Change the Leader or Change the Leader?

Shadow of Leader

“I’ve got enough change management.  What I’m looking for is change leadership!” ~a frustrated CEO.

One of the most frequent questions I am asked by Board Chairmen is “when is the right time to change the CEO?”  Usually this is not just an idle question of intellectual curiosity, but comes with a back story that often has the Board troubled.

Changing the CEO is one of the most important and far-reaching decisions facing the Board and is never a straight forward decision (unless for fraud or inappropriate personal behaviour) and some interesting new data has recently been published by McKinsey & Co. that provides useful insights.

In a recent study of 600 CEOs leading S&P 500 companies between 2004-2014, McKinsey looked at the success of leaders from the outside vs inside appointees, plus whether or not they were recruited into successful or failing companies. While there is no actual causal data, the insights drawn by McKinsey tend to shed some interesting insight on leadership and change.

While it is not surprising that when recruited into failing companies, CEOs from the outside outperformed internal promotions and not only made more changes in organization structure, strategy and senior team composition, but also made those change more quickly. The hypothesis about the poorer performance of internal promotions has to do with legacy thinking, imbedded political ties, and lack of perspective. Being inside an organization for too long creates a natural myopia and change inertia.

We don’t know who discovered water, but you can be certain it wasn’t fish!

Change the Leader or Change the Leader?

Before jumping to the conclusion that the best approach is to hire an outsider, let’s consider what might be really going on.  It’s not that outsiders are “better leaders” or any smarter than insider candidates, but they do bring one important edge, fresh thinking and an “outsider’s mindset”.

But what about the value of internal candidates and appointees? Of critical importance with an inside candidate is their knowledge of the customer, culture and organization. It often takes months if not years for an outsider to fully understand the strengths and weaknesses of company culture and to understand customers at a deeper level.  And we all know that you can shift strategy and even restructure, but unless the culture is brought into alignment with these new changes, progress can be slow at best.

SSC

There are numerous ways to help internal CEO candidates broaden their perspective and develop an outsider’s mindset.  One is external coaching by a former CEO or business leader who has been through one or more such transitions.  Another is one of the excellent AMP (Advanced Management Programs) residence courses run by Stanford, Harvard, MIT and other centers of executive education.  Another is an external assignment with an NGO or International Development organization in a developing country. A great way to break the shackles of insider inertia and build courage and new thinking. A less radical approach is the YPO (Young President’s Organization) where senior business leaders meet regularly and share challenges and solutions in a confidential and direct manner.

Before you automatically go outside for your next CEO, I suggest you explore the internal option along with some good leadership development. The one with insider’s knowledge but an external mindset may be your best bet.

Organizations are shadows of their leaders . . . that’s the good news and the bad news!

Written and Posted by: John R. Childress

Senior Executive Advisor on Leadership, Culture and Strategy Execution Issues,
Business Author and Advisor to CEOs
Visiting Professor, IE Business School, Madrid

Website: www.johnrchildress.com

e: john@johnrchildress.com
Twitter @bizjrchildress

Read John’s blog,

On Amazon: LEVERAGE: The CEO’s Guide to Corporate Culture

Read  The Economist review of LEVERAGE
Also on Amazon:   FASTBREAK: The CEO’s Guide to Strategy Execution

John also writes thriller novels!

 

 

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
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