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The Rise of the Outsider Executive

New research finds that fewer and fewer top executives came up from within their company's ranks.
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Recent research from the Wharton School shows that less than a third of high-level executives at the biggest companies in the United States start their careers at the company they wind up leading.

The Wharton report focused on Fortune 100 companies. These behemoths represent a tiny portion of the overall economy, and their resources far exceed those of small and mid-sized businesses. Nevertheless, the data points to an interesting trend in the way management teams are now assembled.

Looking For Outside Help

The report, which culls data from 1980 to 2011, shows that executives increasingly have been brought in from the outside over the last quarter century. In 1980, more than 50 percent of executives at Fortune 100 firms had worked their way up to the C-suite from their company's lower levels. In 2001, 45 percent of top executives were homegrown; 10 years after that, the figure plunged to less than 33 percent.

The researchers acknowledge the role the recession may have played in the dip between 2001 and 2011. Some companies felt they might be best served by outsiders' perspectives after the economy went bad. Still, the big dip during that period does not fully account for the increase in the rate of outsider executives dating back to 1980.

Takeaways For Small Businesses

If you are growing your own executive team and are wondering if you should hire from the inside or the outside, you might take note of the following articles:

  • A recent report, also from Wharton, suggests ways to find top value in bringing on executives. Among the tips: You'll get more bang for your buck with an internal promotion.
  • Leaders at growing midmarket companies recount the strategies they used when building their own executive teams. Whether to look inside or outside, they say, depends on the situation; different stages of growth call for different perspectives.
  • A study from NEOMA Business School shows that the benefit to hiring someone with previous experience as a CEO may be negligible.
IMAGE: Getty Images
Last updated: Feb 18, 2014




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