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Comment by mbesto | Hacker News Reader

This is what people seem to forget. A company that doesn't grow for all intents and purposes is a dead company. Or in the M&A world we call it "distressed". It doesn't matter how profitable you are if you don't get grow there are serious implications - employee motivation, loss of talent, erosion of customer services, etc.

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I don't see how employee motivation, loss of talent, erosion of customer services are related to the need for unyielding year on year growth.

There are companies out there, private ones, where their customers are happy, their employees are happy (most of the time) and their retention is high.

Without growth, the only way to get promoted is to get a spot of some higher-up who left the company (or retired/died). Whereas, in growing companies, there are new senior/management positions created all the time, to account for the growth - so, getting promoted is easier.

Ambitious, hard working people like promotions, so they gravitate towards growing companies and not stale companies.

> Ambitious, hard working people like promotions

Ambitious maybe (though that's nearly the definition of ambitious). Hardworking, not necessarily. I know a cement guy that you have never in your life worked a harder day than who has never received a promotion nor even sought one.

So is there anything to be done about it? How to avoid companies being compelled to seek growth always, to the detriment of their internal functioning/culture?

As far as I can tell, don’t go public or be a regulated utility.

Ambition and hard work are hardly the same thing. Many people work hard at their job, are paid a good wage, and are satisfied with their job, rather than constantly seeking a promotion. Constant promotion seeking isn’t admirable, it’s just greed.

Am I the only one who thinks this sounds a lot like how pyramid schemes work?

> There are companies out there, private ones, where their customers are happy, their employees are happy (most of the time) and their retention is high.

Companies that aren't growing? I meet A LOT of companies (about ~50 or so a year) and I can tell you there is massive difference between the distressed ones and the ones who are growing. btw - even 2~5% growth is fine, it doesn't need to be 25% google scale growth...but flat or declining is bad.

There are plenty of small private companies that more or less plod along year after year--small consultancies and the like. You're not going to have the level of compensation and opportunities you have at a large profitable growing public firm but you may be OK with that. Obviously declines are bad and, in any case, compensation will probably be a fraction of Google etc.

I hate how hn top threads usually degenerate into something totally unrelated to the original posts.

It's about stock price and bonuses, in public companies. The only metric that a board of directors can use is stockholder welfare. That's their primary fiduciary duty, according to law these days.

So, what to bonus the CEO on? Stock price appreciation. Stock price valuation loves growth. So even though a flat business throwing off 10% profit is a very nice business to be in, the only way you can increase stock price is to grow margin, which is really hard and attracts competition. Ergo, CEO is going to try to grow the company to boost the stock price. That's one reason dubious mergers are pursued, as it at least will goose revenue and profit. Wise investors might use return on equity or capital as well, but the market in general biases towards the revenue and profit metrics. Stock goes up, CEO gets their bonus.

For a private company, slow or flat growth with a nice profit margin is great, and without having to favor growth at all costs for pesky stockholders and analysts, you can pick and choose when a good opportunity comes along, and grow a bit anyway.

This seems like a popular and reflective comment, but this is a very cultural idea in my amateur opinion. It seems like this -needs- to be so, and many do so because of that belief. But in reality it is a self perpetuating hamster wheel of burn out bliss a company is setting itself up for.

It's not cultural at all -- it's economics.

Businesses are valued based on discounted cash flows (DCF). If you're profitable and not growing, your cash flows are very stable & easy to evaluate -- you get a low P/E or P/E/G ratio. But if you're growing quickly with sane unit economics, most of the DCF value is in future years... which then results in much higher multiples relative to today's revenues & earnings.

So is there anything to be done about this? It seems from this thread that the conclusion is that companies cannot avoid constantly seeking growth, and yet that growth ultimately destroys internal social mechanics / culture.

It can only not avoid it because that’s how the deck is stacked. Different rulesets would give different outcomes. Just because we are riding one certain economic theory, does not mean its the only way of value creation.

So? Who needs that?

Not the company, unless selling stock to raise cash.

Not the employees, if paid in cash instead of funny money.

Nobody needs that.

It's cultural.

Politician wins election by promising lower taxes by assuming greater investment returns hence requiring less money to be set aside for defined benefit pensions.

People see other people’s wealth growing quicker because their investments grew more, increasing demand for higher growth investments.

Population growth inherently leads to economic growth assuming a sufficiently stable society and access to resources.

All of these create an environment where people expect certain ROI and make plans according to those ROI.

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