The insider succession trap

When bad decisions force business leaders to leave their jobs, organizations often rush to replace them with insiders, who are familiar with the original problem and the former leader. In times of turmoil, the choice seems natural and even obvious: Because insiders know the past, they should be less likely to repeat it. General Motors pointedly replaced Rick Wagoner as its chief executive officer with his protégé Fritz Henderson, a career GM employee. However, our research reveals that despite the natural inclination to opt for an insider with connections to the old boss, a failing leader is often better replaced with a completely unrelated outside party.