Appointing Home Grown Leaders to the Top Posts versus Bringing in Leaders from Outside

One of the thorny issues facing senior management in many organizations is the debate over grooming leaders from within and then appointing them to the top posts versus brining in leaders from outside and then making them the CEO. The debate is not confined to a particular country and occupies the energies of corporate leaders worldwide. This is because many organizations prefer that they have people at the helm who have come up the ranks as opposed to having outsiders take to the top slot. The issue is contentious because appointing outsiders to the top slot evokes antipathy from those who have been overlooked and hence can lead to unnecessary tensions and lack of cooperation.

The way out for many boards of corporations is to conduct a search process wherein they consider both the homegrown talent as well as outsiders and decide purely based on merit and nothing else.

However, this is easier said than done since appointing homegrown talent has its advantages. First, these leaders know the organizational intricacies like the back of their hand and hence can be expected to bring familiarity and a sense of purpose to managing the organization given their knowledge of the bureaucracy and contacts. The point here is that since homegrown talent already knows the ropes of the organizational ladders, they are able to translate this advantage into actionable results. Further, they also have allegiance to power centers within the organizations and hence, this gives them an edge over outsiders, as they are able to navigate the treacherous waters of the organizational politics. However, this can also turn into a disadvantage as they would be beholden to certain power centers and hence would biased towards them and this leads to exacerbation of existing divisions.

On the other hand, bringing in outsiders makes sense when the organization is in crisis and needs a fresh perspective. The CEO drawn from the wider corporate world can start afresh without any leftover baggage and can ensure that he or she brings a new set of lens with which the organization can determine its vision. This is the case that works best when corporates are floundering because of intra organizational rivalries and hence bringing in outsiders would be a good idea to rejuvenate the organization. However, this is also easier said than done since there is a possibility of all factions ganging up on the new CEO and denying him or her chance to rebuild the organization.

The best possible course would be to have leaders groomed before the person at the top retires and hence, ensure that these leaders step into the shoes of the retiring leader. However, as the case of the Infosys leadership transition (we shall discuss this in detail in a subsequent article) proves, grooming leaders from within can also spark a boardroom war. Ultimately, the solution to this tricky issue needs to be found by recourse to a mixture of firmness and astuteness and there are no easy answers to the question as to whether homegrown leaders make the best choice or outsiders are the preferred alternative.