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Solve the Succession Crisis by Growing Inside-Outside Leaders

The Idea in Brief

Should companies needing a new CEO pick someone from inside or outside? Insiders know the firm and its people, but they're often blind to the need for radical change. Outsiders see the need for change, but don't know the company well enough to foster it.

Fortunately, says Bower, firms don't have to compromise. Companies delivering superior, sustained performance--P&G, IBM, GE--have inside-outsiders at the helm. These CEOs have ascended within the organization while remaining detached enough from its cultural norms to maintain an outsider's objectivity. They know the firm but also understand how it will have to change. They're able to look at the organization as if they just bought the company.

Growing inside-outsiders takes patience. Over a decade or more, your firm must groom high-potential executives through increasingly challenging assignments and rigorous mentoring. But the effort pays big dividends: Your company has access to an able CEO--whenever it needs one.

The Idea in Practice

How Companies Grow Inside-Outsider Leaders

Recruit right. Hire from a diverse pool of individuals who are highly talented in their area of specialization and who have general-manager potential. Over time, they'll become good insiders--learning to manage in the context of the company's strategy, systems, and culture.

Identify insiders blessed with an outside view. Often, they come from outside the organization's mainstream; for example, spending extensive time away from headquarters.

Before becoming CEO, Procter & Gamble's A. G. Lafley spent years in Asia building P&G's Chinese operation--and working in beauty products rather than its core detergent business. His resulting broad view of P&G's potential likely laid the foundation for the series of acquisitions that have substantially expanded P&G's business' reach.

Groom potential inside-outsiders. Hand them increasingly complex assignments that ready them to manage a whole business as early as possible. If you're a one-business company, identify distinct units--such as geographical regions with markedly different competitive conditions--that promising inside-outsiders can run.

Mentor. Assign senior managers to oversee inside-outsiders' development. These mentors help protégés extract lessons from each assignment, such as learning how to ratchet up growth while still delivering current performance. Mentors also ensure that there are adequate (but not excessive) resources for protégés to turn new ideas into great businesses.

How You Can Become an Inside-Outsider

Pick the right employer. Look for companies that will provide a clear career path, mentoring, challenging assignments with enough time to learn from them, early general management responsibility, and chances to try out new ideas.

Prove yourself on the job. Meet your numbers, help your peers, and develop your direct reports. When bringing problems to your boss, also suggest solutions. Cultivate a group of senior-manager friends who back your ideas with resources.

Broaden your view. Network with people outside your division and company, including customers, vendors, related organizations, and union leaders. Expand your general knowledge beyond your immediate business through seminars and out-of-mainstream experiences.

Solicit unvarnished truths. The higher you rise in your organization, the more people will tell you only what they think you want to hear. So cultivate a relationship with someone--spouse, close friend, mentor--who tells you the truths you don't want to hear.

Copyright 2007 Harvard Business School Publishing Corporation. All rights reserved.

Further Reading


Changing Leaders: The Board's Role in CEO Succession

Harvard Business Review

May 1999

by Jay W. Lorsch and Rakesh Khurana

A company's board of directors can play an active role in cultivating inside-outsider candidates for the CEO role. How? Establish a management-development program focusing on the top three managerial tiers. Through this program, track candidates' assignments, identify their development needs, and define career paths preparing them for higher responsibility. Four years before the current CEO's expected departure, review and challenge his or her plans for the process throughout that period, with the goal of developing several strong candidates--not just the one the current chief favors. And get to know the candidates: Ask them to make presentations at board meetings and assess how they relate to peers.

Ending the CEO Succession Crisis

Harvard Business Review

February 2005

by Ram Charan

Long-term leadership development is essential to cultivating inside-outsider CEO candidates. To bolster your firm's development program, spot promising candidates early, then nurture them with the right on-the-job experiences. Move candidates through positions requiring responsibility for steadily larger, more complex P&L centers. If your company's not configured to provide such opportunities, create jobs--large projects, small internal organizations--that exercise a candidate's P&L muscle. One large company identified the head of its smallest division as the next CEO. Though brilliant and articulate, he had no experience running big businesses. The board created a deputy position in its largest division for him and made the current division head his coach--granting the coach a bonus based on his protégé's success.

How Leaders Create and Use Networks

Harvard Business Review

January 2007

by Herminia Ibarra and Mark Hunter

Leaders who aspire to a CEO position need varied networks. Ibarra and Hunter detail three main types: Operational networking is geared toward cultivating stronger relationships with colleagues who will help you get tasks done. Personal networking engages kindred spirits from outside an organization in an individual's efforts to learn and find opportunities for personal advancement. Perhaps most important for the inside-outside leader is strategic networking to develop relationships with people who can help uncover and capitalize on new opportunities for the company. When choosing an employer, look for companies that teach strategic networking skills as part of their leadership development programs.

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