Why do only some companies keep growing?
Why do some companies continue to grow and are sustainable over a long period of time, while others do well for some time till the founders are present and then things start going downhill?
I have been studying this phenomenon for over 30 years based on my primary research in organisation development and change management and from secondary sources such as literature. In many cases, I have been involved along with the founders in creating this change.
My findings suggest a pattern and process for growth and sustainability. Any organisation that wants to grow and become sustainable needs to create a powerful vision as to what is the highest level they want to reach or what they want to be known for. To illustrate my point, let me give you a couple of examples.
An agrochemical company that was having a turnover of Rs 200 crore wanted to grow as the owner saw great opportunity. We, therefore, designed and conducted a vision workshop involving all stakeholders using a participatory process. It is very important to create a vision. The stakeholders arrived at a new vision, which was to create a soil management company as against continuing as an agrochemical company.
The decision to become a soil management firm opened new avenues such as seeds, manure, biopesticides, wasteland development, fertilisers, etc. In the next two years, the company’s turnover grew to Rs 800 crore. Similarly, a newspaper company, through a similar process of engaging in a workshop, created a vision—to be the largest information and entertainment company.
After the formation of the vision, they diversified into radio, television, internet, syndication of news, etc. The company has grown more than 500% in 10 years, while most of their peers have remained almost the same. The second step is to create a powerful business strategy using Michael Porter’s ‘Five Forces model’. The aim of a good strategy is to stay ahead of others.
A company that wishes to grow must have data of the existing competition, understand their brand strategies, and know the products, plans and pricing and so on of the competition. In addition, the company needs to know what alternatives and substitutes are likely to come. No firm can grow and sustain itself without a powerful strategy.
For example, automakers like Maruti, Hyundai, Toyota and Honda made a strategy to make well-designed, high-quality and fuel-efficient cars with minimum mechanical problems and move to BS VI quickly. They also started making preparations for moving to the electric and SUV categories. On the other hand, Tata Motors, after a colossal failure with Nano and unable to shift with Jaguar and Land Rover to electric, landed in a huge debt trap.
The third important step is to create a style of leadership that encourages ideas, innovation and agility, and engages people to contribute. Companies like Google, Apple, Microsoft, TCS, HUL, P&G, etc., which have done well over the last 20 years, have democratic and humane leaders who encourage people to do their best while being ruthlessly driven for results.
Jim Collins, in his bestselling book “Good To Great”, called such heads “Level Five Leaders”. While dictatorial leaders can get superior results for some time, people ultimately get tired of their oppression and get disengaged with the company. It is equally important to grow future leaders in the company by assessing their managerial and leadership potential and providing them with transformational leadership training. Many companies such as JSW Steel Ltd. have assessed all their leaders through us and created individual development plans to help them grow.
The Government of India has the civil services cadre wherein IAS, IFS, IPS and IRS officers are selected and trained to occupy higher levels of management, and run the nation and the public sector enterprises. Similarly the NDA/IMA are continuously selecting young cadets and training them to be commanding officers and generals in the Armed Forces. Sustainable companies like The Tata Group, Nestle, Amul, HUL, P&G, TCS, etc., have a very strong campus selection programme to grow leaders.
The fourth area that creates growth is having a great culture. Companies like SouthWest Airlines, The Tata Group, Infosys, Shell, Starbucks, etc., have always focussed on creating a great culture where people love to work and stay for years. Many family-managed businesses do not have a great culture
to work in because they do not have defined systems and processes. The company usually runs on the whims and fancies of the owner and his coterie.
A great culture can easily be created if the company has a very fair and transparent performance management system and a feedback mechanism to offer constructive critiques. The firm should be run by policies and systems, and the heads should be well trained in leadership and people management so that they offer respect, recognition and reward in a transparent and correct way.
Global research demonstrates that 81% of people leave companies because of a bad boss and 43%
employees are actively disengaged. It is, therefore, extremely important to train the “boss group” in leadership and effective people management. Any company can be run well with a proper plan, policies, systems, a good leadership and cadre.
Ashoke K Maitra
Senior HR Adviser
(ashoke.maitra@gmail.com)