Greetings! Last week I wrote about deliberate leadership and why the CEO must be in control of the fiscal well being of the enterprise you lead - as well as setting creating a compelling vision for the future. 
Today I want to focus on growth; one the great paradoxes of thinking and acting like an investor while guiding your company forward into the future. Success is rooted in growth - and successful business leaders are drawn to growth like moths to light. And as seductive and vital growth may be, unchecked, it can also be one of the most disruptive and deadly forces impacting a business. In fact, unhealthy or unsustainable growth is typically more treacherous to survive than most downturns. The problem is that growth stresses an organization in many ways. First and foremost is the demand for cash. Companies that experience rapid growth, even highly profitable growth, often outstrip their ability to fund that growth. Inventories soar, new people are hired, receivables typically swell and often stretch-out and in combination put enormous pressure on cash flow. In addition the fundamental risk applied to the assets almost always increases at the same time. (See the article below on Risk J-Curves.) Systems are strained or become obsolete, new people hired take time to be sorted out and brought up to speed, supply chains are often overly taxed and new customers pose a host of "unknown factors" to be digested. The problems are doubly compounded in today's marketplace while credit remains very tight for small and mid-size companies. Under the best of circumstances and during better times, banks are knowingly careful of lending to growing companies, making certain first that your debt to equity is in good balance and that you will generate the cash needed to service your loans. Rapidly growing companies have a tough time meeting those tests. It is when companies experiences rapid, unsustainable growth that they in essence, "grow broke." And sadly - it usually takes companies by surprise. In Earnest Hemingway's novel, The Sun Also Rises - one of the characters is asked how he went bankrupt. He replied, "Slowly at first, and then all of a sudden." If the job of the CEO is to protect the assets and manage risk against return, knowing how to manage growth is essential. Knowing the difference between good (sustainable) growth. My colleague and Vistage Speaker, Glenn Waring presented a financial primer to my CEO group last month. One of the calculations he stresses is your "sustainable growth rate." You can download a PDF of how to make this calculation here: Worksheet for Determining Your Sustainable Growth Rate We have all been told that, in business, unless you are growing, you are dying. I have personally never doubted this to be true - and it makes perfect sense. Business is so inherently dynamic that it is almost impossible to remain static. More than ever, everything is constantly changing and if we are not keeping up - you are necessarily falling behind. It is certainly true of technology, of customer needs and markets, of the demands on our employee's talents and skills and even more so on the demands on our own skills and talents. These days, I have been hearing frequently from successful CEOs who tell me they are not focused on growth - and prefer not to be. In the worst cases it's that they are still concerned for their company's survival and keeping the wheels on. In other s cases it's a reaction growth being so challenging during the depths of the recession and their resistance is a matter of normalizing the current conditions and struggle with driving growth while sales are weak and credit remains tight. Then, there are those that are actually focused on growth - but not necessarily of their top-line. I find that many CEOs think of growth solely in terms of revenue, when growth of margins and bottom-line profits are what truly matter most. A colleague of mine shared with me these three questions that I believe you need to ask yourself regularly: - What are we doing to improve?
- What are we doing to expand?
- What are we doing to innovate?
Good growth is the objective of Deliberate Leadership. It amounts to knowing how to maintain traction while safely growing - and growing with a purpose that is guided by your vision for the enterprise. Sometimes this amounts to "growing smaller" and becoming leaner and more efficient - and in some cases - it's lining-up to be the next giant in your industry. Regardless of what you wish for - or achieve - it is critical that you know how to lead sustainable growth. There is nothing worse, in my opinion, than pushing the accelerator and hitting the wall. There is no excuse for growing broke. It's all a matter of knowing what to do before you try your best to do it. As always, wishing you a great and successful week ahead. 
Philip R. Liebman Managing Director, Strat 4 Group Chair, Vistage International | 
