Should shareholders demand that future CEO are promoted from within a company.

[forest]

It seem to me that many company directors are letting themselves down by not being prepared when the CEO leaves.

Companies like RYM, FPH and MFT more often than not promote manages from within their organisation. Change overs are usually smooth and salary packages reasonable.
Other companies like Fonterra and FBU are not prepared it seems when their CEO leaves. They introduce CEOs who are demanding high salaries, and are often not familiar with the culture of the company. This lack of fitting in strikes me as creating a reduced commitment over time by them and it is not unusual that those outside CEOs are leaving the company in a lesser state as than when they arrived.
I have no doubt that those outside CEOs are very capable individuals, it's just that often it seems they are not that suitable for the positions our directors have in mind for them.

Promotion from within will also motivate middle management to excel in what they do in the hope of a promotion.
At present we creating the situation that experience managers are being managed by a CEO not familiar with company protocol with all the frustrations that are likely to come with that.

Thoughts ?

[Antipodean]

I'm not sure it's such a binary situation - outside company bad internal company good. Seems like there would be bad examples in both arena's should one look for them.

I would say that all other things being equal, a company should promote from within. Makes sense from an efficiency and motivational perspective. However, as no two individuals are ever matched in experience, attitude and ability this hypothetical scenario never actually eventuates.

[RTM]

I'm not sure it's such a binary situation - outside company bad internal company good. Seems like there would be bad examples in both arena's should one look for them.

I would say that all other things being equal, a company should promote from within. Makes sense from an efficiency and motivational perspective. However, as no two individuals are ever matched in experience, attitude and ability this hypothetical scenario never actually eventuates.

It doesn’t seem to have worked out to well for GE. They have just appointed a new leader from outside their organisation. Time for some different thinking perhaps ? Maybe it depends on where the company is within its cycle....and maybe the type of company it is ?

[axe]

hire the best candidate for the job

[macduffy]

hire the best candidate for the job

Good in theory, not so easy in practice. At least hiring from within avoids the all too common "need" to meet international salaries - and the disappointing outcomes that often follow.

:mellow:

[forest]

hire the best candidate for the job

I see that directors usually have a number of years to nurture management into a potential CEO.
Good directors should create their own great candidates.
But what happen too often is that a CEO resigns and the directors haven't got enough time to find a great candidate, so indeed they choose the best candidate they can find in the short time available.
Better prepared directors would have nurtured a small pool of management into potential great CEOs.
It is just a matter of forward planning.

[blackcap]

It seem to me that many company directors are letting themselves down by not being prepared when the CEO leaves.

Companies like RYM, FPH and MFT more often than not promote manages from within their organisation. Change overs are usually smooth and salary packages reasonable.
Other companies like Fonterra and FBU are not prepared it seems when their CEO leaves. They introduce CEOs who are demanding high salaries, and are often not familiar with the culture of the company. This lack of fitting in strikes me as creating a reduced commitment over time by them and it is not unusual that those outside CEOs are leaving the company in a lesser state as than when they arrived.
I have no doubt that those outside CEOs are very capable individuals, it's just that often it seems they are not that suitable for the positions our directors have in mind for them.

Promotion from within will also motivate middle management to excel in what they do in the hope of a promotion.
At present we creating the situation that experience managers are being managed by a CEO not familiar with company protocol with all the frustrations that are likely to come with that.

Thoughts ?

Not too sure myself Forest. My partner is dealing with a situation where they (the board) hired a CEO from within the organisation but it is turning out to be a pile of poo. Being competent in one area of the organisation (at exec level) does not mean competence at CEO level. But I like the way you are thinking there. I think more organisations should look if they can hire from within but if the talent is not there it is not there. Will be more difficult for the smaller firms. Large firms with heads of divisions almost have defacto CEO's already.

[Beagle]

Good debate topic for tomorrow's meeting.

[forest]

Not too sure myself Forest. My partner is dealing with a situation where they (the board) hired a CEO from within the organisation but it is turning out to be a pile of poo. Being competent in one area of the organisation (at exec level) does not mean competence at CEO level. But I like the way you are thinking there. I think more organisations should look if they can hire from within but if the talent is not there it is not there. Will be more difficult for the smaller firms. Large firms with heads of divisions almost have defacto CEO's already.

Blackcap I am not suggesting that directors wait until the CEO signals his or her desire to move on and than offer the CEO position to somebody from the company.
What I like to see that a company has a longer term plan and says the next CEO should have skill set XYZ. Lets plan for the next CEO and pick maybe 3 people with potential in the company and look at those 3 and see what their strong points are and see if they are willing to gain the other skills desired.
This way a company can have the next CEO ready in time. Mainfreight believes in promoting from within and with a little planning most companies could benefit from the same approach.

[iceman]

Blackcap I am not suggesting that directors wait until the CEO signals his or her desire to move on and than offer the CEO position to somebody from the company.
What I like to see that a company has a longer term plan and says the next CEO should have skill set XYZ. Lets plan for the next CEO and pick maybe 3 people with potential in the company and look at those 3 and see what their strong points are and see if they are willing to gain the other skills desired.
This way a company can have the next CEO ready in time. Mainfreight believes in promoting from within and with a little planning most companies could benefit from the same approach.

Like other commentators I think you can not have one rule for all on this. Often companies need outsiders to come in and refresh the thinking within the organisations. But I like this idea of having a longer term plan with a clear set of goals for internal/middle management to aim for and aspire to in the hope they will have a fair chance of a future promotion. At that time, their skills should be weighed up against the skills of any "outsider" candidate skills