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The Road to CPO — and Beyond

Author(s):

RaeAnn Slaybaugh

January/February 2009, eSide Supply Management Vol. 2, No. 1

Not long ago, A.T. Kearney partners John Blascovich and Mike Hales set out to document the CPO evolution — which skills and traits make some rising supply management professionals stand out over others as possible future CPOs.

They relied on the career and management experiences of two well-respected procurement executives: David Nelson, whose résumé includes TRW, Honda of America, Deere & Company and Delphi, and Maureen Corcoran, CPO of State Street.

Two esteemed CPOs share their tried-and-true strategies

Recently, A.T. Kearney set its sights on documenting the CPO evolution — specifically, which skills and traits make some rising supply management professionals stand out over others as possible future CPOs.

Co-authors John Blascovich and Mike Hales, partners at A.T. Kearney, relied on the career and management experiences of two well-known and respected procurement executives to perform this drill-down: David Nelson, whose résumé includes TRW, Honda of America, Deere & Company and Delphi, and Maureen Corcoran, CPO of State Street. The findings were published in a related Executive Agenda report, "Skill-Building for Leadership: Two Routes to CPO and Beyond."

"Generally speaking, CPOs — or their equivalents — follow either a functional or a business path into that role and into subsequent positions," the report begins. For example, Nelson, a distinguished long-time supply management and procurement leader, followed a functional path after holding positions at TRW, Honda of America, Deere & Company and Delphi. Corcoran, on the other hand, took the business route, having served as executive vice president and CFO of State Street, as well as COO of its Basel II program.

Yet, in spite of their divergent career paths, Nelson and Corcoran have similar advice for supply management professionals who hope to eventually evolve into the CPO role.

1. Be Curious, Ambitious and Open to Change

Nelson and Corcoran's trajectories to CPO share two critical traits: curiosity and ambition.

"Early in his career, Nelson let his superiors know that he would go anywhere and do any new job in order to advance," the report states. "Meanwhile, Corcoran, whose background is in accounting, seized the opportunity to take on a new role every few years."

As a result, both professionals gained not only job-specific knowledge, but also multiple viewpoints of the business. One of the most important lessons they learned is that there is always more than one way to tackle a function, particularly as the pace of change and globalization accelerate.

"In fact, the ability to think beyond 'the way we've always done it' — and lead the corresponding change effort — may well be the hallmark of most successful C-level leaders," agree Blascovich and Hales.

2. Develop Strong Successors

Nelson also shared a surprising strategy with Blascovich and Hales: Always hire a younger, smarter backup person so you are easy to promote.

As an ambitious young buyer, Nelson recalls noticing many people being passed over for promotions because no one could assume their present jobs. Since that time, he says, he has always developed strong successors.

3. Learn the Organization Inside and Out

Corcoran's evolution to CPO is a testament to the value of a broad knowledge and skill set. After graduating college, she spent seven years at Price Waterhouse, then joined John Hancock Property and Casualty's internal audit group before shifting gears once again and moving to State Street as a mutual fund client-service manager in 1989.

Since that time, her career has included roles of increasing responsibility in operations management, sales and marketing, client consulting and strategy development. The move to procurement took place after she ran a strategic sourcing consulting project and State Street needed an individual to institutionalize the sourcing discipline after the consultants left.

"We had three choices: Hire someone who'd done supply chain work at another company, hire an ex-consultant or use an inside person to make the additional hires," she recalls. State Street chose the third option, selecting Corcoran for the post in 2003.

"CPOs know the enterprise and how to execute, negotiate, manage and mitigate risk, and do deals," Corcoran explains. "This adds up to general business effectiveness that can be applied in many other situations."

Two Career Paths into Procurement (and Beyond)
This figure illustrates how a range of entry points and skills converge at the CPO spot and branch out
into future careers. According to Nelson and Corcoran, today's CPOs need to master key skills from both
paths to fulfill their mission of creating value beyond cost.

4. Understand the Efficiency/Risk Dynamic

As Blascovich and Hales learned in their research, CPOs must do more than understand the close relationship between supply chain efficiency and increased supply risk; they must also have the tools to analyze, prioritize and act on these risks.

"Becoming familiar with such tools is well worth the effort," the authors advise. "Unmanaged risks can derail even the most meticulous market planning."

Sony, for example, lost $420 million in its 2007 recall of computer battery packs manufactured or assembled in China. Soon after, problems with adulterated ingredients, lead paint on toys and defective tires from China hit the headlines.

Once risks are identified, CPOs must prioritize them according to their potential impact and probability of occurring, and develop appropriate mitigation plans, Blascovich and Hales add. "It can be tempting to stop when plans are complete," they warn. "But [CPOs] should continue acting to implement preemptive plans, test responses, track and report progress, and adjust plans as the company and environment change."

5. Collaborate With Suppliers for Competitive Advantage

From his vantage point, Nelson regards the ability to collaborate with suppliers for competitive advantage as the most critical of all CPO-friendly traits. "It may seem counterintuitive to expect gains from a 'softer' approach to supplier negotiations, but there are lessons to be learned from the Japanese experience," he explains.

By "the Japanese experience," Nelson is referring to a recent study of supplier-automaker relations which continues to place Japanese automakers far ahead of even their best U.S. counterparts. Scores from 350 to 500 indicate good to very good relations; 250 to 349, adequate; and below 250, very poor to poor. Toyota scored 415, up from 407 in 2008. Meanwhile, Honda scored 380, up from 368, and Nissan fell from 300 to 289. No U.S. automaker scored higher than 200.

"Neither U.S. schools nor companies are benefiting from the insights," Nelson explains. "The schools teach theory. They don't see practice as their job. Most American buyers have never been in a supplier's plant, much less understand the cost structure or know what could be better."

Aim Even Higher

While this separation of departments persists — and many CEOs still don't know the names of their organizations' CPOs — Nelson believes the bottom-line value of an effective CPO can't be overemphasized. In fact, he believes the CPO is a natural fit for the corner office.

"What will it take for any truly revolutionary business philosophy to take hold?" Nelson asks. "The answer may lie in another possible career outcome for CPOs: the CEO spot.

"Perhaps a CEO who combines deep company and supplier knowledge; the CPO and business skill sets; and a strong, experience-based vision for the company will put all the pieces together."

RaeAnn Slaybaugh is a senior writer for the Institute for Supply Management™. She can be reached by e-mail.

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