Is company growth always the best strategy?
Monday, Feb. 27, 2006
by Richard Pacher
Some companies stay small and concentrate on maintaining their 'mojo,' the magical, somewhat ephemeral quality that often defines them.
Children think bigger is better. After they speak the first word, their next bon mot is often ''more.'' Then comes, ''no,'' of course, but the point is that immature humans rarely discern the superiority of quality over quantity. Neither do corporations.
Growth, in fact, is valued above all else, it would seem, as most metrics used to judge a company's success measure growth. Consistency, for example is just too ho-hum for Wall Street, even if the firm's profitability is considerable.
A CEO's goal, generally, is to ''grow the company,'' but is growth desirable? Author Bo Burlingham asks a tough question and comes up with several answers. The companies he profiles in his new book are, for the most part, run by gifted executives who made a deliberate decision to maintain a set of core values that would guide them.
Only one company has overtly religious people at its helm, as far as can be told from the text, but each manifests profound care and concern for the consequences and implications of their operations on their community, their workers and themselves.
In addition to the warm and fuzzy stuff, however, each operation is obsessively committed to running a high-quality operation and providing clients with the best product or service or combination of both in its industry. And each has concluded that growth beyond limits would compromise -- or sabotage -- their mission.
Burlingham examines a handful of companies, most of which fly under the radar, or are not well known outside their fields. But many beer drinkers are familiar with Anchor Steam, a northern California brew. They were early innovators in what has become the micro-brewing revolution. The owner/brewmaster, Fritz Maytag, a scion of the appliance company family, has had many opportunities to build his company by outsourcing production, a common industry practice. But after determining that the quality of the golden liquid would be impossible to monitor and maintain under those circumstances, Maytag canceled orders that would have vaulted his firm well beyond its current level of success.
Alternate rocker Ani DeFranco also has had numerous opportunities to sign or partner with major music companies but founded her own Righteous Babe Records, based in the rust belt metropolis of Buffalo, N.Y. in 1990. Her homemade company remains in business. This is no small accomplishment given the death spiral most of the few surviving music companies are in. DeFranco's iconoclasm and insistence on dealing with local businesses are a key differentiator.
Miami-based fashion designer Selima Stavola is another small giant identified by the author. Her success, Burlingham writes, is consistent with others who chose to concentrate on quality in all aspects of the business, especially in the human elements.
Stavola had worked for major fashion houses, but chafed at their rules and demands and decided to go out on her own. She chose which customers to work for, and this exclusivity made her even more in demand. Though she has had numerous opportunities to expand her business, she preferred to keep things intimate.
''If it's big, it owns you. You don't own it,'' she told Burlingham.
The other unifying factor Burlingham identifies in his small giants is ''mojo,'' the magical, somewhat ephemeral charisma a company possesses.
It's interesting, as well, to note that none of the companies profiled are widely held. Some are sole proprietorships or employee-owned. The implication, of course, is that stockholders, with their goal of increasing the value of their investments, focus on quantity at the expense of quality. How childish!
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