In What Circumstances Should an It Company Choose Between Internal Promotion and External Recruitment as an Optimal Scheme for Changing an Executive?

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In What Circumstances Should an IT Company Choose between Internal Promotion and External Recruitment as an Optimal Scheme for Changing an Executive?

Rchelle Song
09/2012

CONTENTS

1 Introduction1
3 Comparisons between IP and ER3
3.1 Internal Promotion3
3.1.1 Merits3
3.1.2 Demerit4
3.2 External Recruitment4
3.2.1 Merits4
3.2.2 Demerits5
4 Cases Study6
4.1 Yahoo!6
4.2 Google7
5 Conclusions11
Bibliography13

1 Introduction
As a team which is completely able to enforce a company’s strategy and to be the decision maker, the group of executive leaders is of massive significance to a corporation. Specifically, there are two ways to find someone to take the helm, normally regarded as internal promotion (IP) and external recruitment (ER). For those developed vocations, it is no longer a problem with regard to the choice between internal promotion and external recruitment. The reason for this is because in a highly developed industry, in-house training has become a necessity of the daily operational duty for every company, whose consequence is that management training can work not only for keeping talent within the company, but also for promising a trend of continuous advancement for the whole industry (Arslan and Kus, 2008). That is to say, any company which loses an experienced sales manager today could probably soon find a similar suitable trained candidate to fill this gap tomorrow from either inside or outside the company. Nonetheless, things can be more complicated when it comes to the IT industry. Research has shown that the turnover rate for IT professionals (IT turnover) is one of the most persistent challenges faced by organizations (Joseph et al., 2007). In terms of this high rate, Knowledge@Wharton ( 2005: online) estimated that: … CEOs who come from the outside are gaining ground. In the United States in the 1970s, Conyon noted, the number of external candidates to make it to the CEO's office was 15%, a figure that increased to 26% in the 1990s. Similar trends can be seen internationally. In the United Kingdom, the number of outside CEOs appointed in 1989 was 25%; by 1999, the number had risen to 35%. Accordingly, this project will concentrate on an analysis of the personnel selection methods in the IT industry and will try to identify an optimal scheme in this area. 2 The Specifity of IT Industry

Recently, Symantec, Yahoo!, RIM, HP and some other IT companies changed their CEO one after another, as their first steps towards a transformation for the whole organization which could better deal with the challenges such as the acceleration of the product cycle and the changing market. Based on the statistics in the first half of 2012 from Challenger, Gray & Christmas, Inc.( 2012), a human resources consulting firm from America, 61 computer and software companies’ CEOs faced replacements by their board of directors, in contrast with figures of 55 in 2011 and 45 in 2010 respectively. What these increasingly frequent personnel changes reveal is a trend of radical shift in the IT industry: the product cycle is shrinking to only a few months, the traditional desktop computing is moving forward to the mobile computing (Jones, 2012). Given that, impatience against the disappointing performance of firms is gradually gaining among those IT giants’ board members, as well as experts from this profession. Thus, they began to seek solutions. Robert McCormick, chief strategy officer from an independent advisory proxy firm Glass Lewis, said that the technology industry's product cycle is faster than the other industries (Jones, 2012). He said a compressed product cycle means that, if the product schedule delayed, or the revenue declined, the board of directors would tend to replace its CEO rather than waiting for an improvement which could cause the company to fall further behind its competitors. John Challenger, the CEO of Challenger, Gray & Christmas, Inc (2012)., stated that:...
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