Companies looking for the best possible leaders—and leaders looking to become CEOs—would do well to heed the model of private-equity (PE) backed companies, which often look outside their ranks when hiring for the top job and see excellent results.
Three-quarters of new CEOs at PE-owned companies are external hires, and roughly two-thirds are “complete outsiders,” finds a recent working paper by Paul Gompers, the Eugene Holman Professor of Business Administration at Harvard Business School. In contrast, one recent analysis found that 72 percent of S&P 500 companies drew new CEOs from within their own ranks.
[This article was provided with permission from Harvard Business School Working Knowledge.]