Efficient Growth

How to Drive Top-Line and Bottom-Line Growth Simultaneously

Consistent Growth
Is Elusive

Despite flat revenue performance and budget expectations, increasing regulatory changes, and investor activism, the CFO's top mandate today is sustained revenue and margin growth. This means allocating resources in the most efficient manner to support mature and emerging businesses, as well as innovation bets.

Yet only 10% of companies have consistently achieved simultaneous top- and bottom-line growth. How have those companies succeeded in making resource allocation decisions that support both current and future growth potential?

What Is Efficient Growth?

"Efficient Growth" is sustained, long-term revenue growth with simultaneous margin improvement. Companies that accomplish efficient growth receive an annual shareholder premium of 7.05%, and see the largest premium paid by investors during a "peak".

Over the past 20 years, only 60 companies across the Fortune 1000 and S&P Euro 350 had consistent year-over-year revenue and margin improvement and long-term growth that exceeded their industry peers.

Finance: The Unexpected Obstacle to Efficient Growth

Four Keys to
Efficient Growth

Efficient Growth leaders focus on making better capital allocation and investment decisions, while also cutting the right costs. In slow growth periods, these leaders do four things differently:

  1. Allocate capital to bigger, riskier growth bets and innovation
  2. Focus on managing businesses for asset efficiency, not just profit and loss performance
  3. Scrutinize acquisition and partnership opportunities
  4. Communicate with investors effectively

Create the Conditions
for Efficient Growth

The secret to Efficient Growth is not operational efficiency, but rather bigger, more focused growth bets. Sadly, the finance function has made this harder by creating growth anchors: hurdles that are intended to reduce risk, but which stifle initiatives with the potential to feed Efficient Growth.

By removing harmful growth anchors and establishing growth ladders to help initiatives flourish, finance leaders can help put their companies on the path to richly-rewarded Efficient Growth.

How M&A Supports
Efficient Growth

CEB's analysis of 3,000+ deals over 15 years shows that the approach to mergers and acquisitions taken by Efficient Growth companies differs from that of their peers in five key ways:

  1. Average deal size
  2. Mix of deal types
  3. Consistency of deal-making across the business cycle
  4. Frequency of divestiture
  5. Extent to which they impair goodwill

Efficient Growth Amid
Economic Uncertainty

Amid economic uncertainty, CFOs at Efficient Growth companies take five steps to drive top- and bottom-line growth:

  1. Kill underperforming projects based on principled criteria
  2. Develop a new theory of the customer’s changing preferences
  3. Based metrics/KPIs in operational and capital efficiency
  4. Identify and protect key revenue-driving expenses
  5. Cultivate innovation by running pilots in key segments

Efficient Growth
Assessment

Efficient Growth Leaders consistently identify and allocate capital to bigger, riskier growth bets than their peers. However, some of the key findings from CEB's 2016 risk and growth analytics survey were:

  1. Finance leaders are seen as more risk averse than their business leadership colleagues
  2. On average, companies have a 50-50 split on capex allocated to growth versus maintenance investments
  3. Most companies have potential to harm their ability to pursue transformational growth projects through processes or policies

CEB helps finance organizations to benchmark their approach and upgrade processes in line with Efficient Growth Leaders.

The Product

CEB Finance Leadership
Council — Integrated

To solve lots of challenges—financial markets, volatility, uncertain growth projects, a greater demand for financial guidance, increased compliance pressure, heightened investor expectations, and flat budgets—you need perspective and expertise from lots of Finance leaders. CEB Finance Leadership Council – Integrated brings together the best insights, benchmarks, guidance and tools for Finance Operations, Accounting, FP&A, Tax, and Investor Relations.

CEB gives us an opportunity to benchmark: there is really good research that we can be part of and that we can benefit off. And it is also very pragmatic in implementation help.

Detleft Thielgen
CFO
UCB S.A.

Meet the Experts

Meet the team behind our Efficient Growth tools.

Tim Raiswell

Finance Research Leader
 

Read Biography

Dennis Gannon

Executive Advisor
 

Read Biography

Johanna Robinson

Finance Practice Leader
 

Read Biography

Decision Making Tools

Whitepaper

The New Finance Mandate: Efficient Growth

Four steps Finance teams must take to help the business make better investments and drive Efficient Growth.

Checklist

Preparing for an
Economic Slowdown

Key questions every executive committee should be asking to assess their company’s readiness for an economic slowdown.

Whitepaper

Capital Allocation:
Dos & Don’ts

Seven mistakes to avoid and seven tactics for better capital allocation during periods of slow revenue growth.

Unlock These
Resources Now

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