Is top management team-supply chain manager interaction the missing link? An analysis of risk-bearing antecedents for supply chain managers

Purpose: Supply chain managers (SC managers) may make less than optimal decisions for the firm when facing compensation and employment risks. The purpose of this paper is to study two relevant factors (target setting and strategic importance of the supply chain function) that may drive SC managers to perceive more or less risk to their welfare. Design/methodology/approach: The study combines survey data from 133 firms with secondary data in order to reduce source bias and enhance the validity of results. The authors also conducted interviews with supply chain and human resources managers. Findings: The results show that top managers can alter SC managers’ perceived risks. Ambitious targets drive compensation risk but not employment risk. The supply chain function’s strategic importance, on the other hand, decreases employment risk but increases compensation risk. Research limitations/implications: The authors emphasize two ways that the top management team (TMT) influences SC managers’ perceived personal welfare but acknowledge that there may be others factors. Due to the topic sensitivity, the authors could not collect data on all variables (e.g. individual characteristics) that may affect risk perception. The findings are based on Spanish firms and may not be generalized to other contexts. Practical implications: This research proposes three suggestions. First, compensation and employment risks should be considered separately when designing compensation and evaluation systems. Second, appropriate performance targets may put compensation risk in a reasonable range that is neither too high to prevent risky-yet-beneficial decisions nor too low to allow nonfeasance. Third, escalating the supply chain’s strategic importance effectively offsets employment risk. Originality/value: Scholars have repeatedly shown the negative outcomes of SC managers’ perceived compensation and employment risks. Yet, little attention has been given to their antecedents. The study explores two relevant antecedents and provides integrative empirical evidence regarding actions top leaders can take to manage SC managers’ perceived risk and subsequently enhance firm performance.