10 Questions About Growth that Every CEO Should Know How to Answer

  1. What is your TSR aspiration? Is that aspiration appropriate given the expectations embedded in your stock price and the ability of your plans to deliver improved performance?
  2. How much growth do you need in order to deliver on that aspiration? What target revenue-growth rate is required in order to meet your goal given the momentum contribution of other TSR drivers?
  3. Will optimizing growth and margins in your existing businesses be sufficient to meet your goal? Or will TSR success require you to consider a more radical strategy?
  4. What drives the differences in valuation multiples in your industry? Will your growth plans enhance or erode your multiple relative to peers?
  5. Will your growth initiatives create more TSR than alternative uses of cash or capital? In particular, what would be the impact of increasing dividend payout rather than investing in growth?
  6. Is your investor mix aligned with your growth agenda? If not, do you have a plan for migrating to investors who are likely to be more closely aligned with your strategy?
  7. Is there a balance between your sustainable growth rate and the growth rate of your served markets? If not, what is your plan for effectively using excess cash to optimize TSR?
  8. How will today´s growth initiatives affect your ability to find growth and deliver superior TSR in the future? In particular, what will be the impact of your growth initiatives on your company´s average return on capital?
  9. Do you need to revisit your company´s TSR target and strategy in light of your answers to the above questions? If so, do you have a process in place for doing so?
  10. Are your management team, board, and investors aligned on the optimal role for growth in achieving your TSR objectives? If not, do you have a plan for creating such an alignment?

Source: Spotlight on Growth: The Role of Growth in Achieving Superior Value Creation / Eric E. Olsen, Frank Plaschke, Daniel Stelter / Boston Consulting Group (BCG), September 21, 2006

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