In Search of Growth, from Anywhere

Almost every director knows it’s a problem. And yet, the question remains: What can boards do to help their CEOs and firms break the slow-growth era?

To an unprecedented and frustrating degree, traditional tailwinds driving corporate growth are stalling, and leaders are under pressure from investors and other stakeholders to find new avenues to boost sales and profits. After growing revenue by nearly 7% annually from 2018 to 2023, S&P 500 firms are only expected to grow a collective 4% in 2024, the lowest annual growth of any non-recession year in the 21st century. Despite an initial market boost following the US presidential election, uncertainty about the impact of policy changes on taxes, tariffs, and immigration is expected to keep a lid on growth next year as well. “Everyone is asking where the next big area of growth is going to come from,” says Stu Crandell, global head of CEO and executive assessment in the Board and CEO Services practice at Korn Ferry.

The machinations leaders have historically relied on to goose growth in cyclical downturns have all been exhausted. Costs have been cut to the bone, while dividends and stock buybacks are at all-time highs. Mergers and acquisitions are starting to ramp up again, but companies have a mixed track record of leveraging them to drive innovation and long-term growth, says Tierney Remick, vice chairman and co-leader of the global Board and CEO Services practice at Korn Ferry. To be sure, studies have shown that most mergers and acquisitions fail to create long-term shareholder value, and experts say layoffs—from deals and cost-cutting initiatives—are draining firms of the creative talent they need to innovate. “M&A has benefits, but it has to be combined with financial and talent investment to drive growth,” says Remick. 

Nearly everyone agrees that boards need to get more involved in strategy discussions—including board directors themselves. In Korn Ferry research on board evaluations at S&P 500 firms, 37% of directors cited a lack of conversation about strategic direction as one of their top concerns. “It’s one of their biggest complaints,” says Anthony Goodman, head of the board effectiveness practice at Korn Ferry. Part of the problem is that the volatility of the last few years, coupled with the increasing demands placed on directors, hasn’t allowed much time for strategy. But Goodman sees the issue as the result of two even bigger issues: board composition and culture. “Many boards still don’t have the directors or the culture to allow them to go toe-to-toe with management on strategy,” he says. “It’s hard to push for growth without that.”

There are signs that boards are getting more involved in both guiding and challenging leaders on strategy. Goodman says more boards are creating new committees or expanding the mandate of existing committees to explore growth opportunities. Similarly, boards are tapping outside experts for advisory boards to fill knowledge gaps and provide market intelligence. Boards are also taking a larger role in oversight of issues like talent, sustainability, and other areas that contribute to growth. 

But experts say the most important way boards can help restore growth is by recognizing leaders’ need for space to contemplate big ideas and make bold decisions. “Now is not the time to be risk averse,” says Remick. That’s easier said than done, of course, especially in an environment with activist investors ready to pounce on any mistake. To be sure, perhaps the biggest impediment to fostering innovation and jump-starting growth is the very real risk that the wrong decision could cost leaders and directors their jobs. 

Leaders are at a point where they can no longer stay still, however, says Jane Edison Stevenson, global vice chair of board and CEO services and global leader of the board and CEO succession practice at Korn Ferry. And boards have an obligation to encourage leaders to take reasonable chances knowing it might not work out. “Innovation is not one hundred percent perfect,” says Stevenson. “It may not end up in a fairy tale.”.