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Chemicals and Process Industries

Chemical and Process Industries: Five Leadership Issues Worthy of Board and Executive Attention

Petrochemicals, Specialty Chemicals, Packaging Paper, Other Materials Manufacturing



Introduction

​The chemical and process industries (CPI) (including petrochemicals, specialty chemicals, packaging, paper and other materials manufacturing) are seeing rapid changes in the face of globalization, commoditization and structural changes. The increased pressure to innovate, influx of private equity investors, ongoing mergers and acquisitions, 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 board members and CEOs in the chemical and process industries, the following five issues and their implications on leadership talent have emerged as top of mind for the executives:

  • Driving and managing structural changes
  • Defining and finding the next generation of CPI leaders
  • Creating a diverse and engaged board
  • ​ Encouraging and commercializing innovation
  • Capturing the value of volatility in feedstock prices
​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.

 

Driving and Managing Structural Changes​

  • Over the last two decades, Chemical and Process industries (CPI) have confronted serious challenges driven by globalization and commoditization, which have put pressure on margins. Companies have responded through structural changes, including mergers and acquisitions (M&A) and spinoffs, to create scale around core competencies, reshape business portfolios and selectively enter new markets or regions.
  • Consequently, there is a continually growing need for general managers at the board and executive levels who can bring change management skills and demonstrate true entrepreneurship.
  •  

    Defining and Finding the next generation of CPI Leaders

    • Once the generation of baby boomers retires, there is a major risk of talent shortages at senior levels in CPI. Over the past three years, 50% of top CPI companies have appointed a new CEO.
    • CPI CEOs generally are internal appointments, and the most common role prior to CEO is COO. Externally appointed CEOs previously held a CEO-level or head of business unit (BU) role in another company; 58% of externally appointed CEOs came from the CPI industry.

     

    Creating a Diverse and Engaged Board

    • An effective board is one that represents a rich variety of perspectives, allowing companies to develop (and execute) robust strategies while simultaneously managing risk.
    • The work of the board of directors has never been more complex. Traditional issues like CEO succession and remuneration remain, while shareholder activism, digital transformation and cyber security present new challenges.

     

    Encouraging and commercializing innovation

    • Innovation is an essential lever to create competitive advantage, build new revenue streams and counterbalance growing commoditization in the chemical and process industries’ (CPI) value chain.
    • CPI companies need to further accelerate their innovation efforts; more leaders are needed who can pragmatically drive sustainable growth by managing innovation through complex environments involving multiple parties and functions.

     

    Capturing the Value of Volatility in Feedstock Prices

    • Shale-based feedstock has given rise to new investments in petrochemicals due to its low price and availability. The United States is benefiting (the trend remains favorable despite low oil prices), but other regions have seen declining investment intensity, particularly Europe.
    • There is a growing need for skilled engineering and capital management leaders to build new plants in the CPI industry. However, as solid project management experience becomes more difficult to come by in the United States, companies will need to be increasingly creative in their talent strategies.

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    Chemical and Process Industries: Five Leadership Issues Worthy of Board and Executive Attention