I came across an article in Forbes recently that points out an intriguing trend: more and more companies are choosing CEOs from outside the company rather than hiring from within.
Hiring a CEO from outside used to be seen as a last resort, right? It was something that happened if a company’s CEO was suddenly forced out by the Board or when some kind of failure in succession planning left a firm without anyone suitably “groomed” for the job.
Today, though, according to new research from Strategy&, which is PWC’s strategy consulting arm, it’s increasingly common for a company to deliberately choose an outsider CEO. Suddenly hiring from the outside is a succession plan in and of itself – not the lack of a plan.
In typical Forbes fashion, this is a well-written and easily digestible article. They drew conclusions from looking at 12 years of detailed data on incoming CEOs at the largest 2,500 public companies. Here are a few highlights:
- The main reason for the shift? Companies are undergoing major change and might not have leaders with appropriate skill sets. Some industries (like energy) are reeling from big swings in supply, demand and prices. Others (like telecom) are moving to new business models. And almost everyone is adapting to changes in regulatory policies and the rise of digitization. So maybe the guy down the hall isn’t really ready to lead the troops through so much change.
- Another reason has to do with shifts in governance. Boards today are more independent than they used to be, thanks to regulation and an overall drive for better governance in the wake of scandals. The days of the “imperial CEO” presiding over a board made up of insider directors are fading. Also, outside directors have a more open mind about evaluating outside CEO candidates.
- Finally, the nature of employment has changed dramatically over the last several decades. People don’t work for the same firm for 20 years anymore; we’re all on the move (whether we know it or not!).
Maurice Gilbert is Managing Partner of Conselium Executive Search, which specializes in placing Compliance Officers and Legal Counsel for clients in the U.S., Europe, Latin America and Asia Pacific. Maurice is also CEO of Corporate Compliance Insights, a worldwide publication devoted to governance, risk and compliance issues. Maurice can be reached at maurice@conselium.com or maurice@corporatecomplianceinsights.com.
