Reaching for $1 billion
The Atlanta-based, global consulting firm, North Highland, has a history of double-digit growth and has no plans of stopping.
"We define ourselves as a growth company,” explains CEO, Dan Reardon. “It’s a key part of our strategy and our mission – it’s a part of all we do.”
In the firm’s early years, compound annual growth was 30% a year. The current, larger firm now looks for 15-20% growth per year. Still, Reardon is focused on a $1 billion goal.
Really put the people first. They’ll help the company tackle every hurdle that comes up. People like to succeed. So talking in that positive success mindset is very much a reinforcing loop and I think it’s a key to growth.
- Dan Reardon, CEO North Highland
North Highland works to grow within existing offices but believes expansion into more geographies will continue to be a key growth driver. “It’s about the size of the organization to serve our clients,” says Reardon. “North Highland is a management consulting firm for the largest companies in the world, and they’re everywhere, so we have to be everywhere.” Being everywhere starts a positive cycle, says Reardon. “Geographic growth will lead to revenue growth, which leads to more people. And that will get us to the billion dollars, we hope, over the next five years.”
Growth at that speed doesn’t come without its side effects, however. “We’ve hit a wall probably five times in that growth path,” he explains. “My takeaway is that there’s a lifecycle of growth. In the early stages it takes a different style of management, a different type of infrastructure. As the firm grows into a completely different form, new challenges emerge that must be addressed.”
One issue the growing North Highland must deal with is that of growing faster than its employees. “I don’t think humans were designed to grow 30% a year in terms of their responsibility and the burden that they have to carry,” says Reardon. To deal with this, North Highland’s executive team created a different sort of career-path expectation to prevent employee burn-out, and let employees take a non-vertical climb up the career ladder, giving them some breathing room to acquire skills and experience to make the next leap.
Having flexibility with employees helps keeps the focus on the positive effects of growth. “A core tenet of growth is not just the value creation, but also the career creation for our people.” Reardon feels strongly that without North Highland’s growth he would lose their best and brightest employees because they need to keep growing too.
“If North Highland takes care of its people, its people will take care of its customers, and then its customers will turn around and take care of our people. So it’s a very circular reinforcing loop,” said Reardon.
That strategy has worked in their favor. Since joining as CEO Reardon has watched North Highland grow from a firm with $2 million in yearly revenues to more than $350 million.
North Highland has an established international-growth strategy based on the ability to better serve clients and replicate projects in different locations. “International growth is critical for our business,” Reardon says.
Part of the company’s strategy deals with potential cultural clashes. “The way we’ve addressed that is to hire people from different cultural backgrounds. They have a better understanding of how to manage across the borders.”
The role of technology in a growing company
For North Highland, updating the infrastructure has been essential for pushing through the growth walls. “Where [technology] has saved us is when we hit one of these growth walls. When you blow through $100 million, $200 million and $300 million in revenue, you need a much more robust system. So we’ve had to upgrade our technology that will take us to $3, $4 or $5 billion.”
Paul Kanneman, retired national IT management practice leader at Grant Thornton LLP, explains that technology is crucial for dynamic companies to keep growing. He uses cloud computing as an example. “Cloud computing enables [growing companies] to scale their compute capacity up or down in response to business demands.”
How compensation and benefits factor into growth
North Highland is 100 percent employee owned, but employee stock-ownership plans (ESOPs) can be complicated. Earlier this year the Obama administration submitted a budget proposal that included a proposal to eliminate the deduction for ESOP dividends for C corporations.
Mergers and acquisitions not always the best path to growth
M&A activity works well for some industries; Reardon, however, is not enthusiastic about achieving major growth through acquisition. “Mergers and acquisitions usually don’t work well in the professional services industry because there’s about a 90% failure rate, mostly due to a clash of cultures.”
North Highland tested the waters by making a small acquisition a number of years ago, giving the new addition a long period of time to fully integrate. “That’s worked out extremely well,” says Reardon, “but it’s not a key part of our strategy going forward because it’s just too high risk and our culture is so core to who we are. I think if you were to inject something very different it would be dangerous for us.”