From CPO to CEO: a realistic aspiration?

CEOs of major corporations come from diverse backgrounds – but not from the ranks of Chief Procurement Officers. In a recent blog on the State of Flux website, Alan Day suggests that this might change. He comments:

“Procurement is a great function to gain a breadth of business experience. We get to meet lots of supplier CEOs and talk with them about the strategic alignment of our businesses and how we might work together. We get to understand how the organizations works operationally, we network at a senior level, run large teams and look after big budgets.”

The big weakness, according to Alan, is a lack of Sales experience and consequently ‘closing skills’. To remedy this, he proposes that CPOs should develop expertise in sales by learning account management in the context of Supplier Relationship Management, a discipline that he suggest is akin to the account management role within Sales.

What the research tells us

Unsurprisingly, there is extensive research into the topic of CEO skills and background. Management consultant McKinsey is among those highlighting the critical importance of operational experience – for example running a large division, or a period as Chief Operating Officer. While studies show that a substantial majority of CEOs are appointed from within the organization, only some 15% come from a functional leadership role (most commonly Finance, occasionally Legal) – and in many cases that is because the functional experience has specific relevance to a critical business challenge. In their report, McKinsey observes that most of those functional executives only make the step up because they have had broader experience and exposure, since ‘lack of breadth’ is otherwise the biggest inhibitor.

To gain a view from the front line, I turned to Richard Sterling, a seasoned executive search consultant at AltoPartners with experience at placing CEOs, as well as appointments for heads of function including Procurement and Commercial Management. Richard acknowledged that the CPO role has the potential to carry greater status, but does that really translate to a potential path to the CEO position? Here is what he said:

“To assert that Sales is the singular missing ingredient as to why more CPOs are not becoming CEOs is at best extreme reductionist thinking.  To further assert that developing account management skills within the context of Supplier Relationship Management is equivalent to a sales-focused Account Management position is to not fully comprehend the difference between sales (identifying and creating opportunities, building the relationship, potentially forming alliances, closing the deal)  and the more general activities of account management (working with existing clients, nurturing relationships, growing the account, being the client’s every point of contact on all matters). Even where it exists, SRM rarely has an equivalent level of status or accountability to the account management and account executie roles.

CEOs rise to their position from varied backgrounds although finance, legal and operational streams are most common.  This does not mean that a CPO cannot rise to being a CEO; however,  it needs to be understood that there is a great deal more to being a CEO than the State of Flux blog puts forward – and there is little chance of anyone moving direct from CPO to CEO.

The aspiring CPO needs to develop a range of personal attributes and relationships which may run counter to being a high performing CPO. By way of example, let’s look at decision making: Today’s CEOs need to make quicker decisions using the best information available, buttressed by a broad range of internal and external relationships.  High performing CEOs are comfortable with this approach. They trust their intuition, which has been fine-tuned over the years.

CPOs, however, tend to be – by profession, education and experience – analytical and risk averse, wanting as much information as possible and spending time getting that information, then more time validating the information before making a decision. They are generally driven by a relatively narrow set of performance measurements which, unlike their colleagues in Sales, are open to challenge (for example, are ‘savings’ actually achieved?) In the face of today’s rapid and highly competitive environment that approach is not sustainable.

Finally, the aspiring CPO needs to become very calculated about their career. This means that the aspirant will need much more than just having exposure to other business functions or their peers in other companies.  There is no substitute for having real experience and board-level accountability. This is what the aspirant will need to acquire either through a series of significant projects in which ability and performance outside procurement can be demonstrated, or perhaps by progressing to a role such as chief operating officer. Chief Operating Officers are one of the more commonly considered routes to the role of CEO. ”

In conclusion

So is the transition from CPO to CEO impossible? Clearly not, but as a direct route it is highly unlikely. While in some cases a career path might include a period as CPO (and there are some good arguments in favour of this), it is clearly not normal. Right now, many of those in Procurement who truly want to progress to CEO positions recognize the best route is to leave the Corporate world – and start a business of their own!