Fierce CEO: Outside CEOs make companies more productive than insiders

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The perennial question of whether an in-house executive or someone from the outside should be chosen as a company’s new CEO is answered in favor of the latter in a study in the Harvard Business Review....

The decision to go outside the company versus inside for a CEO hire really depends on the condition of the company, said Tim Conti, co-founder at executive search firm ON Partners, via email. “In a situation where a company is a market share leader with disciplined operating principles and an intriguing product/service roadmap, an inside successor provides much needed continuity to the company. In a situation where the company is in need of a pivot, an outside hire is the best option to advance that goal.”

Even when strong internal candidates exist with new ideas about direction, their ties to the former CEO and their regime will limit their ability to effect change, Conti said. “Also, simply promoting an internal candidate, when the company has issues, is not the shot in the arm the company needs to re-energize the workforce. And, as a result, company productivity with an internal hire is certain to be less than with an external hire.”