The Art of Assembling Leadership Teams: Internal vs. External Hires

Twitter, a global leader in social media, has weathered a particularly tumultuous year. First, there was its headline-grabbing acquisition by SpaceX and Tesla mogul Elon Musk, followed by its dramatic restructuring, and topped with the appointment of Linda Yaccarino as its new CEO. Now, as the dust settles, a monumental task lies ahead for Yaccarino: to stabilize the social media giant and reignite its growth. 

As any seasoned executive will attest, such a feat requires the efforts of a formidable team. 

An indicator of Yaccarino’s strategy can be found in how she assembles this team. Early appointments, such as Joe Benarroch, a seasoned executive from NBCUniversal, pose a critical question: Will Yaccarino rely primarily on external hires, or will she balance these with internal promotions? 

This decision is crucial, as it shapes the character of the executive team and influences the challenges its members will likely encounter, both internally and externally.

The Delicate Balance of Internal vs. External Hiring

Internal hires carry an undeniable advantage in terms of familiarity and continuity. These individuals are already well-versed in the company’s culture, operations, and nuances. They offer a clear track record and can hit the ground running. 

Promoting internal candidates often sends a positive ripple across the organization, indicating that the company values its employees and offers significant opportunities for career growth.

Laurent Freixe, CEO for Latin America at Nestlé, vouches for internal hiring: 

The question of insiders and outsiders hinges a lot on the capacity of the organization to develop strong leaders. If the organization is capable of doing that, then I would always give the opportunity to an internal candidate. It sends out a signal of a meritocracy. You give the impression that talent can grow in the organization, which creates more retention, more interest. You also know the people that come from within much better.

But this practice isn’t without its pitfalls. 

When an organization is ready for a complete makeover, internal candidates might not be the right fit. Internal promotions could also risk creating a leadership vacuum due to limited options. Plus, relying heavily on internal promotions could end up turning the organization into an echo chamber bereft of fresh ideas. 

As Greg Poux-Guillaume, CEO of AkzoNobel, warns, “If you only promote from within, you end up with a shallow leadership gene pool. Diversity matters in all its forms, including diversity of professional experience. You need a mix of internal and external hires to get that.”

External hires, in contrast, can inject fresh viewpoints and signal a period of change and rejuvenation. They allow organizations to tap into expertise honed in diverse organizations and industries. 

Still, these benefits aren’t without challenges. Evaluating the competencies and cultural fit of external candidates is intrinsically complex. Once these candidates are hired, they usually require a longer adjustment period to understand the company’s nuances and build their networks within the organization.

Christophe Catoir, president of the Adecco business unit within the Swiss-based Adecco Group, shares a word of caution: 

For one of our leadership team positions, we hired an external candidate. This came with the challenge of learning to understand the company, our culture….The person we recruited was highly experienced and didn’t want to underdeliver but wanted to act immediately—without investing time in understanding what makes us tick. The relationship was, unfortunately, not successful.

Furthermore, an excessive emphasis on external hiring might send an unintended message to the existing workforce that internal growth is limited. In this case, Jonathan Lewis, CEO of Capita, points out that if the external hire is tangibly more experienced and competent, most people will “respect that decision because it gives the business a higher probability of success, and the individuals concerned recognize that there’s a rich learning opportunity for them.”

Which Hiring Ratio Is Most Effective? 

In this complex tapestry of pros and cons, the balance between internal and external hires is vital. CEOs like Juhani Hintikka of WithSecure grappled with this dilemma. “I ended up hiring members of my previous team,” Hintikka explained, noting that it made him open to criticism. “On the other hand,” he added, “you can start from day one.”

The “golden ratio” of internal to external hires depends on the company’s situation. In startups, executives have the liberty to build new teams from scratch, valuing can-do attitudes and adaptability. As the startup evolves, the original team may not fit anymore, so a founder may turn to external hires for their expertise.

For leaders assigned to further develop a successful organization, the emphasis is usually on internal hiring, augmenting existing talent, and occasionally stirring the waters with external hires for long-term sustainability.

The transformation of an underperforming organization, on the other hand, typically requires bold changes with a higher share of external hires. As Jan Jenisch, CEO of Holcim, explains, “If a company is not successful for a long time period, you lose a generation of managers…. In this situation, you have to hire from outside…and accept a higher risk of failure.”

In extreme cases, a complete leadership revamp might be needed. A CEO from a major U.S.-based services business, who requested anonymity, shared that he had to source 100% of his top leadership team externally over a three-year period in order to turn the company around.

Looking Forward: Assembling the Future

The decisions made by leaders like Linda Yaccarino regarding team composition carry immense weight and set the course for their organization’s future. The balance between internal and external hiring extends beyond merely filling vacancies; it’s about constructing a leadership blueprint, influencing the organization’s culture, and defining the company’s future direction. 

As Twitter embarks on this new chapter under Yaccarino’s leadership, the world will be watching how she assembles her team. Her choices will not only decide Twitter’s corporate trajectory but also significantly influence the broader discourse on leadership team assembly in the digital age.

Written by Marianna Zangrillo.
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