CEO, ex-Accountant or ex-Sales

Company or corporation needs a CEO. CEO is the head to drive the company. Chief Operating Officer is important because he/she will plan and move the business forward. According to the new research, hiring a CEO from outside the company works better than appoint the internal employee to become CEO.

That’s what a new study by Vell Executive Search found. The study looked at 51 CEOs and their companies’ revenue growth, focusing on publicly owned technology outfits based in New England with $100 million or more in annual revenues.

Hiring a New CEO?

According to the research, externally hired CEOs at companies with over $1 billion in revenue brought in a median three-year revenue growth of 99%; their internally promoted counterparts achieved only 35% growth. Founders, which were concentrated in smaller companies, outperformed both of these groups.

Dora Vell, managing partner at the firm, says founders generally know their product, industry and customer better than anyone. But why would an outside CEO do better than an inside one? Vell says it comes down to the hiring process.

Some CEOs avoid surrounding themselves with strong top-tier executives, Vell says, because they don’t want internal competition. This can make for a weak pool of homegrown candidates, and the result can be the wrong person in the job, especially if the company is trying to please long-term directors.

Also, the chance that an internal hire will be willing to break with existing strategy or set truly new goals seems lower, so the company will have more difficulty adapting to changing market conditions. This seems particularly evident in technology businesses.

Another finding: The best CEO is an experienced CEO–in most cases. Vell correlated CEOs’ performances with their backgrounds (strategy, consulting, engineering and so on); with all backgrounds but one experience trumped inexperience. CEOs with prior CEO experience did better. No surprise. What faltered? Finance.

Younger or Older CEO?

The survey also found that younger CEOs returned better results than older ones, though again that might be more true in tech than elsewhere. CEOs who had been on the job seven or more years did worse than ones who had served three to six. That too may reflect the peculiarities of tech.

Criteria to Choose?

CEOs with no experience in finance running companies with revenues between $100 million and $1 billion oversaw median three-year revenue growth of 91%. CEOs who had been in finance returned just 43%. That may reflect the times we’re in. Fast financial moves just don’t work these days, and CEOs with a number-crunching past are probably more likely to have focused on money than on the underlying business. “You can’t save your way to profits,” Vell says.

Will you hire an accountant to drive your company forward?

*History and fact tells us that CEO from the sales background tend to perform better. They know how to make money and how to generate more income for the company. They are the one who were the front liner for the company.