The Ninety-Day Sprint

{Q} What was Wall Street looking for?

{A} Sustained growth and profitability, and a strategy that will keep the momentum. Wall Street pays you for future value even though all the measurements focus on actual achieved financial performance. In the software industry, those indicators are license fees. In 2000, PeopleSoft reported record revenues and profits, yet their stock took a 20 percent hit. The reason was because their license fees were down, and Wall Street believed that overall revenue would eventually fall short. So from my perspective, it’s about revenue, profit, strategy, and execution.

{Q} What was the biggest lesson you learned when Lawson went from a private company to a publicly held company?

{A} We had to become much more focused on quarter-to-quarter profitability than we had been in the past, when we could take a much longer view. We didn’t sacrifice our long-term view, but the intensity level in terms of providing guidance to Wall Street and figuring out how we were going to beat it was a real cultural change.

{Q} What was the pressure like to hit the guidance each quarter?

{A} Every CEO knows that you can cut your way to short-term success—that’s really not that difficult. You can cut back on employees, R&D, marketing, and other expenses. But you always have to ask, ‘What’s the long-term impact of those short-term decisions?’ We had to do some significant cutbacks when the industry softened in 2003 and 2004, but we also continued to make investments in long-term growth—and those have paid off for Lawson.

{Q} What about Wall Street’s view of a CEO’s responsibility to the community?

{A} You have a responsibility to help your community in some way, shape, or form. I first thought it was all about running the business, getting customers and achieving growth and profitability. I didn’t really know what the community role was all about until I got involved with it. We had some great people helping us with a program we called ‘Lawson Lends a Hand.’ Employees loved being part of it. I don’t think you can measure that in terms of dollars and cents. And quite frankly, Wall Street couldn’t care less about it. But it is important to employees and customers—which affects performance greatly.

{Q} Do you think Wall Street is good for business?

{A} I think Wall Street is the best and worst thing for business. I think it’s survival of the fittest, at its best or worst. It forces you to be lean and mean, to constantly focus on strategy and to constantly focus on sustainable revenue growth and profitability. On the negative side, Wall Street has no real soul, so that if you’re cutting employees as a byproduct of that, so be it.

{Q} Are there some misconceptions about how the Wall Street game is played?

{A} It is very serious, but it’s really a game—they’re looking to see who can perform better than somebody else. Wall Street rewards you for the future value of your organization. They penalize you brutally when you miss. The reason they penalize you brutally is because they’ve already made an investment in what your future value is. Another myth is that there is just one Wall Street. Not true. There are multiple funds, multiple players, and multiple objectives, which makes it very, very interesting.