie 200821 22. Trusted Relationships How do you get the honest number?The highest possible number that you are certain you will make.Anything less will inhibit our investment in the future of the business. Build and maintain a high-trust relationship with the EVP ofSales To engender trust, you have to trust first Break the cycle of gaming the system Incent the VP Sales on corporate results (EPS?) instead of revenue or contribution margin (And with a lot of stock) Copyright M. Leslie 2008 22 23. Leadership Looking beyond Sales Create a high trust environment with and betweenthe entire management team The aura of trust, and the transparency of stylespreads throughout the company Pervasively diminishing the gaming of the system andpolitics Enlisting the energies and talents of the employeepopulation in the mission of the company Above the mission of self And The Virtuous Cycle Continues Copyright M. Leslie 200823 24. Some words to live by: 25. Regret for the things we did can betempered by time; it is regret for the things we did not do that is inconsolable.Sidney J. Harris (191786) 26. If you want a friend Buy a dogROXIE Copyright: Mark Leslie 200726 27. The Virtuous CycleExceed Revenue ExpectationsGrow the companyExceed Profit ExpectationsIncrease Stock Price Increase Stock Multiples Copyright M. Leslie 200827 28. Leadership and the Virtuous CycleOr How I Made 40 Quarters in a Rowmark lesliemleslie@leslieventures.com 650/561-1228