Each year Supply Chain Digest gathers a panel of supply chain experts (virtually) and asks them for their predictions about the coming year. This year was a particularly tricky one to prognosticate about because of the lingering recession. One of the experts, Dr. Chris Caplice, Executive Director of the MIT Center for Transportation and Logistics, noted that the only sure thing he could predict was that “the level of uncertainty in the financial markets, commodity prices, consumer demand, and virtually every other facet of the economy that supply chain managers are concerned with will only increase [“Supply Chain Guru Predictions for 2010: Full Comments,” 2 February 2010]. Caplice went on to assert that, despite the uncertainty, “the biggest challenge that firms and supply chain managers will face in 2010 is talent management – ensuring that they recruit and retain the right people who possess the right skills.” He continued:

“On the surface, the idea that employee retention during a recession is a challenge sounds ridiculous. No one voluntarily quits in an economic downturn, right? Most companies are dramatically reducing their headcount – some more strategically than others. So, why with all these other challenges that supply chain managers face should they spend precious bandwidth on talent management? The short answer is that job satisfaction tends to decline during recessions and the set of skills needed in supply chain management functions is quickly changing. Not paying attention to professional development during a downturn will lead to defections of the best people in your organization during the recovery.”

One of the things I like about Caplice’s comments is that they focus on the future rather than getting mired in the morass created by the current recession. Companies that look ahead, even while they are trying to survive, are the ones that will prove to be the most resilient. Caplice goes on to explain why focusing on people is important.

“Job satisfaction drops during a recession for a couple reasons. If there are layoffs, the remaining employees tend to suffer from survivors guilt. While they are glad to still have a job, they have the added stress of seeing their peers and co-workers let go. Additionally, as we all know, the amount of work does not decrease after a layoff, so the remaining employees have to do more with less. This is usually reflected in increased productivity of firms (higher output with less input, i.e., employees) coming out of recessions. With a tighter organizational chart there are usually less short-term upward opportunities for promotion. While all of these factors will not necessarily lead to people voluntarily leaving during the recession, you can rest assured that there is a lot of dusting off of resumes and getting reacquainting calls to headhunters. While most firms are good at getting rid of the really bad performers, they have a worse track record for growing and retaining the top tier. This can lead to an organization with a lot of middle-ground or B-players – not the best team for future success. When the individual and sparse ‘green shoots’ in the economy coalesce into a forest, you can expect a massive top-talent flight from companies (or business units) that have not nurtured their star performers. This talent flight might be a good early indicator for the recovery! This is especially difficult for supply chain management functions because the required skills have quickly and dramatically changed. The growing uncertainty in all areas coupled with increased level of supply chain sophistication now requires a higher level of analytical expertise. The broadening of supply chains in most firms from an internal-function to a cross-firm focus has raised the importance of soft leadership skills, as well. The ability to influence people and organizations that do not directly report to you (e.g., suppliers and customers) is one of the critical keys to success in supply chains today.”

Shawn Beilfuss, a long-time reader, fellow blogger, and supply chain analyst, agrees with Caplice that nurturing supply chain professionals is essential [“Thoughts on Developing Supply Chain Professionals,” Cross Border Journal, 12 June 2010]. Shawn writes:

“I would say that many in the supply chain industry, when framing what they require in their people, still focus on the traditional, functional roles of supply chain–transportation, warehousing, procurement, shipping, etc. I believe that this causes managers to fall into the trap of building an inflexible workforce and organizational structure that will struggle to adapt to supply chain initiatives that require working cross-functionally across these areas of business. This scenario puts strain on supply chain people because they find themselves in ‘stretch roles’ that consistently push them outside the range of responsibilities originally intended for and communicated to them based on an antiquated, narrow and traditional approach to human resources management. It would be nice if at least these stretch roles were recognized in hindsight and properly rewarded, but many organizations both lack the ability to properly evaluate their people in this situation and will often just happily accept these efforts as what was expected all along. The above can be avoided by approaching the supply chain of a business, including its people, from the standpoint of supply chain architectures rather than functional roles and responsibilities.”

I think that Shawn’s “stretch roles” are what Caplice refers to as employees having to do more with less. Shawn concludes that “all the technology, facilities and equipment in the world will mean nothing of your people aren’t in place to deploy such a solution.” He’s right and I believe that Caplice is thinking along the same lines when he worries that the best people will flee a company if they are not nurtured through these difficult days. Caplice concludes:

“The source of future innovation lies at the boundaries and intersection of firms within a supply chain. The ability to coordinate, influence, and shape these far flung relations will determine how successful supply chains will be in the future. This is a big change over the older set of hierarchical leadership skills that were required within a more ‘silo-ed’ operation. In 2010, then, I predict that the economy will improve, demand will rise, and companies will face increased costs (and scarcer supply) of most commodities and inputs to their operations. But the biggest input scarcity they will face will be their top supply chain talent.”

In that concluding paragraph, Caplice touches on two subjects I have often written about: sources of innovation and the challenge of business silos. I wholeheartedly agree with Caplice that innovations are most often generated “at the boundaries and intersection” of organizations. It is at the boundaries where one is most likely to find multidisciplinary approaches for tackling nagging challenges. To read more about business challenges created by silos, read my posts entitled The Curse of Silo Thinking, Breaking Down Silos, and Silos in the Supply Chain. Shawn also agrees that breaking down typical business silos is critical to make supply chains more resilient. He writes:

“After people, a business should start its people thinking about how its physical and financial resources, or architectures, are deployed rather than zeroing in on trucks, warehouses, facilities, budgets, etc. off the bat. The whole idea is that resources are rationalized across a supply chain and not piece-meal, where imbalances can occur that negatively impact the end result of services and products provided to customers. It is advances in and the procurement of informational architecture, primarily supply chain technology, that is driving the effort by many companies to challenge employees to think cross-functionally, to think in terms of general supply chain architecture rather than in terms of individual supply chain components. The problem with this is that technology can quickly get ahead of companies and their employees to the point that human resources management ends up ‘chasing the tail’ of end-to-end supply chain restructuring. In the end, the progress of technology deployment will be as slow as the slowest caboose–which unfortunately in many cases is the constraint faced by under-developed competencies and capabilities of your supply chain people.”

During a period of high unemployment, it is easy to forget that an abundance of labor doesn’t mean that employees don’t require nurturing. If you want your company to thrive, not just survive, talented people are the ones that are going to make that happen. In areas as specialized as the supply chain, this is particularly true.