CEOs have profound impacts on the companies they run, and choosing the right CEO is essential for ensuring success. However, the decision can be difficult to make. In particular, companies must choose between hiring a CEO internally or hiring one externally. Here are some of the factors that may affect this decision.
Benefits of Internal Hiring
CEOs who have worked with the company they will manage will have an edge over those who have not worked with the company. A company’s workflow and mission cannot adequately be described on paper, and CEOs without experience will not be able to understand certain elements of the company that internal hires will understand. Because of their experience, internal CEOs can often start implementing their new ideas quickly.
Disadvantages of Internal Hiring
In some ways, the advantages of internal hires also represent the disadvantages. After working with a company for a certain period of time, it can be difficult to think of alternative ideas and solutions to problems. By hiring a CEO internally, it may be difficult to implement larger reforms that may be necessary for certain companies.
Benefits of External Hiring
Hiring a CEO without experience with a company gives those making the decision more options to choose from. The talent base within a company is necessarily limited; the talent base from outside a company is much larger. Because of this, those who want to target as large a pool of talent as possible may prefer external hirings. In addition, bringing a new person to a company can be a great way to gain new perspective on how the company operates. This insight can help to transform a company.
Disadvantages of External Hiring
It can be difficult to understand a potential hire based on his or her resume and interviews. Because of this, those who hire a CEO without experience with the company may not know who they are hiring until he or she has already started implementing changes. In addition, passing over qualified applicants may cause the company to lose great assets, and it may send the message that the company does not value prior work.
How to Decide
If the company is functioning well and is continuously growing, it may be best to hire internally. In other words, companies that will benefit from conservative leadership may be best served by hiring someone with experience in the company. Companies that are struggling, on the other hand, may wish to examine the value of radical changes. Companies that need to change quickly to survive and thrive will often find themselves best served by hiring a CEO with a vision for the company’s future.
About the Author
Executive consultant Pete Marks partners with business leaders around the world to help them build the most effective executive teams. He has written extensively on various issues, including an article about online MBA ranking.