The Right Way to Let Outsiders In
Associations endlessly debate whether industry or management experts are better leaders. But either way, knowing the organization’s culture is crucial.
As unresolvable conflicts go, “We need a leader with industry experience” vs. “We need a leader with strategic management skills” is almost as enduring as that squabble over the chicken and the egg.
The insider, the argument goes, brings a close understanding of the organization, knows the internal nuances, and possesses an institutional memory. The outsider, the counterargument goes, brings a fresh set of eyes, understands management at a higher level, and is willing to take more risks. But Noel Tichy is certain you don’t want the latter.
Tichy, a business professor at the University of Michigan, recently cautioned against overly romanticizing outsider executives: In a Washington Post article, he pointed to former Hewlett-Packard CEO and current Republican presidential candidate Carly Fiorina as just one example of why hiring outsiders is bad news. Indeed, he writes, “every outsider selection—no matter how much it’s portrayed as a coup in the press or pumped up by executive recruiters—is in reality the archetype of failure.”
Harsh. But there’s a reasonable point behind it: Any company that goes hunting far afield for a leader, Tichy writes, has likely to some degree neglected its duty to think about succession planning. They’ve failed to build “a leadership pipeline that produces ready leaders at all levels of the organization,” he writes.
We talk a lot around here about how associations neglect succession planning as well. But that doesn’t mean that outsider executives ought to be dismissed wholesale, especially in the association world. A 2012 study by Association Laboratory recommended outside CEOs for “associations who have faced mismanagement or other administrative challenges.” And last year, in a story about the association insider vs. management outsider debate (members-only), David M. Patt, CAE, of Association Executive Management, stumped for the outsiders: “Getting up to speed on the industry is far less important than knowing how to manage the association—in fact, it’s better if the CEO is not an industry expert,” he says. “Don’t worry about conquering the learning curve. Let the members or the board determine what issues are important.”
But the risk with outsiderdom is just as strong with associations as it is in corporations, I think, and the reason for that has to do with Tichy’s central example. Fiorina’s ill-fated tenure at Hewlett-Packard (she was forced to resign under pressure in 2005, after six years as CEO) was in many ways an outsize business failure—her signature accomplishment was a merger with rival computer maker Compaq that bloated the company. But in many ways her larger failure was cultural. Layoffs are stressful at any company, but at H-P the ones she presided over were a violation of the company’s previous commitment to avoid layoffs at all costs. The anger and distrust among the remaining employees was more than just fear—it was concern that the mission of the company that employed them had been abandoned.
Tichy points to some research that suggests that insider executives are better at fixes than Fiorina-like outsiders: After three years, the former tend to be more beneficial to the bottom line than the latter. The difference, writes Rice University business professor Yan Anthea Zhang, is that “outside CEOs are not deeply rooted in the company and typically lack a good understanding of its core competencies and major weaknesses. When it comes to strategic change, they typically are good at doing rapid cost-cutting and divestment.”
That suggests that perhaps the way to look at this is less in terms of “inside” versus “outside” than in terms of flexibility—that outsiders need a better arsenal of tools. That shouldn’t be difficult: After all, it’s not rocket science for an outsider to grasp an organization’s business and culture. Indeed, doing so might make the hard decisions a bit more thought-through and feel less ruthless. Part of the benefit of being an outsider is that you can make high-level decisions, sure. But those decisions are best made as the result of a deeper understanding of who you’re working for, and how much risk-taking they want out of that risk-taking outsider in charge.
What benefits to insiders or outsiders bring to your organization? Share your experiences in the comments.