transport and logistics: five leadership issues worthy of board … · 2015-07-11 · transport and...

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Transport and Logistics:

Five leadership Issues Worthy of Board and Executive Attention

R507042 - rr-0039 - Top 5 issues in T&L v10.indd 1 10/07/2015 16:07:06

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Introduction

The transportation and logistics (T&L) industry is going through rapid changes in the face of globalization, digitization, and the emergence of new and innovative service offerings leading to entirely new business models. Margin pressures and increasing commoditization, technological advancements, demographic flows, geopolitical shifts and economic changes, and a host of other major risk drivers all are contributing to dialogues in boardrooms and executive offices. Most significantly, executives are asking if they have the right leadership talent in light of the challenges they face.

From our conversations with the board members and CEOs in the transportation and logistics industry, the following five issues and their implications on leadership talent have emerged as top of mind for the executives:

ɳ Creating a solutions-based business

ɳ Navigating the digital transformation

ɳ Identifying next-generation leaders

ɳ Capitalizing on an expanding world

ɳ Building a best-in-class board

We hope this executive briefing document will serve as a discussion starter for thinking through how to attract and retain the right leadership talent in the face of these challenges.


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Creating a Solutions-Based Business

MARGINS ARE UNDER PRESSURE IN TRANSPoRTATIoN AND LoGISTICS

ɳ The transportation and logistics (T&L) industry traditionally has been driven by an emphasis on operational excellence, process improvements and a focus on cost minimization.

ɳ Margin pressures and increasing commoditization of services are creating a need to transform the business from a set of standard transactions to a flexible array of solutions-based offerings.

KEy PoINTS

ɳ Focus on creating and innovating upon advanced T&L solutions for the client on top of driving operational efficiencies.

ɳ Review key talent in the company and establish reward systems that encourage creativity, strategic vision and forward thinking.

ɳ Source and develop talent with the future services-oriented business in view, not just today’s immediate needs.

ɳ Look to hire outside the T&L industry in order to challenge current thinking.

SENIoR LEADERShIP IN ThE INDUSTRy IS RELATIvELy INSULAR AND TRADITIoNALLy oPERATIoNS FoCUSED3

INTERNAL hIRES FALL INTo oNE oF ThREE CATEGoRIES3:

NEW TALENT REqUIREMENTS IN T&L

REVENUE & PROFITABILITY OF LOGISTICS PROVIDERS 2005-20121

GROSS MARGIN % IN TRANSPORTATION & LOGISTICS2

20.2%17.9%

17.2% 14.8%2010 2011 2012 2013

have only T&L industry

experience

83%FUTURETALENT

REQUIREMENTS

Strategic thinking

Drive forchange

Communicationand collaboration

Inspirational leadership

Globalorientation

Solutionorientation

and innovation

3

1

2

Revenue has experienced average growth of

7% per year

But profitability has declined from

6.8% to 4.2%

50% have entered the CEO role immediately after an operational role.

75% of external appointments are from competitors in the T&L industry

25% have come from the company’s board of directors.

The remaining 25% held a CFO role.

1. Increasing the profitability of logistics. Oliver Wyman, 2014 2. Data include shipping, trucking, rail, air freight and relevant transportation services, S&P Capital IQ, 2014 3. Russell Reynolds Associates’ analysis of T&L leaders, 2014


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Navigating the Digital Transformation

ThE DIGITAL ChANGES WILL BE PRoFoUND1

ɳ Long before Big Data became a trend, managing massive volumes of data had been part of day-to-day operations in transportation and logistics.

ɳ However, T&L companies need to be prepared to invest in digital capabilities that will transform their business rather than incrementally improving their heritage of data-driven management.

KEy PoINTS

ɳ Develop and implement a comprehensive approach to managing the impact that digital technologies will have on your business.

ɳ Ensure that organizational responsibility for digital development in the company is clearly communicated, with clear accountability across all relevant functions.

ɳ Look beyond the usual suspects when recruiting talent for digital—the pool of digital candidates is small, and the competition to recruit such talent will only increase.

MoST T&L CoMPANIES hAvE DIGITAL STRATEGIES IN PLACE2

hoWEvER, MANy CoMPANIES hAvE RUN INTo MAJoR BARRIERS IN EFFECTIvELy IMPLEMENTING A DIGITAL BUSINESS3

DIGITAL oWNERShIP IN T&L3

DOES YOUR COMPANY hAVE A DIGITAL STRATEGY?

Lack of single head of digital

Departments competing for ownership of digital

CEO not recognizing the potential for digital

Functional silos

Lack of digital expertise and/or skills

2016 2020 2024

Launch of the U.S. government’sInternational Trade Data Systemsubmission of all data for export/import processes traditionallyinvolving 38 governmentagencies, now managedthrough a single window. Mexico, Singapore and Japanare trying to implement similarsystems.

The Internet of Things An estimated 200 billion devices/sensors collecting data frommanufacturing lines throughput topoint-of-sale information, allin real time.

The RFID (radio frequency ID)industry is poised to grow from$7.8 billion in 2013 to $30 billionin the next 10 years.

T&LTotal Yes

73%

No27%

No26%

Yes74%

CMO CEO CDOArticulate a digitalmarketing strategyto be�er connectwith both B2B and

B2C customers.

Champion digitalinitiatives, execute

digital strategyeffectively and drivea digitally enabled

business.

Build a future-readyand digitally savvy

workforce viarecruitment and

development.

33% 29% 3%

1. Inbound Logistics magazine, April 2014 2. Digital Pulse Survey, Russell Reynolds Associates, 2014

3. 17th Annual Global CEO Survey: Key findings in the transportation & logistics industry, PwC, 2014; 16th Annual Global CEO Survey, Transportation & Logistics, PwC, 2013

80%

80%

80%

77%

77%


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Identifying Next-Generation Leaders

ThE ChANGING oF ThE GUARD1 PRoFILE oF ToDAy’S AND ToMoRRoW’S LEADERS

ɳ Companies that fully comprehend the challenges ahead in the transportation and logistics industry know there is a shortage of talent with the skills and competencies needed for the future.

ɳ Securing the talent necessary for tomorrow’s business requires next-generation recruiting and strategic development of high-potential executives.

KEy PoINTS

ɳ Start succession planning early.

ɳ Build a strong succession process that develops internal talent and actively tracks promising external talent.

ɳ Identify areas of business growth, as well as areas of high risk, and the leadership capabilities needed to manage growth opportunities.

BREAKING ThE MoLD1

T&L CEOs are remarkably similar to one another and have long tenures, suggesting their set of skills/experiences have been well-valued.

TODAY

IN THE NEXT FIVE YEARS

Little international diversity:

85% of CEOs are of the same nationality as the country of the company’s headquarters

Tenure is rewarded: Average tenure before CEO appointment is

12.6 years but ranges from 2 to 34 years

� Headquarters country national

� Single-country/region experience

� Operational star � Limited out-of-industry

experience

� Track record of strategic success

� International experience (multilingual and/or having lived in multiple countries)

� Experience in a digital or in a digitally enabled company

� Gender diverse and/or ethnically diverse

The T&L CEOs surveyed have been in their current role for an average of 6.2 years.

In 2013, the average tenure in the company preceding CEO appointment was 4.6 years.

1/3of T&L CEOssurveyed areless than five

years awayfrom

retirementage2

14%already areoverdue to

retire2

Almost entirely male:

97% 1. Russell Reynolds Associates’ analysis of T&L leaders, 2014 2. Assumes average retirement age of 65, based on Organisation for Economic

Co-operation and Development’s average of 37 countries’ statutory retirement age


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Capitalizing on an Expanding World

RISE oF ThE MEGACITIES1

Increasing population densities in cities are creating urban economies exceeding the scale of entire nations. (in billions USD)

ThE INDUSTRy’S PREFERRED CoUNTRy LEADER PRoFILE3

LOCALS ARE A MINORITy OF REGIONAL LEADERS.

RISING IMPoRTANCE oF EMERGING MARKETS2

The traditional flow of goods internationally is set to move in reverse: from mature markets to emerging ones as spending power increases.

No SMooTh RoAD To SUCCESS4

Companies in the sector know there are complex challenges to address in emerging markets.

PROBLEMS ASSOCIATED WITH DOING BUSINESS IN EMERGING MARkETS

ɳ Demographic flows, geopolitical shifts and economic changes have an immense impact on transportation and logistics, but the industry is not uniformly prepared to navigate the opportunities and threats of growing cities and emerging markets.

ɳ To make the most of opportunities in these non-traditional markets, companies need to get smart about the talent they place at the helm of these countries and must articulate a robust international growth strategy.

KEy PoINTS

ɳ Identify the competencies necessary in a high-performing country head: individuals performing at a global level who have an ear to the ground and can capitalize on each market’s unique profile.

ɳ Hire more local talent to ensure growth and local knowledge in emerging markets.

1. Global MetroMonitor, Brookings Institution, 20142. “Indonesia’s Rising Middle Class and Affluent Consumers: Asia’s

Next Big Opportunity,” The Boston Consulting Group, March 2014; “Volume of global goods trade set to nearly double by 2030,” PwC news release, October 2, 2014

3. Russell Reynolds Associates’ analysis of T&L country managers, 20144. Agility Emerging Markets Logistics Index, Transport Intelligence,

2014

TOKYO

$1,520

$1,358NEW YORK

$517SHANGHAI

$820TURKEY

$415AUSTRIA

$512NORWAY

19.9%Poor transportation infrastructure

21.0%Corruption and fraud

13.8%Difficult customs procedures

13.2%Government policies

10.8%Difficulty se�ing up/doing business

9.7%Security

3.8%Difficulty in repatriating profits

201420202030

USD$9.3 BILLIONSales on Singles’ Day in China for Alibaba Group alone

135 MILLIONMiddle class consumers in IndonesiaaloneUSD$18 TRILLIONProjected volume of global goods trade: double today’s values; tradeamong emerging economies willgrow at 6% per annum—almostdouble the global rate

Only 36% of regional heads surveyed across mature and emerging regions are local to the area that these leaders manage.

Less than a fifth of these heads were externally recruited into their role.

Among both locals and expats, a majority (63%) never have had experience in the company’s headquarters and, instead, have spent their career managing region after region.

Among the internally appointed, these geographical leaders, on average, have extraordinarily long tenures in the company preceding their current role, ranging between 5 to 38 years, with an average of 16.8 years.


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Building a Best-in-Class Board

ThE TRANSPoRTATIoN & LoGISTICS BoARD oF DIRECToR PRoFILE1

ɳ An effective board is one that represents a rich variety of perspectives, allowing companies to develop (and execute) robust strategies while simultaneously managing risk.

ɳ The work of the board of directors never has been more complex. Traditional issues like CEO succession and remuneration remain, while shareholder activism and digital transformation present new challenges.

KEy PoINTS

ɳ Conduct regular board and individual director evaluations—this will help ensure that director performance is aligned with the company’s strategic objectives.

ɳ Look beyond the usual suspects and the typical board of director profile. Focus on the capabilities, experiences and perspectives necessary to provide insights and effective corporate governance.

FoRMULATE A WRITTEN CEo SUCCESSIoN PLAN

This plan should include the skills, competencies and experiences required for the next CEO, as well as assessment and development plans for internal candidates. Boards also must regularly revisit an emergency succession plan.

FUTURE ChALLENGES FoR T&L BoARDS1

Directors joining the board of T&L companies today will be faced with a host of both traditional and new challenges.

68+21%

35-454%

46-5517%

56-6758%

Transportation

Financial services

Government

Leisure and hospitality

Consumer goods

25%7%5%5%

28% 77%Male directors

Femaledirectors

23%

Strategicdifferentiation

Digitaltransformation

Globalization

Urbanization Sustainabilityissues

Cybersecurity

of current board seatscould turn over in the

next five years.

21%

AGE OF DIRECTOR DIVERSITYINDUSTRY ExPERIENCE

1. Russell Reynolds Associates’ analysis of T&L Boards, 2014


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Global offices

asia/Pacific ɳ Beijing ɳ Hong Kong ɳ Melbourne ɳ Mumbai ɳ New Delhi ɳ Seoul ɳ Shanghai ɳ Singapore ɳ Sydney ɳ Tokyo

europe ɳ Amsterdam ɳ Barcelona ɳ Brussels ɳ Copenhagen ɳ Dubai ɳ Frankfurt ɳ Hamburg ɳ Helsinki ɳ Istanbul ɳ London ɳ Madrid ɳ Milan ɳ Munich ɳ Oslo ɳ Paris ɳ Stockholm ɳ Warsaw ɳ Zurich

americas ɳ Atlanta ɳ Boston ɳ Buenos Aires ɳ Calgary ɳ Chicago ɳ Dallas ɳ Houston ɳ Los Angeles ɳ Mexico City ɳ Minneapolis/St. Paul ɳ New York ɳ Palo Alto ɳ San Francisco ɳ São Paulo ɳ Stamford ɳ Toronto ɳ Washington, D.C.

© Copyright 2015, Russell Reynolds Associates. All rights reserved.

Russell Reynolds Associates is a global leader in assessment, recruitment and succession planning for chief executive officers, boards of directors, and key roles within the C-suite. With more than 300 consultants in 45 offices around the world, we work closely with both public and private organizations across all industries and regions. We help our clients build boards and executive teams that can meet the challenges and opportunities presented by the digital, economic, environmental and political trends that are reshaping the global business environment. www.russellreynolds.com. Follow us on Twitter: @RRAonLeadership


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transport and logistics: five leadership issues worthy of board … · 2015-07-11 · transport and...

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