MELIORA – Ever Better

To Our Clients: 

The two of us spend much of our waking hours working in the trenches with our teams to help best execute the important business you entrust to Jefferies each day, but we, like many of you, are first and foremost “operators” of our business. As “operators” we all face the constant pressures to broaden our respective platforms, gain market share, achieve economies of scale and, for lack of a better expression, “get bigger.” For a few hours last week, we paused and tried to reflect on what was now most important for our long term success. What follows is a note we just sent to our 3,885 employee-partners around the globe reflecting our conclusion. Our most valuable assets at Jefferies are our people and, as we “operate” our firm, we need to enlist their help, support and “buy in” to achieve every goal. Since, whether you are leading a company or a team of investors, you are all “operators” yourselves, we thought we would share with you our recent note both so that you can understand real-time the focus of your partners here at Jefferies and also in the hope that you may find some of these thoughts helpful or useful as you “operate” your respective business.

Thank you for your continued trust and confidence,

Rich and Brian

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To: Jefferies’ 3,885 Employee-Partners
Date: October 1, 2014

Subject: MELIORA − Ever Better

With the support of our clients, we at Jefferies have been working a very long time to build our firm into a larger, stronger and broader business. In 1990, we had a small fraction of our current employee-partners generating a whopping $7 million of global net income and we were rightfully proud. In 1999, our investment banking revenues miraculously reached $81 million and we thought there was no way we could ever repeat, let alone beat, that number. In 2005, we were incredibly pleased when our fixed income revenues totaled $179 million.

In the twelve months ended August 31 this year, 3,885 Jefferies employee-partners around the globe collectively have generated $3.4 billion in net revenues and $593 million of pre-tax earnings. In equities, fixed income, commodities and currencies, we broke through $1.75 billion in net revenues and our investment banking efforts generated over $1.6 billion. Jefferies Finance’s revenues were over $225 million for the same twelve month period. To put our investment banking franchise in perspective, our revenues approximate what DLJ recorded at its peak before its year 2000 merger, are nearly twice the size of those of the once mighty Salomon Brothers at its peak and are larger than those of Bear Stearns at its peak in 2007. We have worked long and hard to make our capital base as significant and broad as possible, to grow organically and through selective acquisitions and hires, and to distance ourselves from the rest of the once crowded field of investment banking and securities firms.

While growth is wonderful and we will never stop working our hardest to try to continue to build Jefferies, we think this is a good time to transition to an even more important goal that we should all individually and collectively strive to achieve. Our watchword for today, tomorrow, the balance of our fourth quarter and for years to come is “BETTER.” From years ago, when the need was MORE resources and MORE capabilities, to more recent years, when we all talked of a BIGGER firm and BIGGER results, the need now is for us to be BETTER, to act BETTER, to deliver BETTER and to win BETTER.
Why have we chosen BETTER? We believe a BETTER Jefferies is the logical next step after MORE and BIGGER. Over decades, we have built and attracted the resources and capabilities we need. We developed and grew to critical mass across the board, and indeed across oceans and continents. Today, we offer our clients the highest quality people and capabilities globally. That is a foundation we have laid over many years. Now it is time for each of us to consistently deliver the highest level in everything we do, so that we ultimately are recognized as the BEST firm providing ideas and execution to capital markets investors and issuers globally. For us to take our firm to the next level, it isn’t about the next big hire or an acquisition; it is all about each of us squeezing out the absolute maximum from every single resource across Jefferies, and pushing ourselves to do an even BETTER job for our clients than we have ever done before. While maintaining our culture of decency and humility, we all can feel the momentum toward the possibility of being “the” Wall Street/City firm of the 21st Century. Yet, we will remain a firm that will never lose our hunger to be ever BETTER.

BETTER will particularly describe the quality of everything we will do going forward for our clients and for ourselves. BETTER quality will derive from BETTER teamwork, BETTER focus on priorities and BETTER behavior in all respects. The two of us hugely believe we are surrounded by a team of leaders that make our job the easiest it has ever been, but then again, even each of them can do BETTER. Our troops on the ground delivering each day for our clients are the best we have ever worked with, but which of you couldn’t do just a little BETTER? It goes without saying (and don’t doubt for a second that the two of us are our own harshest critics), that the two of us have many ways we can be BETTER and we will do our best to improve every day.

2015 will see us roll out an ever increasing level of training for everyone at Jefferies. We will focus on each of us as individuals, on the teams we are each part of every day and on our firm as a whole. Jefferies University will do a BETTER job of giving each of us the opportunity to learn about ourselves, our partners and our firm, so that we can each do a BETTER job for our clients and for Jefferies.

We intend to revamp our performance review efforts to focus on how we can help each of us get BETTER. Our reviews will focus on the future and not the past, with an emphasis on what we are doing right and thus should continue on the same path, as well as a focus on where we can each do BETTER. If improving ourselves as individuals and collectively is our priority, we will get BETTER rapidly, just as we achieved MORE and BIGGER in record time.

Finally, as we said two weeks ago in our Town Hall, we must behave even BETTER. We implore you to take care of your and our health in every way. Please don’t miss your annual physical and please do take the few minutes required to complete your health assessment. Each of us is precious to others and should be handled with care. Similarly, please be mindful of all of our legal and ethical obligations to our clients and to all other constituencies with whom we work. Please don’t cut a corner or even go near a corner. If you see or hear something that could bring risk or repercussions to any one of us or to all of us, please elevate it immediately. We are protecting ourselves and our families from real harm.

A BETTER effort will yield a BETTER firm with a BETTER long-term business and an even BETTER opportunity for all of us.

Looking forward to an ever BETTER Jefferies,

Rich and Brian

P.S., In case you were wondering, Meliora is Latin and means “better.” According to Wikipedia, “It may be used in the accusative and substantively (i.e., as a noun) to mean “better things”, “always better”, “ever better”, or, more fully, “for the pursuit of the better”.” And lest you wonder where we found this wonderful word, it is also the motto of the University of Rochester, which was very kind to one of us many years ago, and is translated as “ever better” or “always better” by the University. MELIORA.