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What’s wrong with the traditional “GAAP” accounting formula. Leadership More Human Podcast' Highlights from our chat include: Mike’s “Humbling Moment” with his daughter, and how it changed his life. Why the “Profit First” formula works with the entrepreneur’s natural behavior. How Parkinson’s Law works against business owners.
When you read about non-GAAP earnings, often one of the big costs they are excluding is the massive stock giveaways to executives. From the article (linked above), Facebook gave executives 12.8% of revenue – a total of $746,000,000 last quarter (again just in stock based compensation).
GAAP and FASB standards require financial reporting of earnings, cash flow, and profitability – all measures that investors have traditionally examined. We believe that a next step for investors is to analyze the predictors and drivers of these intangible factors, which means focusing on leadership.
When multiple players compete for the same space, revenues indicate the progress towards achieving market leadership that creates the dominant protocol for industry partners, suppliers, and customers. (In In a market like social media, a firm’s success can depend on the winner-take-all profits that come from market leadership.).
Outdated beliefs about the world can linger for decades in a leadership team. Finally, Generally Accepted Accounting Principles (GAAP) used to manage businesses and report to investors often ignore intangible assets or miscategorize them as expenses. You can take our online leadership investment style assessment).
Imagine if all manufacturers had, for example, a supply chain efficiency score, or all companies had a leadership development score. The FICO score is an excellent example; the company reduces a consumer’s complex credit history to a single three-digit score that both creditors and debtors can understand.
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