Other workers like a friendly competition, so set up ways to enable that - and recognize even the small achievements. Some people like to teach, so have them (for instance) teach your company’s method for organic growth.
There are many ways to get the broader organization involved. The good news is that it’s a lot more fun than cost-cutting and - unlike M&A - it is everyone’s business. The daily business of growing organically can be a grind. The best way is to design the right dialogs and data into the management process that governs your company’s strategy and execution.Ĥ.
So can having a corporate reserve fund to help the operating units pay for organic growth. If you want your operating units to be good at growing organically, you need to create an environment that encourages it. I’ve even seen situations where a company’s language gets in the way, such as defining an “organic growth opportunity” not in terms of ends but of means (more sales people, a new CRM system, or a new product introduction, for example). Another is senior leaders typecasting their portfolio, referring to this unit as a “cash cow” and that one as a “growth engine” - unhelpful labels that result in missed opportunities (in the first case) or overly aggressive behaviors (in the second). One is surrendering to the business cycle - under-investing in the down cycle and over-investing in the up cycle. Companies sometimes have practices that subtly - but powerfully - discourage organic growth.
By the time Gillette sold itself to Procter & Gamble, Kilts had turned Gillette into an organic growth machine with far higher margins than before he took over.ģ. He instituted a policy of continuous productivity improvement, but also allowed - even encouraged - his operating units to use the savings to fuel future growth. This was essential to Jim Kilts’ turnaround of Gillette a few years ago. Better to recognize that no company is 100% efficient and that there is always a chance to fund organic growth through savings generated by efficiency gains. Encouraging companies to be more focused on the long term is not the answer. Make growth “net free.” The problem with investing in organic growth is that the costs hit the books before the revenues do, creating a tension between short-term profitability and long-term growth. This realization - which came from a headroom analysis, just one method companies can use - made the retailer more focused and dramatically reduced the number of initiatives its managers had to support. But when the retailer took a more careful look, it found that its best opportunity was to get people to buy more in the categories they were already shopping (such as apparel or electronics or groceries). Its focus was to get more people into the store (“foot traffic”) and, once in the store, to get them to shop more categories (“cross the aisle”). A few years ago, one of the world’s largest retailers had literally hundreds of initiatives going after same-store sales growth. Some senior leaders simply lean harder on their operating units, increasing their targets and demanding more growth.Īll of these approaches lead to initiatives that will never pay off - sometimes a multitude of them. A lot of companies throw money at the problem - more R&D, more marketing, more sales people. Others focus too much on their most loyal customers or, worse, on their competitors’ most loyal customers. Many chase market share they’ll never get. I am often amazed at the helter-skelter way that companies pursue organic growth. Today’s business leaders must be able to boost their organic growth in other ways. In fact, we are now experiencing the lowest-growth recovery on record, including the recovery from the Great Depression. Nor can they rely on macroeconomic growth. This preserved an indicator that has consistently pointed north since the economy emerged from recession in 2009.īut CEOs can’t rely on cost-cutting to keep their profit momentum going - it’s gone about as far as it can at most companies. companies would show no earnings growth in the early part of this year. Recent quarterly reports suggest that corporate profits rose for a 10th consecutive quarter, defying predictions that U.S. That “phew” you’re hearing is the sound of investors exhaling.
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