The Next Recession: Your Interview for CEO?

By January 25, 2019Beyond Supply Chain
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There’s a 100% chance a recession is in our future and the law of averages says we are due soon. After all, it is part of the normal economic cycle. Since 1945 the United States has averaged a recession every 4.75 years. (I’m using the U.S. as a proxy for the global economy for no other reason than the data is more readily available, goes further back in time, and it’s the world’s largest economy).

It is hard to believe, but it has already been roughly 9.5 years since the Great Recession ended and the feeling is growing that the next one is just around the corner. China is already likely headed toward a downturn and the U.S. probably will not be far behind.

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While the prospect of a looming recession is certainly unsettling, is it not also an opportunity for supply chain executives to prove their worth in the overall sense of being a business leader? I recently had the opportunity to chat with nine current and former CEOs. One of the topics we focused on was how, from their perspective, the head of supply chain is an attractive source for CEO talent.

There was unanimous agreement that being a great chief supply chain officer (CSCO) starts with making sure the trains run on time. But there was also unanimous agreement that the role of CSCO has radically changed over the past 10 or 15 years. It is how the supply chain executive’s role has evolved that makes the looming recession a real opportunity.

Sure, supply chain controls the largest buckets of cost in the company and has the biggest control levers to manage margin and protect cash flow (which alone could be enough to steer a company through a downturn). No longer, however, is the role simply about cost and cash flow. This group of CEOs highlighted that they could count on their head of supply chain to understand the whole business, not just a function like finance, or sales, or marketing (a CEO’s words, not mine).

The CSCO is uniquely positioned to drive innovation based on product or service platforms that already exist. Whether it is a new product, new service, or a variant of an existing one, it will likely be more efficient than creating from scratch. In a recession environment where funds for greenfield exploration are less likely, working from this “already existing” approach might just be the best option.

When describing their own role of CEO, this group zeroed in on leadership, building great teams and being able to drive consensus among all functions within the company. The role of today’s CSCO necessitates strong performance in these areas. When reflecting on the role of the CSCO, one CEO said there are very few business roles outside of CEO and CSCO that give an individual the opportunity to lead organizations of 40,000 employees or more.

The fact that more supply chain executives are being recognized for these skills is no accident. Our most recent Future of Supply Chain survey showed the profession recognized business strategy and leadership as the most important skills for success. Just a few years ago “Foundational Knowledge of Core Supply Chain Functions” topped the list.

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When revenue goals aren’t being achieved and marketing plans aren’t working as expected, perhaps there is an opportunity. The astute supply chain executive can use the skills honed during the 9.5 years since the last recession to bring the diverse functions of the business together and lead the company to better times. Who knows, this next recession could be your extended interview for CEO.

 

 

Michael Uskert,

Managing Vice President, Supply Chain Research,

Gartner

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