Published: March 10, 2016
Companies are changing the way they look to hire chief executive officers. Of the major companies in the Standard & Poor’s 500, a majority of new CEOs are coming from within the company. This is a new shift from previous years when companies looked to hire leaders from outside the company. This old style was to bring a new perspective to the company while bringing in a name that might help to boost the stock price.
One reason that companies are starting to move toward the in-house CEOs is because these CEOs can often be much more driven by the success of the company. Many of these new CEOs have a great pride in the company and they want to see the company succeed the most. These CEOs also tend to have a much better grasp of the current operations. This gives them a much better understanding of what areas of the company could use improvement. However, on the other hand, CEOs that are new to the company could bring very helpful insight on how to better change other areas of operations.
In 2004, Spencer Stuart started tracking CEO transitions. This past year had the highest number of transitions from in-house positions to CEO positions at about 80 percent. This is almost a 20 percent rise from 2012.
Most of this rise can be attributed to companies increasing the succession planning for CEOs. Also, boards of directors are looking to increase the variety of work experience the CEO candidates have. This includes working in multiple departments and even working around the country. One example of this is Ford’s new CEO, Mark Fields. He has worked with the company for nearly the past 30 years. In that time he has worked on four different continents while working for the auto industry mammoth.
Although there has been in a rise in in-house CEO hires, it will always come down to each company’s situation. When Target went to hire its first outside CEO, they looked for someone different from the normal CEOs that had been hired. After only a few short months, Brian Cornell’s performance caused Target’s stock price to rise by over $20 from $58 to $80.
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