That heading title seems self-evident, right? Of course, a business owner wants to generate as much revenue as he or she can, which will, hopefully, lead to higher profit. Moreover, our capitalistic system practically demands growth. The objective is always to make more money – especially since companies typically invest ahead of growth, in terms of supplies, equipment, facilities, personnel and so forth.
When that investment fails to pay off, when growth does not occur, the beginnings of a death spiral quickly become apparent. Low growth means that rising costs eat into constant levels of revenue and that profits decline. Less profit means less capital available to reinvest, which, in turn, means less product innovation and expansion. Generally, the operation continues to contract, unless the company is bought or infused with more outside cash in an attempt to keep it operating.
Growth, however, isn’t just important for the above reasons. In fact, many would argue, that financial considerations are the second most important reason that a company should keep expanding.
The most important reason? Growth keeps the company culture energized.
Yes, it’s an intangible, but it’s a critical intangible. Growth creates jobs, generates excitement, and confirms the vision and the passion with which the company was created in the first place. When a company is on the upswing, it gives everyone in the organization a sense and an understanding that the company has merit and worth. Everyone loves being part of a winning operation – it creates an overall affirmative mindset. That mindset causes employees to believe they can make things happen – and they generally do.
On the other hand, a company that’s struggling for growth can make you feel as if you’re attending a funeral that’s only lacking a corpse. The difference is like night and day – most have witnessed. Like attending a meeting and being met with a “what’s-the-use” attitude that can instantly negates any constructive advice and reachable goals we’re ready to provide. The management seems to be going through the motions, because they feel obligated to try and do something – but the real motivation to turn things around left the building a long time before we entered it.
A good example can be seen at this large professional association. Most of the top jobs at this association were clearly the result of entitlements, not merit, and the underlying profession was one that virtually guaranteed a very comfortable income. The elephant in the room was a looming, very large and obvious approaching threat to that income stream. This time, no one actually fell asleep during my presentation – but I could also could not see, feel or hear any sense of urgency about dealing with a troubling outlook.
And let’s face it, for almost any business operating today, there are plenty of reasons to be concerned about the future. Information is widely shared and available, causing competition to be even fiercer to the point of being cut-throat, and to come from a wider geography. At the same time, because of the difficult economy, customers are trying every which way to limit any price increases. The competitive base keeps growing and provides cheaper alternatives to domestic products. And mature industries in this country suddenly find themselves competing against every other country in the world – most of which have fewer costly regulations, flexible or illegal trade policies and much cheaper labor pools.
These challenges, however, can be met and overcome, by researching and recommending alternative paths to maintain profitability. An outside voice, however, can only do so much. Company management is obviously behind the wheel and must steer the business in the correct direction. That the company ends up not on the road to success, but, instead, stuck in a ditch by the side of that road, is mainly due to three distinct problems with that management.
- A strong Strategy, but weak execution
- Strong execution, but a weak strategy
The diagram below holds the keys to both good management – and bad.