CEO Appointment Linked To CEO Performance Theses Examples

Published: 2021-06-18 07:03:32
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Category: Management, Education, Business, Business, Company, Performance, Study, Difference, Ceos

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Introduction It has been our objective, in the previous research and surveys we conducted, to find out if there is a significant difference between the performance of an externally recruited CEO and an internally appointed one. A CEO or Chief Executive Officer of a company plays a very significant role in the success of the organization and, therefore, it is key to assess and discover which formula would work best for a company. Studies had been initiated to determine which will be the better choice between an internally appointed CEO who has grown within the company and expected to be very familiar and knowledgeable with the company’s portfolio and, on the other hand, one that is externally hired that can bring a wealth of experience from the outside world and can, more importantly, inject fresh business perspectives and insights that an internally appointed one usually does not have the advantage of. There are ongoing debates and a wide variety of opinions presenting the advantages and disadvantages of hiring a CEO that is already within the organization, hence, a promotion from within the company, versus getting somebody from outside the company that is usually the preferred recourse of top shareholders and owners if they would want a new breed of leaders join the company, especially, if said company has not been performing well and needs a drastic turnaround to improve the business. Hiring from within gives the advantage of an insider who has already endeavored to establish the company culture and the spirit of entrepreneurialism within the organization and already with a proven competence, character and chemistry while hiring an external CEO will bring in more skills and experience (Bhushan, 2014).
Conclusion about results / research questions or hypotheses
The outcome in the research conducted showed no significant difference in the outputs or performance results of a CEO that is internally appointed as against a CEO that is externally hired. The results, however, were inconclusive and did not manifest any difference in the five areas of interest, namely: price movements, profit margins, return on assets, return on equity, and net asset value. The second research question, which studies the extent of a CEO’s origin, equity, education level, age, years of service and years as a CEO and its impact on the company’s performance, has shown three areas where these set of independent variables have created a significantly predictive model. The areas referred to are the price movement, return on assets and net asset value.
The results and findings of the research may be largely dependent on the sample demographics used in the said research and study. Though the sample demographics utilized vary in terms of the degree of education, origin, age, equity, years of experience in the current company and years of experience as CEO of the company, the results may have been greatly influenced by the fact that the country has long been a closed economy and has only been recently opened up. Before Vietnam became an open economy, most large companies were State owned enterprises and, therefore, almost all CEOs and even the rest of the company’s executive members were appointed by the political regime who was, at the time, controlling the major aspects of the economy. Given this scenario, most CEOs may have been greatly influenced by a similar mindset and business practice that could have trickled down to the next generation of CEOs. The uniformity of mindset and practice that could have been formed may have been a factor why there is no difference between an internally hired and an externally appointed CEO.
Discussion of the results / conclusion about the research problem
The results for the first research question did not manifest any difference in the five areas of interest between an internally appointed CEO and an external hire and can be regarded as inconclusive. The first research question explored the extent of the difference of company performance between companies that has internally hired and externally appointed CEOs based on measures of shareholder values. On the other hand, the outcome of the study on research question two, particularly the regression analyses done, showed the areas of price movement, return on assets, and net asset value creating a significantly predictive model. Price movement manifested its predictability using the CEO’s origin and showed that CEOs that are internally hired contribute to an increased price movement value. Furthermore, both CEO equity and the number of years as a CEO in the current company were seen as critical factors in predicting the return on assets for the company. The different areas of the research study were all made to address the main research issue as to whether or not the way, manner or source of the appointment of a CEO can be linked to the CEO’s performance and as to whether there is a significant difference in the CEO’s performance if said CEO came from within the organization or hired from outside the company. The overall results of the research study showed that there was no significant difference in the performance of the CEO whether or not the CEO came from or promoted from within the organization or externally hired. Based on the outcome of the research using the sample demographics in the said study, there was no conclusive evidence showing the advantage or disadvantage of a CEO that was hired internally or externally since data showed no significant difference on the study outcome.
Implication of the theory
The implication of the theory that CEO appointment is linked with CEO performance implies to us that there may be a huge difference in terms of culture, mindset or business upbringing between a CEO appointed internally who has long been connected with his company and has not, maybe, been exposed to other business ways apart from his own company, versus someone hired externally who has gained a lot of exposure from different companies’ best practices and, hence, can give and offer the new company a wide range of great skills, experience and fresh business perspectives. Considering the difference in the degree of exposure in terms of business practices between an internally and externally hired CEO, there should be some amount of variations or even opposing behavior by these CEOs depending on their background and the amount of exposure they had from different companies, since the knowledge and the experience they gain from these various organizations would, more often than not, impact on their leadership style and the way they would run their respective companies. Based on the research done by Karaevli and Zajac (2012), CEOs recruited externally are, on the average, performing just about the same as those who rose from the ranks but with the exception involving certain circumstances where outsider CEOs tend to perform better than insider CEOs. The said research suggested that the outsider CEOs outperform the insider CEOs at companies that are poorly performing and in these cases, the board of directors would opt an outsider CEO to stimulate change within the organization (Karaevli & Zajac, 2012). An outsider CEO can effect change more easily and can better overcome resistance from the existing employees pertaining his or her change initiatives (Karaevli & Zajac, 2012).
Implication for policy and practice
Results of researches and studies tend to impact or influence the policies and practices of a company. In this case, the study aimed to find out whether or not the performance of a company is differently affected if the CEO was internally hired or externally recruited and, particularly, if the company would better perform if they got their CEO from within or without the organization. Granting that the results showed that a company performs way better if a CEO will be hired from the outside, there is a greater chance that the company would come up with a policy of hiring an external CEO and encourage this practice continuously considering the positive benefits the company would get in abiding by such practice. On the other hand, if results showed that companies better perform if they will appoint or promote a CEO from within the organization, then there may also be the inclination of the companies to adopt a policy that will support succession planning or hiring internally a CEO from among its deserving senior management executives. The practices and policies may be greatly influenced by the studies and researches made by the companies but the actual applications of these policies are still subject to constant observations and further studies by management and key stakeholders to assess if said results of research outcomes still hold true and effective at any given period. Considering that results of studies and researches are dependent on different factors, it is important that these factors are constantly watched out for and periodically being examined in order to determine if results are still the same or if it has already changed and would require some adjustments to the existing policies and practices of the company.
Limitations
In the previous chapter, the sample was described, examined and studied pertaining to each of the demographic factors. Furthermore, the chapter discussed the results of the two research questions and its corresponding sub-questions. However, the results of the MANOVA or multivariate analysis of variance for research question one were shown to be inconclusive and did not manifest any variance or difference in the five areas of interest between an insider or internally hired and an outsider or externally appointed CEO. The first research question aimed to address the extent of the difference of a company’s performance if the company hires an internal or an external CEO using as evidence measures of the company’s shareholder values. The research study likewise used a quasi-experimental correlation design particularly addressing the five areas on share price movements, net profit margins, return on assets, return on equity and net asset value for companies with insider versus outsider CEOs. A quasi-experimental study is a type of experiment or study where participants are not randomly designated (Kowalczyk, 2013). This kind of research shares some similarities with the traditional design but lacks an important element of random designation or assignment to the research control (Kowalczyk, 2013). Given this, the researcher could have some amount of control to the assignment but still guided by certain criterion. This kind of experiment may be a subject of concern pertaining its internal validity because there is likelihood that the treatment and the control groups may not serve as a good basis for comparison at baseline level and may not convincingly show the causal link between the treatment condition and the observed outcomes (Kowalczyk, 2013).
Conclusion and Practical Recommendations
As the growth of Vietnam is continuous and more companies are expanding, it is important to determine which type of leader, particularly the CEO, that can better run the country’s corporations. It has been an ongoing debate as to whether a CEO that is internally hired is more effective than a CEO that is recruited externally. There are certain advantages that an internal CEO can bring as earlier reported and, on the other hand, particular benefits in hiring a CEO coming from outside the organization. The research study conducted, however, revealed that there is no significant difference in the company’s performance whether or not the CEO hired by the company came from within the organization or hired externally. Given this outcome, it is recommended to further study the sample demographics or population utilized in this research study to validate the results and verify its conclusivity. The earlier assessment, particularly on the MONOVA result addressing research question one or the extent of the difference of the company’s performance if the CEO is an insider or outsider, manifested the inconclusivity of the study since it did not indicate any difference in the five areas of interest between internally and externally appointed CEOs. On the other hand, the results of the regression analyses for the second research question indicated a significant outcome, particularly on three variables including price movement, return on assets and net asset value. Based on the study, price movement was found to be a significant factor of predictability using the CEOs origin and suggested that an internally appointed CEO can contribute better to the company’s price movement value. Furthermore, the CEO equity and the number of years as CEO in the current company were also significant in predicting the return on assets for the company.
Recommendations for Further Research / implication for further research It is recommended to conduct further research on this topic considering the limitations earlier discussed as far as one of the types of experimental research used in this study. With the quasi experimental correlational design utilized in this research experiment, there is implication that there is an important element lacking in the study, which is the randomness element of the said research experiment. Considering that with this kind of research, the researcher can influence or exert some amount of control, then there is likelihood that the research did not enjoy the benefits and maximize the value of full randomness in the sample population that is vital in protecting the integrity of the research. Another factor that is worthy to consider is the fact that Vietnam has long been a closed economy and has just recently been opened up. Before the country experienced an open economy, most of their large corporations were State owned enterprises and all CEOs were politically appointed. The system and practice by these politically appointed leaders may have been so entrenched that even when their economy became open, the practice remained the same. This background and corporate history experienced by Vietnamese companies may have contributed to the results showing no difference between internally hired and externally recruited CEOs considering that there had been no alternative CEOs available with the previous monopoly of State own enterprises in the country. This implies absence of the advantages of getting an outside CEO who is supposed to bring a welcome change and a new business perspective into the company. If the exposure given by State owned enterprises has been too strong considering its previous dominant practice in the country, then the origin of the CEO may be irrelevant.
Works Cited
Bhushan, A. (2014). Are you trying to decide whether to hire an internal or external candidate? Retrieved from http://ceoworld.biz/ceo/2014/02/27/are-you-trying-to- decide-whether-to-hire-an-internal-or-external-candidate-9920976
Karaevli, A. & Zajac, E. (2012). When is an outsider CEO a good choice? Retrieved from http://sloanreview.mit.edu/article/when-is-an-outsider-ceo-a-good-choice/
Kowalczyk, D. (2013). Correlational research: Definition, purpose & examples. Retrieved from http://study.com/academy/lesson/correlational-research- definition-purpose-examples.html

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