CEO: Internal vs external hire

updates + insights » CEO: Internal vs external hire

Air New Zealand’s appointment of its chief financial officer as an interim replacement for outgoing chief executive Christopher Luxon raises an interesting debate about the benefits of internal versus external hires for senior roles.

Air New Zealand has been clear in pointing out that CFO Jeff McDowall isn’t seeking a permanent appointment to the role, simply that the global search for Luxon’s permanent replacement is ongoing with the preferred candidate not likely to join the nation’s carrier until 2020; Luxon leaves the role on 25 September this year.

Some may say that a board’s most fundamental responsibility is the appointment of its CEO, who then has accountability for delivering on the organisation’s strategic intent. Regardless of how the need arises, when faced with the task of recruiting a new CEO, boards would typically follow a pragmatic process of examining the business need (priorities and plans for the future) and determining the person specification for the role as well as any specific competencies that reflect the business need.

Succession planning is likely a frequent topic on the board agenda and depending on the size and scale of the business, some boards may even have a pool of talent in their “back pocket” should an immediate need arise.

Conventional wisdom suggests that as for any hire, internal candidates are potentially the safer option because the person is a known quantity; they also have the advantage of insider knowledge would means they are less likely to cause disruption within the business – that’s assuming you have a replacement for their existing role. Internal candidates also demonstrate to the wider business the value that is placed on growing and developing talent within the organisation.

For a CEO role in particular, identifying a potential pool of internal candidates in advance of the need and then assessing and further developing them is part of a well thought out executive development plan.

And then there’s the case for an external hire.

Publicly listed companies operate in a different environment and are likely to make public their intention to go to market and complete a comprehensive global search to reassure shareholders that a robust recruitment process has been followed.

If you have identified a very specific business need or you are at a pivotal stage of your business evolution, there is a lot to be gained from looking outside of the current business for your next CEO in terms of bringing in different thinking, experiences and fresh perspectives to the top role. With disruption here or around the corner for almost every sector, external leadership may be necessary given the need for change.

The top takeaway is to be clear on the need, keep an open mind about the “right” candidate and follow a robust and transparent recruitment process. That way you’ll be more likely to appoint a CEO that you actually need, to deliver on your business strategy.    

If you are looking for direction and assistance on recruiting top talent for your business, get in touch with us.   

The Decipher Team      

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