• The Dangers of Hiring an Outsider

    The Economist 's Schumpeter blogger expects Nokia to replace its CEO soon. And reports are that Nokia is seeking an outsider to take over for CEO Olli-Pekka Kallasvuo , who has been in charge for the Finnish giant's steady decline in stock value since 2006. Is that a bad idea? From the Schumpeter blog: One of the few things that management theorists agree on is that recruiting bosses from outside is something that you should avoid if you can. Listen to über-guru Jim Collins: in “Good to Great”, he observed that more than 90% of the CEOs of his sample of highly successful companies were recruited internally. Or consult Rakesh Khurana of Harvard Business School: in “Searching for a Corporate Saviour”, he described how companies that invest their hopes in a charismatic outsider are usually disappointed. Or read the painstaking studies that come out of the Academy of Management: they show that even companies that are having a hard time are better off sticking with an insider. The curse of the alien boss is particularly potent in the high-tech sector: think of John Sculley’s disastrous reign at Apple or Carly Fiorina at Hewlett-Packard. Nokia is especially likely to prove allergic to a foreign CEO. For a start, the firm is headquartered in a country that is dark for half the year. That will surely limit its ability to attract the best and brightest. (The rumour mill suggests that one prominent American has already rejected the job because he or she does not want to live in Finland.) To make matters trickier, Finns deem Nokia a national treasure: it accounts for about a fifth of the value of their stock exchange and a huge share of their exports. A foreign CEO would be under intense scrutiny from day one. Read The curse of the alien boss here .

  • An Argument to Resist the Shining Star

    It is very tempting to want to pry a star performer from a competitor, but Michael J. Mauboussin argues, at Harvard Business Review , that can be a foolish approach: [T]here is a tendency to prize a few standout individuals while ignoring how much they draw on their surrounding systems for support. For instance, many companies, sports teams, and entertainment businesses hire a star when they want to quickly improve the organization’s results. More often than not, however, newly transplanted stars fail to deliver, because they’re separated from the people, structures, and norms that helped make them great in the first place. In one study, professors from Harvard Business School tracked more than 1,000 acclaimed equity analysts over a decade and monitored how their performance changed when they switched firms. The dour conclusion of the research: “When a company hires a star, the star’s performance plunges, there is a sharp decline in the functioning of the group or team the person works with, and the company’s market value falls.” Read When Individuals Don’t Matter here . (H/t Henry Abbott )