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Picking a CEO: Microsoft, others go with insiders

February 5, 2014 • Business


FILE – In this Tuesday, Nov. 19, 2013, file photo, Microsoft CEO Steve Ballmer speaks at the company’s annual shareholders meeting, in Bellevue, Wash. Microsoft announced Tuesday, Feb. 4, 2014, that Satya Nadella will replace Steve Ballmer as its new CEO. Nadella will become only the third leader in the software giant’s 38-year history, after founder Bill Gates and Ballmer. Board member John Thompson will serve as Microsoft’s new chairman. (AP Photo/Elaine Thompson, File)

NEW YORK (AP) — Companies looking for a leader face a big question: Pluck a CEO from the rank-and-file or a fresh face from outside the organization?

Microsoft decided to take the former path. The software giant on Tuesday tapped 22-year company veteran Satya Nadella for the top job.

The appointment suggests the company isn’t looking for a radical change in the way it operates. It’s a move companies including Coke and Chevron have made to fill their corner offices. Others such as Procter & Gamble even make a habit of grooming CEOs from within.

While outsiders may bring a fresh perspective, they also come with more risk. Meanwhile, homebred insiders can bring many other benefits to the CEO suite, such as extensive knowledge of the company’s structure and culture.

That’s a big reason why about two-thirds of CEOs have traditionally been hired from within, says Sydney Finkelstein, a professor of strategy and leadership at the Tuck School of Business at Dartmouth and author of “Why Smart Executives Fail.”

“There’s always more risk when you go outside,” says Bob Damon, executive chairman of the Americas for Korn Ferry, an executive search firm.

Still, corporate history is dotted with examples of companies who have gone with outsiders, with varying results. Some companies even try one route, and then go back the other way when that fails.

And with so many industries from technology to retail undergoing Login to read more

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