Why
Nestlé Was So Quick to Hire an Outsider CEO
Nestlé
surprised the business world this week when it announced a new CEO. The Swiss candy and snacks company did
not name the new boss from within the ranks of its top executives, as is common
at long-established corporate giants. And it looked far beyond the confines of
the food industry. Ulf Mark Schneider, the new CEO, had previously served as
CEO of European healthcare company Fresenius, which specializes in treating
kidney disease.
That would seem a strange move for the
company that makes Hot Pockets and Baby Ruth bars. But Nestlé, like many of its
industry peers, is now looking at a world in which packaged and processed foods
can help treat or alleviate health problems.
With
Nestlé’s current CEO transitioning to a chairman role, the odds were certainly
on an insider to snag the CEO spot. Choosing an insider, who understands and
respects the corporate culture and business model, would have been in keeping
with the general practice at big companies. As Strategy&’s 2015 CEO Success study showed, last year,
77 percent of the CEO successions at the world’s 2,500 largest companies
involved insiders.
But companies facing disruption are more
frequently turning to executives whose primary experience is outside — outside
the company, and outside the industry.
And
Nestlé is indeed facing disruption. The company has come up against a host of
recent challenges: currency
fluctuation, a recall in India, a disappointing Chinese porridge. At root, however, Nestlé is confronting a more
fundamental issue. Across the board, packaged food companies are finding their
long-standing business models and practices under attack.
Critics
have charged that the fat-, salt-, and sugar-laden
processed foods and snacks Nestlé and its competitors
sell are
a factor in the prevalence of obesity,
diabetes, heart disease, and other costly health problems. As a result,consumers’ tastes are changing, and
shoppers are filling their carts with foods they deem more healthful and fresh.
And that is leaving the old-school companies to play catch-up to new and trendy
natural-foods brands.
In
response, food companies are trying to change the conversation. Many incumbents
have been reworking recipes to remove artificial ingredients and reduce sugar
and salt. McDonald’s hassaid its suppliers will cut certain antibiotics used in
the chicken it serves. General Mills even took
the neon colors out of its iconic Trix cereal, and
replaced them with all-natural fruit-and-vegetable dyes.
Beyond changing the conversation, packaged
food companies are seeking to change their strategies and business models. And
increasingly, companies are realizing that they may need to look beyond the
familiar confines of their own world to find new ways of thinking.
Indeed, in 2015, 22 percent of new CEOs at large companies last year
came to their new company from outside. That’s up from 14 percent in the
2004–07 period. Historically, such moves were seen as a last resort when no
internal candidates measured up. But boards are now more frequently making an
outsider a deliberate choice in succession planning. And, as the authors of Strategy&’s
2015 CEO Success study note, industries that are
undergoing the most disruption are bringing in higher shares of outsider CEOs.
For example, between 2012 and 2015, 38 percent of the CEOs hired at large
telecommunications firms were outsiders. Furthermore, low-performing companies
were generally more likely to hire outsider CEOs than high-performing
companies.
Companies that need to make a rapid, sharp
turn often find they need to add outsiders to the mix. And perhaps that is why
Nestlé was eager to look for an outsider.
Michelle Gerdes
http://www.strategy-business.com/blog/Why-Nestle-Was-So-Quick-to-Hire-an-Outsider-CEO?gko=5afc3&utm_source=itw&utm_medium=20160705&utm_campaign=resp
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