Question

You are assigned to a group of students for this online discussion.

Is it smarter for a board of directors hire a CEO from internal or external candidates? Obviously this candidate should be an experienced executive; but better to know the company or better to know the role?

You should to consider some of the following in your discussion:

a. Does it matter if it is a replacement CEO or the first time a growing company hires a CEO?

b. Consider this for a company like McDonald's Corporation – review page 39 in textbook on “Are there cracks in the golden arches?”

c. Respond constructively to at least one other student comment.

Answer 1

Ans

Following situations have been addressed separately:

1. In a case of a conglomerate which has complex set of operations and is formed by many companies having unique set of challenges it is better to have an internal candidate who has worked with the company for long and across diverse companies in various roles.

The other factors to consider while deciding are:

2. What is the current state of the company financially. If the company is in healthy financial state then carrying on the vision of the existing CEO by letting an internal candidate become the new CEO is recommended. However if the company is facing challenges and the vision of the previous CEO has failed to energize the company then letting an outsider with newer perspectives is a better choice.

3. Sometimes the company is facing technology disruption and newer forms of competition in which case letting an outsider as CEO having experience of disruptive technology is a cogent choice.

3. For companies in service organizations where culture is the most important asset of the company it is advisable to have internal candidate take over as he will understand the cultural ethos better.

4. In specific situations where the culture itself has become a challenge for growth then getting an outsider is important to usher in a new culture.