Maximas:: The prevailing theory of the relationship between corporate performance and the origin of a new CEO is that external successors will be appointed following poor performance and internal successors following good performance. An external successor is believed to be a more appropriate choice following poor corporate performance because such an individual is often thought to possess new ideas and skills that could help turn the firm around (Brady & Helmich, 1984; OToole, 1984; Vancil, 1987).
More appropriate choice following good corporate performance
Since external successors are not entrenched in the organization’s past, they are viewed as more likely than internal appointments to change the organization’s strategy (Carlson, 1962; Grusky, 1983; Helmich, 1974; Lewin & Wolf, 1974; Pfeffer & Salancik, 1978). For instance, some analysts advocated an outside successor at Westinghouse to “breathe life into the company, breaking up its clubby culture” (Baker, 1993, p. 26). Conversely, it has been argued that an internal successor is a more appropriate choice following good corporate performance.
The metamorphic model of inertia and reorientation (Tushman & Romanelli, 1985) proposes that inertial forces tend to insulate such executives from environmental changes; that is, internal forces for stability in the organization preclude executives from carefully attending to environmental change.
Furthermore, when performance is good, continuity and stability are often cited as appropriate strategies. Internal successors, being most knowledgeable of the internal policies and practices that contributed to the firm’s success, would be in the best position to perpetuate the status quo (Brady & Helmich, 1984).
Brady, G.F., & Helmich, D.L. (1984). Executive succession. Englewood Cliffs, NJ: Prentice-Hall.
Carlson, R. (1962). Executive succession and organizational change. Danville, IL: Interstate Printers and Publishers.
Baker, S. (1993). The king is dead. Long live the king. Business Week, May 10,26.
Tushman, M.L., & Romanelli, E. (1985). Organizational evolution: A metamorphic model of inertia and reorientation. In B.M. Staw & L.L. Cummings (Eds.), Research in Organizational Behavior (vol. 7). Greenwich, CT: JAI Press.