September 11, 2008
The Ups and Downs of Going Outside for Talent
In a recent interview with Ad Age, Paul Polman, the newly appointed CEO of Unilever, said that companies typically bring in a top executive from outside the organization for one of two reasons. “Either it’s because the company is in dire straits and there’s nobody in the company who knows what to do… or the company feels [so] comfortable about its strategy and the strength of its management team that it can support a new CEO coming in.”
Bringing executives in from the outside has become increasingly common in an era when lifetime employment with a single business is a rarity. Making the move can be a challenge and sometimes a problem for both the new hire and her/his employer.
A recent article on the Knowledge@Wharton (K@W) website looked at some of the “unexpected problems” that outsiders can bring.
“Human resources managers will want to [hire] people who worked in a related industry or firm for the skills they bring. That makes sense from a human capital perspective, but we question whether that’s all they bring with them. Do they bring other experiences … positive or negative?” asked Wharton management professor Nancy Rothbard, who co-authored a paper, Unpacking Prior Experience: How Career History Affects Job Performance, with Gina Dokko of New York University’s Stern School of Business and Steffanie L. Wilk of Ohio State’s Fisher College of Business.
According to the authors, “Habits, routines, and scripts that contribute to performance in one organizational context may detract from performance in a different organizational context. That is, the relationship between prior related experience and performance may not be wholly positive. Indeed, despite the common assumption that prior related experience will improve performance, past research findings have been mixed about the effect of work experience on performance.”
Prof. Rothbard said companies make the mistake of believing that by hiring people with experience from another company they can save on training. “You really need to think carefully about your training and socialization to mitigate the negative effects of the trouble people have transferring the way they think about how the job is done.”
For many coming into a new company from the outside, it is not as much about training in processes but culture, according to Prof. Rothbard.
“I know it seems odd that if you hire someone with experience to then say, ‘Here’s your mentor.’ But maybe they need a mentor for the values of the company, not so much the skills needed for the job.”
Discussion Questions: What is your experience seeing experienced executives coming into a new company from another in a related business? What are the factors that need to be considered when evaluating and deciding to hire talent from the outside? How can management determine if a potential executive hire is a good cultural fit?
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Absorbing the culture of a company is the key move that an outsider needs to make, in order to be successful in a new environment. At the same time, a company culture most be open and adaptive to new ideas and best practices. No matter how much a newcomer tries to respect and absorb “the way we do things here,” he or she is less likely to succeed if the homegrown talent fails to recognize the need for some new blood. And, at the same time, new hires going to work at successful companies (rather than failing ones) need to respect the skill set and culture that put those companies on the map in the first place.
A lot depends on the type of position being hired for. A CEO from the outside will usually bring in all his friends to work under him so there will be a ton of turnover. This takes longer for lower level workers to get used to since the entire culture is being changed.
When bringing in a VP here or there, the new employee is expected to conform with the existing culture. They can usually fake it and get by.
There is no easy answer to this question. For sure, you need someone who is flexible and can adapt to a new environment, both at work at at home. Definitely, you never want to hire a “jerk,” even if he is a rainmaker. Otherwise you end up losing too many lower level employees. For the most part, its a crap shoot because people’s judgment is involved when hiring. We can only improve the odds of a successful hire but we are a far cry from a guarantee.
Company culture is one thing and varnish another. There are many folks and special-interest firms muddling-up this issue.
The purpose of a business, and thus the driving force of its corporate culture, is to develop a universal focus on making a fair profit under ever-changing conditions; to sustain growth; inspire associates by giving them assurances that let them know that they are fairly treated (versus pawns to kingly-enriched CEOs et al) and are part of the firm’s cultural fiber. That requires honorable, capable, dynamic leadership from the top.
When that condition exits in an already successful company, promote from within. If it doesn’t, accept that internal varnish and hope aren’t good cover ups. Go outside and seek out a person who can shake up the cultural bushes, lead with integrity and transparency, and would to build the desired company culture.
I always refer to the Crate & Barrel example when it comes to this question. Crate hires execs for their home office from their stores ONLY. The results have obviously been stellar, year after year as the brand continues to thrive.
Although the true answer is “it depends,” my guess would be that if you looked at success from within (like Crate) or success rate from outside, the dominant tilt would to the insider. Nothing beats inside knowledge of how to operate within the very hairball you’ve lived in…unless of course, you just want to blow it up, sell it and get a bigger job, then all bets are off.
Essential is a strong, focused, disciplined and entrepreneurial CEO. Add a HR leader on the same page to ensure both recruitment and training are positioned to support the CEO’s plan. Complete with an executive cadre equally aligned to ensure any “new hire” remains “on the reservation.”
In the end, hold any and all accountable.
I’ve seen qualified insiders and outsides both excel and fail; in the end retail ain’t for sissies.
In the case of Bob Nardelli at Home Depot, it was a mistake. At my most recent trip to Home Depot, I found that the floors had been sealed to reduce dust and six people asked me if I was finding everything alright. That’s night and day from a month ago…of course, I was one of 5 people in the store and we know how hard it is to get people back in the store once you’ve lost them. The Lowe’s that opened up across the street has had friendly employees from day one.
Jim Sinegal has stuck to his guns and proved that loyalty and promoting from within are traits that inspire loyalty and good word of mouth from your customers = good business. Wall Street lives for the quarter and doesn’t subscribe to the philosophy that experience and loyalty create value in an organization. A higher end demographic that values stability is their core customer and they have more discretionary income as well.
Gerald Storch seems to be a breath of fresh air at Toys “R” Us and has the benefit of not having to conform to Wall Street’s short-sighted pressure and expectations. It will be interesting to see how these companies fair over the next five years.
The beneifts can be numerous including that the person can bring in knowledge and a different way at looking at problems. The challenge can be getting them to merge cultures. We try to grow people internally and are very specific and careful about recruiting senior people in.
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Absorbing the culture of a company is the key move that an outsider needs to make, in order to be successful in a new environment. At the same time, a company culture most be open and adaptive to new ideas and best practices. No matter how much a newcomer tries to respect and absorb “the way we do things here,” he or she is less likely to succeed if the homegrown talent fails to recognize the need for some new blood. And, at the same time, new hires going to work at successful companies (rather than failing ones) need to respect the skill set and culture that put those companies on the map in the first place.
A lot depends on the type of position being hired for. A CEO from the outside will usually bring in all his friends to work under him so there will be a ton of turnover. This takes longer for lower level workers to get used to since the entire culture is being changed.
When bringing in a VP here or there, the new employee is expected to conform with the existing culture. They can usually fake it and get by.
There is no easy answer to this question. For sure, you need someone who is flexible and can adapt to a new environment, both at work at at home. Definitely, you never want to hire a “jerk,” even if he is a rainmaker. Otherwise you end up losing too many lower level employees. For the most part, its a crap shoot because people’s judgment is involved when hiring. We can only improve the odds of a successful hire but we are a far cry from a guarantee.
Company culture is one thing and varnish another. There are many folks and special-interest firms muddling-up this issue.
The purpose of a business, and thus the driving force of its corporate culture, is to develop a universal focus on making a fair profit under ever-changing conditions; to sustain growth; inspire associates by giving them assurances that let them know that they are fairly treated (versus pawns to kingly-enriched CEOs et al) and are part of the firm’s cultural fiber. That requires honorable, capable, dynamic leadership from the top.
When that condition exits in an already successful company, promote from within. If it doesn’t, accept that internal varnish and hope aren’t good cover ups. Go outside and seek out a person who can shake up the cultural bushes, lead with integrity and transparency, and would to build the desired company culture.
I always refer to the Crate & Barrel example when it comes to this question. Crate hires execs for their home office from their stores ONLY. The results have obviously been stellar, year after year as the brand continues to thrive.
Although the true answer is “it depends,” my guess would be that if you looked at success from within (like Crate) or success rate from outside, the dominant tilt would to the insider. Nothing beats inside knowledge of how to operate within the very hairball you’ve lived in…unless of course, you just want to blow it up, sell it and get a bigger job, then all bets are off.
Essential is a strong, focused, disciplined and entrepreneurial CEO. Add a HR leader on the same page to ensure both recruitment and training are positioned to support the CEO’s plan. Complete with an executive cadre equally aligned to ensure any “new hire” remains “on the reservation.”
In the end, hold any and all accountable.
I’ve seen qualified insiders and outsides both excel and fail; in the end retail ain’t for sissies.
In the case of Bob Nardelli at Home Depot, it was a mistake. At my most recent trip to Home Depot, I found that the floors had been sealed to reduce dust and six people asked me if I was finding everything alright. That’s night and day from a month ago…of course, I was one of 5 people in the store and we know how hard it is to get people back in the store once you’ve lost them. The Lowe’s that opened up across the street has had friendly employees from day one.
Jim Sinegal has stuck to his guns and proved that loyalty and promoting from within are traits that inspire loyalty and good word of mouth from your customers = good business. Wall Street lives for the quarter and doesn’t subscribe to the philosophy that experience and loyalty create value in an organization. A higher end demographic that values stability is their core customer and they have more discretionary income as well.
Gerald Storch seems to be a breath of fresh air at Toys “R” Us and has the benefit of not having to conform to Wall Street’s short-sighted pressure and expectations. It will be interesting to see how these companies fair over the next five years.
The beneifts can be numerous including that the person can bring in knowledge and a different way at looking at problems. The challenge can be getting them to merge cultures. We try to grow people internally and are very specific and careful about recruiting senior people in.