“A large company’s need to bring a new chief executive from the outside is a damning sign of something basically wrong with existing management.” - Philip A. Fischer -
The argument for internal promotions is straightforward: personnel within a business are intimately familiar with the firm. They comprehend the industry, context, and environment - all of which are critical skills for a CEO to have. Internal succession candidates are also acknowledged to be well-suited to the company. They have built ties with other members of the senior leadership team and are presumably aware of, if not actively participating in, the company's strategic direction. Internal candidates provide a feeling of continuity and stability, which may be important to some firms when choosing a CEO.
There are further advantages to selecting internal succession candidates. It may be motivating for a person and other members of the company to know they are being considered for the top position. Seeing an employee climb through the ranks might inspire other employees to strengthen their talents and chart their own career path. Outside of the firm, research has indicated that when internal candidates are elevated to CEO, the stock market performs well[i]. When contemplating a company's and its workers' long-term performance, the motivational and economical components of internal promotion cannot be disregarded.
There are other compelling reasons to select an outside candidate. The conventional wisdom is that hiring a CEO from another firm or industry may provide a fresh perspective, experience, and creativity to a management team. Because of their outside-of-the-company experience, they may enhance procedures and processes. A new pair of eyes may sometimes detect challenges or potential answers that a team of the finest brains may have missed.
External CEOs are regarded not just for their ability to provide fresh ideas, but also for their standing as an outsider. Their absence of established ties to personnel and traditions allows them to shake things up and launch new ideas more easily. They are also considered as more eager to experiment with new strategic directions. Finally, their absence of personal links with staff or departments allows them to make difficult decisions regarding spending and personnel.