Research undertaken by the UCLA Business School and reported in the Wall Street Journal concentrates on one of the most problematic choices for any company: when a new CEO has to be appointed, is it better to prefer someone from inside the firm who knows its context and culture or, instead, to place one’s bet on the new outlook (and perhaps greater aggressiveness) of an outsider? The research evaluates results obtained by companies who made either one or the other choice in particularly challenging circumstances, such as the 2008 crisis.
The solution suggested is worthy of Pontius Pilate: the idea seems to be that of a “hybrid” CEO who has experience in a controlled company, thereby acquiring knowledge of the group culture, but who, at the same time, is less bound and more accessible to make assertive decisions, because not directly involved in the previous management. According to the research, those who chose this hybrid solution performed 11% better than those who chose either to go along the path of continuity or to make a clean break from the past.
Which new CEO is better? Someone inside the company who knows its context and culture, an outsider ... [+]
As so often happens, this kind of research tends to hyper-simplify an extremely complex and delicate process. However, it has the merit of airing a topic that is generally not really considered much and of promoting reflection.
What are the mechanisms involved in appointing a new CEO? What exactly is a Board of Directors looking for when selecting the best candidate? Results obtained in other contexts? Technical expertise? Relational skills? Belonging to a certain network? Sharing the style of leadership?
All these elements should be included in the evaluation and be considered in the broader context. Belonging to a network is one of the most reassuring criteria and guarantees continuity. At the same time, it limits the pool of possible candidates and excludes different experiences and skills, which, instead, might prove decisive, above all, in difficult periods. The same applies to the sharing of the leadership style: there is nothing more conventional than to re-propose the status quo, without really recognizing its limits and defects.
So, insider or outsider? Putting the question this way is, I believe, both limiting and misleading. An interesting alternative idea comes from the Financial Times, which recounts a trend that is catching on in the English-speaking job market. Apart from the umpteenth new definition (this time the term is “quiet hiring”), what the experts consulted by the London newspaper is an exciting passage, what has become a compulsory move in a job market characterized by lack of available talent, that is to say, the decision to go along internal paths, training up young employees to take over vacant positions.
However, this is no longer done by selecting by role or job title but according to the skills or experiences required. One of the exciting aspects is also the strategic fitting of these skills to the vision of development in the medium and long term.
When wanting to take a long-term view, projecting one’s company into the future, then this is an approach to be considered. A McKinsey study has noted that, from now until 2030, one out of every 16 workers will have to change their job, and nine executives out of 10 will face significant skill gaps. Not being an insider or an outsider will make the difference at that point. What will make the difference, instead, will be the ability to act in different scenarios with skills that are adaptable and outside one’s comfort zone. As will the ability to adapt and agility in responding to context, a kind of intelligence that has yet to be discovered and developed. It will be vital to invest, too, in Boards of Directors who will know how to combine strategic vision and people strategy. To sum up, there is a whole new chapter to be written, which does not seem to have even been barely outlined in the minds of our entrepreneurs yet.
