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JULY 21, 2003
By David Liss Management by the Numbers [Page 2 of 2] Q: To what degree is maintaining metrics also about managing expectations of different audiences: investors, Wall Street analysts, and other parties? How do you manage the expectations of these third parties and other constituent groups? A: The one that's the most interesting group to try to manage today is the expectation that investors have in our company and its performance. Our chief financial officer and I spend a lot of time on that topic. The ones investors watch most closely are revenue growth and EPS. We set expectations realistically and deliver against those expectations consistently. These considerations are at the core of how Wall Street fundamentally values a company. You have to properly set expectations and cascade those objectives down through the organization. I wouldn't want to say to Wall Street that we have revenue growth rate projections of 18% and not internalize communication of that objective to the 4,500 people that are part of the company. It would be a huge mistake if you set up different expectations for what you communicate externally and how you manage internally. You can't have a disconnect between the two. Q: Are analyst ratings and stock target pricing a metric for you? A: Candidly, they're not a consideration for us. I manage Symantec. I can't manage Wall Street's view, its interpretation of Symantec's performance. We set goals and communicate what these goals are, both internally and externally. Wall Street will make intimations of whether they like that or not. Q: Are there differences between metrics that should be monitored for a public company vs. a private company? A: I don't think so. By and large, every private company has a desire to become public or be acquired by a public company. I am on the board of a private company now. We manage that company just like any public company, to the extent that if we ever decided to take the company public, we don't have to change the management metrics, approach, or management structure to meet the new constituency requirements for reporting. Q: How should companies consider industry-specific metrics versus broad financial metrics: p-e ratio, etc? A: This is an issue for all of us. I'm on the board of a utility company. It has achieved modest single-digit revenue growth. They're quite proud of that, while I would be quite concerned if that were to be the growth rate for a software firm. For example: An important consideration may be what you're sending in R&D in comparison to your peer group. Or, for a software firm, what is the license revenue mix? I couldn't care less about the performance of Symantec relative to that of a financial-services company. But I would care about the performance of Symantec in comparison with an enterprise software company or with another securities software firm. Whatever measures you choose should give you the ability to measure your performance against like-industry companies. Q: How about time frame? How would you contrast metrics that measure progress on a six-month, one-year, three-year, or five-year basis? A: We look at the same metrics but have different growth expectations for each area. There are different operating margin expectations for each. You have to apply the right metrics in the way that reflects how you are choosing to manage the business and the performance expectations. Goals and targets must match expectations. I set expectations for the company overall and for each operating unit of the company. The total should equal the expectation for the entire company. Q: What do other CEOs need to keep in mind as they consider/reevaluate the use of metrics for their companies? A: Live by the adage that you can't manage what you can't measure. The best metrics are simple to understand, simple to communicate, and relatively easy for everyone to get access to the data that represents the results. That makes your metrics an effective management tool. If you make your metrics difficult to gather, manage, or communicate, they won't be effective. Simplicity is key. My experience has proven to me the importance of picking the few metrics that are the most critical for running the business. Stick with them -- and communicate them to both internal and external audiences. You don't change these metrics regardless of the whimsical views of Wall Street or the problem du jour. You have to pick the most important metrics and manage to this set standard. At the same time, you have to continually evaluate as the business changes over time to ensure that your metrics remain relevant. I would argue that all good leaders do this. What would you like to Ask the CEO? Please submit your questions to Ask the CEO
 Liss is a contributing correspondent for BusinessWeek Online. His background includes six years as a management consultant and as a legislative aide on Capitol Hill. He has a master's degree in public administration from Columbia University Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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