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Internal or external CEO?

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Roger Quinn ▼ | December 19, 2010
CEO candidatesIs it better to promote an internal manager to the top spot or your company should search for someone new and fresh? The answer is: nobody knows the answer, only trial and error can give the solution to this problem.


While it is indeed important to build a solid bench for succession planning, the truth is that, depending on the company and its situation, it can be just as important to bring in outsiders as it is to develop homegrown talent. People are not born in the company, they all have to come from somewhere. And suggesting that companies are better when every or even most executives grow up there is simply untrue.

As with all things in business, there is no one-size-fits-all answer. It depends on the needs of the company at any given time. And more often than not, it's a question of balance. Some companies that are famous for promoting from within, while others a searching for a top outsider at the turn of their business cycle.

Let us see some examples from the both sides and let's see can we draw some conclusion from those examples. After realizing that its home-grown mentality was hurting the company, Caterpillar began bringing in executive outsiders from Ford Honeywell, and Harley-Davidson. 3M has hired outsiders for its last two chief executive officers, and we all know that bringing in former RJR Nabisco and American Express executive Lou Gerstner saved IBM.

In fact, most of America's biggest and most respected companies, Microsoft, Apple, Google, Cisco, and Microsoft for example, regularly hire executives from outside the company. Cisco's chairman and CEO John Chambers joined the company as senior VP of worldwide sales and operations after 14 years at Wang and IBM and he did a great job at Cisco.

Before joining Apple, chief operating officer and the only man we can call equal to Steve Jobs, Tim Cook, was a vice president at Compaq and before that he spent 12 years at IBM. Google chief executive officer Eric Schmidt served Bell Labs, Zilog, Xerox, Sun, and Novell. No need to describe his leadership and his famous note that he and Google founder will stay at the company for 20 years.

Advocates of developing internal talent can be very persuasive when it comes to promotions of home managers. However, they are not right: there simply is no correlation between executives being promoted from within and the health or success of a company. It's a myth. If someone is really good then it doesn't matter who taught him, this company or that company.

There is no way to say which way is better so every one company should tried candidates from the both sides and decide which one has better chance to deliver with respect to company culture. And in the end, it really doesn't matter where somebody comes from, the end result is what counts.

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