Inside vs. Outside CEO’s: Booz&Co Perspective!

Back in December 2009, I blogged about the ‘CEO’s from Within’. In that article, I expressed my opinion on the viability of having a CEO from the inside, from within the senior leadership of organizations to reach the helm and be the next-CEO. I still believe in this opinion. Nonetheless, It’s fair to mention that It came as a surprise to me the Booz&Co article on ‘Why Outsiders are better in Turnarounds’ which briefly discusses the psychological impacts of recruiting insiders as CEO, especially when it comes to handle turnarounds and big decisions. The paper was published by The Journal of Experimental Social Psychology, and authored by Brian C. Gunia (Northwestern University), Niro Sivanathan (London Business School), and Adam D. Galinsky (Northwestern University) on November 2009.

What surprised me, though I did not have full access to the research, is the psychological connection as with the Birthday. The study refers to four experiments. One of them was about giving higher raise to an under-performer because of the psychological link with the decision maker who recruited him at the first place.

Well, I am not confident that the study negates the ability of insiders or Inside-CEO to tackle turnarounds, and case of Jack Welch, who spend 20 yrs at GE before assuming leadership for another 20 years is quite inadmissible and supports such argument.

Anyway, such study and earlier researches by Jim Collins and several others mandate further investigation and research on the subject matter.

CEOs from Within

During the journey of reading one of the best ever published business books; bestseller of its type; Good To Great by Jim Collins [and subsequently How the Mighty Fall by Jim Collins also], I had received Harvard Business Review report on the “The 100 Best-Performing CEO’s in the World”. Well, not so much amazing! isn’t it! Actually it does surprise me to unveil a wonderful conincidence between the list and Collins’ findings.

It’s the CEO’s from within or what Collins referred to as ‘Inside CEO’, i.e. CEOs that climbed the helm of their organizations from within; they were either VP’s, senior executives or middle managers; invested quite big portion of their lives in the same organization. Collins concluded in his research in the ‘Good To Great’ that:

“Ten of eleven good-to-great CEOs came from inside the company, whereas the comparison companies tried outside CEOs six times more often”. Amazingly is the negative correlation Collins concluded: “Larger-than-life, celebrity leaders who ride in from the outside are negatively correlated with taking a company from good to great”!!

From the HBR list [the free preview], I could notice that at least 80% of those successful, best performing CEO’s did actually came from within, from the inside. They generated over three trillions of market capital change over their tenure as CEOs; i.e. around 10 years; assuming HBR analysis period from 1997 to 2007.

In Collins Good to Great, he contrasted over 26 companies’ performance over 15 years to understand how a great company can progress towards greatness. He proposed a simple module of six fundamentals articulated about disciplined people, thought and action:

Level 5 Leadership
First Who… Then What
Confront the Brutal Facts
The Hedgehog Concept
A Culture of Descipline
Technology Accelerators
Though my intention is not to blog about Collins Good to Great outcomes, nevertheless, it is inevitable to see outcoming results from reputable organizations as HBR to exhibit findings that support Collins research. This undoubtedly emphasizes on the values and implicit meanings the six fundamentals intrinsically have to promote sustainable performance and does encourage every single CEO to ask the following:

Why my name does not show there! what’s missing?

… engaging in a disciplined thought with disciplined people will trigger disciplined actions.

Cheers!

Mouaz Aref Al-Zayyat