Are Supply Chain Leaders Ready for the Top?

Posted: 11/1/2010

There is an old Chinese proverb that says, "There are many paths to the top of the mountain, but the view is always the same." If the "top of the mountain" translates as the role of chief executive of your company, is one of those paths a career in supply chain management? There is an old Chinese proverb that says, "There are many paths to the top of the mountain, but the view is always the same." If the "top of the mountain" translates as the role of chief executive of your company, is one of those paths a career in supply chain management?

If you had asked this question 15 years ago, the answer would be "no." Today, that's changing, albeit slowly. More supply chain executives are starting to progress toward the executive suite. But if the few who do make it are to become many-as we believe they should-we need to give serious thought to what's needed for that to happen. In effect, we need to know how to chart a wider, more accessible path to the top of the organization chart. It is important to do so not only to elevate the supply chain profession but to benefit businesses by having more high-quality, well-rounded, operationally savvy executives vying for the top job.

Like Sir Edmund Hillary being the first to climb Mt. Everest, we can point to some pioneering chief executive officers (CEOs) who rose through their organizations as executives with significant supply chain and logistics operational experience. One of the most notable is H. Lee Scott, who served as president and CEO of Wal-Mart Stores, Inc. from January 2000 to January of 2009. Scott was a major catalyst behind the improvement of Wal-Mart's distribution network. Another trailblazer is W. Bruce Johnson of Sears Holding Corp., who was executive vice president of supply chain operations before becoming interim CEO and president of Sears Holdings (it's yet to be seen if Johnson assumes the CEO role on a permanent basis). However, the majority of Fortune 500 CEOs still come from disciplines such as marketing, sales, finance, and legal. While those paths are by no means inappropriate for development of the next corporate chief, they are not the only paths. We believe that CEO succession committees would be helping to strengthen the top management team if they routinely considered supply chain executives as potential candidates.

There are two important reasons for our assertion. First, for those who deeply understand the breadth and depth of the supply chain experience; it is clear that supply chain management offers some of the most comprehensive and underutilized training grounds for high-potential leaders. The supply chain leader's vantage point encompasses the entire value chain. His impact extends from the supply base through his company's operating platform and on to the customer. The best supply chain leaders regularly interact with key players across this span. With the exception of general managers and CEOs, few if any other roles in a business share this comprehensive scope.In addition, and perhaps most importantly, the two core skills that best define supply chain leaders-influence management and people/team development- typically define the best CEOs and general managers as well. We need to fully exploit this alignment, which is currently misunderstood and underleveraged. This will require us to explore our own perceptions of supply chain leadership-and to be open to making some changes in our beliefs and approaches.

Secondly, we need to accelerate the attraction of top talent to the discipline. Consider the mindsets of two intelligent and ambitious college students who are pondering supply chain careers. The first student sees strong evidence that that career choice is a great way to climb the organizational ladder, perhaps even making it to the top spot one day. She studies the careers of business leaders who graduated with supply chain degrees and went on to secure higher and higher positions, including CEO roles. The second student sees very few examples of this trajectory. Which student will be more compelled to pursue a career in supply chain?

Why don't chief executives come from the top supply chain ranks as readily as they do from finance, marketing, and sales? Senior supply chain management roles constitute some of the best preparation possible for the CEO's position. But if they are to be seen as such by those who plan CEO successions, supply chain leaders themselves need new ways to think about the route to the top office.

Different Routes to the Top

It is important to call out a subtle but critical distinction regarding the career path to the CEO position.
Increasingly, there are examples of executives who began their careers in marketing, sales, or finance who received supply chain experience on their way to the top. A recent case in point involves the relatively new chairman and CEO of Xerox Corp., Ursula Burns. Burns began her Xerox career with a degree in mechanical engineering and moved through a diverse series of assignments, including heading up manufacturing and supply chain operations. In many media announcements about her appointment as CEO, Ms. Burns' supply chain experience was called out. However, Burns didn't start out as a supply chain professional. Her career began in product development and planning.

Consider two hypothetical career paths. In one, the college graduate (let's assume he graduated with a B.A. in marketing) enters through the marketing function and after proving himself, he gets operational and supply chain experience before earning his first general management assignment. (See Exhibit 1.) Another graduate starts in the supply chain organization and after a successful tenure, moves on to pick up operations and marketing experience prior to becoming a general manager. This second career path, specifically its starting point, is the focus of our discussion. Reaching the CEO's office via the supply chain organization is certainly possible and, as noted earlier, has some precedent today. However, we need to ask, "What will it take to create a well-worn path from the supply chain organization to the CEO's office?"

For a start, we must more fully understand and communicate the rich CEO training ground that the supply chain organization offers. We need to promote the fact that many of the most important skills practiced by great CEOs carry equal importance for effective supply chain leadership.








The Importance of Influencing Well

In our practice, we have found that five traits separate the best supply chain leaders from everyone else: influencing skills, developing leaders and teams, customer centrism, results orientation, and emotional fortitude. (See Exhibit 2.) Consider the emphasis that companies like General Electric Co., IBM Corp., and Cisco Systems, Inc. place on developing these skills-and the investments they continually make to do so. Let's take a hard look at the first of the two core skills: influence. As management thinker Peter Drucker said, "The only definition of a leader is someone who has followers." Drucker went on to say that influence is required in order to acquire followers. Leaders use influence to help shape the actions, behaviors, and opinions of people around them. A leadership style that relies on influence contrasts sharply with one that uses the power of the position to force followers to conform to the leader's directives.

Over the last 10 years, value chain management has become increasingly critical to a company's success. Leading businesses such as Wal-mart consider value chain management a core strategy. The responsibility for ensuring that all the value chain players operate together as a seamless and powerful system sits squarely on the supply chain leader's shoulders. Achieving this alignment requires superb influencing skills that span internal and external boundaries.

We worked with a supply chain leader who was put in charge of a major inventory reduction project. The goal was to improve annual inventory turns from 12 to 18 for a major raw material used in one of the company's business units. This was no small task for many reasons: The supply base lacked appropriate concentration, the inventory ordering process was nonstandard and decentralized, and the various manufacturing sites strongly resisted "outside interference." Our client needed to enlist the support of the business unit leadership team and various other functions. This meant that the business unit would have to agree to underwrite all time, money, and resources for the project. The inventory management solution required the collaboration of sales, operations, finance, suppliers, and others. Many of these constituents didn't report to our client; regardless, she owned the operational and financial targets associated with the project.

To the uninitiated, this might seem like a relatively straightforward task. After all, the business unit would receive the benefits-that is, the reductions in working capital required-if the project was successful. Shouldn't that be enough to gain the cooperation of all involved? Not necessarily. In the real world, each of these constituents had a "day job"-an array of other demands on their time and resources. They had their own bosses who expected them to deliver on all their objectives, not just this one. Securing a strong, passionate commitment from these individuals became highly dependent on our client's ability to wield effective influence to secure full cooperation and dedication. Fortunately, her influence created a sense of positive obligation on the part of those involved, compelling them to balance the project's demands with their other responsibilities. As a result, the project was successful and the team made a significant and lasting contribution.

Now let's turn to the successful CEO. We worked with a CEO who, in the words of Jim Collins,1 author of Good to Great, was an exceptional Level Five leader. Her leadership embodied a powerful combination of modesty and conviction. As she worked with her team to create an entirely new business focus, her ability to convey trust, confidence, and unshakeable determination excited her organization to take the leap. Due to her positive, influential leadership, her team followed her from the known into the unknown. Today, they are well on their way to transforming their business. This is influential leadership at its best. The influence requirements of this CEO and our supply chain chief differ only in scale and scope. Imagine our supply chain leader refining her influencing skills over and over again with larger and more complex enterprise-wide supply chain projects. She just might end up becoming a CEO candidate.

The Importance of Developing Others

Now let's examine the skills sets needed to develop leaders and build strong teams. The supply chain officer faces some unique challenges in practicing these skills. Like a CEO's executive team, the supply chain function is inherently cross-functional and ubiquitous, touching nearly every corner of the enterprise. It embraces all functions: operations, finance, marketing, IT, and many others. Perhaps most testing of all: It regularly calls for building cross-functional, collaborative teams that include external parties such as suppliers.

We worked with a senior vice president of supply chain for a large manufacturer. A couple of years ago he was challenged to regionalize several critical supply chain activities. As a market leader, his company had the financial strength to consolidate its market position via two highly targeted acquisitions. With the acquisitions, supply chain complexity increased significantly. Prior to the acquisitions, 50 percent of the total spend was sourced domestically. Now 80 percent of the total spend was concentrated in Asia and the Pacific Rim. Different procurement processes, cultures, and commodity categories came with these acquisitions. The differences had to be rationalized to achieve the synergy advantages anticipated in the acquisition's financial projections.

The supply chain chief needed to establish a common vision for his function, build the most effective team possible, drive alignment between the supply chain organization and the business units, and achieve significant cost savings-a daunting set of tasks. To streamline the procurement process, eliminate redundancies, and improve compliance, the global organizations were to be reorganized into regional procurement centers. This meant big changes for many employees. During a private meeting with a key manager from the newly acquired company, the executive was discussing some scary changes-changes that could significantly affect the organization's employees. An impressive moment came when the manager spoke up: "The only reason my organization isn't running for the hills from your proposed changes is that they've heard great things about you and the quality of your team. Our best players want to be part of your team and will work hard to earn a spot."

Throughout the acquisition and integration initiatives, the supply chain executive faced huge organizational challenges that touched every corner of the business. Not only did his assignment exercise his own leadership skills-particularly his ability to influence others and develop new leaders-but it expanded the suite of skills that would improve his chances of landing in the CEO's chair. If the cachet of supply chain management is to rise, we need to take action to make it so. Let's begin by taking a new look at ourselves.

Expanding the Supply Chain Brand

Every business leader has a professional brand. In simple terms, your brand comprises the image and feelings that come to mind when others think of you. Your brand creates associations; hopefully, these are associations you desire. Like any commercial brand, a leader's brand also creates expectations. Your brand should reflect your essence-what you care about as a leader. It reflects what you value and how you create value. A brand needs to be proactively developed, refined, and managed. When a leader neglects to proactively develop his brand, be assured that those around him have "branded" him in their minds, and often in ways he will not like.

So what is supply chain's brand? How well does it align to the brand of great CEOs? We need to think of ourselves as brand managers, with our brand being supply chain leadership. We need to realize that while we have a healthy brand today, we have several sources of untapped equity that when released, will significantly improve our opportunities to ascend to the CEO position.

Following are three specific areas where we can act on that realization.

1. Balance Strategy and Tactics. It's our observation that the supply chain brand is more associated with tactical execution than with vision and strategy development. That was clear during dinner at a conference some years ago with several senior supply chain leaders. The conversation turned to the previous quarter's financial results, and some of the leaders were describing what their teams delivered and how they did it. They demonstrated an impressive focus on results. During the conversation, one of the leaders remarked, "We are like well-oiled machines when it comes to executing initiatives and delivering results.

But you know, our people are also strategic thinkers. I don't think my peers fully appreciate how good we are at developing vision and strategy. As long as we deliver the cost numbers, they don't seem much interested in how we got there." That mindset can be changed through better communication and by being opportunistic. Here's one instance of a golden opportunity: A supply chain manager applied a new logistics strategy to deliver significant cycle time reductions. The strategy challenged some of the company's traditional business practices and beliefs-for instance, its long-time resistance to strategic partnerships. At a review with the business-unit president, the supply chain chief announced the initiative's results, and quickly passed the baton to the next presenter.

Typically, the business unit leader would let the moment pass. However, this time, he turned to the supply chain boss and asked her, "Just how did you pull this off?" After she had explained the strategy-that included forming a strategic partnership-the president responded, "This is great stuff. Typically, I don't get what you guys do and-don't take this wrong way-I don't really want to know the details. But the strategy you have just described is really powerful and has application across other areas of the business. I want my marketing folks to hear this story." In the mind of this business-unit president, this supply chain leader had just added a "strategic" association to her brand.

Supply chain leaders should focus on creating more balance between the strategic and tactical associations to their brand. In the early weeks and months, it will almost certainly require an "over-correction" by aggressively looking for ways to develop strategic skills in key managers and deliberately showcasing these capabilities to the organization.

2. Balance Cost and Revenue. Another brand association of supply chain professionals is a tenacious focus on cost reduction. Business leaders continue to experience intense pressure to cut costs everywhere, especially because their post-recession revenues are growing so sluggishly (if at all). In the current environment in particular, the supply chain organization has been the hero riding to the rescue. Many companies owe their last two years' profit and loss (P&L) performance to supply chain organizations that "found the cost" when top-line growth was nowhere to be seen. However, the CEO brand stretches much further to encompass vision and strategy, largely because top-notch CEOs are renowned for being able to keep their companies' growth engines firing continually-and profitably.

For these CEOs, if you are not growing, you are shrinking. For them, growth is very much about increasing sales, growing market share, expanding into new markets, and developing innovative new products. So are supply chain leaders pegged in perpetuity as cost-cutters and tacticians? Not necessarily. They can pursue opportunities to expose their teams to important market- and customer-focused initiatives that put them closer to the bull's-eye of profitable growth generation. One supply chain leader decided that the best way to get out of the "cost only" box was to form an alliance with his company's senior vice president of sales and marketing. The two leaders established a mutual commitment to create an experiential learning exchange between their organizations and in the process, to create value for their customers and several targeted prospects. They developed a plan to pursue value chain integration with their best customers-a plan that required sales, marketing, and supply chain representatives to work with select customers to pursue cost reduction and product innovation. The targeted customers represented more than 30 percent of the business unit's profit.

Throughout the process, the supply chain leader's team had numerous interactions with the CEO to review progress. Later, the CEO confided in us that he was "very impressed" to hear supply chain executives talk so much about customers. In fact, this cross-functional team was responsible for renewing all targeted customers at substantially higher margins.

3. Emphasize Inspirational Leadership. It isn't unusual for the supply chain brand to have a strong technical association. This technical bent, which emphasizes the "hard" vs. "soft" skills, can effectively mute the key role that inspirational leadership plays in supply chain success. Supply chain leaders need to attack this perception and in the process, unlock the untapped passion within themselves and their organizations. When they do, they are leading like the best CEOs and pumping equity into their brand. One supply chain executive had a two day offsite meeting with her leaders to kick off what she envisioned would be a transformation of her organization's culture.

She was looking for more than a "shot in the arm"; she wanted her team to become authentically passionate about their mission. In advance of the meeting, she sent out an e-mail to her leadership team asking them to think about the following questions.

What are we really passionate about?
What are our current sources of inspiration?
What can we commit to achieving tomorrow that seems almost impossible today?
What value do we create that goes beyond dollars and cents? How do we improve lives?

These questions comprised the only agenda items for the meeting. The discussions over those two days were fascinating and resulted in an inspirational manifesto, developed by the leadership team, which guides the team's activities to this day. The manifesto wasn't full of soft, fluffy language. Instead, it called out specific behaviors, activities, and goal-setting processes that the team committed to embedding in their business culture. The team embraced this quote from Richard Branson, founder of the famous Virgin brand, that reflects the essence of the culture they want to build: "I don't know whether the word insane is right, but you've got to love a challenge and you've got to be willing to push the limits beyond what other people think is possible." This is the spirit that these supply chain leaders are bringing to their organization. It would make any CEO proud.

Our Opportunity

Supply chain leadership is an exceptional and underexploited source of CEO talent. Outside of P&L management, nothing compares with the comprehensive nature of supply chain management, which spans all of a business value-creating processes. Success in this discipline leans heavily on some of the very leadership skills that distinguish the world's best CEOs. As such, our challenge is to educate ourselves and our companies on these key points of alignment. We may need an assertive marketing campaign to make our point, but the effort will be well worth it.

1 Good to Great: Why Some Companies Make the Leap... and Others Don't, Jim Collins, HarperBusiness, October 2001.

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