The boards of most company’s invest a great deal of time and money in executive searches and assessments prior to appointing a C-level employee. Boards will typically review the performance records of current company employees while concurrently looking at outside prospects. However, many times little attention is paid to whether executives who have actual CEO experience are directing the search. This is an important point as only someone who has experience in a C-level position will have the knowledge to know what to look for in potential candidates.
As an example, in Microsoft’s search for a successor to Steve Balmer, who began running the company in 2000, two well-known, respected and experienced CEOs, Steve J. Luczo, of Seagate, and John Thompson, formerly of Symantec, took point on the search committee, showing the world’s largest software company understands that it probably takes one to know one. In conducting the search both Luczo and Thompson will have two main options in choosing a candidate, looking inside the company or expanding the search to outside prospects. This article, written by Michael Useem, Ram Charan and Dennis Carey provides more detail on the Microsoft situation.
1) Staying Internal
When looking at internal prospects Luczo and Thompson will consider several current and former Microsoft upper-level managers. However, when considering internal candidates the main issue is Microsoft’s long-term strategy and whether Microsoft should continue on its current path or reinvent itself. Typically, insiders are prone to gravitate towards the former as they will have been responsible for implementing the outgoing CEO’s strategies.
2) Looking Outside
When looking at candidates outside the company there are two options:
A) Search for a tech-savvy manager possessing a proven track record who is capable of running the company for the next decade or two. This clears the way for a larger change of direction, but it comes at the cost of any passed-over internal talent heading out the door, and this is exactly what happened when Boeing hired James McNerney from 3M and lost Alan Mulally to Ford, who then took Ford Motors to new heights.
B) Search outside the company for an experienced CEO with the ability to further develop Microsoft’s best talent, with the understanding the new CEO would step aside in a few years, when an internal prospect becomes ready to step into the position. This adds the advantage of being able to hold off on coronating an internal exec that may just not be quite ready to take the reins, while still retaining top prospects and permitting strategic redirection.