Many new CEOs expected to be 'external hires': Experts

Quest for innovative ideas in a highly competitive environment is pushing a large number of Indian firms to look beyond their organisations, and even the sector, while recruiting chief executives.

According to a study by executive search firm MANCER Consulting, as much as 30% of the new CEOs this year are expected to be 'external hires' as companies seek candidates who have a global approach, along with proven capabilities and experience, which may not be available in their internal talent pool.

Presently, external hirings for the top job have been mostly observed among the young sectors such as e-commerce, automobiles, technology and aviation, while the trend has also emerged with growth of small and medium enterprises and entry of foreign corporates, experts said.

However, mature industries such as Banking and Financial sector firms as well as manufacturing entities have not often gone outside the industry to recruit their leaders.

Experts are of the view that companies have a greater tendency to hire externally when they face some crisis or there is a need for change.

"There has been a noticeable trend towards hiring CEOs from outside the firm... This also mirrors the trend observed in the US where in 2012 more than a quarter of S&P 500 firms needing a CEO were hiring from outside as compared to less than 10% in the 1970's," GlobalNxt University School of Business Dean Jason Fitzsimmons said.

"...External hires may be more likely to be able to steer a course of change as compared to an internal candidate who may be tied to the firms existing culture and strategy," he added.

Citing similar sentiments, HR services firm Randstad India CEO Moorthy K Uppaluri said that "young sectors that are on growth trajectory over the last two decades look at outside succession as they need fresh thinking into the organisation and develop the culture, processes and systems".

"Also, large and medium sized entrepreneur driven organisations tend to hire professional CEOs in their quest to build the company in the context of the local and global opportunities," he added.

Giving multiple reasons for companies to look externally, MeritTrac CEO Vasu K Saksena said: "We have a large number of younger industries and larger number of new companies in mature industries which have grown and reached a stage from where they are looking to transform".

"This transformation demands newer ideas, exposure to different practices and cultures and ability to manage larger and diverse teams," Saksena added.

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