Rapid growth is a drug

I recently had the privilege to hear Joe Rogers, Jr (CEO of Waffle House) speak at a luncheon. He had a number of interesting things to say about growing a company. First, a couple of interesting facts about Waffle House. It is the second largest 24 hour (McD is #1) fast food chain in America with over 1,500 restaurants mostly in the Southern United States. Joe Rogers, Sr started Waffle House in 1955. In 1957 they made their one and only acquisition and they’ve grow organically since then. In the 1960’s they started to franchise the brand. In 1973 Joe, Jr took over from his farther when they had 400 restaurants. They have over 1,000 shareholders and is still privately held. He believes that Waffle House will still be privately held 20-30 years from now.

• Rapid growth is a drug: Mr Rogers gave a number of examples of fast-food chains that had astronomical growth and then flamed out. He believes that rapid growth is a drug and not necessary to be successful in the long run. After rapid growth in the 70’s they’ve slowed down. Since the 80’s they’ve only maintained 5-6% growth — slow according to industry standards.

• Grow slow to became the biggest: He believes in growing at a measured pace to become the largest. 5-6% is slow, however after 50+ years Waffle House is now the second largest in it’s category. Most other fast-food restaurants in this category are declining.

• Pace your growth based on careers: He believes very strongly in growing management and not hiring from the outside (see below). A company should measure and pace it’s growth based on the careers of managers. This is not easy, however definitely possible.

• Don’t hire outside senior executives: Finally he believes that you cannot hire a senior executive from the outside. Outsiders don’t have the passion, and cultural background as Waffle House livers. Someone asked him if he isn’t worried about group think and stagnating if you don’t bring new blood onboard for new ideas. He said it is easy and inexpensive to hire a consultant (or read a book) to get new ideas. Interesting…

It was very interesting to hear another viewpoint regarding company growth. I usually only hear about rapid growth and also hiring the best and the brightest from outside an organization.For more info on Waffle House see wikipedia.org and wafflehouse.com.Do you think this model is also applies to technology companies? Can you think of specific examples?