It seems as though every firm and company wants to consider itself “high growth,” but only a small percentage of them actually are.
Whether you like the style of Donald Trump or not, the growth results that all of our clients are seeing now, and projecting for the coming years, is impressive and somewhat astonishing. Small business in particular does not know how to address this growth period, and accounting firms are in a similar boat. But there are companies and firms out there who have been recognizing ongoing double-digit growth in years past as well. These are the high growth juggernauts.
Even before this current growth cycle, I noticed an interesting pattern among a group of really successful CEOs with their companies. Somehow they were consistently achieving greater growth than average and their organizations appeared to be having more enjoyment in doing so. They and their executives, and their companies, had an altogether different “focus” than other CEOs and managing partners.
In analyzing one practice after another, I began to understand the dynamics of their high growth. A high degree of teamwork permeates the organization, particularly at lower levels. Their customers and clients appreciate working with these companies, which in turn fueled further growth.
After several years identifying other patterns, I have found a clear correlation between double-digit revenue growth and the manner in which they utilize strategy with operations. Here is the basis for the findings:
Focus on Executive Involvement
Most of the strategic growth at these high-growth companies was accomplished by the key executives and partners of the high growth company, while operational department managers and other partners accomplished the fiscal year organic growth.
An organization’s sales personnel were involved in the operational sale of the products and services, and they were speaking and building relationships with the purchasing agents, buyers and controllers of the customer. However, the key executives and partners of high-growth firms were the ones speaking directly and frequently with the CEO and executives of their customers.
So what makes a high-growth firm? A key metric is an increase of revenue in double digits on an ongoing year-to-year basis. That is why it is called a “high-growth.” The double-digit growth does not occur in just one fiscal year.
It is driven by the CEO and managing partner who establishes the hig- growth objectives and metrics, but the overriding factor is one that is more profound than that. The real key to achieving ongoing double-digit growth occurred when a CEO moved the entire company into a strategic management environment from an operational management mode, and became a “juggernaut force.”
Operational management, fiscal year to fiscal year, can be a very successful style of management. Most companies of all sizes utilize operational management, probably 90 percent of all companies. It is not considered high growth. Its growth is best described as “organic growth” that equates from 2 to 9 percent annual growth in revenue. There is certainly nothing wrong with that growth.
Characteristics of an operational managed company are organic growth, managed revenue on a fiscal year basis, short term in foresight, and no formal strategy. If there is a formal strategy, it does not drive the fiscal operational plan. It is an adjunct to it.
The environment for operational management is found in the management of revenue and expenses on a fiscal year basis and focuses on growing organically.
High-Growth Strategic Management Equals Strategic Growth
The focus of the really successful companies and firms of high growth was on forward-looking approaches and strategic decisions on products and services. Their management style was to augment operational management with strategy, not make it an adjunct to operations. I call this strategic management, and it is a growing trend for high growth companies.
Characteristics of a strategic managed company are strategic growth in double-digits; managed revenue and profits on a three-year ongoing basis; longer term in foresight, and a formal strategic plan that augments the operational plan.
While these are the mechanics and patterns between strategic management and operational management, we also began noticing a transformed management process with those CEOs and companies practicing strategic management.
The Role of the CEO/Managing Partner is Crucial
There is no line manager role higher in authority in a firm than the CEO or managing partner, and that role is crucial to a high growth environment.
That is because the organization must transform itself so that the CEO is still “accountable” for the operational management side of the business but is no longer the key operational decision maker. That’s a huge difference that many operational CEOs and managing partners cannot handle. The CEO takes on the added accountability of Strategic Management, and to achieve consistent high growth spends almost 100 percent of his or her time in that capacity, delegating operational decisions to lower levels.
When strategic double-digit growth does not occur within an organization, the reason is usually because the CEO has remained mired in the fiscal year operations of the company and this only achieves organic single-digit growth. If the CEO’s drive is to achieve double-digit growth ongoing, then he or she must transform his workload for both himself and his strategic executives and partners. Many CEOs don’t want to do this, or don’t know how to do this. Does the firm even have strategic partners? If not, transformation is key.
In analyzing high growth companies I also found there was no rule about the size of the company involved. Double-digit growth usually occurred with those CEOs who were implementing strategic management axioms regardless of the size of the company. So this cliché of being “too small” to implement strategic management axioms just does not hold water.
Regardless of the size of the company, the strategic CEO/managing partner role is crucial to strategic management because he or she has the ultimate authority to approve the larger game-changer events that need to be planned and executed by the strategic executives. If she is spending any significant amount of her time on other operational management activities, then the drive for double-digit growth will not happen to the degree in which it can occur.
The exception is in smaller firms with less than $10.0 million in revenue, where the CEO or managing partner must maintain some accountability for the operational decisions of the business. However even in those instances it is up to the CEO to delegate as many of those operational decisions down to a lower level person, usually a sibling, spouse or junior partner in the business.
For example, if a new piece of equipment will enhance your product offerings, then that becomes a game changer event of the strategic plan. The only person who can make that decision and approve such a transaction is the CEO, particularly in small business and family-owned businesses.
There’s a growing trend in firms and companies transforming themselves into high growth entities, from operational management to strategic management. When they do, the main benefit is ongoing double-digit growth.