Magazine article Management Review

GROWTH from Top to Bottom

Magazine article Management Review

GROWTH from Top to Bottom

Article excerpt

Name: Winslow Buxton

Title: Chairman, President and CEO

Company: Pentair Inc., St. Paul, Minnesota

Line of Business: Diversified manufacturing

Number of employes: 10,000

Revenues: $2 billion


One of the most challenging aspects of my job is balancing the differing expectations of employees, management, customers, financial analysts and investors. The common denominator for all of these groups is growth. But this seemingly simple term has different connotations for each constituency, and a successful company must satisfy all of those meanings.

For customers, growth means the assurance that the company will still be around tomorrow and that higher sales volumes and satisfactory earnings will keep prices in line. For employees, growth means job security and increasing wages and benefits. For management, it means greater opportunity and responsibility, improved stock performance and wealth creation through various incentives. For analysts, it means improvement in all areas of the business that affect the bottom line. And for in vestors, the sole barometer of growth is the prospect for stock price appreciation.

As these expectations suggest, a public company must strike a balance between earnings growth and sales growth. This is easier said than done. Not long ago, the market gave its highest multiples to companies that focused on the bottom line. DEC, Sunbeam and others were rewarded for slashing costs to trim losses or improve profits. Today, it is top-line growth that drives stock-price appreciation. Internet stocks, for example, are being richly rewarded for their growth potential, not actual earnings.

The key to long-term success-and the challenge for today's CEO-is to grow the top and bottom lines simultaneously. That means a company must be willing to change as financial requirements, economic conditions, technologies and the competitive environment create new demands on the business.

For some companies, change is revolutionary: ITT is no longer in the telephone business, and U.S. Steel is principally an oil company. For others, change is evolutionary: Sam Walton's little retail store became Wal-Mart. But for many, change proved to be an impossible hurdle: Studebaker, New York Central, Beatrice, Pan Am and others have disappeared from the corporate landscape. …

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