CPOs in the C-suite. The chief procurement officer has achieved strategic importance and more visibility. What comes next?

Transcription

1 CPOs in the C-suite The chief procurement officer has achieved strategic importance and more visibility. What comes next?

2 1 Introduction Across industries including technology, manufacturing, health care, and retail the supply chain is far more than just the purchase and movement of materials and components. Increasingly, the supply chain offers distinct competitive advantages, including but not limited to cost-effectiveness and the social responsibility and environmental impact of material sourcing. With greater strategic importance placed on the supply chain, the CPO the chief purchasing officer or chief procurement officer is moving from a behind-the-scenes role into the spotlight. Although not a universally adopted role, CPOs are becoming more common in organizations and they are increasingly near the top of the leadership pyramid. The CAPS Research 2014 Chief Purchasing Officers Mobility and Compensation Study, a survey of more than 100 Fortune 500 CPOs, reported that 82% have direct access to the CEO, an increase from 60% in This increased visibility raises important questions: What are the qualities and attributes of a best in class CPO? What comes next for the CPO? Can this strategic position pave a career path to the top of the organization, such as chief operating officer or CEO?

3 CPOS IN THE C-SUITE 2 The best in class CPO. In planning a career, an individual typically focuses on the experiences, skills, and behaviors necessary to move into broader roles. Workplace evaluations focus on past and present job performance, but often skimp on examining a person s potential and preparedness for new and different roles. It is crucial to understand all three areas performance, potential, and readiness to determine how to develop oneself most effectively. Using Korn Ferry s proprietary methodology, we developed a best in class profile of a CPO representing the aggregate assessment results of those who are most effective in that position. Below, we have plotted its leadership style, thinking style, and emotional competencies to illustrate what it takes to be successful in this role. Additionally, by comparing this CPO profile with that of a COO and CEO, we can also understand any gaps in potential and readiness. In other words, what needs to be different before an individual can pursue greater leadership opportunities, such as moving up to COO or even CEO? In leadership style (i.e., how a person outwardly influences and leads others) the best in class CPO exhibits a highly social and participative style, a quality commonly seen in CEOs as well. Simply stated, the most effective CPOs know how to connect people by creating an environment that fosters the development of trust. They are inclusive and have highly developed interpersonal skills. Best in class CPOs do not tend to be task-focused micromanagers or rely on an authoritarian, command-and-control style. Rather, they leverage their interpersonal abilities to influence others and skillfully build credibility with stakeholders.

4 3 Best in class CPOs are strong at developing highperforming and collaborative teams, and enhancing cross-functional relationships. Figure 1 How best in class CPOs lead compared with COOs and CEOs. Usage score CEO COO 3 CPO 2 1 Task Social Intellectual Participative Leadership style The leadership style of best in class CPOs (see Figure 1) also reveals that they are strong at developing high-performing and collaborative teams, and enhancing cross-functional relationships. They build bridges internally with peers and externally with supply partners. They empower direct reports to function as mini-cpos within specific spending categories (e.g., chemicals or electronic assemblies). The result is a team of people who are strategically focused on what they are buying and how, and they demonstrate an in-depth understanding of the economic, social, and environmental impacts. This team approach contributes to a strong talent pipeline of CPO successors with similar leadership profiles. Although the CPO profile is similar to that of the COO and CEO, the CPO s slightly lower use of social and participative leadership can be attributed to the sheer diversity of relationships each role must cultivate. The CPO is a bit closer to the action, while the CEO and COO rely on others to execute plans and strategies. Their increased breadth of responsibility drives the need for more varied relationships.

5 CPOS IN THE C-SUITE 4 Figure 2 CPO thinking style compared with COOs and CEOs. 7 6 Usage score CEO COO CPO 2 1 Action Flexible Complex Creative Thinking style In thinking style (i.e., how a person solves complicated problems on his/her own), best in class CPOs, like other C-suite leaders, are at ease with complex situations and are reasonably creative thinkers (see Figure 2). Highly effective CPOs see the links between all elements of a situation, gaining a helicopter view. Their creativity manifests as exploration of innovative solutions, while also addressing interconnected issues. They are equally adept at working with the details of implementing a solution, developing thorough plans, and ensuring that all activity drives toward a longterm goal. Best in class CPOs, however, are notably less action oriented than CEOs or COOs, both of whom make rapid decisions based on best available information. In contrast, the CPOs are more analytical and methodical in their problem solving and long-term strategic planning, and are less likely to make snap decisions. In addition, they are unlikely to act on intuition, but prefer to maintain a clear direction based on careful analysis of risks and opportunities.

6 5 A best in class CPO demonstrates a mental tenacity in the face of complex and persistent problems, but also remains calm and professional under pressure. Figure 3 CPO emotional competencies compared with COO and CEO. Usage score CEO 4 COO CPO Ambiguity Composure Empathy Energy Humility Confidence Emotional competencies In emotional competencies (i.e., how a person handles difficult interpersonal situations), the best in class CPO displays a profile of moderately high intensity on all six competencies: dealing with ambiguity, composure, empathy, energy, humility, and confidence (see Figure 3). This reveals a well-balanced executive who accepts and enjoys the changing demands of the business environment. A best in class CPO demonstrates a mental tenacity in the face of complex and persistent problems, but also remains calm and professional under pressure. He or she is generally an effective and reassuring role model during crises, while also being able to adapt or modify an approach when necessary. The best in class CPO is highly capable of understanding the motives, aspirations, and likes/dislikes of others. Combined with a CPO s social and participative leadership style, this emotional competency bolsters the ability to read a room quickly and intuitively, and connect with others and make them feel heard. In addition, by perceiving the skills, strengths, and perspectives of others, highly effective CPOs are able to facilitate mutually beneficial outcomes. They also share credit with others when the moment demands it. In contrast with the levelness of emotional competencies of the CPO, COOs and CEOs score higher on empathy, energy, and confidence, and lower in humility. This lower humility/higher confidence combination suggests greater comfort in taking large, visible risks, and the ability to withstand the pressure.

7 CPOS IN THE C-SUITE 6 Career development for CPOs. Recent research into CPOs reveals a position with significant mobility; among CAPS Research survey respondents, 64% had been in their job less than four years. In addition, 51% had been at their current employer less than six years. Reflecting the newness of this position, 41% of CAPS Research survey respondents were the first person in their company to hold that specific title. When there is a predecessor in the role, in 28% of cases the individual left the firm (quite possibly recruited away), and 17% of the time the predecessor retired. Two interesting statistics are that nearly 9% of predecessors were reassigned and nearly 4% were promoted, both of which suggest internal careerpath possibilities for current CPOs. The question, then, is where did these executives go? What roles can current CPOs evolve to meet? CPOs who have their sights on becoming CEOs one day need to be deliberate about their career development. A CPO s potential and readiness to make such a move will require focus on closing specific gaps in order to match the CEO profile. As previously noted, these gaps include: Leadership style. Increase use of social and participative styles of leading. CEOs spend a great deal of time cultivating relationships (social) with diverse parties, including investors, analysts, and customers; exposure to this greater diversity of people instills confidence. Best in class CEOs are also skilled at getting other people s input and listening (participative) to find solutions to problems. Thinking style. Increase action orientation. CEOs have a deliberate action focus and are not bothered by making a move before they have all the information. Emotional competencies. Increase empathy, energy, and confidence. Build upon existing strengths in understanding others and reading the room (empathy) and handling complex issues, as well as the complexity of multiple issues (energy), while expanding one s comfort level with taking risks (confidence).

8 7 How can a CPO bridge gaps? CPOs traditional ambit involved sourcing and procurement of goods and services. They are now strategic partners on CEOs leadership team. Over the past decade, the role expanded driven by the need for improved cost control, response to increasing competition, and market demand for innovation. CPOs are now involved in supply risk management, accounts payable, contingent workforce management, new product development, M&A due diligence, compliance with the Foreign Corrupt Practices Act and ethical sourcing, sales force training, the make/buy decision, as well as other responsibilities. The expanding scope of the CPO s responsibilities leads naturally to a wider set of relationships within the organization and among external supply partners. Thus, some style gaps may close organically, as a selfaware CPO evolves with the job, taking on broader responsibilities and developing his or her leadership, thinking, and emotional styles. Getting to the next level. Career conversations among CPOs frequently center on what s next and how to get there, particularly as succession plans for CEOs are developed and the competencies of candidates are assessed. In order for CPOs to be considered for the CEO position, they must demonstrate potential and readiness, as well as performance. The differences are important: High performance means a person is good at his or her current job. Readiness suggests that he or she is prepared for the next promotion. High potential means there are indications that he or she will succeed at the highest levels of leadership. According to research, only about 29% of high performers are also high potentials, whereas 93% of high potentials are also high performers (Corporate Leadership Council 2005). To advance upward, CPOs need to show they are in the latter group.

9 CPOS IN THE C-SUITE 8 Potential is directly linked to another essential attribute: learning agility. Korn Ferry defines learning agility as the willingness and ability to learn from experience and then apply those lessons to succeed in new situations. Learning agile leaders are known for seeking challenges, soliciting feedback, and being selfreflective and resourceful. The desire to continuously learn and do something new or different is a challenging characteristic to develop; yet, it is also the most essential to leadership success. In fact, research shows that learning agility is the most significant predictor of success, more so than IQ, education, or emotional intelligence (De Meuse 2011). Even for CPOs with true high potential, rising to the top is more likely to be realized in organizations that consider procurement to be strategic and in which CPOs have a direct link to CEOs. This level of visibility and reputation makes them attractive as CEO candidates. It is not enough for CPOs to develop a slate of skills if others are not aware of their strengths and competencies. The career development path for CPOs often involves taking on additional responsibilities in order to make a bigger contribution to the organization. That might involve a title expansion or a new role that comes with a bigger purview and higher profile. A logical advancement is from CPO to COO, which may increase one s chances of becoming a candidate for CEO. The bottom line for CPOs is to ask for more. And also do more. CPOs with greater aspirations need to actively manage their careers and seek to gain visibility on the senior team and recognition as a strategic contributor. At the same time, they need to attend to their personal skills and attributes, by developing the qualities that will make them attractive candidates when the next opportunity arises. Pressing questions for the CPO. How do I accelerate my procurement strategy with the talent on my team? Are my senior leaders achieving their full potential? Am I ready with leadership succession plans? How can I jump-start my new executives to lead well now? How can I find the perfect executive and the top talent we need? Is our branding attracting and retaining the right talent? Am I optimizing my leaders and the human potential on my team?

10 9 References CAPS Research Chief Purchasing Officers Mobility and Compensation Study Tempe, Ariz.: CAPS Research. Corporate Leadership Council Realizing the Full Potential of Rising Talent (Volume I&II). Washington, DC: Corporate Executive Board. De Meuse, Kenneth P What s Smarter Than IQ? Learning Agility. Los Angeles: The Korn Ferry Institute, Proof Point, October Hoffman, Heidi, and Rachel Johnson Your Secret Weapon in the War for Talent. White paper. Los Angeles: The Korn Ferry Institute. Available by request.

11 CPOS IN THE C-SUITE 10 About the authors Heidi A. Hoffman Heidi is a senior client partner with Korn Ferry and head of the firm s Supply Chain Management Center of Expertise, North America. heidi.hoffman@kornferry.com Karen H.C. Huang, PhD Karen is the manager of Assessment Services based in the Korn Ferry Washington, DC, office. karen.huang@kornferry.com

12 About Korn Ferry At Korn Ferry, we design, build, attract and ignite talent. Since our inception, clients have trusted us to help recruit world-class leadership. Today, we are a single source for leadership and talent consulting services to empower businesses and leaders to reach their goals. Our solutions range from executive recruitment and leadership development programmes, to enterprise learning, succession planning and recruitment process outsourcing (RPO). About The Korn Ferry Institute The Korn Ferry Institute, our research and analytics arm, was established to share intelligence and expert points of view on talent and leadership. Through studies, books and a quarterly magazine, Briefings, we aim to increase understanding of how strategic talent decisions contribute to competitive advantage, growth and success. Visit for more information on Korn Ferry, and for articles, research and insights. Korn Ferry All rights reserved. CPOCS2014