We appear to be obsessed with growth. It’s the subject of just about every board meeting and strategic discussion.  It is also often topic number one in the ‘broadsheets’ and even in the tabloids.

Will the economy grow by 2% this year? Or will we face disaster and barely make 1%? But what is growth? And crucially, how much do we really want?

Macro economic growth is what we hear about, incessantly it seems, from politicians, media and commentators – especially the doom and gloom merchants. Positive growth is good, negative growth is bad. Quarterly [GDP] growth figures are the barometer for just about everything it would appear – two consecutive quarters of negative growth means we are in recession.

The obsession over these growth figures is almost as great over that of Bankers and Banker’s remuneration. When we saw a negative growth figure for Q4 2011 the political doom-merchants and economic nay-sayers went into overdrive, panicking over the prospect of the dreaded double-dip. Seemingly a fate worse than being  offered the Chelsea FC manager’s job. All of that due to a 0.2% contraction – that’s right, a fifth of one percent. In school that would comfortably be rounded up to zero.

Over the course of the 08/09 recession, the UK economy (output) contracted by 7%. Not 70%, not even 17%, but 7%. This was bad, and more severe than any recession in living memory, but one could argue, not as bad as several other factors currently dogging the UK – especially the UK’s debt position which currently stands at somewhere between £1trillion and £3trillion (dependant on whose figures you listen to, and whether you include all liabilities, including pensions).

Yet it is still growth that we are obsessed with, largely because the media tell us to be, while building the negative case, spreading doom and gloom. This is the reason that a massive number of the general public think we are currently in recession – despite us having not been in recession for approaching 3 years.

Economists predict growth will be approx 1% this year (downgraded from the dizzily high expectation of nearly 1.4%) and not much above 2% per year for the rest of this decade – considered poor compared to an average of less than 3% for the last decade. This seemingly miniscule difference is still managing to fill 1000s of pages of media commentary, as well as fuelling immense political debate.

Everyone is striving for macro economic growth – but how much do we want? Do we really want the UK economy growing at 5%? Or 10%? Growth would see the demands on key materials stretched (witness some commodities and raw materials rocket in price purely on that back of China’s 9% growth), critical pricing indices rocket (witness house prices in times of economic ‘boom’) and risk attitudes relaxed to potentially dangerous levels (witness pre-2007 leverage levels).

Lessons from the East

Even China, through Wen Jiabao, has lowered their growth targets for 2012 to a mere 7.5%, their 10/11% growth having caused them long-term issues. China without doubt has prospered by industrialising rapidly. Chinese workers formerly employed in agriculture have been lured to cities to produce goods for export. The export demand for such goods, coupled with an undervalued currency, ensured that China built up a huge surplus of savings. But did it become a fateful consequence.

Inexpensive imports kept inflation low. The central banks thus had leeway to ‘play’ with interest rates. Easy monetary policy, combined with lax banking regulations, sparked a credit boom that turned to bust (does all this sound familiar yet?). However, because of the underdeveloped state of the Chinese banking system, much of the country’s immense foreign currency reserves were recycled in the US debt markets…. The rest is history.

Now it could be highlighted that China’s recent robust growth has helped the western world escape a double-dip recession, and that if the pace of Chinese growth decelerates, that may make such western recovery more difficult.

Chinese growth had led to greater economic strength, but having expanded through exports, China now has an emerging middle class and a demand for services and imported products, rather than indigenous manufactured products. Service sectors do not have the same potential for productivity gains as manufacturing. Ergo: Chinese growth over the medium term will probably be more geared to domestic demand and slower than it has been in the past decade. Victim of its own success.

Furthermore, with pressure for wage rises (that have been lagging behind production growth) on the back of such tremendous economic growth, the pressure on the (weakening?) economy will increase. All because of high growth. Minor concerns compared to the Eurozone, and the rest of the world, but it still goes to highlight an inherent risk in comparatively high growth (macro) economies.

The UK would have a further challenge against high growth.  Chinese growth levels in this country would likewise see business prosper, likewise see the rich get richer, likewise see wages lag behind business growth (and business owner earnings)….which would in turn inflame the same media commentators that deride our lack of growth today.

SO is there a level of Macro Economic Growth with which we would see universal acceptance and happiness?…and maybe even a smile appear on Robert Peston’s face?

What about YOUR business.

What about Micro-Economic Growth? For a start, forget the GDP figures. Fractions-of-a-percent changes in Macro-Economic growth are utterly meaningless to an SME. Even whole percentages have very, very little relevance to most businesses, and obsessing on it will mean you are not in turn spending the relevant time on your own growth. Forget the growth outside your business; make sure your metrics are heading in the right direction.

Clearly, even within micro-economic environments, growth at all costs is equally foolish.  Witness a well known business, famed for meteoric growth during and despite the recession, doubled its turnover over the course of 3 years, launched new products, entered new markets, began supplying top-tier customers…but forgot fundamentals such as cash, margin and crucially ensuring that profit didn’t shift in the opposite way to turnover. Its administration and subsequent break-up will be announced over the next 6 weeks.

Top-line growth is easy. As the old euphemism goes, any fool can sell something at a loss. Profitable growth is harder, maintaining positive cash-flow through profitable growth even harder still. But sustainable, profitable growth should be, in theory, uncapped.

Plenty of businesses witness annual top and bottom line growth in excess of 50%, many greater than 100% but they do so with planning, intelligent leadership and a growth strategy (see my guest blog on the Business Growth Hub website about ensuring People are at the centre of your growth strategy)

“It’s not knowing what to do, it’s doing what you know”

The answer to both business and country/GDP (Micro and Macro Economic) growth is to know your ‘business’. Tony Robbins’ quote above may sound flippant, but anyone who had led a business to a specific level, knows what that business needs to do – even if what they need to do is replace themselves with a right leader for their business’s next phase.

Too many leaders spend time re-inventing what they need to do, rather than just following what they know needs doing. These leaders forget the notion of having two ears and one mouth for a reason. Understand where you want to be, decide how you are going to get there, design the path/route/strategy to follow (and be open to others suggests on route-planning) and follow it.

Governments can’t do this, they have politics/media/opposition benches/less-informed public opinion to pander to…..but businesses don’t have that excuse.

Grow within your capabilities, by design, by plan, by strategy. Push yourself, drive yourself to achieve more but know when your growth targets are enough.