Magazine article Management Today

Outsiders Inside Track to the Top

Magazine article Management Today

Outsiders Inside Track to the Top

Article excerpt

Chief executives throughout the land should have started to worry when Roger Leverton left Pilkington. Though a well-versed, right-minded and good manager, Leverton, the board decided, had moved the company forward too slowly. At Sears, too, Liam Strong lost his struggle for success. At United Utilities, Brian Staples bit the dust. What's going on?

Pressure for performance is being felt as never before - witness how swiftly institutional investors rounded on BT's Sir Peter Bonfield, some even demanding his head over the MCI merger hiccoughs. Life at the top is no easier in MCI's own country. Three Apple CEOs in four years have walked the plank. AT&T hired John Walter as heir apparent, only to pull the rug from under his feet.

If the firing mechanism is in good order, the hiring one evidently isn't. The better the latter, obviously, the fewer we see of the former. Yet boards can be wantonly careless about this most conspicuous appointment. Several giants, among them Coca-Cola and Gillette, have 65-year-old-plus CEOs soldiering on indefinitely for lack of suitable internal successors. And when hiring from outside, AT&T discovered a little too late that Walter lacked 'intellectual leadership'.

At Pearson, new girl Marjorie Scardino has tempted fortune by vowing to double the share price in five years after raising profits at least 10% annually. Scardino's arrival is one answer to a basic hiring question: for best results, do you appoint an insider or an outsider? Scardino, having successfully run a Pearson subsidiary, can claim to couple the outsider's critical eye with the insider's understanding. Certainly, one sovereign advantage of splitting corporations into autonomous divisions is that individual business bosses can come under much closer and more testing examination than the best of head-hunters can supply. But well-managed companies should know their inside talent thoroughly, anyway.

In theory, the board dutifully sees that enough of such talent is developed. In practice, though, outsiders are on the march: nearly a third of the US top 1,000 companies are run by imports, against 9% three decades ago. Even those companies that are doing well are looking outside for help. Xerox's appointment of Richard Thoman, IBM's chief financial officer, is one example. And two years ago, Wait Disney, appointed Michael Ovitz, the top Hollywood agent to the position of president.

Importing boards presumably hope that outsiders will bring a different, stronger direction of energy. An internal crisis that causes abrupt replacement certainly gives outsiders carte blanche to sweep away bad managers, poor practices, loss-making businesses, superfluous assets and people - and all the other legacies of corporate ineptitude. …

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