Succeeding at Succession

The authors conducted a study of 300 CEO transitions at corporations, and found that hiring a successor externally is not necessarily better or worse than hiring internally. What matters is the health of the organization at the time of hiring. Healthy organizations typically do better with internal hires who are likely to already be high performers. Organizations needing radical change do better with an outside hire who bring a fresh perspective and have license to make change. Moreover, candidates who were hired from the organization’s board outperform all others because they have inside knowledge paired with outside expertise. Thus, the authors advise that having a potential CEO successor on the board of the organization first is an invaluable way to prepare them for the CEO role. Contrary to popular belief, the study found that those who are hired externally into interim senior management roles to observe the incumbent CEO and then quickly promoted to CEO are the least successful because their reporting line to the CEO starts them off in a less influential position. Though the study was conducted using corporations, the conclusions have proven to be valuable to nonprofits planning for or tackling leadership succession. In particular, the board has served as an important leadership pipeline for many nonprofits.

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