Succession Planning and Leadership Development Are the Antidote to the Outsider CEO Problem

When executives retire or move on to new challenges organizations may look to the outside to find their replacements. Those left behind may have good reason to do so, but more often they’re just reacting to a departure they didn’t see coming — and didn’t have a plan in place to handle as a smooth transition. This puts the organization at risk in a variety of ways, and can have dire results, as University of Michigan Ross School of Business professor Noel Tichy explained in a Washington Post commentary earlier this year.

So Why Pick an Outsider CEO?

Organizations pick outside leaders over internal candidates for all sorts of reasons. For example, the board or leadership team may be looking to make big changes and want to bring in someone who can push for them. This person might be a known change agent who has a history of overhauling operations, or it might be an axe-man who is brought in to make hard decisions and cuts.In other cases, the board sees an heir apparent in the wings, but doesn’t support that person, for whatever reason. This can happen if the board or leadership team isn’t involved in creating the succession plan, or at a family-owned business where complicated relationships make it hard to take action.Finally, a simple lack of planning may have left the organization without an obvious choice of someone who can step up and take the reins. Board members may feel they don’t have time to get someone ready to take over and need to fill it as quickly as possible.

Outsider CEOs Provide a Quick Fix — With a Side of Problems

Bringing in an outside leader can fill an organization’s corner office quickly, but often causes more problems than it solves. Any time an outsider takes a leadership role, other company leaders may have to deal with:

• A long learning curve. Even the most nimble of change agents is going to take some time to learn a new culture, business, leadership team and employee base. It can take six months for a new leader to feel comfortable taking action that’s consistent with the organization’s values and operations.

• Conflict and controversy. It’s human nature to be a little distrustful of outsiders, and employees may feel uncertain during the transition. If a new leader is brought in without any explanation as to why she’s the right person for the job, employees may resist her authority.

• Flagging morale. Some employees may have gotten the impression that they were being groomed to move up. Bringing in an outsider can demoralize an entire team, as the expected leader’s authority is undermined and the rest of the team loses faith in the company.

• A disregard for internal knowledge. Employees may wonder why outsiders are “better” than internal candidates, and may assume that those who come up in the organization simply don’t know enough or aren’t properly prepared. They may even discount their own expertise, leading to a drop in quality, service or productivity.

Succession Planning Can Eliminate the Rush

As you can see, bringing in an outsider — especially in an urgent situation — can cause more problems than it solves. A good succession plan can mitigate these risks and potential hassles. While succession planning takes time and effort, it outweighs the disruption of bringing in an outsider in a time of transition.The advantages of succession planning include:

• Building a deep bench of employees with internal knowledge and experience who can step into positions when the time is right.

• Creating career paths and development plans for high-potential employees who hope to build a career at your organization. Knowing they’re moving up in the organization can keep these talented employees engaged with the organization and decrease the likelihood you’ll lose them to another company.

• Minimizing the risks present during any leadership transition, whether it’s at the top of the company or the head of a department.

Look at your leaders — the ones you can’t afford to lose — and ask yourself what might happen if any one of them quits tomorrow. What’s your next step? Do you bring someone in, or do you have a plan in place?Need more information on succession planning? Read our white paper:Success Labs is a leadership development and management consulting firm in Baton Rouge, Louisiana. For more than 25 years, our expert team of consultants has worked with hundreds of companies to explore their business potential and improve their company and cultural performance. Contact us to get proactive about your people strategy.