Internal vs. External CEO's: What's the Right answer?

In a story today in the Globe and Mail, a study by the executive recruiting firm Spencer Stuart indicates that CEO's who are external hires tend to boost the market value of the company....in the first three years.

I wrote about the three-year CEO cycle on my blog last August "The Three-Year CEO Cycle...for Better or Worse". Basically I gave a compelling (at least I think so) indication that when corporations bring in outside CEO's and they stay for three years or less...then yes...the shares go up....and because of the PR spin...it seems like the corporation is doing well...Yet, time and time again, when these external CEO's stay for more than three years..the "Hawthorne effect" wears off and many corporations have seen that gutting the soul of the corporation has consequences.

When I see this kind of study, I first question the motivation. Spencer Stuart is an executive recruiting firm and as such has a vested interest in corporations hiring externally. This is not to say that their study is false in anyway...I am just pointing out a potential conflict of interest.

Secondarily, when you look at a three year cycle...it is like looking at what is to be a long term investment...say for retirement...and judging your investment solely on the last three years. If you look at mutual funds and the like...you can be misled by considering only the short term returns. A five to ten year retrospective gives you a lot more insight.

So I personally don't think that three years as a CEO enables anyone to state that external is better than internal. Personally I believe it is the quality of the leadership and that can come from within or externally.

I hope that corporations and shareholders won't be looking at this study and say, "well maybe we should consider an external hire" the first step should be to outline what the leadership qualities are and what short and long term outcomes are desired.

I am all for change and I don't think there is a good or bad approach....unless the only focus is short term shareholder value...I've seen the devastation caused by this and it is not pretty.

Kijiji and how buying and selling keep morphing...

I am moving in a couple of months and have gone to the internet to sell my excess goods. What a difference from when I moved five years ago and the real only choices you had were garage sale, charity, put a posting on a board (which for me would have been akin to putting your phone number on a bathroom wall) or just giving it away for free.

Mostly 5 years ago I did the latter and we all know that if you put things into a garage sale...well, if it has a value over $5 don't expect to sell it for anymore.

But on Kijiji and Craigslist, within a couple of weeks I have sold quite a lot of things...not anywhere near what they are worth (and don't we always think our things are worth more) but certainly I have sold many things for basically what I was asking for them....and I continue to do so. I find this process so much better than eBay, because on eBay, you pay a percentage to eBay and then you have to incorporate shipping costs -- in fact with the likes of Kijiji and Craigslist, I would suspect eBay will have its own comeuppance soon.

It made me begin to wonder about how there should be a Kijiji for corporations. Not only would it be fiscally responsible, it would also be environmentally a sound approach.

Just think about it...instead of buying all new stuff, all the time...you can scan for items at a significantly reduced cost and you just go get it. In fact, the first step would just to be able to do this within the boundaries of a corporation and then expand between corporations.

I think this could truly revolutionize how business is done...result in a more collaborative approach between entities, reduce costs and save the planet...all with one simple process.

Yes, of course there is always a downside....if "new" stuff isn't bought, then it isn't made, which results in lost jobs...but I think the upside trounces the downside.

Maybe it should be called COjiji or some such for corporations...anyway...I'm off to sell more of my personal stuff on Kijiji...but think about your organization and how much you could benefit from such an approach!