A Wells Fargo bank branch
Photography by Craig Warga — Bloomberg via Getty Images
By Steve Tobak
September 26, 2016

Whenever I hear New Age business gurus preach that corporate America’s obsession with growth is all about greed – that CEOs should be more focused on making customers and employees happy than making money for investors – I have to roll my eyes.

Growth is what makes customers and employees happy. Growth makes all stakeholders happy.

Market leaders such as Apple and Google benefit from pricing power and high profit margins. That’s how they keep their pipelines full of great products that customers love and write big payroll checks that employees love. If they don’t stay ahead of competitors and the market, they lose their lead and all the perks that go with it.

Granted, growth is a double-edged sword. It can be taken too far, as we’ve seen recently with Wells Fargo. Last week, CEO John Stumpf got raked over the coals by the U.S. Senate Banking Committee over a wide-ranging scandal in which thousands of overzealous retail branch employees created 2 million fake accounts to meet over-aggressive sales quotas. The nation’s largest retail bank has since done away with its “cross-selling” incentive plan, but not before firing 5,300 employees over a five-year period for “inappropriate sales conduct.” Senators were incensed that top executives made millions in bonuses while failing to hold themselves accountable for the high-pressure sales environment they created. They have a point.

 

Wells Fargo has agreed to a $185 million fine to settle charges but that’s nothing compared to the hit its brand is taking for allowing so many customers to be impacted for so long. Why it did not tighten oversight of the plan and loosen up on the goal is beyond me. Ironically, the bank made all of $2.6 million in unauthorized fees on the fake accounts.

In many ways, startups have tougher growth challenges than established corporations. In hyper-competitive Silicon Valley, companies race to win customers, gain market share and scale up before rivals can catch them. But growth at any cost is never a smart strategy. Earlier this year, high-flying unicorn Zenefits learned that lesson the hard way. In a fervor to push sales, founding CEO Parker Conrad wrote a software program that enabled unlicensed staff to circumvent state regulations and fraudulently sell health insurance to small-business customers. The scandal led to Conrad’s resignation and, in an unusual move, the company agreed to slash its valuation from $4.5 billion to $2 billion to make things right with investors. A costly mistake, to be sure.

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And yet, at a time when it seems all we see are examples of toxic, at-all-costs growth, there are still companies exercising the kind of bold, innovative growth that leaves competitors and regulators in the dust. Look at Uber: in just seven years, the San Francisco-based ridesharing service has raised $12.9 billion at a most recent valuation of $68 billion and offers services in over 500 cities around the world. Its uber-competitive CEO Travis Kalanick did not accomplish that remarkable feat by playing nice with competitors or kowtowing to the status quo. Along the way, he’s had to fight taxi unions, commissions and regulators in dozens of cities and countries. And he hasn’t been afraid to wade in pools that bigger fish are only dipping their toes in — self-driving cars, for instance.

The key to pushing the envelope without going too far is to never lose perspective on why growth is so important in the first place: to benefit stakeholders. All of them.

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