When it is time to select a new CEO, many companies will have a suitable insider that can become their new leader. In some companies, however, bringing in an outsider as CEO may be viewed as the best way to move the business forward.
Often, when an outsider is brought in as CEO, the company is looking for someone who can bring about change. On the other hand, an insider may be named the new CEO when a company is more or less on the right track and does not seem to need an outsider to bring about major shifts in direction.
This is illustrated by some recent examples, both in the retail sector. Not long ago, Wal-Mart announced that an insider would be taking over as the new CEO. Kohl’s, on the other hand, is bringing in an outsider to lead the company.
Both Wal-Mart and Kohl’s currently face the conditions brought about by today’s somewhat challenging economic situation. Neither of these two companies serve predominantly upscale markets. So, both are likely to face challenges as many consumers in their typical markets are straggling economically and, thus, may be unable to spend like they used to. Consequently, both companies need to adapt to the realities of current economic conditions.
Wal-Mart has taken steps to attract somewhat higher income customers. Thia shift at Wal-Mart seems to entail making more gradual evolutionary changes, so these changes have the potential to work well. Thus, since Wal-Mart may already be on the right track, naming an insider as the new CEO seems appropriate. In contrast, Kohl’s has been struggling with the aftermath of rather ill-suited changes made previously. So, Kohl’s may need more of a change in direction, which is when companies can be more likely to bring in an outsider as CEO.
Nonetheless, it is important to remember that success comes from making the right changes. Insider CEOs may be more likely to make changes that fit the company because they may have a better grasp of how the company works, what its strengths are, and what the company is actually capable of doing. Of course, they must be careful to avoid the trap of trying to change everything, believing that, after all, what is being done now is not working. Making too many changes, or changes that are too major, can ultimately become a disaster. An outsider brought in as a change agent CEO can easily end up making changes that do not fit the company. Yet, an outsider may be helpful if insiders are too resistant to change or are unable to see what changes may be beneficial.
So, in conclusion, whether the new CEO is from inside or outside, success comes from making changes that are right for the company. Ill-fitting changes can be a disaster.
