Responsible Growth in an Uncertain Economy

Few in the business community were reluctant to bid farewell to 2009. Most companies have taken their hits from the recession and are glad to close the books on this difficult chapter in our history. As more positive indicators appear on the horizon many business leaders have begun to shift thinking away from the recession and towards planning for growth.

The initial stages of the recovery present many opportunities, particularly for organizations that are poised to take advantage of the good times, when they roll again. The companies that will succeed are those who come out of the starting gate strong – but not so fast and furious as to make hasty strategic decisions.

The key to success this year is responsible growth – balancing the need to invest in growth with financial caution. This critical balancing act puts serious pressure on the C-suite to set the stage properly in an environment with little margin for error.

Is your organization positioned to take advantage of emerging opportunities in these uncertain times? How will you grow with the recovery?

Responsible growth in today’s economic climate requires a thoughtful approach and a laser focus on three key areas of improvement: Learning to grow “lean”.

1. Learning to grow “lean”. Do you have flexibility to pursue opportunities without incurring permanent overhead? Investing too heavily too soon could accelerate risk, and an atmosphere of persistent risk doesn’t offer room for error.

2. Developing a capital strategy married to your growth strategy. In a capital-constrained marketplace, any discussion of growth must include a pragmatic approach to capital to fund each stage of growth.

3. Building organizational insight to increase responsiveness in uncertain times. One of the lessons of the recession for many companies was that all too often, visibility into the drivers of cash flow and profits is inadequate. Management teams are often “flying blind” regarding what actions to take in order to adjust to changing market conditions.


Growing "Lean"
Any seasoned leader can cite examples of growth through aggressive investment. Consider the “.com” boom of the late 1990s, in which money was freely invested and cash “burn rates” were accepted as an investment in potentially massive future profits. The private equity boom of the 2006-2008 period was similar in spirit, often investing staggering amounts of money in order to build market share, quickly achieve a financial goal and profitably exit the investment.

Those days are over. The rules have changed, possibly forever.

In response to market imperatives since late 2008, companies from the largest to the smallest scaled back across the board. Many made cuts at lightning speed in order to survive. A December 2009 research study conducted by CFO Research Services revealed that 79% of companies reduced their workforce in 2009, and most will not reverse that action in 2010. Companies also cut back on marketing and advertising and delayed investment opportunities. Nearly half of the companies surveyed believe these actions may reduce their future prospects and expose them to greater risk.

Now that the worst of the recession appears to be behind us, businesses must determine how to proceed with strategic growth initiatives with a leaner structure – without returning to former levels of overhead spending. So what are pragmatic steps to growing lean? Two of the keys are rethinking strategic resources and intelligently using strategic partnerships.

79% of companies reduced their workforce in 2009;
84% said they were not likely to reverse those cuts in 2010.

Flexible Strategic Resources
In the example of the “.com” era, companies took an idea and immediately hired people to build it, manage it, sell it and support it. This approach ensures focus and speed, but also ensures“cash burn.” Today’s business leaders identify ideas that need to be explored and validated with a sound business strategy prior to infusing capital.

Unfortunately, the people most qualified to accomplish the vetting of ideas and the building of business strategies to capitalize on opportunities are already drowning in demands of countless operational issues that must be addressed with reduced staffs.

Happily, the same recession that created the lean organization has created an emerging trend in the use of flexible strategic resources at the highest levels of an organization. The C-suite today can bring in a temporary team of resources with experience tailored to the activity at hand, be it considering an acquisition or preparing for an initial public offering or another critical strategic imperative.

Responsible growth requires a nimble strategy that addresses any potential source of capital, including internal, external and non-traditional sources to pursue organic growth or strategic acquisitions. Find that tipping point where systems and flexible staffing needs meet, without necessarily investing in headcount. That may mean bringing in the expertise you need to make the right strategic moves for your organization. Looking into 2010 and beyond, your C-suite may have little room for error, but by keeping focused on both stability and opportunity, your organization can regain its footing and advance to the next stage in your growth trajectory.