In their Harvard Business Review article "How Insider CEOs
Succeed," Michael Watkins and Witt Kieffer President and CEO, Andrew Chastain, write that while one might think an internally-promoted CEO would "have an easier time adjusting to and excelling in the job than external hires would" the reality is that "chief executives who have advanced from within face hurdles that are comparable in magnitude, albeit different in character, from those that externally hired leaders confront."
Citing the findings of a 2018 PwC study of CEO turnover at 2,500 of the world's largest companies in which 83% of successions involved internally promoted CEOs, the authors note how paradoxically it is the externally hired CEOs who get more attention. The rationale being that "Internal executives are known commodities, theoretically carrying less risk."
Among the challenges faced by incumbent CEOs are the five excerpted below:
Operating in the shadow of their past.
One assumed advantage internally promoted CEOs have is that they are a known entity. However, the fact that they come with established track records, relationships, and leadership and operating styles means they have to overcome perceived biases.
Making tough calls that disappoint supporters.
Once in office, promotees quickly realize that they will have to make decisions and trade-offs that displease some of the people who helped them advance.
Leading former peers and being less accessible to former reports.
In nearly all cases CEOs who rose from within have to lead people who were formerly their equals (and on rare occasions, their superiors).
Establishing the right pace of change.
CEOs appointed from within often have a long list of things they want to do now that they (finally!) are in charge... These leaders want to attack issues and plant a flag early in their tenure. This can lead to what the authors call "change fatigue."
Managing the departure of the outgoing CEO.
When the previous chief executive is leaving on good terms, as often happens when an insider replaces him or her, there are benefits: The transition can be carefully planned and executed with no discontinuity or confusion. But any transfer of power presents challenges, especially if there is overlap between the outgoing and incoming leaders. (See “The Successor’s Dilemma,” HBR, November–December 1999.)
The authors conclude that, "The success of internal CEO transitions cannot be taken for granted. The sooner a newly promoted chief executive appreciates the challenges involved—and, with organizational support, develops a plan to overcome them—the sooner he or she can get on with the business of leading."
Follow this link to read the full article which appeared in the March/April 2020 print edition of Harvard Business Review.