Leadership development and succession planning
There are lots of reasons to promote your CEO from within and DDI’s Evan Sinar lays them out in a post titled: “‘Growing Your Own’ Leaders? Here’s How to Make it Fruitful.”
“For many organizations, a ‘grow your own’ strategy—that is, filling most leader roles with capable internal candidates—is an aspiration, a hallmark of corporate culture, and a well-deserved source of company pride. Those that pursue this approach and execute on it well are less susceptible to the expense, uncertainty, and time to find high-caliber leaders externally. These companies also send a clear, ‘we look internal first!’ message to employees, clarifying that paths to growth won’t need to involve looking elsewhere, fostering engagement, and reducing turnover risk of valued talent.”
The strength of the insider is that he or she has all of the types of human capital identified in the HBR article, “Are Leaders Portable?” The problem is that may not be enough. Bob McDonald seemed like he was the right choice for CEO at Proctor and Gamble, but he didn’t work out.
Outsiders can bring fresh thinking
So, “When Is an Outsider CEO a Good Choice?” The authors of the article with that title say that:
“On average, CEOs recruited from outside the company perform about the same as those who come up through the ranks, the authors’ research suggests. But there are certain circumstances in which outsider CEOs tend to do better.”
The common wisdom is that outsiders make a good choice when the company needs a shake-up or fresh thinking. For examples, consider Alan Mulally at Ford or Lou Gerstner at IBM. But those may not be enough. Noel Tichy holds that
“The vast majority of technical, political, and cultural errors made by Ron Johnson at J.C. Penney could be chalked up to his outsider status.”
A middle way
Joe Bower suggests that the choice doesn’t have to be either/or. He suggests that be the best choice for CEO of most companies is what he calls “an inside outsider.” He may be right. That description would fit Jack Welch, probably the most successful CEO of the last half century.
