Balancing internal and external CEOs
One critical decision in CEO succession planning revolves around choosing between internal and external CEOs. Each option has its advantages and disadvantages. Internal CEOs bring in-depth knowledge of the company, aligning with its culture and history, which can lead to quicker impacts and cost efficiency. However, they may face resistance to change and have limited external networks, while they are unlikely to have been in the top job before.
External CEOs, on the other hand, offer fresh perspectives and broader networks. When Alain Jope, the CEO of Unilever, unveiled his plans to retire in 2023, it prompted a call from investors for an external candidate to take the reins of the global consumer giant.
Jope, a seasoned 35-year veteran within the company, delivered a mixed performance. Analysts noted that the organization had grown less agile and somewhat introspective. Consequently, the board appointed Hein Schumacher, the leader of a Dutch dairy cooperative, to succeed Jope as CEO, spearheading a review of its extensive portfolio of brands that includes Ben & Jerry’s ice cream and Hellmann’s mayonnaise.
Yet, external hires like Schumacher may face a longer learning curve, challenges in fitting into the company’s culture, recruitment costs, and potential disruption. The choice between internal and external CEOs depends on the specific needs and goals of the organization.
Many companies opt for a dual-track succession planning process to maintain a balance between internal and external options, involving a rigorous evaluation process spanning 18 to 24 months and assessing both internal and external candidates with the assistance of executive search firms.