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(originally published by Booz & Company)


Why Your Next CEO Should Come from Inside

But to be great leaders, executives need to go beyond diagnosing what’s wrong. These leaders have to really understand what’s feasible given the people that they have. They will be called upon to initiate change and manage risk by pushing and stretching their people, but not breaking them, not fomenting a revolution, and not leading people to do things that are destructive. It’s fascinating to watch a significant organizational change unfold. From the outside, the process looks like revolution. But the leaders themselves move cautiously, trying hard not to lose their organization’s trust. Later, looking back, they often conclude that they were too cautious — that they could have been bolder still. When our students [at Harvard Business School] asked Jack Welch what his biggest mistake was at GE, his response was, “I didn’t move fast enough.” And yet at the time, most observers felt he moved at breathtaking speed.

Part of these leaders’ effectiveness comes from being mentored well. Often, when you’re young, you don’t know how to challenge the status quo. You just get everybody angry. You’re regarded as a Cassandra or not a team player. Building Insider Outsiders requires an enormous investment of money, time, and patience — especially of the incumbent CEO. Mentors need to recognize when a young executive has an unusual, objective perspective, and should encourage and nurture this quality over time through a carefully chosen sequence of assignments that builds and tests a wide range of capabilities.

S+B: In your book, you talk about the need for “creative abrasion,” and you also say that one key criterion is competitiveness. How do you strike a balance between competition and teamwork?
I think part of it is asking, competitive against whom? With whom? I didn’t become an effective leader until I learned to stop competing with my peers. Some managers have to learn that their job is to compete with external competitors, and that the way you do that best is to help your peers succeed. I think one of the reasons athletes from team sports do relatively well in business is that they’ve learned that. They know that you don’t get to lead without knowing how to work with others. The other day I was listening to the [New England] Patriots players interviewed after they beat the [Indianapolis] Colts. They all sounded like coach Bill Belichick. “Oh, it’s a great team.” Not one of them took personal credit.

Leaders need to manage the planning and budgeting processes so that these become opportunities for rising executives to learn how to review and develop strategy. These are also occasions to look at new businesses that help executives see it’s possible to think differently. Sometimes that requires bringing in diverse kinds of people. We have a wonderful case on a woman at IBM who was given the job of building the company’s network technologies business. She took it to $3 billion in two years. She was a very different kind of person from what IBM was used to, although she was an insider. But they were clever enough to give her that responsibility and to mentor her well, and she learned a lot in the process. And so did the company.

The employee in this case assembled a team of people just like her to grow the business quickly. Yet later she had to bring in exactly the sort of person that she had left out, but who knew how to manage complex processes. And she talks about learning how effective it was — how problems suddenly disappeared because the new person brought order where there was unnecessary chaos.

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  1. Joseph L. Bower, The CEO Within: How Inside Outsiders Are the Key to Succession Planning (Harvard Business School Press, 2007): New research on the challenge of finding the next chief executive. Click here.
  2. Chuck Lucier, Steven Wheeler, and Rolf Habbel, “The Era of the Inclusive Leader,” s+b, Summer 2007: Annual CEO succession study reveals the average time frame a leader has for change: seven years. Click here.
  3. Steven Wheeler, Walter McFarland, Art Kleiner, “A Blueprint for Strategic Leadership,” s+b, Winter 2007: How to build an organization in which executives will flourish. Click here.
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