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?