Over the weekend, Justin Rose won the United States Open Championship (U.S. Open) with a total score of one over par for the tournament. Similarly, Webb Simpson won last year's U.S. Open by also posting a total score of one over par. For the second year in a row, none of the best players on the planet were able to break par with their four-day aggregate scores, and the steadiest player prevailed.
Of course, this is not an attack on the prowess of professional golfers; the United States Golf Association does a remarkable, almost sinister, job of making the courses difficult for this particular tournament. But in a sense, the U.S. Open offers the business world a valuable reminder: facing tremendous competition and extreme pressure, consistency fuels victory.
Consistent Pars Beat Sporadic Birdies
Similar to bettering par in golf, the business world covets and even glorifies instances when companies outperform standard benchmarks. Instead of birdies and eagles in golf, however, it's often phrased as:
- We're on pace for double digit growth this month.
- Our customer base tripled last quarter.
- Sales are up 200 percent this year.
Many executives dream about weeks, months, and years of meteoric growth, when the graphs look like "hockey sticks," shooting exponentially up and to the right. Their investors salivate over it, and it usually leads to great valuations. The media usually showers them with praise and puts them on magazine covers. But according to business management expert Jim Collins, that's not the key to long-term success.
In his book, Great by Choice: Uncertainty, Chaos, and Luck, Jim Collins argues that the most successful companies, like U.S. Open champions, are the most consistent ones. He cites "10x" companies that outperformed their industry index by at least a multiple of 10. But instead of having a massive boost in earnings one year followed by a significant drop in another, these companies grew steadily over time. For example, Styker (SYK) set out to grow earnings by 20 percent each year and did so 90 percent of the time for over 20 years.
The Power of Laying Up
A remarkable part of Collins' research of Stryker and other 10x companies is how they restrained themselves when conditions were favorable; they didn't try to max out each year and instead left potential earnings on the table. When enjoying a record setting pace, it can be instinctive to push the limits further. But doing so, Collins suggests, can fatigue employees, abuse customers, and set companies back in the long-run.
Again, the world's best golfers show business leaders how comparable restraint helps them win. In the most challenging tournaments (majors), golfers will often layup in an effort to mitigate risk and avoid catastrophe. Perhaps the paradigm came in 2007 when Zach Johnson won the Masters. Johnson did not attempt to reach any of the par 5s at Augusta National Golf Club in two shots. Instead, he consistently and conservatively laid up on every par 5 in route to a 2-shot victory.
Focus on Par, Not Hockey Sticks
The key is consistency. Every business needs to grow, and "birdies" are helpful. But great companies are able to endure the most rigorous conditions. When the stakes are highest, recent U.S. Open winners and dominant companies have shown that it's about overall steadiness not surges.