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JULY 21, 2003
By David Liss Management by the Numbers "You can't manage what you don't measure," says Symantec CEO John Thompson, who explains why certain metrics are vital "Ask the CEO" reader Michael Perla of Powder Springs, Ga., submitted this question: "If you could only monitor five metrics to run/steer your business, what would they be and why?" I posed the question to John W. Thompson, chairman and CEO of Symantec (SYMC ), a Cupertino (Calif.) Internet security outfit that makes antivirus and firewall technology. Since Thompson joined Symantec as top exec in April, 1999, revenues have more than doubled, from $632 million to $1.4 billion in 2003. The company hasn't missed an earnings projection in the last two years. Below are edited excerpts from his responses, culled from our conversation: Q: So what would be your critical metrics and why? A: Let's define what metrics are: They're vectors for how you are performing now but also indicators for how you'll do in the future. Here are five critical metrics I use to manage Symantec. Customer satisfaction: We use an outside firm to poll customers on a continuous basis to determine their satisfaction with our products and services. This needs to be an anonymous relationship -- a conversation between our pollster and our customers. Polling is done by product area: firewall, antivirus, services, and other product lines. (Thompson declined to name the pollster.) Market share: We look at this a couple of ways. We have our own views based on relevant markets. Then we use industry analysts such as Gartner, IDC, and Giga as benchmarks for annualized results on market share. On a quarterly basis, we look at our revenue performance and growth rates, and that of our competitors. We compare against actual, realized growth rates, as compared to growth rates of relevant competitors in similar segments. The objective is to get trending data. That gives us a sense of market changes and market growth. We also use a blended [rating] of analyst companies in the same space. Each industry-analyst firm counts things a bit differently, based on its methodology. The numbers don't have to be spot-on or Six-Sigma precise. Revenue growth: You have to consider if revenue is growing at a rate equal to or greater than the market rate. If you look at the antivirus market, for example, industry analysts projected growth in the high teens, while our enterprise antivirus sector grew at a rate of 32%. This indicates that we're gaining market share faster than the market growth rate for the industry. We can then assess how we had planned to grow. Did we plan to grow at 32% or less -- or more? You have to gauge your growth relative to the market for your product or service, and your own internal expectations of your performance. Expenses: It's important to always plan for how much money will have to be spent to generate a certain level of revenue. This enables you to monitor funds flow in the company. Did I plan to spend $10 or $12, and what did I get for that expense in return? The objective is to keep expenses in equilibrium to revenue generation. Earnings: Two keys to watch here -- operating margins and earnings per share (EPS). A business running efficiently is improving its operating margins. If you are efficient in your operating margins, this should produce a strong EPS, which is a strong metric that Wall Street looks at all the time. Q: What problems do tracking metrics solve for a corporation? How does maintaining metrics help you manage and steer the direction of the corporation? A: I'm a little old-fashioned -- I don't believe you can manage what you don't measure. The importance of metrics becomes more important as the enterprise grows in size and scale. Metrics also serve as an indication for the team about what you're paying attention to. If employees know you're measuring market growth and customer satisfaction, they'll pay attention to those considerations and will behave based on indicators that you, as the leader, provide to the organization. Metrics helps the team focus on what's important for an organization.
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