Growth, Barely

It beats a sales decline, at least.

Analysts project a 4.8% year-over-year increase in earnings for S&P 500 firms, marking the fifth consecutive quarter of growth. But historically, that’s not much of an increase. If expectations come to pass, 2024’s growth would be slightly over 4.0%, the lowest of any non-recession year in the 21st century.

That growth, in many places, isn’t “real,” either, since the gains come not from companies’ marketing acumen or product superiority, but rather from their passing along of higher costs to customers. In retail, for instance, a 2% to 3% revenue gain is effectively “flat,” since it’s just keeping pace with inflation, says Craig Rowley, a Korn Ferry senior client partner specializing in retail firms. “It’s one reason executives are cranky,” he says. ​

The growth—or lack thereof—could cause several more problems down the road. When a company doesn’t grow, its employees may become disenchanted. Activist investors may question whether a CEO and board of directors are up to their jobs. “If you want a less meat-grinder life as a CEO, grow the top line, predict profitability accurately, and have an employee base that’s happy and engaged,” says Korn Ferry global vice chair Jane Edison Stevenson.

To be sure, there are some fields—for instance, life sciences and AI-focused technology—that are growing just fine. But experts say they’re the outliers. The tailwinds that propelled big revenue gains in the first two decades of the new century have died down. Developed economies aren’t growing much at all. China’s economic growth has slowed down considerably. And while interest rates have come down, they remain at levels that make mergers and acquisitions cost prohibitive.

But experts say there’s more that leaders can do to spur growth at their own organizations. Developing economies might not be growing as fast as they were a decade ago, but they’re still moving faster than advanced economies. Yet many CEOs avoid them, preferring to wring more market share out of the US. “Companies are not focusing on where the opportunities for growth are,” says Jean-Marc Laouchez, president of the Korn Ferry Institute.

The biggest key to future growth, many experts say, is innovation, whether it’s new gadgets that save consumers time and money, or breakthrough manufacturing processes that make products faster, better, or cheaper. Aside from AI, says Grant Duncan, Korn Ferry managing director and sector lead for media, entertainment, and digital, EMEA, most companies are focusing on incremental, not ambitious improvements. “Where are the big ideas?” he asks.

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