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A Green Light For Growth

After a short, but well-publicized hiatus, growth is back-for an unlimited engagement-on the agendas of most top executives.

No more hand-wringing. No more complaining. No more whining about the continuing and inevitable shrinkage of American business. That’s old news. Today’s banner headline: Growth is back.

That’s the message conveyed loud and clear by an overwhelming majority of the 885 top executives who responded to a recent Chief Executive/Deloitte & Touche LLP poll. Having had a taste of growth during the last three years, these executives are hungering for more, setting their corporate tables with the cultural attributes they’ve deemed necessary for growth, and investing in the utensils-people, capital, R&D that will allow that growth to multiply.


While the average annual growth rate of 2.2 percent in GDP since 1990 is below the 3.2 percent rate historically, fully 40 percent of respondents indicated that their companies have experienced an annual growth rate of more than 6 percent over the past three years. An additional 28 percent report annual growth between 3 percent and 6 percent. For 75 percent of respondents, the growth they achieved during this period met or exceeded their objectives. And despite the national trend of slow growth, these CEOs clearly believe there’s more growth opportunity yet to be realized.

For the majority of respondents, growth has been recorded predominantly in financial terms-corporate income and net assets. But significant gains also have been made in profitability, technology investments, market share, and the size of the customer base (R&D investments also grew, but at a markedly slower rate).

As Thomas L. Doorley Ill, founder and senior partner of Braxton Associates, the global strategy-consulting arm of Deloitte & Touche Consulting Group, points out, “Because CEOs now understand that high-growth companies achieve sharply higher performance everywhere that matters-returns to investors, new product innovations, employee satisfaction, job creation, for instance-it follows that growth should leap to the top of their strategic priorities.”


Whether it was seeing that growth could be accomplished that deepened the commitment, or the commitment that fostered the growth is unclear. But, regardless of the source, growth is in full swing, and respondents have lined up behind it. While the majority of respondents believe growth is riskier today than it was three years ago, and while some 70 percent say they wouldn’t sacrifice the bottom line for top-line growth, nearly three-quarters of respondents say growth is near the top of their companies’ list of goals (19 percent claim it’s No.1). And 89 percent say the consensus in their companies is firmly in growth’s camp.

But they still have work to do to make growth happen. For while there is general agreement about what it takes to achieve long-term sustainable growth (focus on the customer, a clear corporate vision, as well as quality people and products), only three or four of every 10 respondents felt his or her company had the cultural attributes in place to make it happen. Critically, only 30 percent of respondents believe their companies have efficient, growth-supporting processes; only 34 percent feel they currently are well-organized to capture growth; and only 40 percent contend they have a highly growth-oriented leadership.

To Doorley, this is a natural result of how quickly growth has come to the fore. “CEOs simply haven’t had time to prepare their companies to grow,” he says.

For those companies, however, that are most energetically and optimistically anticipating growth, cultural progress has advanced considerably. Companies expecting more than 20 percent growth over the next four years claim growth orientation at a rate that is about 10 percent higher across the board; 54 percent, for example, boast a growth-oriented culture, versus a mere 10 percent for their slow-growth counterparts.


Expectations of greater gain appear to be the outgrowth of both experience and investment. While 93 percent of companies that expect to grow by more than 20 percent during the next four years grew during the last three years, only 54 percent of those companies that expect less than 5 percent growth in the next four years have grown at all since 1993; 23 percent of these companies, in fact, have seen company revenue decrease.

Similarly, the least optimistic of respondents report considerably greater losses in market share, profitability, customer base, and net assets over the last three years than do those respondents anticipating greater growth.

But whether influenced by dire circumstances or corporate culture, those respondents who anticipate limited growth also invested less during the last three years in such growth-producing attributes as capital, research and development, and personnel. For example, only 38 percent of the least optimistic companies increased their capital investment over the last three years, compared with 73 percent at the most optimistic companies; and 20 percent of the least optimistic respondents actually decreased their capital investment, while only 4 percent of the most optimistic companies report capital investment shrinkages. Similarly, while 27 percent of the least optimistic companies report growth in headcount during the last three years, 39 percent report a decrease. This compares with a headcount increase of 72 percent at the most optimistic companies and a decrease at only 12 percent. (The vast majority of respondents, by the way, believe that growth and downsizing are in no way opposing forces, stating that, contrary to conventional wisdom, growing and pruning can be pursued simultaneously.)


What’s fueled all this growth? While respondents acknowledge the impact of industry consolidation, global expansion, and mergers and acquisitions, they feel strongly-regardless of future growth expectations-that the key drivers were customer retention, quality, new product or service development, market demand, and productivity. The only significant variations to this list are industry-related: Manufacturers cite the keen importance of technology; respondents in the financial-services industry believe culture was key. This list clearly corresponds with the litany of qualities respondents believe corporations must have to foster growth: customer focus, common vision, experienced workers, and quality products.

When growth was impeded, respondents say, there were a number of barriers standing in the way, including culture, technology, and productivity. But at the forefront, most clearly blocking growth, was increased, tougher competition, followed by slackened market demand, faulty internal processes, and, to a more limited extent, a lack of skilled workers. Events derailing growth, respondents say, were primarily Congressional actions, economic growth, capital spending levels, mergers and acquisitions of other companies, and changes in interest rates.


In looking at their own companies, their own industries, and the corporate world at large, respondents were relatively consistent in their appraisal of where the best opportunities for growth lie.

Although some pundits look toward global expansion and increased M&A activity, respondents to this survey primarily believe they’ll achieve growth in the next four years by concentrating on developing their current markets and introducing new products and services.

In terms of industries that are primed for growth in the near term, respondents, not surprisingly, overwhelmingly named telecommunications and, to a lesser extent, computers, entertainment and media, and health care. At the bottom of the list, cited by a tiny minority of respondents as candidates for growth, were manufacturing and retail.


As they become increasingly aware of the positive impact of growth on company performance, more and more CEOs appear to be adopting growth as a senior strategic priority. The result, notes Braxton’s Doorley, is that “first mover” advantages are no longer available. “Everyone is going to their customers to describe new product/service plans,” he notes. “Many companies have programs in the design stage to expand manufacturing or distribution.” How can CEOs capture the high-performance advantages of growth in a crowded field? “Look to the attributes and habits of ‘growth winners’ and follow their lead,” advises Doorley. “In short, build and imbed a growth system to restart stalled growth engines, and sustain value-creating growth momentum.” The result: green lights all the way.

About Michael Winkleman

Michael Winkleman
Mike Winkleman is editor-in-chief and chief content officer at Chief Executive magazine.