David Read, Founder and Chairman of Prestige Purchasing says what you think and the questions you ask are the key to CEO success and organisational agility
I love attending conferences in our sector. There is so much to learn about what the leadership of so many of our great businesses are thinking. At one event earlier this month I heard a CEO saying “we have learned not to focus (so much) on the numbers, as the more we focus just on making the business better, so our numbers improve as well.” And he went on to discuss their approach to scaling up, dominated by the question “as we get bigger, why can’t we also get better??”
Later in the day I heard another sector CEO say that his business “had historically become over-fixated on supply chain” and “we have fixed the inflation problem and are now running at industry standard GPs, so now we can move on to more interesting challenges”. The assumption that supply chain was just about cost made my heart sink.
Since the pandemic, I’ve been really excited by the extraordinary CEO talent developing in our sector. When I joined hospitality (after university – some 50 years ago) most CEOs seemed to focus mostly on P&L and property management, with clear financial goals guided by a monthly budget. The process of business improvement often sprang from below budget performance, with remedial action taken to bring the business back on track, using tried and tested methods to get there. You have a problem with Food GP? – just focus on reducing food waste, lowering supplier prices, and raising menu prices, and the issue goes away. At least for now. I believe that our sector is rightly dispatching this this style of management to the dustbin of history.
CEOs almost always get the information they ask for. It might not arrive as fast as they’d like, but eventually it gets there. The bigger problem is getting information they haven’t demanded because they don’t know to ask for it. And it’s not just obscure corners of underperforming operations that CEOs can be oblivious to – it’s all too often some new and brewing development that will redraw the lines of performance and/or competition for the future.
What inspires me about our new breed of CEOs is their openness to learn, and their ability to ask questions. This is more difficult than it may seem at face value. After all, Boards expect them to be confidently right, and for the most part organisations need that decisive stance, too. But when leaders are pressured to have all the answers, they can all too easily stay within the bounds of what they know. The best CEOs in my view deliberately put themselves into situations where they may be unexpectedly wrong, or unusually uncomfortable, looking for new perspectives and insights about future risks and opportunities. In so doing, they increase the chances that the right questions will surface to help them pick up on critical but previously unidentified signals, and they are able to identify a bad decision and correct it much faster than a CEO who sees it as a weakness just to change his/her mind.
I see examples of both open and closed thinking in our sector all the time. In my own area of specialism – supply chain there have in the past been two paradigms that have dominated operator-think:
- Efficiency at scale dumbs down the diner experience
- Too much focus on supply chain leads to a degradation of quality
These are both superb examples of old school thinking – and our contemporary CEOs are at last getting ahead of it. The fallacy that purchasing and supply activity does things that result in lower quality has at last been fully exposed. What leads to poor quality is poor decision making, often caused by inadequate due diligence on the impacts of changes outside the of the realms of tempting and attractive cost savings identified. They often exist, but like all change they carry with them the risk of unintended consequences if not properly understood and evaluated. Indeed, one operator with whom we worked set up a supply project where price/cost was not even within the goals of the project – by just focusing on process and quality the cost reduced as well – by a surprising 12%.
I’m now seeing business leadership with a heightened curiosity about the many levers of supply, where provenance, specification, sustainability, operational impact, quality, availability, supplier service, and innovation are all seen as important levers of success and are the subject of deep discussion as a part of the decision-making process. Here, efficiency is sought as a means of increasing quality, and price and cost are properly understood in the context of all the other levers.
My team at Prestige Purchasing love working with this type of business leader, and their teams. It makes our work much more challenging, but a great deal more meaningful – and the solutions we develop in this environment are much more likely to be successful and long-lasting.
So for me, a less myopic focus on the P&L in favour of a “getting bigger by getting better” approach, supported by a relentless pursuit of knowledge driven operational improvement, and great decision making is the way forward for our sector. This will ensure that we all continue to raise our game at every level, particularly when delighting our customer, on whom we all depend. Who knows we may even start to accept that “industry standard GPs” are just not good enough…
