25/11/2009

By Andrew Lester

The purpose of growth is not so obvious. Sure most people can give you the pat answers: it makes us bigger and bigger is better, it helps us lower fixed costs as a proportion of total cost, it makes more money...... but the purpose of growth goes way beyond these answers. In truth the real purpose of growth is to provide better shareholder returns than other companies in your sector so that the business is worth disproportionately more and benefits from the “halo” effect that successful growth brings with it.

Managed sustainable growth is of itself a key driver of the vibrancy of an organisation. It demonstrates vigour, a drive for improvement and a business culture that continually strives to improve customer value and shareholder returns. In doing so it also attracts a great many other benefits that are more difficult to quantify but which materially differentiate successful growth businesses from others.

Growth therefore has additional purposes for the organisation beyond simply improving revenues. Here are some examples:

Positive Stress — we all know the difference between negative stress and positive stress. Too many organisations have plenty of negative stress and hardly any positive stress. Growth provides huge benefits to organisations in driving opportunities for employees to shine and feel valued.

Employee Motivation and Development — business growth requires new skills and competencies of existing employees. Beyond the natural concern over “change”, most employees relish the opportunity to develop their own skills and are highly motivated by working on new “stuff” as well as the existing business. Managed sustainable growth needs input and support from everyone in the business: increasing the opportunity for everyone to see that their ideas and input is taken seriously and used to good effect.

Organisation culture — growth is a key element of generating a “winning workplace” and supports what every employee wants: to be a valued member of a winning team with an important purpose (looking after existing customers and building new business for the future). These organisations are great places to work, they attract the best and retain the best, consistently over time. Suppliers and customers — everyone wants to work with “winners” and winners are defined by companies that grow continually. Growing companies attract more and better customers who appreciate the value they get.

Growing companies also provide better routes to market for suppliers looking to develop long term sustainable (and mutually beneficial) relationships with intermediaries and end customers. Think simply: who would you rather be supplying customers who demonstrate sustainable growth or those that don’t.

The “halo” effects of sustainable growth are powerful generators of company wealth. They provide resilience in recessions and assets for that are difficult for competitors to copy quickly.

Please feel free to email me to comment or ask questions: andrewlester@carr-michael.com.


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