Briefings Magazine

No Room to Grow

Only a small percentage of firms are expecting even decent revenue growth. Is this their own doing?

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By: Russell Pearlman

Looking exclusively at stock prices over the last three years, you could easily assume that companies must be growing faster than weeds in spring. Just last year, the broader US stock market was up by about 25 percent.

But when it comes to business growth at most firms, it’s quite a different story. Indeed, sales growth for S&P 500 firms has been on a downward slide for almost two years. At the same time, earnings growth have declined, on average, for more than a year. Profits have fallen in the energy, materials, and healthcare sectors, while earnings for consumer-staples firms, on average, have flattened.

Certainly, there are factors that are out of a CEO’s control. The US economy is growing only gradually. Europe’s largest economy, Germany, is stagnant. And in Asia, the growth rate of China’s economy is at one of its lowest levels since the mid-1970s. Higher interest rates haven’t helped either. But experts say those issues aren’t an excuse. “Growth, no matter what metric you are pursuing, is a leadership issue,” says Scott K. Edinger, a consultant and author of the national bestseller, The Growth Leader: Strategies to Drive the Top and Bottom Lines.

Korn Ferry surveyed senior executives at nearly 600 firms across 28 countries while researching its latest World’s Most Admired Companies list. Only 14 percent of the leaders said their organizations would grow by 15 percent or more over the next two to three years. That’s far less than the 36 percent of executives who thought their firms would grow by that much when they were surveyed in 2020—and that was in the middle of the pandemic.

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Growth is, of course, the lifeblood of any company. But too often, experts say, companies are getting in their own way. In some cases, too many firms are fixated on creating a perfect, scalable product on the first try. “Nobody starts with one linear formula. They eventually discover it somewhere along the way as they trudge through,” says Ayon Banerjee, a growth-strategy expert who’s led teams across Asia for multiple industrial firms. Many senior leaders say their firms are generally too slow responding to disruptive technologies, new competitors, and changes in customer demand, observes Mark Royal, a senior client partner for Korn Ferry Advisory.

Another major problem: Companies can’t find the right people with the right skills. In the World’s Most Admired Companies survey, nearly 45 percent of leaders said that “talent and skills gaps” were one of the top barriers to growth.

To be sure, not everyone thinks growth is a problem. New business permits are up 7 percent in the US over the last year. But what do leaders of bigger firms do to push growth? For one, experts say, they need to focus on their customer service more. Customers’ perceptions of how they are treated is the second-most important criterion in making a sale or building a relationship, Edinger says—even more important than price. “It tips the scales in your favor,” he says.

Better growth can also come by focusing more on people at the company, not its tech, experts say. Eighty percent of corporate leaders tell Korn Ferry that people are more important than technology when it comes to driving growth. “Getting the right people is critical to fueling new growth,” Royal says. But that’s not always what employees understand when they see organizations throw billions at artificial-intelligence tools and cloud computing, then lay people off rather than retraining them.

Once leaders find the right employees, experts suggest they should publicly reward them. One of Banerjee’s former employers would—very publicly—give about 20 percent of workers additional responsibilities along with new titles. The announcements, Banerjee admits, sometimes created short-term spikes in jealousy, but soon everyone, promoted or not, was energized. “Growth drives us. Even someone else’s growth,” he says. “When people grow or aspire to grow, the business grows.”

 

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