Don’t forget the inside candidates
When companies need a new leader, why do they so often call in the City headhunters and search for external candidates instead of promoting from inside? Is it because the internal applicants’ faults are known while the unknown outsiders offer hope?
If succession planning was working, companies would have at least one insider lined up who can take over if the chief executive falls off his yacht, is forced to walk the plank or jumps ship to a rival. Yet for all the lip-service to succession planning, many companies shun the existing management to recruit from outside.
Marks & Spencer recently lined up the internal candidates to replace Sir Stuart Rose as CEO and paraded them in front of press and investors – then raided the rival Wm Morrison to pinch its boss. Now WM Morrison is searching for a new chief executive, but it too is looking outside the supermarkets group for new blood rather than the successors it should have trained itself.
There is nothing wrong with nominations committees looking at the talent outside to compare it with the internal candidates, of course, but there seems a bias towards then choosing the outsider.
Maybe committees think they are being clever in keeping the internal team and adding a new player so getting the best of both worlds; maybe they realise that if they promote the deputy they must then search for someone to fill the junior role, so doubling their work. But the likelihood is that if they block the deputies’ promotion hopes they will have to replace not only the COE but the number-two positions too. Will those M&S executives who were so publicly rejected for the top spot hang around?
There is also the possibility that boards, having branded someone as a deputy and watched him or her perform that bag-carrying role, are blind to seeing the individual as a leader. And it is true that the chairman and his team know every fault and flaw of the internal candidates but know almost nothing about the people lined up by the headhunters and prefer the external candidates in the optimistic hope that they will bring positive qualities rather than negative.
Internal candidates bring continuity however – and usually come cheaper. They are not always best, but sometimes it seems they are not always considered at all.
