When a new CEO arrives at a company, its management methods, approach to organisation and culture can change. However there is certainty that everything works in the best possible way and above all there is no mathematical formula which automatically connects a new CEO to a forward leap in corporate performance. Even if, as is customary in academic literature and expected by many firms, it is easy to think that the arrival of a new CEO, coming from different firms, is what makes the difference.
Ayse Karaevli and Edward J. Zajac (from the Otto Beisheim School of Management in Vallendar in Germany and the Northwestern University, Kellogg School of Management in Evanston, USA respectively), think that the magic that can be sparked between a new CEO and corporate results is not that obvious – on the contrary. They explain that the implicit or explicit assumption that outsider CEOs will give an advantage in achieving strategic change in companies is not always that true. It takes much more than a new CEO to change the fortunes of a firm.
In order to demonstrate that reality can be different from the theory of many boards of directors, the two researchers, in their When do Outsider CEOs Generate Strategic Change? The Enabling Role of Corporate Stability which has just been published in the Journal of Management Studies, have studied the changes which took place between 1972 and 2010 in a US airline and a chemicals company with a series of different CEOs.
The idea put to the test is that the arrival of an outsider CEO, albeit with many years’ experience, can do little when faced with a firm without organisation, without corporate spirit and without a certain continuity of management.
The results of the research appear to confirm this theory. The actual conditions which the CEO should succeed in modifying constitute according to the two authors the basis for change.
When do Outsider CEOs Generate Strategic Change? The Enabling Role of Corporate Stability
Ayse Karaevli and Edward J. Zajac
Journal of Management Studies, June 2013.