ROSABETH MOSS KANTER: If your company is doing well, look in inside. If your company is slipping and falling, that might be a sign that the company has done too much looking inside. Companies that become insular, ignore dissenting voices, and fail to anticipate market trends might want to look outside for new talent and fresh views.
Finding a CEO from within the company is associated with strong performance, as research by my Harvard Business School colleague Joseph Bower shows. This certainly offers the virtues of continuity, smooth succession handoffs, and in-house knowledge. Smooth succession is a winner’s advantage that helps keep a company on a winning streak. For example, I’m impressed by the way Verizon handled the succession from Ivan Seidenberg to Lowell McAdam. There was a long board-led selection process, a long period of Seidenberg and McAdam working together, and then a seamless transition to McAdam as he took on the CEO role and later added Chairman.
Companies in trouble—on losing streaks and in need of turnarounds—benefit from experienced outsiders who bring fresh perspectives, put the facts on the table dispassionately, and craft new strategies without feeling that they must defend past actions. In my book, “Confidence: How Winning Streaks and Losing Streaks Being and End,” I describe many companies that had long promoted from within but realized that declining performance required an external hire as CEO—Gillette is one example. Insiders who thought they were next in line for the CEO job are certainly disappointed, but they can be persuaded to stay if the upside is compelling enough. And one of the actions of a great turnaround leader is to empower people throughout the company to increase their own leadership potential, thus improving performance and making it more likely that one of those insiders can be CEO next time around.
Rosabeth Moss Kanter (@RosabethKanter) holds the Ernest L. Arbuckle professorship at Harvard Business School, where she specializes in strategy, innovation and leadership for change.