Connecting demand with supply of qualified leaders

Dec. 15, 2016

It is a little-known fact that healthcare providers (e.g., hospitals, integrated delivery networks) are beginning a period of serious challenge: They are losing 30 percent to 35 percent of their supply chain leaders — the highest managerial position for this essential and impactful part of the organization — in the next three years, and an additional 25 percent to 31 percent in the next two to three years after that.

This is according to the responses of Supply Chain Leaders who answered questions on the topic of Supply Chain Leadership and Succession, the focus of a national survey produced by Jamie C. Kowalski Consulting LLC, in cooperation with Bellwether League Inc., the hall of fame for healthcare supply chain leadership. The survey topic debuted in 2015 for a baseline and was repeated last year to begin tracking any changes and trends.

Survey responders spent, on average, more than 10 years of their careers with their current employer, and less than 40 percent identified their position as being a formal part of the C-suite. Hold that thought.

Possibly a more concerning result from the Supply Chain Leader survey responders is that retirement will account for 36 percent to 46 percent of total expected vacancies. The rest of the responders stated they intend to leave their current employer for another position — one preferably where Supply Chain is part of the C-suite team.

If that isn’t enough to intensify the sleepless nights of provider senior executives, consider that more than half of responders, on average, from the last two surveys stated they are very concerned that there is not now, nor will there be, an adequate supply of qualified people to fill those vacant positions. Further, there is uniform belief that recent college graduates and/or “second-in command” managers hoping to move up will need at least three to five years of preparation to take on the ever-increasing responsibilities and challenges that these high-profile leadership positions, which continue to evolve, require now and tomorrow. If you do some rudimentary math, you may notice a tipping point of a year or two of uncertainty — not quite a void of “experienced talent,” but close.

To add some context to the serious, if not sobering, nature of keeping and probably (or possibly) replacing a Supply Chain Leader, consider the following observation: The total annual portion of a hospital or IDN’s operating expenses associated with Supply Chain Management has reached approximately 50 percent when the data are organized and analyzed in an “Activity-Based Cost” (ABC) view. Consider that the historical hospital operating expense pie chart has shown that 70 percent of expenses were associated with “Labor” and the remaining 30 percent were associated with “Supplies and Other.”

Is this fuzzy math? Are statistics being manipulated? No. ABC uses the same expense data, but looks at it across the enterprise and not just by cost center. That means some of the 70 percent associated with Labor is in Supply Chain Labor, which represents a portion of the “Supplies and Other” category. ABC includes all labor expense, both full- and part-time, that are involved in supply chain activities, regardless of the cost center to which their labor is charged. So, in addition to the Purchasing, Storeroom, Receiving, Central Sterile Processing and other related staff doing supply chain tasks, add the hours of nurses checking shelves, counting supplies, filling out an order or requisition, putting supplies away and searching for supplies and that causes the associated labor costs to explode. Add the staff in Food Service, Plant and Clinical Engineering, etc., and the cost element increases further.

Successful Supply Chain Leaders are demonstrating the ability to lead teams through initiatives that find and eliminate tens of millions of annual spending dollars on supplies, inventory and those associated expenses. That type of expense reduction goes right to the bottom line, enhancing profitability and potentially, credit and bond capacity ratings, all without any negative effects on the quality of care.

Despite these issues and expressed recognition of them, only 40 percent of respondents said that they have developed a written succession plan. This is a shocking data point, especially from those leaders who believe that they should be a part of the C-suite. Isn’t that an important part of an executive’s job — developing their team and preparing a potential successor? And, given the data gleaned from the survey responses, isn’t this even more critical than generally the case? While only 3 percent of the responders felt that creating a succession plan was “not their job,” such a small number is still stunning.

As the character Chester A. Riley used to say on the 1950s TV comedy, The Life of Riley, “What a revoltin’ development this is!”

This demand for and supply of imbalance cannot — and should not — be allowed to continue. A comprehensive Plan for Succession, based on leader development, mentoring and coaching, must be created and executed quickly. It has to be all hands on deck. Consider identifying where to find replacement candidates, the needed skill sets and knowledge they’ll need, and what sources might assist with developing those skills among candidates that may not yet be ready.