Look internally for CEO to put you in pole position
25 July 2012
A study of the performance of Formula 1 teams could have important implications for recruiters. That is the view of Amanda Goodall, a senior research associate at the IZA Institute for the Study of Labour, Bonn and also the Cass Business School, London.
Wed, 25 Jul 2012
A study of the performance of Formula 1 teams could have important implications for recruiters. That is the view of Amanda Goodall, a senior research associate at the IZA Institute for the Study of Labour, Bonn and also the Cass Business School, London.
Goodall found that found that over a period of six decades the best Formula 1 leaders were likely to have started their careers as drivers or mechanics, and developed an in-depth knowledge and understanding of the industry.Goodall sums up why leaders recruited internally, or within a particular industry make strong leaders. “They understand the culture, the environment, and the way to work effectively in an organisation,” she says, adding the proviso “they must excel in their field.”
Goodall points to global consulting firm Booz and Company’s recent ‘CEO Succession Study 2011: The New CEO's First Year’ as further evidence.
This found that companies with an insider CEO outperformed their respective stock market by 4.4% between 2009 and 2011, compared with just 0.5% for companies with an outsider CEO. The study also found that internal hires stayed longer.
She says that one practical application of her research is for recruiters to put themselves in the shoes of those whose boss they are recruiting. For example, in relation to staff working in HR, “how would it feel to have a boss who doesn’t know about HR?”
Goodall doesn’t accept that hiring leaders internally leads to uniformity of thinking and lack of new ideas. “You want people who can think outside the box but this doesn’t necessarily mean coming from a different profession,” she says.
Widening diversity on boards has become a huge issue in recent years, with women’s representation at senior executive levels in particular continuing to stimulate vigorous debate.
Goodall adds that one of the problems with leadership appointments is an obsession with personalities. This could be one reason why, according to the Booz and Company study, outsiders accounted for 22% of all CEO appointments across the globe in 2011, up from 14% in 2007, she says. Also contributing to the problem is that boards responsible for leadership appointments are themselves are “often not made up of specialists.”
Goodall says there are occasions when it may be better to bring in leaders from outside. One example is where an organisation needs to draw a line under past leadership failures. She says the possible appointment of former cabinet secretary Baron Gus O’Donnell, who has emerged as the frontrunner for the chairmanship of Barclays is a case in point.
Where leaders are appointed from outside a particular industry, such as banking, Goodall suggests they should “recognise what they don’t know” and surround themselves with people who understand the business.
A study of the performance of Formula 1 teams could have important implications for recruiters. That is the view of Amanda Goodall, a senior research associate at the IZA Institute for the Study of Labour, Bonn and also the Cass Business School, London.
Goodall found that found that over a period of six decades the best Formula 1 leaders were likely to have started their careers as drivers or mechanics, and developed an in-depth knowledge and understanding of the industry.Goodall sums up why leaders recruited internally, or within a particular industry make strong leaders. “They understand the culture, the environment, and the way to work effectively in an organisation,” she says, adding the proviso “they must excel in their field.”
Goodall points to global consulting firm Booz and Company’s recent ‘CEO Succession Study 2011: The New CEO's First Year’ as further evidence.
This found that companies with an insider CEO outperformed their respective stock market by 4.4% between 2009 and 2011, compared with just 0.5% for companies with an outsider CEO. The study also found that internal hires stayed longer.
She says that one practical application of her research is for recruiters to put themselves in the shoes of those whose boss they are recruiting. For example, in relation to staff working in HR, “how would it feel to have a boss who doesn’t know about HR?”
Goodall doesn’t accept that hiring leaders internally leads to uniformity of thinking and lack of new ideas. “You want people who can think outside the box but this doesn’t necessarily mean coming from a different profession,” she says.
Widening diversity on boards has become a huge issue in recent years, with women’s representation at senior executive levels in particular continuing to stimulate vigorous debate.
Goodall adds that one of the problems with leadership appointments is an obsession with personalities. This could be one reason why, according to the Booz and Company study, outsiders accounted for 22% of all CEO appointments across the globe in 2011, up from 14% in 2007, she says. Also contributing to the problem is that boards responsible for leadership appointments are themselves are “often not made up of specialists.”
Goodall says there are occasions when it may be better to bring in leaders from outside. One example is where an organisation needs to draw a line under past leadership failures. She says the possible appointment of former cabinet secretary Baron Gus O’Donnell, who has emerged as the frontrunner for the chairmanship of Barclays is a case in point.
Where leaders are appointed from outside a particular industry, such as banking, Goodall suggests they should “recognise what they don’t know” and surround themselves with people who understand the business.
