Originally Published MX May/June 2004

COVER STORY

For most medical device companies, setting goals for annual growth can be an agonizing exercise conducted in a flurry of market research and a frenzy of sales predictions. But when executives of Stryker Corp. (Kalamazoo, MI) conduct their annual budget-planning sessions, one goal is already a given: Net earnings growth will be at least 20%.

The company's practice isn't remarkable for its novelty. In fact, the 20% goal has been a company mainstay since John W. Brown was named president and CEO of Stryker in February 1977. But Stryker's success at achieving the goal is certainly remarkable.

Figure 2. Earnings growth for Stryker Corp. from 1976 through 2003. (click to enlarge)

Over the past 27 years, Stryker has compiled a compound annual earnings growth rate (CAGR) of 25%, including a 21-year run (from 1976 to 1997) during which the company's earnings growth exceeded 20% (see Figure 2). That streak took a five-quarter detour in 1998, when Stryker decided instead to invest its earnings in the $1.65 billion purchase of Howmedica—a move that nearly doubled the size of the company.