OUR BEST IDEAS, QUICK AND CURATED | SEPTEMBER 9, 2022

This week, empirical research on what it takes to generate value-creating growth. Plus, an interview with Andy Penn, who just stepped down as Telstra’s CEO after leading a transformation of the Australian telecom, and a McKinsey expert on how the Great Resignation is giving employees and employers alike the chance to reshape the nature of work.

Room to grow. The past 15 years haven’t been stellar for corporate growth rates. After the global financial crisis, the world’s largest companies grew at half the rate they did before 2008. A typical company grew at a paltry 2.8 percent per year during the ten years preceding the COVID-19 pandemic, and only one in eight recorded growth rates of more than 10 percent per year. Now, with a slowing global economy, rising inflation, and geopolitical uncertainty, growth that delivers profits and shareholder value may become even more elusive.

A critical driver. McKinsey recently conducted a study of the growth patterns and performance of the world’s 5,000 largest public companies over the past 15 years. The research showed that an extra five percentage points of revenue per year correlates with an additional three to four percentage points of total shareholder returns (TSR)—the equivalent of increasing market capitalization by 33 to 45 percent over a decade. Companies that managed to grow faster and more profitably than their peers during that period did even better, generating shareholder returns six percentage points above their industry averages.

A ten-point plan. As senior partner Chris Bradley and his colleagues discuss in “The ten rules of growth,” business leaders can follow a holistic growth blueprint that allows them to overcome obstacles to growth. The list of imperatives includes starting with a winning, scalable formula; focusing on growth in your core industry; combining healthy organic growth with serial acquisitions; and focusing on growth where you have an ownership advantage.

Make the trend your friend. This age-old axiom holds especially true today as the acceleration of pre-COVID-19 trends widens the gap between corporate winners and laggards. Over the past 15 years, companies that expanded in ways that maintained or increased their exposure to fast-growing, profitable segments generated one to two percentage points of additional TSR annually. This suggests that organizations already in attractive markets should keep investing to stay ahead of the pack.

Leading the way. As senior partner Jill Zucker and her team note in “Choosing to grow: The leader’s blueprint,” leaders who outperform their peers not only think, act, and speak differently; they align their organizations around a shared mindset, strategy, and capabilities. Drawing on McKinsey research, the article looks at how growth-oriented leaders shape their thinking and actions toward growth over both short- and long-term horizons. They react decisively to shorter-term disruptions that can be turned into opportunities—what we call “timely jolts”—and build organizational resilience to respond to disruption.

OFF THE CHARTS

Higher learning meets machine learning

Students in higher education are eager to continue using new classroom learning technologies adopted during the pandemic, according to McKinsey research. In a survey, more than 60 percent of students said that all the classroom learning technologies they’ve used since COVID-19 began had improved their learning and grades. Two technologies in particular stood out for boosting academic performance: 80 percent of students cited classroom exercises, and 71 percent cited machine learning–powered teaching assistants.

INTERVIEW

Sometimes ‘you’ve got to be unreasonable’

Since he became the CEO of the Australian telecommunications company Telstra in 2015, Andy Penn has seen his fair share of challenges, from network outages that shook the company’s core value proposition to building the right leadership team to staying the course in the face of impatient market expectations. In an interview conducted before he stepped down from the role on September 1, Penn discusses the challenges of transforming an organization while maintaining an innovative spirit and employee engagement. “You’ve got to be unreasonable because that’s how you stretch the aspiration and how you ultimately get the best out of your people and your teams,” he says.

More on McKinsey.com

Building resilience: The history and future of US crisis management | The crisis management community has made great progress on building resilience in the past two decades, but much work remains to approach the future in a more integrated and coherent way.

Spotting green business opportunities in a surging net-zero world | Achieving net zero by 2050 may prove to be the largest reallocation of capital in history. Explore how eight industries may transition to net zero, and how organizations can respond with green businesses that create value along the way.

Supporting employee mental health and addressing burnout in Asia | What actions can leaders across Asia take to improve workplace mental-health outcomes? We look at ways they can identify solutions, take holistic action, and empower workers.

INTERVIEW

You’ve been leading McKinsey’s research into the Great Attrition since it began in 2021. What has struck you most about this job-quitting trend over time? Where do you see it heading?

What struck me in the beginning continues to intrigue me now: the disconnect between employer and employee mentalities. When the Great Attrition started, many employers in the US were quick to blame unemployment benefits as the driver, saying that people were getting paid too much to stay home and thus didn’t want to work. Then the benefits ended and employees kept quitting, and it became clear that the problem wasn’t isolated to the US—it was global. So employers wanted to know how long people could go without working and in some cases saw rising inflation as a potential reprieve for their talent woes, assuming people would come flooding back.

What they missed, though, was that it wasn’t about people not working, it was about people not working for them. People are arguably working harder than ever before, they’re just doing it more on their own terms and in ways that make sense for their lives. I don’t know if that changes going forward. If people have figured out a way to make work work for them, why would they go back to work that doesn’t?

What will the new global economic picture mean for the trend?

I certainly don’t have a crystal ball, but as employers continue to react to economic uncertainty by cutting jobs and slowing growth, the gap between talent supply and demand should narrow. There are certainly arguments to be made that employers shouldn’t be cutting jobs at all, because in a supply-driven downturn you will need talent to get out of it.

The narrowing of the gap could bring us to more of an equilibrium. But without real changes in how we work, I think we will struggle to attract people back into the traditional workforce and truly grow at scale.

Your latest research surfaced five employee profiles, or ‘personas’ of workers that companies can pursue to fill open jobs. Which persona would you be?

In my heart of hearts, I’m a “traditionalist” [career-oriented people who care about work–life balance but are willing to make trade-offs for the sake of their jobs]. But I’m also a mom, and like many working mothers, I’m burned out. So while a typical value proposition of solid compensation and career advancement appeals to and retains me, I also need flexibility.

I feel the pain and understand the drivers that are pushing many out of the workforce for a break or even for good. So there’s a world in which I could be a “Gronk”—someone who leaves and returns to the workforce only for the right circumstances.

At the end of the day, it’s a really exciting time to be an employee, and in my opinion, an employer as well. We have the opportunity to reimagine and reshape the very nature of work—how it is done and the role that it plays in our lives. Getting it right not only gives employers an incredible advantage but also lays the foundation for a new, more effective and efficient way of working for employees, employers, and their customers.

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