A CEO role is very critical for the present and future of any company, we still talk about Jack Welch (former GE CEO) and Steve Jobs (Apple CEO) who defined new direction and the future of the company (Simply put, turned-around the company). The question widely remains open on who could be the successor. When it comes to hiring of CEO, firms past and present outlook is equally important. Typically, board of directors (BOD) look for candidates from these groups – Insiders, Outsiders, Former Executives, Member of Board of Directors and Insider-Outsiders.
Relation between Health of the company and CEO hiring –
Insider – If company is healthy then BOD’s prefer insiders to be the next CEO. They will continue the same cultural and take a step forward in the same direction. Transition won’t be a challenge.
Relation between Health of the company and CEO hiring –
Insider – If company is healthy then BOD’s prefer insiders to be the next CEO. They will continue the same cultural and take a step forward in the same direction. Transition won’t be a challenge.
Outsider – If company is in serious crisis then BOD’s prefer outsiders. Outsiders break the cultural barriers and see to it that decisions are made and implemented across the company. It’s a tough task for an insider to pull the trigger as he becomes the part of the cultural.
Former-executive – They come to rescue if the company is in crisis, we have seen that in case of STARBUCKS, APPLE, DELL, etc.. They understand company’s culture and can quickly identify the problem. But the problem with former executives is once retired they do not look for a comeback to start all-over again.
Member of BOD – Member of Board of Directors is usually the last option if unable to find a replacement. They can be a good replacement as they understand the problem in the company, but often the last resort. No member BOD wants to a CEO, they play other roles and responsibilities which keep them busy.
Insider-Outsiders – Insider-Outsiders are the people who join as a President or a COO and will be promoted as a CEO in another 18months. They work with different business units and understand the cultural and process of the company. This 18months period gives candidate the time and exposure required to become the next CEO of the company. Interestingly, a survey carried by XXX on CEO’s belonging to S&P 500, performance of CEO’s increased by people belonging from Insider-Outsiders. This combination allows executives to learn company culture and the business model so that he can start delivering from the movement he steps in as CEO.
The only disadvantage I see in this process is the Deputy CEO/President may also think like the current CEO. Ideally, firm needs a CEO who understands the existing process and at the same time brings innovation and his past experience.
Former-executive – They come to rescue if the company is in crisis, we have seen that in case of STARBUCKS, APPLE, DELL, etc.. They understand company’s culture and can quickly identify the problem. But the problem with former executives is once retired they do not look for a comeback to start all-over again.
Member of BOD – Member of Board of Directors is usually the last option if unable to find a replacement. They can be a good replacement as they understand the problem in the company, but often the last resort. No member BOD wants to a CEO, they play other roles and responsibilities which keep them busy.
Insider-Outsiders – Insider-Outsiders are the people who join as a President or a COO and will be promoted as a CEO in another 18months. They work with different business units and understand the cultural and process of the company. This 18months period gives candidate the time and exposure required to become the next CEO of the company. Interestingly, a survey carried by XXX on CEO’s belonging to S&P 500, performance of CEO’s increased by people belonging from Insider-Outsiders. This combination allows executives to learn company culture and the business model so that he can start delivering from the movement he steps in as CEO.
The only disadvantage I see in this process is the Deputy CEO/President may also think like the current CEO. Ideally, firm needs a CEO who understands the existing process and at the same time brings innovation and his past experience.
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