Are You and Your Company Prepared For a Supply Chain Talent Crisis?
Supply chain programs aren’t graduating enough new practitioners to replace those exiting in the workforce, but the talent crisis is about more than demographics: a shift in thinking must also take place at the corporate level and in academia to develop talent that can collaborate in today’s supply chains.
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Study after study has shown that for every new supply chain manager entering the workforce, two (or more) are retiring.
Although supply chain programs are proliferating, today’s universities simply aren’t producing enough high-quality supply chain managers to fill the need.
This story line, however, is incomplete, the talent crisis isn’t just about demographics.
The crisis is more about mindsets and skills sets - and our inability to develop the talent to thrive in tomorrow’s global decision-making environment.
Amazingly, the “skill set” dimension of the talent crisis is not new. Over a decade ago, authors Edward W. Davis and Robert E. Spekman warned: “It is essential that we recognize that most managers do not currently possess the skills or mindset needed to operate in an extended enterprise environment.”
What skills were they referring to? Answer: Few managers - including supply chain managers - possessed the willingness to get “out of the box” and the ability to think and act collaboratively.
They struggled to deal with ambiguity and change. They failed to appreciate the big picture - especially how their decisions impact value creation across the company and up and down the supply chain.
Sadly, we’ve made little progress over the past decade in producing managers who possess these skills that are so critical to value co-creation.
Because diagnosis precedes prescription, let’s answer a pressing question before we delve into the skills companies say they are looking for. Why are collaboration and systems-thinking skills so difficult to build?
Part of the answer is found in the nature vs. nurture debate. But, in this case nature and nurture form a tag team that works against the development of high-level value co-creation skills. Here’s how.
- Nature’s Role. By nature, Americans tend to be highly individualistic. On the individualism scale developed by the Dutch organizational expert Geerte Hofstede, America scores a 91, making it one of the most individualist cultures in the world. Managers are expected to be self-reliant and self-motivated. In fact, collaboration is not highly valued. Rather, individual accomplishment is celebrated. Merit, as evidenced by what one has done, is critical to hiring and promotion. The bottom line: Seeking the spotlight and sharing the spotlight emerge from different mindsets and promote different behaviors.
- Nurture’s Influence. By nurture, Americans tend to be linear, analytical thinkers. The emphasis on left-brain thinking begins early. Best-selling author Daniel Pink uses the following story about Gordon MacKenzie, a creative force at Hallmark Cards, to illustrate this point.
When visiting classrooms, MacKenzie made it a habit to ask, “How many artists are there in the room? Would you please raise your hands?”
In kindergarten, every kid quickly raised a hand in the air. By second grade, only about 75% of the kids raised their hands. But in second grade, hands went up slowly, timidly. By sixth grade, no hands were raised. Instead, all of the kids looked around to see if anyone would admit to what they had all learned was out-of-the-norm behavior.
Pink calls this a cautionary tale and warns that in today’s fast-paced global market “everyone, regardless of profession, must cultivate an artistic sensibility.” The push against right-brained thinking is exacerbated by business schools, which are notorious for valuing quantitative analysis. Creative and collaborative behaviors are often dismissed as “touchy/feely.”
To make matters worse, companies often reinforce this attitude by hiring for analytical skills. IQ has trumped EQ as a valued characteristic. Career success depends on a manager’s ability to not just “run the numbers” but also to “hit their numbers.” The oft-heard criticism at a Fortune 100 company we interviewed is: “If you don’t have the numbers, it’s just your opinion.”
Analytical skills are certainly necessary in a supply chain world, but they are no longer sufficient. New solutions to complex problems are needed. In today’s supply chain, creativity, collaboration and holistic thinking are critical to long-term success. But, the reality is that nature and nurture doubly disadvantage supply chain decision makers. To overcome the skill deficit, vocal, persistent leadership is needed.
The makeup of our impending talent crisis became apparent as we conducted a longitudinal study of supply chain collaboration over a period of about 12 years. Let’s briefly review our process and outcomes.
- Study 1: Our journey began at the turn of the millennium as we interviewed SC managers at 51 supply chain leaders. Mangers repeatedly talked about the need to do things differently. But, they bemoaned existing practices that locked existing, non-collaborative behaviors in place.
- Study 2: Six years later, we replicated the study. Our goal: Find out how much progress had been made. This time we interviewed managers from 61 companies. Surprisingly, managers at about 70% of the companies decried a “lack of supply chain leadership” as an impediment to talent development. They said that their companies had not invested in the routines needed to find or train highly sought-after creative collaborators. Managers continued to complain, “The most difficult challenge is to find people with the right skills.”
- Study 3: Again, six years later, we returned to the field to revisit the question: Had firms learned to work together? This time, we interviewed managers from 23 companies, focusing on dyadic relations - that is, companies that were actively striving to co-create value. The not-so-surprising finding: Despite the collaborative rhetoric, most companies seem to be stuck on a talent-seeking treadmill, running into the same challenges and obtaining the same results.
After analyzing the interviews, what did we learn? First, we identified a handful of collaboration skills companies wish they could find among those joining the SCM profession. Second, we learned that corporate decision makers are frustrated by an academe-industry disconnect that perpetuates the talent deficit. Third, we discovered a need for a new type of industry-academic partnership.
The Talent Deficit: Taking Inventory
So far, we have called out the mindset dimension of the talent deficit. Even so, we can’t forget that real demographic challenges face the SCM profession (Table 1). We must indeed deal with some unfavorable supply and demand trends.
On the supply side, we often talk about the limited capacity of universities to produce well-educated supply chain managers. Too few supply chain programs exist to educate the next wave of supply chain leaders. More daunting, perhaps, is the fact that neither university administrators nor talented young men and women perceive supply chain as the career of choice.
Why not? Over a decade ago, Michael Hammer, the father of re-engineering, noted that fewer than one in ten major corporations had engaged in serious efforts to radically change the way they create and deliver value. He lamented that top management simply doesn’t pursue operational strategies with the same gusto as financial deals.
Hammer concluded: “Operations simply aren’t sexy.” This attitude has a trickle-down effect that strangles the growth and popularity of supply chain programs.
Regarding demand, the demographic challenge of boomer retirements is well documented. The fact that receives less attention is that key trends involving global trade, omni-channel fulfillment and technological revolution are making companies more reliant on supply chain talent than ever before.
Today’s operating environment simply demands more managers who understand the intricacies involved in sourcing, making and delivering the products customers want at a price customers are willing to pay.
Having summarized the demographic challenge, let’s briefly discuss three skills sets managers say they are looking for but can’t find among today’s supply chain talent pool.
Technological innovation such as computing power and the Internet have made modern SCM possible. New technologies like autonomous vehicles, additive manufacturing and predictive analytics promise to usher in a new wave of process redesign and productivity.
However, poor change management skills continue to hinder value co-creation, standing in the way of new technology-enabled practices and processes. Managers who understand the dynamics of change are in high demand.
Specifically, Figure 1 denotes that firms persist in a steady state until an external force drives change. They then enter a transition phase (Phase 2) during which adaptation and change is pursued. Resisting forces, however, act as a counterbalance to change. If resisting forces are more prevalent or stronger than driving forces, firms follow Route 1 back to the former status quo.
Effective change agents know how to deploy resources to amplify driving forces and/or attenuate resisting forces. Critically, most managers push harder on driving forces despite the fact that removing resisting forces is usually the more effective strategy.
Managers who grasp these dynamics can pull the right resource levers to help the firm follow Route 2 to new value-added processes. Beyond grasping the dynamics of the change process, supply chain managers need two enabling skills that are in short supply.
- Financial intelligence. Throughout our interviews, supply chain managers often lamented that finance is the language of business. Why? They don’t speak the language of finance. Thus they struggle to explain how their decisions will impact the metrics top management cares about. Financial intelligence gives supply chain managers more power to influence key conversations about resource deployment and strategic direction.
- Psychological intelligence. Negotiation - a critical tool in the hands of the change agent - is getting what you want for the other person’s reasons. Thus, it is not surprising that interview managers persistently alluded to psychological intelligence (PI) as an in-vogue skill set (see Figure 2). PI is the art and process of finding out what motivates key decision makers. As a soft-side skill, PI is often overlooked in supply chain curriculums.
Simply put, companies seek supply chain managers who are strategic influencers.
Since Toyota rewrote the rules for value co-creation in the 1980s, U.S. companies have been trying to find new and better ways of working together. Yet, most rely on the old-school tools of contracts and power that impede close, collaborative working relationships in the first place. Interview managers described two tools they would like to see in today’s SCM toolkit.
- Ability to manage relationship intensity. Companies still select suppliers on criteria like cost, quality, delivery and financial viability. They define relationship intensity based on some form of ABC classification/Pareto analysis. Supply chain leaders now recognize the need to take a more holistic approach that explicitly evaluates co-value creation potential and collaborative capability - something few managers know how to do.
- Ability to use trust as governance. Power and contract management are go-to tools in the supply chain manager’s toolbox. Thus, the common language in buyer/supplier relationships is, “What does the contract say about it?” The result: New opportunities to work together to co-create value and change competitive rules are usually overlooked. Although managers have talked about the importance of trust-based relationships for 20-plus years, trust remains the most used and abused word in the supply chain lexicon. Few managers know when and how to build it.
The bottom line: Companies want to turn the right suppliers into partners in profit. But they don’t have managers with the attitude, skills and vision to do it.
Complexity has been called the 21st century supply chain challenge. Consider the mind-boggling numbers associated with Wal-Mart’s supply chain, which manages more than 10,900 retail outlets under 69 banners in 27 countries. In a typical week, 250 million customers make a purchase at a Wal-Mart somewhere in the world.
In the U.S. alone, Wal-Mart operates 158 DCs (many over 1 million square feet in size), maintains a fleet of 6,500 tractors and 55,000 trailers, stocks an average of 142,000 SKUs at each Supercenter and buys product from over 100,000 suppliers.
And that is just Wal-Mart’s core network. Supply chain complexity for many companies explodes as you move upstream. For example, when Chrysler first analyzed its supply chain, managers discovered a manageable 1,500 first tier suppliers, 50,000 second tier suppliers, and 250,000 third tier suppliers.
To date, companies have focused on managing this detail complexity. Supply chain rationalization is the tool of choice. However, the managers we interviewed noted that dynamic complexity - i.e., getting all of the pieces to fit and work together - is a greater challenge.
But, few managers know how to bring clarity to complex networks and problems. Fewer still know how to figure out what will happen across the entire system when they pull different levers.
Ultimately, a review of university curriculums reveals supply chain programs laden with quantitative analysis courses, which are without doubt valued and valuable skills. These programs are designed to prepare students for entry-level jobs in the core source, make and deliver domains. According to the managers we interviewed, what is missing is an effort to teach relational dynamics and holistic decision-making.
The Talent Deficit: An Attitudinal Challenge
Beyond essential skills, interview managers talked about a work-ethic gap. They perceived GPAs - and even degrees - as saying little about a student’s readiness for the job, noting that many graduates are ill prepared to succeed at their companies.
They also described a desire to work with universities to help create a more relevant learning experience, but lamented that collaborating across the academic-industry divide is challenging. We discerned three disconnects that dissuade closer industry/academic integration.
The Academy views itself as the custodian of knowledge, discovery and dissemination, placing great emphasis on publishing in “A” journals. Thus, the saying: “Publish or perish.”
Regrettably, the esoteric research valued by “A” journals and the Deans of American business schools doesn’t translate well into the relevant skills needed by managers who must actually make and deliver things. Roger Martin, the former Dean of Canada’s Rotman School of Management, actually calculated the cost of producing each “actionable” article at $1.5 million.
What does this mean? Existing academic structures allocate scarce resources to obscure research over relevant teaching - a reality that nurtures the talent crisis.
A student recently asked: “How do you view us? Are we the customer? Or, do you see us as a product?”
The reality is that business schools serve three customers: Students, taxpayers and recruiters. Remarkably, two customers - taxpayers and recruiters - view the third customer as a product. The situation is, however, more nuanced. As customers, many students exhibit an odd behavior, treating college as the “price of admission” to the professional world.
The result: Higher education may be the only industry in the world where many customers actively strive to get as little as possible for their money.
How do these realities perpetuate the talent crisis? Answer: The “missing” skills described above aren’t comprised of facts that can be memorized and regurgitated.
To acquire these skills, professors must cultivate an experiential education, forcing students out of their comfort zone. And herein lies the dilemma. The only customer that evaluates professors is the student - that is, the person who resents being forced to venture outside the comfort zone.
They weren’t adequately prepared during college to make successful transitions. They didn’t develop critical thinking, complex reasoning [skills] and the ability to communicate in writing. [And] they didn’t develop the attitudes and dispositions during college associated with adult success.
For many, [students’] typical experience was they studied alone little more than an hour a day, and for that effort they received high grades. The students in our study who studied alone five or fewer hours a week had a 3.2 grade average. So they learned in college that success comes relatively easily.
Consistent with the classic article titled On The Folly of Rewarding A, While Hoping for B, professors - like all creatures of nature - respond to measures, catering to students with lighter workloads and inflated grades.
Finally, advisory boards, a mechanism designed to foster industry-academe collaboration, often fail to interject relevance and accountability into curriculums. Why not? Academics tend to be protective of their syllabi. One professor responsible for managing his university’s supply chain advisory board summarized this disconnect as follows: “We want your help. We just don’t want you to tell us what to teach.”
Part of this protective stance is rational. Practitioners often focus on training, but academics are charged with providing an education - and the two are not synonymous. However, the roots of the problem run deeper. Academics don’t want to give up control or step out of their own comfort zones. The result: Business and academe are often out of synch.
The Talent Deficit: A Prescription For Progress
Modern supply chains are complex and value co-creation is fraught with risk. But, cultivating the sought-after-but-missing skills falls short of brain surgery or rocket science. The task is doable, but the motivation is missing.
With this in mind, let’s turn the clock back to the early 1990s, as the U.S. economy recovered from a recession. Recruiters at Ford Motor shared a serious message with their core university partners: Ford was spending too much time and money helping newly hired graduates come up to speed.
If these core universities didn’t remedy the talent deficit, Ford would find new sources of talent. Then, the stock market boomed, the economy took off and Ford’s financial distress evaporated. Sadly, the threat to find new talent sources was quickly forgotten - by Ford and its partner universities.
Nonetheless, the experience points to a need for industry to treat universities as real supply partners. After all, talent is as valuable a resource as anything else a company sources. Such a repositioning of the relationship would bring two new behaviors to bear in resolving the talent crisis.
A role for supplier development. To help suppliers improve performance, Honda often lends them process improvement engineers, sometimes for several months or more. Honda’s supplier development approach is a powerful model for academe. Imagine how classroom dynamics would change and what learning might occur if an industry expert joined a professor to team teach kaizen bursts or value-stream mapping, especially if students were invited into the company to employ these tools. Grades, of course, would be tied to real performance improvements.
Other options for industry-engaged education include consulting field studies and “living case competitions” - i.e., competitions that use cases based on current problems at local companies with managers as judges. To make such activities the norm rather than the exception, industry must view universities as supply partners that are worthy of investment - both in terms of money and coaching. Professors must likewise embrace experiential learning and open their classrooms to industry.
The need for accountability. Industry must begin to act like a real customer. That is, companies need to clearly communicate that if academe won’t prepare graduates for the real world, industry will find a new source. Never before has industry had more supply options. For instance, disruptive technologies in the form of MOOCs (Massive Open On-line Courses) are democratizing education. Although the quality of a MOOC education isn’t great, the bar set by traditional universities is rather low.
Alternatively, some companies are beginning to insource education, and not just training, via corporate universities. And some companies like Ernst & Young are taking the unprecedented step of expanding the talent pool by removing degree classification as a criterion for entry-level positions.
Ernst & Young argues that there is no evidence that a college degree correlates with on-the-job achievement and will use online assessments to evaluate the competency and potential of job candidates.
Let’s conclude as we began, with a warning: Building the skills we have been talking about is hard, uncomfortable work. Companies and business schools will likely balk at the challenge.
However, if you are a fan of sports movies, baseball manager Jimmy Dugan from the movie A League of Their Own may encourage you. At a particularly poignant moment in the movie, when star catcher Dottie (Gina Davis) is about to quit the team, saying, “It just got too hard,” Dugan (Tom Hanks) responds: “It’s supposed be hard. If it wasn’t hard, everyone would do it. The hard is what makes it great.”
If we’re going to face the talent crisis head on and shift our way of thinking, supply chain education needs to aspire to greatness.
About the Authors
Amydee M. Fawcett, Ph.D., is the director of the Center for Leadership in Ethics and Sustainability and Assistant Professor of Supply Chain Management at the Goddard School of Business at Weber State University.
Stanley E. Fawcett, Ph.D., is the director of the Jerry and Vicki Moyes Center for Supply Chain Excellence and the Goddard Professor of Global Supply Chain Management at the Goddard School of Business at Weber State University.