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Manufacturing Managers, are you ready to be the CEO!

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Within manufacturing organizations, the share of CEOs with manufacturing background is dwindling; which is a big concern for today's practitioners and veterans of manufacturing. Unless your tenure in manufacturing can decisively show that manufacturing is strategic to your business, factory ceiling is the limit for you. Read this article to break free from career stagnation and get a glimpse at how manufacturing head of a leading organization made his own way for the top position in the organization.

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Manufacturing Managers, are you ready to be the CEO!

  1. 1. 1 Copyrights ©2014, Shridhar Lolla, All rights reserved. Manufacturing Veterans, are you ready to be the CEO? Shridhar Lolla, PhD CVMark Consulting First Draft, to be edited 2013 Summary: Within manufacturing organizations, the share of CEOs with manufacturing background is dwindling; which is a big concern for today's practitioners and veterans of manufacturing. Unless your tenure in manufacturing can decisively show that manufacturing is strategic to your business, factory ceiling is the limit for you. Read this article to break free from career stagnation and get a glimpse at how manufacturing head of a leading organization made his own way for the top position in the organization. Keywords: manufacturing, manufacturing managers, manufacturing organizations, career progression, competitive edge, CEO ___________________________________________________________________________ Have been knowing Sanjay Thakur (Jay) for almost twenty years now. I had seen him very closely in our factory running the machining shop. He was very young then, may be just 2 years out of college. He was identified as the future manager for the organization's manufacturing operations. His keen interest in TQM and Lean had brought him a lot of accolades. We were excited by the figures he would display in monthly management meetings about his exploits of cost reduction, fuel savings, energy conservation, savings in packaging material and reduction in distance travelled by castings. He was very focused and he almost lived inside the factory. Since then he has grown to manufacturing head position, now in a large capital goods manufacturers from the US. He is responsible for one of the largest multi product manufacturing facilities and commands a large team and budget. We are still connected and often share our experience of what's happening in manufacturing industry. When he had called me a year back there were clear signs of investment in infrastructure sectors opening up in an unprecedented way. Being an adviser to manufacturing companies, I often receive request to identify real competent manufacturing professionals to lead manufacturing operations. I also noticed that the calls from organizations were a bit increasing, desperately seeking seasoned senior manufacturing managers. There were a few opportunities for Jay too, and hence the context. Our conversation revealed that Jay was aspiring for the next level of role. As per his profile, the next one that fitted well was the role of COO, Chief Operating Officer. But there were very few companies in my knowledge with such specific roles. These days, mostly, CEOs and CFO have been filling part of that role. Jay had been through 3 big organizations in his career and had been in the role of heading manufacturing in all of them. He seemed a sort of stuck in that position reporting to the CEO. He had said, 'I had enough of manufacturing... I would like to try my hands in sales, business development or strategy....'
  2. 2. 2 Copyrights ©2014, Shridhar Lolla, All rights reserved. However, because of his specialization and seniority, there were few organizations ready to take him in roles other than that of manufacturing. He tried in his own organizations but was told that the organization needed him in manufacturing. In fact, he badly wanted to move up the rung and be a CEO soon. Normally manufacturing organizations have CEOs who are from manufacturing operations background but it seemed that the things have changed a lot during past few decades. You would now have MBA graduates coming from Marketing or Finance background often preferred for the top most position. In fact, Jay too had done an MBA long back, unfortunately he was so immersed in manufacturing activities day in day out that he never got the chance to showcase his knowledge of business management. A recent study by my team indeed showed that share of managers with background in managing manufacturing holding CEO positions in manufacturing companies has come down significantly since 1980s. In fact, it has become difficult for engineers to rise to the top today in manufacturing or engineering organization. The shift is becoming very clear in market based economy where the demand from the top management is much more than knowledge of manufacturing. Perhaps, big picture approach, the tools, structured methodologies and case based learning of MBA schools are making a lot of sense in developing skills in managing business better than the sheer technical skills imparted by engineering colleges. Figure: During past few decades the share of CEOs with manufacturing background in manufacturing organizations has dipped significantly During our discussion that day, we realized that all along his career, Jay has been managing manufacturing operations, trying to achieve production targets, chasing marketing plans, improving quality and reducing cost. This is where he had spent whole of his close to 2 decades of career. He had been part of several operational as well as corporate review meetings, but all these meetings were nailed down to manufacturing reviews. He never got an opportunity to think on behalf of his company nor anybody was ever expected or interested in hearing anything strategic or business-wise from him. In the organizations he worked for, thinking big (strategic) had been left to the CEOs, Marketing Heads, Strategy Groups and the CFOs. Nobody ever gave him a damn if he spoke anything about customers, market, competition etc. Of course everybody liked his native
  3. 3. 3 Copyrights ©2014, Shridhar Lolla, All rights reserved. character and were personally very good to him, but professionally people in the corporate office were satisfied limiting their relationship of asking for more output from his factories. He was even not there in the planning of supply chain that wields enough strategic importance in today's globalized world. In reality he was always in his role detached from the main strategy making of the company, he had little influence in the direction his company was going to take. He was just a follower. Yes, people always said, manufacturing's job is to follow the demand from the market. Thus, despite his huge experience in the so called high places in manufacturing, there was real big gap between where he was and where he wanted to (should) be. After several phone calls, I ultimately told him, 'It is not difficult to get what you aspire for; may it be CEO position, provided you are ready to learn.' 'Ok, how much time would it take?' 'What's lead time of your business?' '10 weeks!' '10 weeks! Ok, allocate around 3 quarters for you to be considered worthy of CEO position by your own organization.' It was becoming clear to us that, 1. His image was not such that he was cut for the top job 2. He had never shown strategic thinking on discussion about growth of the company. 3. Nobody ever expected him to show strategic thinking and perhaps, aspire for the top job. In none of the organizations he had worked for, manufacturing did not provide a competitive edge. A competitive edge is the one, which a company can use to leave competitors far behind in capability and time; and grab market share. In most of the cases his organizations were getting business due to functionalities of product, sales efforts, technology or reach. Manufacturing did not provide any competitive edge, whose attributes the sales team could sell to win deals. 'Looks like I am only responsible for myself being in manufacturing...,' he had said broodingly. 'May be, but it is not late, you can, with your experience make manufacturing capability as a competitive edge that could win your organization more deals. You can make manufacturing a strategic resource for the organization. If that happens, you would be in the lime light of strategic discussions and main decision making body of your organization than just getting stuck in budgeting and review meetings' I had advised. 'You would need to prove that the organization is able to compete in the market because of you.' 'But I am already executing the orders brought by sales efficiently'. 'Yes, you are only executing orders brought by sales team and may be a little efficiently... Every other manufacturing guy is doing the same in respective organization. This is not yet a level to provide a competitive edge. The sales team is not getting order because of you.' I explained.
  4. 4. 4 Copyrights ©2014, Shridhar Lolla, All rights reserved. Then I asked fervently, 'Is your sales team telling to customers that they get orders because of anything specific in your manufacturing capability?' 'No.' 'Then...' 'So what do I do?' he asked earnestly. 'You will have to show that manufacturing is not a reactive function but a strategic one. A function that provides a decisive competitive edge to the organization.' 'How do I do?' 'Go back to fundamentals of manufacturing operations!' 'I am already doing it.' 'No you are not. You are not seeing manufacturing from the eyes of marketing... from the needs of customers.' 'Yes we do, we attend customer complaints...' I had cut him short, 'Other than attending complaints... have you ever been able to understand the real need your customers want to be fulfilled other than functionality of products? A need, which is so painful that the customer has forgiven you and forgotten about the need since no body in the industry care enough to fulfill it.' 'What do you mean?... Do you mean service quality?' I realized that he was thinking hard. I then briefed him about the 4 layers of Hayes and Wheelright's Manufacturing Maturity Model. We realized that his manufacturing is at level 1 and there is a lot of scope for him to improve manufacturing and make it strategic. Figure: Hayes and Wheelright's Manufacturing Maturity Model Thereafter, we agreed for a 9 month growth plan for Jay that would decisively open up an opportunity of upward mobility for him. The objective was to see that he would be seen strategic thinker, excellent decision maker and a prospect for CEO position. ...
  5. 5. 5 Copyrights ©2014, Shridhar Lolla, All rights reserved. Jay's company makes capital goods, very critical and costly components that need to be commissioned in time to justify ROI of large infrastructure of its customers. Since these were customized , customers' business viability was greatly dependent on suppliers once the purchase order was placed. Typically, the market accepted lead time was 120 days. However, it was usual and considered a practice of the industry that orders were fulfilled in not less than 180 days, despite the reason that the commissioning of these jeopardized the ROI of customers. It was normal that expediters from customers would spend weeks at suppliers premises to prioritize manufacturing of their orders. A 180 day lead time as against a possible much lower than 120 days meant that the whole supply chain and the industry was inefficient and sluggish, and in reality not many made good money. Fortunes of companies in this industry were known to often fluctuate in uncertainty. Jay's company was ones holding 45% market share of the industry and had come down to 14%. The company was looking at expanding market to other regions and developing new technologies to sustain itself, but those attempts were proving to be very costly and risky. Jay agreed that the botched up delivery schedules in the industry was definitely looking like an opportunity for someone to tap, while everybody else was considering it as a state of the industry. If an organization was able to deliver products in less than 120 day or just as promised while winning a deal, it would provide a 2 months higher ROI to the customer. That would be worth more than any discount or pampering done in the name of marketing, in addition to the sheer joy of commissioning customer's facilities on time. Should that happen, Jay's company would be way ahead of competition in fulfilling an unmet need of customers. The impact of such an initiative on sales and revenues was clearly evident. ... Jay had no hesitation in approaching his Sales colleague to obtain frank inputs about manufacturing and customer needs. Their discussion revealed that if his organization could deliver products consistently in 120 days, it would make a big impact in the market. Soon Jay along with his sales colleague had a joint meeting with the CEO and committed himself to improving on time delivery and lead time of the organization. The CEO more than welcomed his initiative and was very happy to see that his approach was backed by the Sales Head and it promised dramatic growth in sales, if everything worked well. Buy-in from Sales and the CEO was not sufficient for Jay to move ahead, he had then brought in his entire manufacturing team and supply chain to commit to improving deliveries. With all set to go, Jay took one step at a time. He looked at the fundamentals of operations and better aligned manufacturing to the market. As a first step he made improving flow of work as the prime objective of manufacturing and made lead time as the prime measure. Everybody was made aware to direct their effort to crash lead time. In a drastic step but following the fundamental principles of operations management, he mellowed down the measurement of capability of manufacturing that was based on quantity of shipments. The only thing he had requested the sales team was to help him in reducing disturbance to the short term planning while the team would be executing given orders already planned. Manufacturing gave the onus of medium and long term plan to sales and supply chain, got the short term plan frozen and followed manufacturing strictly as per the priority. Such
  6. 6. 6 Copyrights ©2014, Shridhar Lolla, All rights reserved. priorities were strictly linked to the delivery dates committed by the sales team to customers. Subsequently, in order to make best use of the attention of his team and balance the flow, he trained his staff on managing their plants by constraints than by trying to improve each and every machine. Within 6 months, the due date performance of manufacturing moved up from a low of 30% to 95%. It resulted into less expediting on the shop floor, reduced urgent transportation cost for inbound materials and outbound finished products. With improvement in due date performance came many things shorter lead time, lower inventory, less defects, lower working capital, higher throughput, happier customers and more orders. By the time it was 9 month since Jay started his mission, Sales team looked at manufacturing with awe and congratulated manufacturing team on it new found glory. Not to Jay's surprise, customer orders for the year zoomed up by 30%. In fact, the manufacturing team was conformable offering 90 days as lead time,... which the sales team kept up their sleeves for special orders. The following annual report of the company had 'agility' as the key word on its front page and the CEO in his address left no chance in claiming manufacturing as its strategic weapon for gaining market leadership.... the glass ceiling in the corporate office had just opened for Jay and everybody was amazed how he had significantly changed the strategy of the company! __________________ About the Author Shridhar is a business coach, and handholds teams in creating 'built to transform' organizations. He specializes in implementing organizational programs in Business Model Innovation, Focused Execution and Operational Excellence. By qualification, Shridhar is an engineer and holds a PhD from IIT Delhi, India. Early in his career, he worked with ABB, the Swiss power and automation technology leader, where he held leadership positions in R&D, Product Development and Service Business. Shridhar has authored two books on building operational excellence culture in today's business environment. His first book, 'Building Manufacturing Competitiveness - The TOC Way' provides a way to dramatically improve performance of manufacturing industry and thereby, resurrect economic growth in India. His second book, 'The Path - Leveraging Operations in a Complex and Chaotic World' is a semi business novel about improving impact of operations on business results. He is also a co-creator of the game changing book 'Business Model Generation'. Shridhar is also a recognized coach for first generation entrepreneurs and is a part of Indian entrepreneurship ecosystem. Spending the day with operational teams and helping them in revealing hidden capacity is his calling. Shridhar lives with his family in Bangalore, India, and can be contacted at lolla@cvmark.com or +91 94480 70081.