In Jim Collins’ best selling management book Good to Great, he demonstrates through massive research and comprehensive analysis that when it comes to CEO succession, internal candidates dramatically outperform external candidates. The core reason is knowledge. As I discussed in Why We Prefer Founding CEOs, knowledge of technology, prior decisions, culture, personnel, et al tend to be far more difficult to acquire than the skills required to manage a larger organization. Collins does not, however, comprehensively explain why internal candidates fail. I will attempt to do so here.
In my post How Andreessen Horowitz Evaluates CEOs, I explored two core skills for running an organization: 1. Knowing what to do and 2. Getting the company to do what you know. While being a great CEO requires both skills, most CEOs tend to be more comfortable with one or the other. I call managers who are happier setting the direction of the company Ones and those who more enjoy making the company perform at the highest level Twos.
Ones like spending most of their time gathering information from a broad variety of sources from employees to customers to competitors. Ones love making decisions. Although, they prefer to have comprehensive information when they make a decision, they comfortably make decisions with very little information when necessary. Ones have great strategic minds and enjoy nothing more than a good game of 8 dimensional chess against their best competitors.