investiledysfunction

We’ve seen Kraft, P&G, Pernod and many other companies in the recent past get on the organic growth bandwagon as they’ve also realized it is the least risky and most coveted by investors.  Our analysis of organic growth efficiency of the S&P 500 over the period from 2002-2007 actually reveals that companies with higher organic growth efficiencies also are rewarded with better shareholder returns.

To that list of the enlightened, let’s add Wells Fargo.  John Stumpf, Wells Fargo’s CEO, states this in no uncertain terms in the August 25th issue of the Financial Times when questioned about doing a mega-deal.  He states, “We don’t need to do a deal.  Organic growth is the core growth engine in this company.”

He later added, “We come from a culture where bigger is not better.  You get bigger by being better, you don’t get better by being bigger.”

Mr. Stumpf hits on organic growth in a practical way and also rightfully disparages the size matters credo which has especially infested financial services.  That said, Wells Fargo is no stranger to acquisitions, but it has tended to do smaller, regional deals which it can fold in to existing operations.

The increasing push and discussion around organic growth is one that we find heartening.  If companies invest in measures to improve their organic growth capabilities, we’ve seen that the numbers paint a very good story.

Managing Director, Pierre Pringuet, of Pernod is looking for some tequila and bourbon.

And while it may make sense for Pernod, the 2nd largest drinks-maker in the world to think of such acquisitions, the organization has for a variety of reasons realized that “organic growth is a must” as Pringuet told the Wall Street Journal in the 7/24/08 issue.

The company’s liquor cabinet is full of brands,  many of which have been gotten through acquisitions (some quite pricey), and now the time and effort turns to generating organic growth.  This is where Mr. Pringuet and his team’s management prowess will really be tested as they aim to generate growth through their actions and investments in marketing, product development, sales, etc.

It’s good to see they’ve seen the light with reference to organic growth.  Now comes the hard work.