People are most important; filling top jobs from outside sends the wrong signal

A lot of large companies are not only going outside of their organization to fill top positions, but often they're even going outside of their particular businesses.

I find this strange. It tells me that some CEOs and boards of directors do not have enough confidence in the personnel in their organizations to promote from within.

Something is wrong with the way these companies are being run.

I can understand a company that's growing by leaps and bounds may have to go outside to fill certain positions because they don't have enough qualified people within their organizations.

This is not the case in the companies I'm thinking about; they're either downsizing or running pretty level, and in some instances offering early retirement to many people due to restructuring.

It wouldn't surprise me if some of these companies are giving early retirement to experienced managers while at the same time refilling some positions with new people from the outside.

The most important commodity a company has is its people. A company is successful because its people work together to achieve clearly defined goals. Isn't a CEO supposed to perpetuate this situation?

His job isn't to design and style cars, or build engines and transmissions. His job is to set overall policy, plan the direction of the company and then develop the organization and put people in place to carry out these objectives.

When you think development, you have to think in terms of developing individuals that fit into the organization that you want to create.

When you bring in outside people to fill top positions you are admitting that your development programs have failed. You are saying that you have no confidence in your people and they have reached their highest level of competence, or according to the Peter Principle their "highest level of incompetence."

No matter how thorough you might be, there's always a risk when you hire from the outside. A new manager's credentials might be impeccable, but you do not know how they will fit into your organization. Your people don't know them, and they don't know your people. In any event, it will take them time to learn your company's procedures, and if their business experience is different (i.e. you make cars and their experience is in soap), then the learning period is even longer.

The simple fact is that a successful company is a function of its people and how well they work together. To cultivate an organization that meets the changing needs of the company is one of the most important responsibilities of its CEO.