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Business Stocks

Expectations

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In the stock market there is a thing called “earning”, basically it’s how much money a company made for each share of the stock. The higher the earning, the better for share holders (company owners). But the stock price does not necessarily hold a linear relationship with the earning. Why? Because there is another thing called “street estimate” or “estimated earning”. It’s the Wall Street’s expectation of company’s earning. If the company’s actual earning meets (or beats) “street estimate”, the stock will go higher; otherwise the stock will be punished. The latest example is Google. It dropped sharply after the 2006 Q1 earning report.

I think same rule can applied to the work place. I got this idea partially from Jack Welch’s (former CEO of General Electric) book “Winning”. Recently I reinforced this idea from my own experience and observations. In the work place there are expectations from the boss, the coworkers and (sometimes) customers. If we just work hard enough to meet the expectation, we will keep the job. But if we work much harder or smarter, and make our bosses looking good, we will get reward or promotion. On the other hand, if we miss the expectation from our boss without a good explaination, we know what will happen.

Some companies such as Cisco and Intel learned this from experience and they got good at this. Basically they set the quarterly earning estimate such that they can beat it by a penny most of the time. By doing this they won’t disappoint the Wall Street and their stock prices are more stable.

As employee I think we should/could also manage the expectations. Maybe not the same trick used by Cisco and Intel. But we could follow the principle when we estimate the effort of our projects (time, resource).

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