Pemba has observed a number of common characteristics in Australian high-growth companies over the past 10 years.
Many are well-documented, such as a vision anchored in purpose, clear strategy, charismatic leadership, strong management, a truly differentiated offering, robust systems including good governance, access to capital, the drive for constant innovation and appropriately aligned incentives between management and shareholders.
While these, and others like strong branding and scalable processes, are all critical, we would like to focus on the few subtler or softer skills that might be less well understood or documented.
From our perspective, great growth stories are about people (not just businesses) and there are some common attributes of leadership style that usually underpin long-term sustainable success stories because they engage and motivate the people in the struggle to deliver and maintain accelerated growth.
There are many ways to lead. In Pemba’s experience, the strongest leaders recognise very early that they don’t have the ability to master the full range of management capabilities; they can’t do it all.
Most of the high-growth businesses with the ability to sustain accelerated growth are led by owners / managers who have a clear understanding of their personal limitations and strive to build a strong team empowered to make decisions, take risks and step up to new challenges within the confines of some clearly defined boundaries.
This softer skill to build talent around you, to delegate and truly trust and empower others is a game changer.
An important caveat would be that it is paramount to maintain a crystal-clear consensus on strategic direction and discipline on resource allocation to ensure this critical enabler of sustainably high growth doesn’t run out of control.
The second characteristic we have observed across leadership teams of great growth stories is active listening.
Whether it is absorbing ideas from customers, external advisers, consultants, industry analysts or taking on board feedback from co-managers or employees, the pace of growth and development of companies is much faster and more sustainable when there is a fundamental grounding to the leader’s ego and a strong sense of humility that fosters a constant desire to improve and a relentless sifting of external inputs to refine key aspects of strategic, operational and financial decision-making.
Sustaining accelerated growth sometimes simply comprises getting a huge number of small and a few big decisions right by actively procuring and acting on quality external advice.
To round out the trio of insights on softer skills I’ll use an analogy. To set the tone at Pemba Capital we align activity to conquering summits that may look unattainable from afar.
We refer to the climb to our next strategic milestone in terms of say 20,000 steps, then set the path. We calculate the steps with a simple formula: team members x hours a day x days to summit.
There is no substitute for engaging the team in doing the hard yards to build a sustainable growth story. Inevitably, there will be huge challenges and unexpected obstacles along the way.
So a third defining characteristic of the strongest leaders of high-growth businesses is just plain old resilience.
This is more than just the ability to keep on pushing upwards. It is that combined with a leadership team’s skill in finding a path around every obstacle which inspires the wider team to continually step up and continually move forwards.
Plodding one foot after another on a steep slope may not sound glamorous and the media certainly like to sensationalise success as an instant phenomenon.
But, as the saying goes, success is almost always an overnight success story born over decades of perseverance.
In fact, as investors we tend to be instinctively sceptical about growth that emerges suddenly. It is rarely sustainable. So it is worth remembering that to gain true value as a shareholder from your great growth story it has to be sustainable.