Should You Hire An Outside CEO?

Is hiring an outside CEO a bad idea?

PATRICK CESCAU is settling into his new job as the head of Unilever having taken over from Niall Fitzgerald. The transition was smooth: when Mr Fitzgerald took the post he said he would hold it for eight years, and his eight years are up. In February, he said Mr Cescau, a 30-year veteran of the Anglo-Dutch multinational and then head of its foods division, would be the next chairman, and from April Mr Cescau shadowed Mr Fitzgerald on the job. In another well-planned move, Mr Fitzgerald is not hanging around to watch over the new man's shoulder. On October 1st he became non-executive chairman of Reuters, the news organisation, a role he is combining with a clutch of other appointments outside Unilever.

These careful steps are a sharp contrast to the uncertainty over succession at many other companies. This week, after the sudden withdrawal from the market because of health fears of its painkiller Vioxx, it emerged that Merck had begun looking for an outsider as a possible replacement for its chief executive, Raymond Gilmartin, who is due to retire in 2006. While an internal candidate might yet be appointed, the widening of the competition for the top job adds a new level of unpredictability to the future of the American drugmaker.

The company I used to work for back when I had a real job hired an outside CEO a little over a year ago. I remember thinking that was a bad sign because it meant they weren't developing leadership internally. It just so happens that Mrs. Businesspundit was taking a leadership class for her MBA at that time, and I went one night. I was talking to the professor afterwards and I brought up the CEO succession issue. He just smiled. He had consulted with that company and told them they were doing a poor job of developing leadership. So they fired him. Now you can see why I couldn't stay there. It just wasn't a good place for an iconoclast.

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