What It Takes To Be A Strategic High Growth Company
In our experience in working with large and small companies, we recognized that a key metric for a high growth company includes an increase of revenue in double digits on an ongoing year to year basis. That is why it is called a “high growth company,” the double digit growth does not occur in just one fiscal year.
It is driven by the CEO of the company who establishes the high growth objectives and metrics but the overriding factor was one that is more profound than that. The real key to achieving the ongoing double digit growth occurred when a CEO moved the entire company into a Strategic Management environment from an Operational Management one.
Operational Management can be a very successful style of management, and most companies of all sizes utilize operational management, probably 85% of all companies. It is not considered High Growth. Its growth is best described as “organic growth” each year that equates from +2% to +9% annual growth in revenue, and 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 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
We noticed an interesting pattern among a group of really successful CEOs with their high growth companies. Ongoing they were consistently achieving greater growth than organic and their organizations appeared to be having more enjoyment in doing so.
As our analysis of one pattern led to another we began to understand the dynamics of their high growth. We recognized a high degree of teamwork which permeated the organization, particularly at lower levels, and we found that their customers also appreciated working with these companies which in turn fueled further growth.
After several years identifying other patterns in high growth companies, we determined that there is a clear correlation between revenue growth and the manner in which they utilize strategy with operations. We could see that the environment of their management style was to augment operational management with strategy, and we call this Strategic Management.
Characteristics of a strategic managed company are strategic growth in double digits; managed revenue and profits on a 3-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.
Here is the basis of our findings:
The Role of the CEO/President is Crucial
There is no line manager role higher in authority in a company than the CEO or President. With large business the CEO role is the highest; with small business it depends whether the founder has transitioned to a CEO role but is not totally active operationally within the company. In that situation the President is the highest role. Either way the highest level position within the going concern that is fully on the job is the highest position of authority, and 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. The CEO takes on the added accountability of Strategic Management, and to achieve consistent high growth spends almost 100% of his or her time in that capacity.
When strategic high 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.
Based upon the size of the company, the CEO’s role is crucial to strategic management because he or she has the ultimate authority to approve the larger game changer events which are required to be planned and executed by the strategic executives. If he’s spending any significant amount of his 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 SME companies less than $10.0 million in revenue, where the CEO or President 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 child in the business.
Double digit growth only occurs when the strategic side of the business is driven by the highest executive and that takes a transformation of the normal method of operation. The CEO in any company cannot do this without being a strong advocate for the two most important Axioms of Success, accountability and metrics.
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.
A Long Term Plan With Annual Game Changer Events
Most of the double digit growth at these high-growth companies was accomplished by the CEO and strategic executives by combining organic growth with growth that occurred from a strategic use of game changer events on an annual basis. This always provided double digit growth, and we called it Strategic Growth.
This means that long term ‘game changer events” were planned in the future with action plans having executive accountability such that as organic growth of single digits occurred in the operational fiscal year there was simultaneous added growth occurring from implementing the game changers which accompanied that organic growth.
This provides a total of double digit strategic growth.
Summary of the Nuances of Strategic Management Growth
Size is not a factor.Whenever I hear a CEO or an executive say, “we are too small to implement Strategic Management” it is obvious that they like the operational organic growth of single digits. There is no size factor in moving to a 3-year Strategic Plan with game changer events, no matter what size of company you are because you do not stop utilizing operational management techniques every fiscal year.
Game Changer Events are commonplace.Nothing about implementing Strategic Management is uncommon to your company and your current executive staff. Game changers consistently occur at all companies but in Strategic Management the game changer events are formally planned in a strategic plan.
Strategy is not adjunct to operational management; It augments it.. Strategic Management allows your operational executives and managers to make solid decisions based upon the strategy of the CEO. Operations is augmented by a formal plan with game changer events that is forward looking.
Transform your organization, don’t restructure it.There should be little resistance to change as when a company undertakes a restructuring of departments and personnel. Transforming current core processes to include decision making on critical issues moving to lower levels is the only transformation that will receive very positive employee feedback.
Accountability and Metrics are important for success.The authority and metric which accompany accountability will allow every employee to become a decision maker on important issues. It will also breed leadership managers as the company grows in double digits.