Only 20% of CEOs Have a Clear Plan to Grow Their Business

June 27, 2016

Sustainable growth is the goal of almost all of Australia’s small and medium businesses. Simple in theory. But hard in practice.

ANZ is running a research program which found just 20 per cent of the CEOs involved have a plan around how tobuild an organisation. This includes the ability to formulate a detailed plan to grow. And it’s a challenge exacerbated by low-‘execution’ skills.

In the ANZ program, many CEOs knew how to create a cash-flow forecast plan and provide basic assumptions to support the cash flow, but 80 per cent lacked the ability to be able to take this plan and implement it.

Overall, the data collected by the ANZ Business Growth Program showed building an organisation that can sustain growth is one of the biggest dilemmas facing CEOs and managing directors. It’s a challenge for the whole economy because businesses such as these are critical for financial vigour.

The program, administered by the University of South Australia’s Centre for Business Growth, collected data from 37 CEOs who attended ANZ assessment clinics last year. These leaders represented small-to-medium enterprises (SMEs) with revenues between $A5 million and $A50 million and employee numbers ranging from five to 200.

Four growth stages and the role of the CEO

The CEO journey

Significantly, a number of major insights emerged from the program.

• Business owners have a deep knowledge of their industry and passion for their customers and products. Many however have not had the time or opportunity to access the expertise needed to grow their business.

• Critically, many leaders do not realise companies go through different stages of growth and each of these stages requires CEOs to evolve. Throughout the program we often found CEOs were playing the wrong role given the company’s respective growth stage.

“CEOs understandably start out as `doers’,” ANZ’s partner in the project, Business Growth Chair Dr Jana Matthews said.

“What they forget is that for their business to grow, they need to become delegators, then coaches and finally ‘change catalysts’. Too often, CEOs remain stuck in phase one – the `doing’ stage.”

The research showed leaders are unaware of how to manage people to high performance.

“Some do not want to grow because they have problems managing their current employees,” Dr Matthews said. “They see more growth as equaling more employees – therefore more problems.“

“We encourage them to do things as simple as working with employees to develop a common set of company values, then making decisions based on those values.”

Lack of knowledge By far, the most significant barrier to growth was the CEO’s lack of knowledge about how to grow and how to build an organisation that could achieve sustained growth. This knowledge deficit impacted their aspirations.

In fact, several CEO aspirations to grow were even lower than the actual growth their company was achieving! In nine of the ten cases, Dr Matthews and the Growth Experts saw more growth potential in their companies than the CEOs did.

In the absence of knowing what to do to grow, many of the CEOs were just trying to “hang on to what they had”, hoping that their luck would continue and that they could achieve marginal growth by doing what they had been doing.

Fear of failing

Another impediment to growth for CEOs is a fear of failing. Providing leaders with a growth and decision-making framework, as well as financial analysis capabilities can help them convince cautious business partners and recognise not growing is often far riskier than growing.

Fear of failing can also often be linked to feelings of isolation; simply not having a peer or mentor to talk with about the business and its various challenges.

The research found even just being in the company of like-minded individuals who are trying to grow their companies has helped CEOs and executives overcome their fear of growth.

Proof of success

The ANZ for Business Growth is proving to be a highly effective mechanism for helping CEOs build their companies and achieve sustainable growth. At the end of the module in August 2015, 75 per cent of the CEOs involved said their business had grown.

Most predicted a 25 per cent increase in revenue over the previous year and projected a 41 per cent increase in staff numbers.

With the Asian opportunity growing, it is essential too CEOs look deeply at how to prepare their companies for growth in offshore markets.

Last year ANZ surveyed 1000 Australian businesses and released the Opportunity Asia 2015 report which found 76 percent of businesses who have expanded into Asia say their profits have increased substantially. Close to 60 per cent of medium sized businesses accomplished this within three years.

Impressively, 50 per cent of the Growth Program participants said since attending, they had started exporting into new markets – including the United States, China, Japan, Singapore, Germany, and Italy.

No plan None of the companies in the program had an operating plan enabling them to tie individual performance to company performance, and none of them had a defined planning process.

In short, most companies were winging it. Fortunately they were smart and luck had played at least a small part in their success.

Every company began the year with cash flow projections showing month-on-month growth, so most thought they had a plan. However, the plan was little more than a series of numbers supported by some key assumptions. What they lacked were specific goals, strategies, timeline and accountabilities.

Developing the abilities to manage growth and change are more critical today than ever before.  Many industries are now facing dramatic changes in technology, social demands, economics and regulation. To thrive both small and large organisations need leaders who are confident, strategic change leaders.

Mark Hand is Managing Director of Corporate and Commercial Banking for ANZ Australia.

You can read more about the ANZ Business Growth Program here.

Original Article