We're always hearing how promoting from within is better than hiring executives from outside. A recent BNET post suggests that the long-term health of a business should be measured by "whether or not it has produced and developed homegrown talent," adding "Any fool can buy talent; only real leaders develop it."
While it's indeed important to build a "solid bench" for succession planning, the truth is that, depending on the company and its situation, it can be just as important to bring in outsiders as it is to develop homegrown talent.
Look, people aren't "born" at a company; they all have to come from somewhere. And suggesting that companies are better off when every or even most executives "grow up" there is not only silly, it's simply untrue. As with all things in business, there is no one-size-fits-all answer; it depends on the needs of the company at any given time. And more often than not, it's not a question of either-or, but a question of balance.
Some companies that are famous for promoting from within - IBM, Caterpillar, and 3M, for example - have all brought in outsiders when they needed to:
- After realizing that its "home-grown mentality" was hurting the company, Caterpillar began bringing in executive outsiders from Ford, TRW, Honeywell, and Harley-Davidson, according to a Wall Street Journal story.
- 3M has hired outsiders for its last two CEOs.
- And we all know that bringing in former RJR Nabisco and American Express executive Lou Gerstner saved IBM.
- Cisco's chairman and CEO John Chambers joined the company as Senior VP of worldwide sales and operations after 14 years at Wang and IBM. I'd say that was a pretty good outside hire.
- Before joining Apple, COO and heir apparent Tim Cook was a vice president with Compaq and, before that, he spent 12 years at IBM. Ironic, considering Apple's ancient feud with Big Blue.
- And Google CEO Eric Schmidt hails from Bell Labs, Zilog, Xerox, Sun, and Novell.
As for the reason why that's the case, it mostly comes down to this. There are indeed advantages for promoting from within, i.e. knowing the company and how it operates, growing up with the company culture, etc. But those same advantages can also be liabilities, since myopia and lack of perspective is probably the number one reason why executives and companies fail.
Bottom line: Boards and CEOs should promote from within, hire from outside, or do both. They should do whatever they need to do to ensure the company has the talent and experience it needs at that point in its evolution. There simply is no broad argument for choosing one way over another. So give it a rest.
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