CEO Succession: To Build or Buy
The world of high-powered companies has increased its pace over the past few decades, meaning that leadership development pipelines have been forced to speed up and become more flexible. When considering CEO succession, the question of whether it is better to build or buy becomes critical for any company and largely depends on its stage of growth. Financial Times recently explored different approaches to CEO succession, examining how they’re holding up today. (June 22, Hill)
Promoting an insider: The model of grooming a successor and promoting that individual after long years of distinguished service is a powerful way to keep a company consistent – and it’s becoming harder to accomplish. Employees today serve shorter tenures than ever, and organizations are becoming loath to commit to their growth.
Hiring an outsider: Without a strong internal talent pipeline, bringing in an external hire means participating in the ever-tightening “war for talent.” Getting an outsider to join as CEO means picking someone with an advanced resume and proven track record, but the competition for the best minds can be fierce with loftier compensation expectations.
Finding an inside-outside hybrid: Some companies have taken to hiring promising executives with valuable skills relatively early in their careers, then plugging them into internal development programs, adding them to the mix of their potential leaders of the future. When done correctly, this approach combines the benefits of diversifying the internal talent pool and succession pipelines.
Relying on a founder: Many of today’s most exciting companies are young organizations still led by their founders. They may be unprepared, however, for unexpected succession (think Uber), spelling problems if and when those founders leave, or are forced out.
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