This past weekend was BarCampBank Seattle. We got into many good discussions ranging from the books were reading and why we like them, to technology disruption, to values-based banking (that last topic was mine, surprise, surprise).
At some point in the day, the incredibly wise Gene Blishen said something that I keep mulling over. We were talking about the need for business to be constantly growing, and he said…
It’s not about growth, it’s about development. As people, we grow for our first 18 years and then we stop growing, but we keep developing as people until we die.
I have always been puzzled by the assumption made by most people I’ve ever talked to that the goal of business is to grow, constantly. But I don’t think most companies deserve and demand the scale to be big. Some companies, some ideas, some leaders are better suited to be smaller. Why not crave to be the right size for your ambitions, your market, your desired size, and not be constantly growing?
I believe all companies and organizations, like people, should be constantly developing. Refining what they do, evolving it, learning and improving. That seems obvious. But I don’t think all companies should aim for growth and scale.
What do you think? Am I missing something?
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Good catch William. That statement from Gene resonated with me as well. He’s got a knack for memorable and Tweetable quotes!
“Relentless growth at the cost of all else” is a popular business mantra but I don’t think it has served modern society too well. Whenever I hear statements or concepts like that, my mind always drifts to a very morbid place. I think of cancer for some reason, another thing that seeks to grow at the cost of all else.
“Cancer is a broad group of various diseases, all involving unregulated cell growth. In cancer, cells divide and grow uncontrollably, forming malignant tumors, and invade nearby parts of the body.”
Sounds like the history of a mega corporation, doesn’t it?
Controlled growth that serves a purpose makes sense, but growth for growth sake is pointless.
I think I’ll aspire to keep developing and learning for the rest of my days instead.
You are a great example of a successful leader in business who doesn’t have ambitions to have a 300 person agency. You do good work, maintain a life with balance as much as you can, and take care of your staff. A very enviable life, and not one of endless pursuit of growth.
Thanks William. This post and comment conversation also reminded me of a smart quote from David Baker, who spoke at last year’s CU Water Cooler Symposium, “You CANNOT grow out of your problems. Fix them at the current size or they’ll just get worse as you grow.”
I see the pros and cons on both sides of growth in numbers vs. growth in development and feel sort of conflicted on picking a side. But! I think in looking at the ‘why?’, it’s super clear…we’re teaching babies to play ‘soooooo big!’, rewarding consumers with discounts for buying value packages of everything imaginable (I fell for that one just last night in the meat aisle) and as adults, on a constant quest of earning and having more. It’s sort of a cop-out, but I feel like we’re conditioned that way from the start.
Thanks for the comment, Theresa! Nice to see you on Saturday!
You’re right, staying small goes against the grain of the Western mentality. Yet all happiness metrics show that once you have enough, more doesn’t make you happier.
Is that true for companies? Once you have a good thing going, is it necessary to grow?
Both Tim and Gene are examples of leaders of small businesses that are doing wonderfully.
You too (two weeks later)!
And, I’m with you…growth in quantity vs. quality isn’t necessary; I just see how people can easily fall into that trap of thinking it is.
You are referring to one of my favorite topics…the book Small Giants is a bit kitchy but identifies firms that couldn’t find the good growth opportunities so they deliberately stayed small (and focused). WIsh I was there…George
That sounds like a great book:
smallgiantsbook.com
Yes, you are missing something: That there’s GOOD growth and NOT-SO-GOOD growth.
Does Vancity serve as many members as it should or could? Or are there more people in the community who would benefit by being Vancity members?
I’m betting your answer to the 2nd question is yes. So why shouldn’t Vancity “grow” (i.e., increase its membership base) to serve these potential members?
A: There is no reason. Growing to serve those potential members is good growth.
On the other hand, some FIs grow by acquisition because they believe that they will achieve economies of scale. What that really means to me is that an organization has grown too big for its current britches, and needs more volume to justify its cost base. An example of not-so-good growth.
And then there’s another reason for growth, and I’m torn whether or not to call it GOOD or NOT-SO-GOOD.
I’d like to make more money, William. I’ve got one kid going to college next year, another who will go in a few years, and my wife and I would like to retire sometime in the future.
I will need more $ to do so. There are two ways I can make more money: 1) Get a new job, or 2) Make more money at my current job. Assuming I stick with #2….
There are 2 ways I’m going to make more money at my current job: 1) We grow, and I get a piece of the growing pie, or 2) We don’t grow, and I have to take a piece of the pie from someone else. All things being equal, I’d prefer #1.
While being big for bigness sake is ridiculous, knocking large organizations or those striving to be big (or bigger) is wrong as well.
Hi Ron. I don’t knock big companies for being big. I question the assumption that bigger is better. If a company or organization has a clear mandate and has a pathway to growth that makes sense and they have systems and processes in place to deal with the ramifications of that growth, then that’s just fine and dandy.
But I think there’s an assumption that if a company or organization isn’t growing then it’s stagnating, which I think is a faulty assumption. I hear the shark metaphor, if you’re not constantly moving forward, you will die. I just like Gene’s framing that as development rather than growth.
And, because I’m hard wired to care more about mission than profits, I don’t care if an organization needs more money, I care that they are furthering their mission and serving people and being useful in a way that aligns to that. Too many companies are driven by their needs to make profit, rather than the needs of their customers, clients, members, etc…
“Too many companies are driven by their needs to make profit, rather than the needs of their customers, clients, members, etc…”
This doesn’t have to be a tradeoff — i.e, the word “rather” does not need to be in the sentence.
Every for-profit company should be obsessed with how much profit it makes. It should also obsess over how it makes those profits. There’s no reason why it can’t be win-win.
And if a company STATES that it is driven more by the needs of its customers, etc. than its need to make a profit, that’s very admirable, but stated intentions aren’t worth very much.
As a society, we have a need for growth (in sales, profits, and other metrics). Otherwise, we play the game of reallocation. That game is really painful. (Come back down south of the border to see for yourself).
Bigger IS better because it lessens (although it doesn’t eliminate) the problems of reallocation.
Bigger creates opportunities to fund new initiatives and developments, that could only be funded by taking away funding from things that already have it. That’s not necessarily bad, but if those things deserved the funding in the first place, then it is bad.
Thanks for that Ron, I agree, the word “rather” was unnecessary.
I’m thinking about the rest of your comments. Not sure I agree. What happened in the States is a reallocation because of some big companies seeking growth for growth’s sake. Out of control growth cratered the economy and resulted in a major reallocation, which was completely unfortunate.
I think growth through partnerships, and well structured strategies that have equal parts what’s good for the company or organization and what’s good for the consumer or citizen would have resulted in a more stable economy.
Ooooh – I love that idea! And I absolutely agree. How many companies have we seen get into trouble when they grow too quickly, simply because they think that\’s what they \”should\” do? Lots. I think a better idea is to really think about \”who\” or \”what\” you want to be as an organization and then focus on that. One of the things that I so appreciate about Vancity is that we use our values and vision as a guiding force. As we consider business decisions we ask, \”Is this in keeping with who we are?\” Growth by expansion is not necessarily our answer, is it? But growth by development? No we are on to something
Thanks Kristin. Like we commented on Facebook, I think some of the poorest decisions Vancity has made were the result of seeking growth without enough regard for our mission. Luckily, for the last several years, I feel that our decisions have been strongly guided by our vision and mission.
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Unfortunately, some executives believe that “growing” is “improving.” It’s a measure of success. And in some cases it’s true.
But the notion that “not growing” is failure couldn’t be further from the truth…especially for not-for-profit financial cooperatives. As is usually the case, Gene’s spot on with this.
Maybe we should call it growth through partnership. I agree with a lot of what Ron’s written below, but some of that reallocation can come through good partnerships and not independant growth.
I don’t think you’re missing a thing.
Read this when you get a chance. http://www.cusuitemusings.com/musings-from-the-nafcu-cu/2012/03/patience.html Here’s the highlights:
The following text comes from page 5 of NCUA’s Material Loss review of U.S. Central.
“Since 2001, U.S. Central had modest growth and a generally conservative investment strategy. However, in 2006, U.S. Central’s business strategy shifted towards more aggressive growth that was focused on increasing or maintaining market share of the retail corporate credit union balances by offering competitive investment products and rates. U.S. Central’s assets grew to $44.7 billion by December 31, 2007, an increase of 22 percent from December 31, 2005. U.S. Central’s growth was achieved by offering highly competitive rates to its retail corporate credit union members, encouraging these members to invest their liquid funds with U.S. Central.
U.S. Central’s aggressive growth strategy placed increased pressure on the credit union to produce higher levels of revenue in order to increase or maintain sufficient capital. In an effort to maintain or increase net income and continue to grow its retained earnings, U.S. Central management increased its offerings of higher yielding investments for its members to invest in, such as mortgage-backed securities. U.S. Central, in turn, significantly expanded its investments in higher yielding, higher risk subprime mortgage-backed securities, to support this growth strategy. In addition, this growth strategy negatively impacted U.S. Central’s defined goal of obtaining a retained earnings to Daily Average Net Assets of 2 percent due to significant losses on previously highly-rated securities. Furthermore, we believe this growth strategy and accompanying investment decisions to purchase higher yielding securities to such extraordinary levels was contradictory to U.S. Central’s fundamental purpose as a wholesale corporate credit union, which was serving as a secure investment option and a source of liquidity for retail corporate credit unions, and support for the not for profit credit union structure.”
Growth is a 2-edged sword. It can do wonderful things. And the above.
Thanks for the great post!
– Anthony
Hi Anthony, thanks for your comment. I think some organizations, be they CUs or pharmacies, have a culture of expansion and growth. And if they have the right strategies and leadership to manage the consequences, both intended and unintended, they can grow successfully.
But I see some CUs, Mt. Lehman being one right here near Vancouver, that serve their members very well, know who they are, and never need to grow. They are relevant and needed and should keep doing the same thing. Their task is to focus on developing so they continue to be relevant to their community.