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Industry insiders winning the CEO race

Filed under: Recruitment General — Stephanie on July 28, 2012

A study on how Formula 1 teams have performed could result in significant implications for recruitment firms. That is the opinion of IZA Institute for the Study of Labour senior research analyst, Amanda Goodall. She also holds the post at London’s Cass Business School.
The research shows leaders have tended to have experience. Consequently, any potential leaders in their chosen industry, such as technology, would be wise to get their feet seeking cyber security jobs or other relevant vacancies, and soaking in as much industry information as they can.

Goodall found that during a 60-year period, the best leaders in Formula 1 probably began their careers as mechanics or drivers, and acquired an understanding and in-depth knowledge of their industry.

Goodall summarised the reason for leaders opting to recruit internally, or make for strong leaders within a certain industry. She told Recruiter:

“They understand the culture, the environment, and the way to work effectively in an organisation.”

Goodall cited the recent ‘CEO Succession Study 2011: The New CEO’s First Year’ by Booz and company, the international consulting firm, as more evidence.

It saw that businesses with an insider CEO performed better than their respective stock market by 4.4 per cent from 2009 to 2011, compared to 0.5 per cent for businesses with an outsider CEO. The research also showed that employees hired internally have a longer duration with the company.

In cases where leaders have been hired from outside of the industry, Goodall says that they should “recognise what they don’t know” and get to know people who have an understanding of the business.

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