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04. CEO’s First Job is NOT to Grow The Company

July 31st, 2005 by Administrator
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For the last few years I have been managing my private business just like a public one — meaning I have been subjecting myself to the same rigors as a CEO of a public corporation, which is to analyze the numbers every quarter, and to set aggressive growth targets year on year, and quarter on quarter.

Sometimes, the quest for top line growth can grow crazy — witness the focus to increase sales by cutting prices, or even worse, buying up companies. There are simply too many stories of companies buying itself unto growth, and allowing themselves into mergers, ventures, and acquisitions even if your gut feel knew it would not work.

That has become the holy grail of management, and we are made to believe that there is no other way. Companies that missed last years numbers even by one percentage point is punished severely by analyst downgrading ratings, and subsequently, a big sell off of company stocks. Beating analysts’ short term expectations, whether they are good for long term growth or not, has become almost the sole objective of the CEO. What happened to good old organic growing? Why does a business have to grow bigger and bigger? Is it healthier to be big, or simply is it to feed the managers’ ego or analyst expectations? The term too big to fail has started to become almost like a monster devouring itself.

I saw this quote, and being schooled with the all out growth strategy at first could not believe it, but more and more, it has started to make sense — Like many companies, I have made the business suffered by trying to grow too aggressively, or going for some markets even if we were not prepared, and instead of making the company better, it has introduced problems instead. The quote, and I hope people start to believe it more simply like this, ” the CEO ’s goal should not be to grow the company. It should be to keep the company healthy. When it is healthy, it will grow.

It is a simple message, and a powerful one. Which is to say that our first objective is really to make sure that we have good quality products, healthy cash flow, happy customers, and motivated employees. Too often, we are too blinded by growth to miss the basic precepts which are so important in building the corporation.

Which makes me go back again to the 3 goals in life that I feel is necessary for me to have a happy, fulfilled life — take care of the health of your business ( or your finances), spend time and enjoy your family, and don’t stop learning– and sharing.

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Posted in On Life |

8 Responses

  1. Reflections of a BizDrivenLife » Says:

    [...] 04. CEO’s First Job is NOT to Grow The Company [...]

  2. Reflections of a BizDrivenLife » How to Make Money Says:

    [...] It is the same piece I wrote a few months back – the CEO should not concentrate to grow the company. He should just instead focus on making it healthy - because when it is healthy, it will grow. [...]

  3. Reflections of a Business-Driven Life Says:

    Your Most Important Job

  4. Reflections of a BizDrivenLife » Two Precepts I Learned in Managing Says:

    [...] This year, I have put some thoughts on the way my business is going, and I have learned two important precepts that I plan to implement next year. Business is good, but if we take time to continue to make it healthier , it does allow the business a better way to capitalize on opportunities when they present itself. [...]

  5. Reflections of a BizDrivenLife » A Buyer and a Seller’s Market Says:

    [...] Related Posts: -CEO’s First Job is NOT to Grow The Company [...]

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  7. Mark Says:

    I love this one. Good job. A good series of follow ups to this article, though, would be elaborating on your definition of “company health” and how you propose to manage it.

  8. Lito Says:

    Full of wisdom. Many companies are focused on growth and I myself was thinking that growth means always positive.

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