The second facet of bold leadership is to be bold enough to say I, as the CEO of this company, am only going to work on core primary tasks. All other corporate processes or tasks are going to be handled by others, and in fact I'm going to outsource many non-core tasks, be they primary or secondary, because there's no way we're going to do a great job on core processes if we're spending our time on non-core tasks.
And then the third part of bold goes back to resiliency. We have to force people who are already over-busy to develop contingency plans. When the odds of any of these contingencies occurring is probably less than 5 percent each, people are going to say they don't have time to develop those plans. But the boss needs to say, "Yes, you do, because if this issue happens to us and our supply chain shuts down, guess what, we don't exist as a company." Of course, you don't need to have a contingency plan or a resiliency plan in place if the grass gets too long or if the water fountain in the cafeteria doesn't work or if employees don't like the food in the cafeteria. But you do need a contingency plan if the only provider of rubber that you use to make your shoes has a strike or their plant catches fire. What do you do then? Well you need to have a plan for that, and you need to be bold enough to force your people to develop that plan, to test that plan, to make sure that plan is current, to make sure that you as an organization and as a supply chain can be resilient.
That's what bold is about. Bold is about taking a different approach to leadership, a different approach to core competency and a different reality to resilience.
SDCE: Resilience, of course, relates directly to the supply chain, and we recently put out an article about "disaster-proofing the supply chain." What grade would you give companies, on average, in terms of building resilience into their organizations?
Tompkins: On a scale of zero to 10, I think the average American business today is a good, solid point-five. Some people have thought about it, and some people might even have written a couple of e-mails on it, but other than the IT function you don't find it anyplace in the organization. Katrina has helped because it's taken the probability from "Come on, we're never going to get hit by a hurricane" to "Wow, there is a probability and we need to plan for it."
SDCE: On the issue of core competencies, why is it that right now, at this particular time in history, it's become more important to focus on core competencies. Are there factors that are making it more important now then it was 15 or 20 years ago?
Tompkins: For years we had too many people in our companies. We had enough people to handle the core primary, the core secondary, the non-core primary and the non-core secondary tasks and processes. You couldn't outsource benefits administration 15 years ago because there weren't organizations that could do that. Thirty years ago there wasn't anyone you could outsource landscaping services to, and every company had a janitor who had two lawnmowers. But then companies realized they needed to become more efficient, and so they cut out the staff [doing the non-core tasks]. Today there are people that can do benefits or cut the grass for you, and they can do it much better and much cheaper than you because that's their core competency. So companies contract for those capability and get it off their plates.
The challenge is that we thought contracting was truly outsourcing. So now, when we want to outsource our distribution, we ask the same guy in purchasing that did the contract for the landscaping service to use the same process to select a third-party logistics provider. He calls three large 3PLs in the phone book, everyone submits a three-page proposal, we take the low bid, and the winner comes in and totally messes it up because they have no understanding of our business. There's a huge difference between contracting the landscaping and outsourcing your logistics, and we need to understand that outsourcing is a process that all organizations need to have as a core competency. The paradox here is that management must outsource non-core things so they can focus on the core, but oftentimes they do not have a core competency in outsourcing. As a result, they mess up what they outsource, and that requires them to spend more time on a process than if they hadn't outsourced it in the first place.