CEO Growth Survey. Fast 100. Deloitte. Australia s Fastest Growing Public Companies

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1 CEO Growth Survey Deloitte Fast 100 Australia s Fastest Growing Public Companies

2 Insights from the Leaders of Australia s Fastest Growing Public Companies Leading executives understand the importance of continual learning and knowledge transfer. By sharing insights on how to sustain value-creating growth, Australia s best companies will become better equipped to raise their performance to the next level. We are extremely appreciative to all executives of Deloitte Fast 100 companies we surveyed for the time and thought they devoted. We hope the results provide our readers with valuable insights on how many of Australia s fastest growing public companies are sustaining winning growth and their plans for future high performance. If you have any questions or require additional information, please contact: Walter Dinale Partner, Deloitte Growth Solutions (02) walter_dinale@deloitte.com.au Kate Hill Partner, Deloitte Growth Solutions (02) kate_hill@deloitte.com.au Visit our website at to obtain your copy of the Deloitte Fast 100 Growth Index or further copies of this survey.

3 Executive Summary Growth is a challenge for many Australian businesses. It is hard to achieve and even harder to sustain. And in the pursuit of excellence only those companies with a deep commitment to growth will survive. Achieving value creating growth is a battle but according to respondents in the CEO Growth Survey, the battle can be won when the valuable formulas to growth are unlocked. A number of important themes emerged in this survey of Australia s fastest growing public listed companies, providing a snapshot of their typical attributes and attitudes. These may not be relevant to every organisation, but they provide an interesting benchmark for aspiring organisations to compare themselves against. Fast growing companies transcend traditionally glamorous growth sectors such as high technology or telecommunications. For top growth performers their success is based on how they operate rather than the industry they represent. Even though many companies surveyed have core competencies other than technology, 27% of respondents said the greatest financial investment in 2000/01 is to be in hardware and software. In a landscape of increasing competition and economic uncertainty, fast growing companies are not immune from the impact the domestic economy has on their business. In fact, the majority of respondents cited this factor as their greatest barrier to growth. 8 of companies surveyed are using acquisitions to further fuel their growth. Once they reach a critical size through organic growth, forming alliances with companies who have a complementary growth formula becomes crucial. Obtaining and retaining good staff is a key success factor. With skill shortages identified as the second biggest hurdle to growth, results show that fast growers would prefer to promote internally and reward staff using employee share schemes and performance management strategies. 83% of companies rated organisational culture as exceedingly important in achieving growth objectives. Overall, with 32% of companies in the survey projecting growth rates greater than 32%, it is no surprise that sustaining growth is a priority. The only way to go from here is up. CEO growth survey november

4 1. From the categories listed below, distribute 100 points to each of the key attributes that have contributed to your company s success? How should these results be compared to the way it currently is in your company? Respondents believe that the key factors that have contributed equally to their companies growth has been the quality of management (22%), and the quality of their goods and services (22%); management s ability to retain, develop and keep quality people (19%); and the company s financial soundness (17%) Growth Drivers Interestingly, each of the respondent company s actual performance fell within 3% of their expectation. This indicates that fast growing, dynamic companies are correctly identifying their strengths and working hard to maintain and develop them. Quality of management Quality of product Level of Ability to attract, Community or or services innovation retain, develop & environmental keep quality responsibility people Current practice Preferred practice Financial soundness TOTAL Community or environmental responsibility ranked 6 th as important to a company s success with only 6% of respondents recognising this as a key attribute. 2. What are the growth strategies that companies are currently pursuing? Overwhelmingly 8 of respondents are pursuing strategic alliance strategies in order to increase growth. This response may be due in part to the tax concessions and relief that is currently being provided as a result of the Ralph Business Tax Reforms and the belief that the quickest growth strategy of all is to acquire other entities with complimentary competencies. The development of technology with new products and e-business was recognised by over 5 of respondents as being a somewhat important strategy for them to pursue. This has also directly led to increased interest in new distribution channels with businesses recognising the vast potential that the Internet (and hence globalisation) can provide in terms of sales of goods and services Strategic alliances / mergers & acquisitions Growth Strategies New distribution Globalisation Targeting the Vertical channels competition integration Extensively Somewhat Not at all New product development E-commerce Overall, respondents appear to be adopting a more strategic based approach to growing their own business (organic growth) rather than seeking to target their own competitors (3 extensively pursuing this strategy) or growing vertically (less than 1 extensively pursued this strategy). Fast growing companies produce new products and services at nearly twice the normal rate. Top 10, Deloitte Fast 100 companies grew revenue at a rate of 76% compared to an Australian average of 6%. 2 CEO growth survey november 2000

5 3. What are the barriers you face in achieving growth in your company? 24% of respondents ranked the domestic economy as the key potential obstacle to business growth. This response may be due in part to the uncertainty of the long-term effects of GST, tax reform, interest rates and the low Australian dollar Barriers to Growth A lack of available human resources and the shortage of specialised expertise were recognised by 1 of respondents (in each category) as an obstacle to business growth. Domestic economy Question 3 Global economy Ability to raise capital Lack of available human resources Compliance Cashf low Government policy Environmental restrictions Shortage of specialised expertise Other 4. To what extent have the following events affected your company s growth? Greater than 5 of respondents indicated that the four events depictedhad nil or minimal impact on their businesses. This was particularly notable in Y2k preparation with 7 reporting nil effect. 36% of respondents indicated that their GST implementation program had an adverse effect on actual growth rates achieved for the period leading up to GST implementation. However, these same companies reported that this was currently not considered a barrier to growth in the future suggesting that the investment in GST readiness has paid off Factors Affecting Growth Y2K preparation GST implementation Olympic Games Business Tax Reform Adverse effect No effect Positive effect 5. In what area do you envisage your company will make the single greatest financial investment in 2000/2001? Business identified the purchase of hardware and software (27%) as being the biggest financial investment for 2000/2001. This is consistent with the adoption of an increasingly technological strategy encompassing e-commerce and the seeking of new distribution channels. Many businesses appear to have realised that growth predominantly arises from existing customers hence the need to extract information quickly and efficiently from current databases. Areas of Financial Investment Operations Equipment/Materials Other 11% Recruitment/hiring 4% Research & Development 9% Training/employee development Benefits/salaries 2% 2% Marketing/sales Facilities/Real estate 8% property Technology 13% (hardw are/softw are) 26% Other investment preferences were expenditure on operations (22%) and on equipment/materials (12%). CEO growth survey november

6 6. What proportion of your company s sales are currently derived via e-business? 62% of respondents indicated that less than1 of their current business is derived via e-business whilst 17% indicated that they did not conduct any transactions via the Internet Current Sales Derived via e-business Nil Question 6 7. What proportion of your company s sales do you expect will be derived via e-business in three years time? Less than Greater than 5 All businesses surveyed indicated that they would conduct some transactions via e-business. However, 4 believed that these transactions would comprise less than 1 of sales with only 3% of respondents foreseeing the possibility of greater than 5 of sales being conducted via e-business. It would appear that conducting electronic business may not be a key strategy imperative to growth Future Sales Derived via e-business Nil Less than Greater than 5 8. To what extent does your organisation s culture play a significant role in the company s growth? All respondents acknowledged the importance of organisational culture as playing a key role in the company s growth with 83% indicating that it was exceedingly important. 9. How does your company develop and retain talented people? Organisational Culture Importance to Growth 81% 19% Extensively Somew hat Not at all Whilst most respondents indicated multiple strategies used to develop and retain talented employees, the most popular response (29%) was enhanced performance management. This was closely followed by employee share schemes at 28% % 8% Retention Strategies 3 29% 6% 1 1% Leadership training Mentoring programs Employee share schemes Performance management Personal plans external education allow ance Flexible w orking hours Telecommuting Other High growth companies generate five to ten times the returns of slowgrowth companies. 4 CEO growth survey november 2000

7 10. Distribute 100 points among the five categories below based on the recruitment methodologies your company is employing to meet the increased demand for human resources as your firm grows. 3 of respondents use external recruitment, followed by 27% deciding to internally promote. When answering how would they like to cater for increased demand in the future, 4 of respondents said they would prefer internal promotion of their staff Recruitment Methodologies Temporary staff (administration) Contract staff (professional) Outsourcing External recruitment Internal promotion Current practice Preferred practice 11. What is your company s projected revenue growth rate for the next three years? Respondents appear overwhelmingly optimistic about the state of the economy and their business with all businesses surveyed reporting growth rates to exceed per annum. 32% of businesses surveyed report expected growth rates of 3, which is 8 times the expected increase in the Australian economy Growth Projections 34% 23% 34% 1 9% Less than Greater than Distribute 100 points among the three categories below based on their importance in generating revenue growth. All respondents surveyed evenly indicated that their expectations of revenue growth are in line with their current work practices and culture. (approx 33% in each category). This indicates the importance of organisational culture in increasing revenue growth Valuable Growth Formulas New Product or service The w ill to grow It s all about execution Current Practice Preferred practice 13. Distribute 100 points among the two categories below based on each one s ability to create shareholder value. 57% of respondents indicated revenue growth as a key to creating shareholder value and the remaining 43% attributed growth to productivity improvements Ability to Create Shareholder Value Revenue grow th Productivity improvements CEO growth survey november

8 14. What are the key indicators of growth for your company? Profitability was cited by respondents as the most popular indicator of growth for the company (27%) whilst value to shareholder (24%) being a close second. This reinforces the relationship between profitability to shareholder value Growth Indicators Other significant growth indicators are revenue (21%), market share (12%) and asset productivity (9%). Revenue Profitability Working Capital Asset Productivity Market Share Value to Shareholders Other (please specify) 15. What timeframe has your business set to achieve this growth? 77% of respondents indicated a timeframe of 3-5 years to achieve growth via strategic alliances, mergers and acquisitions, new product development, new distribution channels, targeting the competition and globalisation Timeframe to Achieve Growth Short term (1-2 yrs) Medium term (3-5yrs) Long term (>5 yrs) Employees of fast growing companies are challenged to improve their skills because the expanding business demands it. Top growth performers benchmark themselves against the best and strive to beat them. Fast growing companies generate more jobs for the economy on average than other organisations. 6 CEO growth survey november 2000

9 Background to the CEO Growth Survey To complement our research and ranking of Australia s top growth performers in the Deloitte Fast 100 Growth Index, a survey was undertaken to identify the key drivers of growth for Australia s top performing companies. The Deloitte Fast 100 Growth Survey was mailed to senior executives of all companies identified on the Deloitte Fast 100 Growth Index in 1999 and The criteria for selecting the Deloitte top 100 publicly listed companies is comprehensive organisations are assessed on their ability to sustain growth, create value for shareholders and create jobs. Developing the Deloitte Fast100 Growth Index takes several stages: 1) Companies selected for analysis are taken from the Australian Stock Exchange. 2) The pool of companies is refined by choosing only those companies that have established a critical mass, ie. a three year operating period, with revenue in excess of $20 million in the base year. 3) Companies are then analysed in terms of their ability to sustain compound annual growth and create value for shareholders. 4) Leading companies are then assessed on their ability to create jobs. For some, this resulted in a re-ordering of rank. grow build build build sustain challenge CEO growth survey november