Everyone wants to grow: more customers, more employees, more revenue, more profit. But breakneck growth triggers new questions: How do you maintain a close-knit culture and find good people to bring into it? How do you keep the agility of a small company and develop the strength of a big one? We asked 11 businesspeople to answer these and other questions. Howard Schultz, Starbucks Corp.'s Chairman and CEO, explains how to get big while still acting small. Michael Bloomberg, CEO of Bloomberg LP, cautions against the seductive power of growth. And Terri Lonier, president of Working Solo Inc., asks, Just how much is enough? Read their contributions — and then apply their cures to your own growing pains.
Founder and CEO
New York, New York
Don't let growth seduce you. When you're growing fast, the temptation is to keep increasing your growth rate — to double your bet while you're winning. You get euphoric. You think you can walk on water. You think you're smarter than everyone else. This is exactly when companies get into trouble. It's hard to say, "Let's slow down." But that's what you've got to do. Trends always stop; the curve always straightens out. I worry about my firm growing out of control. But by worrying, I achieve a degree of control.
I stress to everyone on my team that the time to think about the downside of growth is when we're doing well. Each day, I think about the disasters that could happen tomorrow: Our sales plummet to zero, my best manager gets hit by a bus, my best reporter leaves to work for a competitor. The job of management is less to manage growth while you're going strong than to know exactly what you'd do if — or when — you get into trouble.
On a more personal side, I've found that as the firm grows, work becomes less fun. Now I spend the bulk of my time on administrative duties, rather than on the creative side of product development. When you get big, the government requires you to be more structured. There are more laws and more forms to fill out, and the environment becomes more litigious. Excuses like "Oh, I forgot to pay my nanny taxes" don't work anymore.
Michael Bloomberg is one of Wall Street's most successful entrepreneurs. Before starting Bloomberg Financial Markets in 1981, he was a general partner at Salomon Brothers. Bloomberg LP provides financial news and analysis through several media. Since its founding, the company has increased revenues by an average of 30% per year. Today Bloomberg terminals are used by more than 250,000 people in 97 countries.
Chairman and CEO
How does a company get big and stay small? That's the real challenge of growth. We open a new store every day and hire 500 people every month. In a little more than a decade, we've gone from 100 employees to almost 30,000. You can't grow if you're driven only by process, or only by the creative spirit. You've got to achieve a fragile balance between the two sides of the corporate brain. This balance is what lets a Starbucks district manager experiment in California with a coffee drink without permission from the top. That drink, Frappuccino, was such a local hit that we marketed it nationwide. It generated $100 million in revenues during its first year.
Growing successfully also means knowing when not to grow. For example, the business of artificially flavored coffee is growing dramatically. Each year, we have the opportunity to embrace that segment of the coffee market, which would translate into a 40% revenue increase. But for 27 years, we haven't sold a drop of artificially flavored coffee, and we're not going to start now — no matter how profitable it would be.
As you grow, you have to deal with the perception that what gets big gets bad. For example, some people believe that Starbucks represents homogenization. But we won't let ourselves be put in a box that says "corporate behemoth." In fact, we're one of the only companies in America that gives equity and comprehensive health care to all of its employees, even part-time workers. At the same time, we have to guard against arrogance and cynicism, which would push us to embrace growth for growth's sake.
Howard Schultz joined Starbucks in 1982. In 1987, Starbucks had just 11 stores. By the year 2000, it plans to have 2,000 stores throughout North America.
Working Solo Inc.
New Paltz, New York
The most important question you can ask yourself about growth is, "How much is enough?" How much money? How much power? How much information? For me, the big decision about growth was whether to hire employees. The workplace changes when there's no longer a one-to-one relationship between people. I wanted to remain a key contributor to the business — not to become just a manager of it.
I had to create a comfort range that matched my vision. It's easy to get swept up in the thrill of growth. But then you neglect to establish your own ground rules — and by default, you play by someone else's. Remember to ask yourself: Am I controlling my growth, or is it controlling me?
Here's an exercise I like to use: Visualize walking into a room three years from now and shaking hands with yourself. Who are you? What is your life like? What is your business like? Don't let yourself wake up in three years and say, "I'm three years older, and I just happened to get here." Clarify your vision, so that you can grow into it.
Terri Lonier firstname.lastname@example.org is an expert on entrepreneurialism. Working Solo Inc. advises such clients as Hewlett-Packard, Intuit, and Seagram on how to work with the rapidly growing free-agent market. In 1997, Working Solo tripled in size — from one to three employees.
Cofounder and Chairman
New York, New York
Don't let growth grow your head. Don't let it change your personality. Too often, you see people start to smoke big cigars and to drive fancy cars — and they fail to see that they haven't really arrived. No matter how fast they're growing, people inside an entrepreneurial startup need to keep their street-fighting attitude.
How often have you seen a company become consumed by its own growth? It cruises at a 40% growth rate per year, adds hundreds of people in a matter of months, creates mission statements, brings in gurus and consultants, starts acting like the big boys — and grows away from everything that made its success possible.
Two things in particular have helped us to steer clear of that fate. First, it was our good fortune not to have a lot of money when we started. Our first 16 offices were built, not bought. We started from scratch — and that forced us to cooperate with each other. We weren't owned by some big entity in London or New York, with a headquarters that had all the answers.
Second, we've been able to strike a balance between growing internally, on the one hand, and expanding through healthy mergers and acquisitions, on the other. If your growth comes just through buying other companies, you're not growing — you're acquiring. This might seem like semantic gymnastics, but it's an important distinction. We measure our success by how well we do at growing on our own.
William Tragos email@example.com worked at Young & Rubicam before he cofounded TBWA. In 1993, TBWA joined Omnicom Group Inc., one of the world's largest advertising groups, and in 1995, the firm merged with Chiat/Day. TBWA Worldwide, which operates in 60 countries, has projected 1998 revenues of $900 million. In 1997, the firm was named "Agency of the Year" by Advertising Age.
President and CEO
To me, growth is about pace. In a high-growth environment, there is always too much work to do and not enough time to do it. So I tell people who work for me that in order to prevent insanity, frustration, and burnout, they need to find their own pace and then to develop a laserlike focus on their priorities.
I learned this from one of my mentors at Intel. Each year, as I moved up through the organization, I noticed I was working one hour longer. I realized that if I ever became a vice president, I'd never get home! I also noticed that my mentor (a vice president at the time) worked fewer hours than I did. I asked him what his secret was. He suggested figuring out a pace that I could keep up over the long term. I might have to sprint occasionally, but if I found the right overall pace, I'd be golden.
After finding your own pace, your job as a leader is to establish a pace for the company. In 1996, I gave a presentation to the entire company. I called it the Millennium Mission. The purpose was to give people a sense of where we were going, what we would look like when we got there, and what changes they should anticipate along the way. The vision allows people to establish their own pace for achieving a larger goal. It let people know that somebody is thinking about growth — that there is a plan and some sense of control. I always tell everyone in the company, "It might not be the right plan, but at least we're not confused."
Jeffrey Miller firstname.lastname@example.org has helped make Documentum Inc. one of the fastest-growing software companies in the San Francisco Bay area. Revenues in 1997 were $75.6 million. Since 1993, the company has had a compounded annual growth rate of 8,800%.
President and CEO
Cambridge Technology Partners Inc.
At every stage of growth, you'll face different challenges. The glue that has held us together through our fast and sustained growth spree has been our core value system. We could not have succeeded without it.
Two years ago, our main challenge was hiring. Top-quality people were coming through our door, but we couldn't hire them fast enough. We solved that problem by decentralizing the process. All of a sudden, we had no problem hiring the kind of people we wanted. I felt confident about this decentralization because I knew we had a core value system in place. To make sure that system continues, we've started something called Reboot, in which experienced employees return to our main office in Cambridge and we revisit our core values. If we can train people in a common set of beliefs, then clients will receive service of a consistent quality, regardless of where our people are working.
We faced another challenge in 1994, when we hit the $100 million revenue mark. We knew that growth was going to slow down in our bigger units. So we decided to break ourselves up every 18 months or so. By 1996, we had split into four units in 31 offices — each with the ability to grow into a $30 million business. Our aim is to face these challenges of growth in advance, before they become obstacles.
James Sims has been with Cambridge Technology Partners, a strategic consulting and application-development company, since it was formed in 1991. Under Sims's leadership, CTP has enjoyed an annual growth rate of more than 50%, with net revenues growing from $56 million in 1993 to $406 million in 1997. The company now has more than 3,300 employees in 47 offices worldwide.
St. Luke's Communications Ltd.
The question is not "to grow or not to grow" but "how fast to grow." If you grow too fast, you recruit too fast, and you're more likely to make mistakes down the road. Our strategy has been to grow very slowly. We do this by learning how to say no. We worked out our recruitment rate—the speed at which we could recruit good people and still be able to absorb new clients. We realized that we could take on a maximum of three pieces of new business per year. A while ago, we turned down a $90 million client—a large telecommunications company—because we had already reached our maximum. It's not a tough decision to make if you put a belief in human capital, and in the importance of human interraction, ahead of the pursuit of profit.
There's always the risk that as you get bigger, you'll also become less inventive. We've confronted that risk by instituting what we call the "35 rule." We work in groups. When any one group becomes larger than 35 people, it has to split apart, as an amoeba would. It doesn't matter exactly how the group splits up: For example, a few people might break off and form a new group. But when you let groups in your company get bigger than 35 people, you cease to care about those people—about what they're up to, whether they're being trained properly, and whether they're happy.
Andy Law email@example.com helped set up the London office of Chiat/Day in 1990 and became the office's CEO in 1993. Two years later, he masterminded the breakaway of the London office, winning over both staff and clients and forming St. Luke's — the only advertising agency committed to equal employee ownership. The firm's clients include Midland Bank, Eurostar, and Ikea. Last year, it increased its revenues by 75%.
President and CEO
E*Trade Group Inc.
Palo Alto, California
Some people manage growth by emphasizing a corporate culture. Our culture is simple: We don't have one. Instead, we follow a simple procedure. We swarm all over a challenge until it gets addressed. When we're finished, we swarm all over the next challenge. Sure, it's tough sometimes. You'll often hear four-letter words being tossed around. But you'll never hear that infamous four-word sentence: "That's not my job."
It might seem strange, but I've learned a lot about growth strategy from Doom, the highly popular computer game. Doom is an incredibly powerful graphics engine that draws pictures so quickly that the action seems instantaneous. The engineering behind Doom will be the basis for virtual reality on the Internet. The creators of Doom were once asked which of their competitors they feared most. They didn't point to Microsoft or any of the other big guys. Instead, they said they worried about two people working in a garage, creating stuff that will blow them out of the water.
We embrace this "spirit of the garage" mentality. That's the attitude we use to face our unbridled growth. Without it, we'd be just another company.
Christos Cotsakos firstname.lastname@example.org became president and CEO of E*Trade, one of the leading online discount brokerages, in 1996. Last year, E*Trade increased its revenues by roughly 250% and expanded its customer base from 91,000 to more than 400,000. Assets held in its consumer accounts top $10 billion.
Founder, Chairman, and
Executive VP of Products
Growth comes down to a simple but crucial question: What type of company do you want to create or to work for — a "lifestyle" company that emphasizes organizational culture or a high-growth, investor-backed company? Those are two birds that don't flock together. I see so much heartache among people in lifestyle companies that have achieved some success and that have started to get a little backing from independent investors. Suddenly priorities start to shift: Value lies in growth, not in the culture. So people worry about maintaining the integrity of the culture, the intimacy, the way things used to be done. That's fine if you're, say, an elite advertising agency and you see growth as diluting the culture and the vibe. But if not, you've got to grow like crazy.
The trickiest challenge that I've faced was transforming the company from a relatively small startup into something bigger. Initially we were a tight group of people. But we knew we needed to scale up the company and to hire more experienced management. For a while, I tried to be CEO, but it didn't take me long to realize that being a manager was not one of my strengths. While searching for a CEO, I was attracted at first to candidates who were like me — who had a firm grasp on technology and strategy. It's tempting not to hire people who compensate for your weaknesses — because you don't want to admit that you have any. But to smooth the transition during your period of growth, you've got to understand the strengths and weaknesses of your entire group and to hire accordingly.
J.J. Allaire email@example.com cofounded Allaire Corp. with his brother Jeremy in 1995. Later that year, they launched Cold Fusion, a popular Web-development system that allows companies to integrate back-end services. That product generated $1 million in revenues. In 1997, Allaire Corp. acquired HomeSite, a leading code-based HTML-editing tool, and experienced a growth in revenues of almost 400%. The company now employs 140 people.
CEO and Cofounder
Growing is the easy part. What's challenging is to integrate new people into your company in a way that allows you to keep up with its growth. In one six-month period, we grew from 100 to 500 people. It was incredible. We made sure that we hired well — and that takes an enormous amount of time. It's not something that you can delegate to an HR department that then outsources the job to headhunters.
Instead, we've learned to tap into everybody's personal network. Nepotism is alive and well at CitySearch. For instance, in our Salt Lake City office, we've got three people from the same family. Nepotism is a way for us to hire people who have similar backgrounds, and who already have relationships with people in the company.
But smart growth doesn't stop there. To smooth the integration process, create an environment where there's open and rapid communication — where new employees see and hear everything that happens. Make every project a team project, and assign every new employee to one of the teams. That's the best way to learn.
In 1995, Charles Conn firstname.lastname@example.org left McKinsey & Co., where he was a partner and a leader in its worldwide growth strategy practice. He then cofounded CitySearch, an Internet guide to community resources. By the end of 1998, CitySearch expects to serve more than 25 cities worldwide.
President and Cofounder
US Interactive Inc.
Before focusing on the tactical issues of growth, step back and get some perspective on how it will change your life. A growth spurt will change the dynamics of your company — and it can challenge you to maintain a life. Last year, we added one new person per week to our company. That may not sound like a lot of new people — but believe me, the processes that worked well when we had 40 people didn't work so well when we reached nearly 100. We had to devote a lot of time and energy to reinventing our systems and strategies. The tendency is to say, "I'll just work harder." But pretty soon, all you're doing is working. You forget who your family is and what life is all about. You risk losing what got you into the game in the first place.
As you grow, it's also important to maintain a sense of humanity. My father worked for General Motors for 32 years. One Friday, someone "early retired" him. In just a year, I watched him age 10 years. I remember telling myself that I'd never work for a big company like the one that let him go. But now I am a big company. I used to worry about what I needed to do to provide for my family. Now I have 200 families to worry about. That's an awesome responsibility, and I never want our growth to make me lose sight of it.
Richard Masterson email@example.com is a pioneer of interactive marketing. In 1991, he cofounded US Interactive, an Internet professional-services firm with such clients as IBM, the American Stock Exchange, and Martha Stewart Living Omnimedia LLC. Since 1996, the company has grown from 6 employees to more than 200. It now has offices in Philadelphia, New York, Los Angeles, Seattle, and Washington, DC. In 1997, the company's revenues grew from $2 million to $6.5 million.