An Epidemic Of Failing To Manage Growth

28 Jul 2010 Sandeep Mehta

The article An Epidemic Of Failing To Manage Growth in suggests that lot of the ill that befell companies like Toyota, Dell,  BP was because they grew too fast and did not manage growth because they were too profit driven.

Their chief executives appear to have unquestioningly accepted the Wall Street axiom that growth is the greatest corporate goal. Growth is always good, we hear. Bigger is always better. Companies either grow or die, and public companies must show ever increasing quarterly earnings.

The solution, according to the author is to manage risks from growth:

1. Conduct an annual growth risks audit as part of its budgeting and strategy processes. The audit’s results should be disseminated to all managers, so they can be sensitive and alert to early warning signals. Leaders must constantly convey what cannot be compromised by growth.
2. Have business unit leaders create independent cross-functional teams that report directly to them and are responsible for monitoring the risks of growth and implementing risk management and mitigation plans, which should take effect when predetermined alarms are activated. These teams cannot have conflicting responsibilities and should not be responsible for producing growth. The teams must be measured and rewarded for managing the risks of growth.
3. Base a meaningful percentage of the compensation of all senior leaders and management on successfully managing the risks of growth.

I am not sure I agree.  The problem is not really growing too fast – it is that there are no processes and tools to manage the type and volume of work that needs to be performed.  In fact, growth might actually be required to survive in many industries.

For example, for an R&D driven firm, how does one “manage the risk of growth?” Does one slow down product development?  If that happens, the firm might loose competitive positioning.

Does one address smaller market niches?  This is difficult to do in a product platform driven world. Most companies have learned to target the top niche first and then use the platform to cover a broader range of lower-end markets.  Just look at most cell phone providers like HTC or computer providers like Dell.  They all come out with high-end models at high prices and then migrate the technology to lower-end models.  So, the company rarely has a choice to slow down R&D.  If that is the case, what will growth audits do?

A better solution would be to invest in risk management processes and tools that identify and address risks introduced through increasing pace of R&D.

What do you think?

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