The 3 Financial Styles of Very Successful Leadership: Strategic Approaches to Identifying the Growth Drivers of Every Company

Citation

Steinbuch, P. (2010), "The 3 Financial Styles of Very Successful Leadership: Strategic Approaches to Identifying the Growth Drivers of Every Company", Leadership & Organization Development Journal, Vol. 31 No. 2, pp. 188-191. https://doi.org/10.1108/01437731011024448

In The 3 Financial Styles of Very Successful Leadership, E. Ted Prince presents the concept of the “financial signature”, as essential explanatory variable in predicting a CEO's (and other company leaders) influences on his/her firm's performance. Prince bases the book on his proprietary Perth Leadership Outcome Model (PLOM). The PLOM is outcomes based and determines a leader's success as a function of increased shareholder value.

Prince suggests that all leaders have a financial signature, which manifests itself in their actions and behavior. Although some experienced leaders recognize their innate financial signature, many are unaware. This lack of awareness can often lead to divergence between the company's needs and the decisions made. Prince equates the effect of financial signature on financial decisions just as a leader's personality affects their leadership style.

Although there is an enormous amount of literature on the topic of leadership, the author presents an interesting and valuable addition to current thought. By examining a leader's “financial signature”, Prince suggests boards will have a more accurate approach to selecting senior executives with financial styles appropriately matched to the company's needs and mission. Prince's research shows that a leader's financial signature has the most predictive value for a company's success or failure than any other corporate or external factors. Prince provides a new and innovative tool for senior executive selection.

The book contains 15 chapters, as well as an appendix with an illustrative financial signature self‐assessment. At the end of every chapter is a self‐development exercise on the concepts presented.

Chapter 1 identifies two characteristics of financial style, which forms the core of a leader's financial signature: Resource utilization (how the leader spends) and value added (the degree to which a leader seeks to add value to the company's product/service offerings). He illustrates the link between financial traits and organizational value by showing the individual financial approaches of three leaders (Rupert Murdoch, Robert Maxwell, and Ted Turner) and their effect on their company's outcome. Prince categorizes a leader's resource utilization approach as either low (frugal) or high (extravagant) and their approach to value adding as either low (bare bones) or high (rich).

In chapter 2, Prince discusses the four financial traits, frugal, extravagant, barebones or rich in more detail and provides some case studies for illustration. Prince demonstrates throughout the book how the different combinations of these traits affect the performance of a company. Specifically, Prince measures financial signatures by using gross margin as a measure of a leader's value adding propensity and expenses as a proportion of revenue as an indicator of a leader's resource utilization.

Chapter 3 describes nine financial missions or categories in which to group similarly minded leaders:

1. 1.

   Venture capitalist.

2. 2.

   Profiteer.

3. 3.

   Buccaneer.

4. 4.

   Conglomerator.

5. 5.

   Consolidator.

6. 6.

   Arbitrageur.

7. 7.

   Mercantilist.

8. 8.

   Trader.

9. 9.

   Discounter.

Each of these nine financial missions show the nine different ways in which a company can create value. He concludes by explaining the difference in financial signature and financial mission. In the last chapter of Part 1, the nine financial missions' a CEO can follow are grouped into three major financial styles: Surplus, Deficit, and Puzzler. Prince shows how these basic financial styles affect the long‐term performance and profitability of a company.

Part 2 of the book, chapters 5‐9, discuss the financial mission's effect on a firm, aligning the financial mission with the firm, how a financial mission evolves, assessing one's financial signature and strategies for improving a firm's financial performance. The author discusses how a financial mission will affect sales, operations and products in distinct ways and how a successful leader leader's financial missions evolve to represent their firm's financial needs. Chapter 9 concludes this section by showing how the improvement of a firm's profitability can be achieved by assessing the financial mission of the company's leadership, personalizing development programs based on the leader's financial mission and matching the mission of the leadership team with the company's strategy and external environment.

Part Three of the book contains three chapters. In Chapter 10, Prince discusses and classifies nine market value trajectories that can be used to categorize a firm's market value. By then assessing the market value of a company relative to others in the same industry, the effect of the leaders with different financial signatures can be compared. In Chapter 11, the author demonstrates that the market value trajectory associated with each of the nine different financial missions is determined by the earnings gap. In Chapter 12, Price demonstrates that the financial mission drives certain leaders to lead companies at different phases of their evolution. He underscores the importance of fitting financial mission with market type.

In Part 4 of the book, the author organizes the chapters around the theme of Leadership and market value. In Chapter 13, four types of teams and partnerships are described: Surplus, Deficit, and Puzzler and Conflicted types. Each of these has a characteristic effect on a company's market value. Chapter 14 offers a practical approach to uncovering a leader's financial signature. The final chapter discusses identifying the firm's target market value and aligning it with the financial mission of the CEO and leadership team.

In the The 3 Financial Styles of Very Successful Leaders, author E. Ted Prince does an excellent job of presenting an innovative approach to understanding the impact of a leader on a firm's success and a novel contribution to the existing body of literature on leadership. The concepts are well presented and comprehensive. The incorporation of cases and illustrative examples makes this book relevant to both academics and those interested in a practical paradigm for understanding leadership success. It is an invaluable resource for CEOs, executives, and senior staff who want to better develop their leadership abilities. It is particularly relevant for Boards in developing an insightful understanding of and approach to leadership selection. The book is also an excellent text for business students as well as those who are simply interested in learning more about the field of leadership. By including self‐development exercises, the author enables the theoretical foundation of his work to be easily translated into a practical guide for use by many.

E. Ted Prince tackles a complex subject and translates his findings into a very cogent and clear presentation. I highly recommend The 3 Financial Styles of Very Successful Leaders. The author's innovate approach contributes greatly to understanding the drivers of successful leadership.