UK companies looking outside the office for new leaders, but they're not staying once they get there

Hayley Kirton
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UK companies are more likely to take their hunt for a leader outside the office compared with their overseas counterparts, research released today has found.

According to the study by Strategy&, PwC's strategy consulting business, over half (58 per cent) of chief executives appointed in the UK last year were external candidates, compared with a global average of only 23 per cent.

The level of external hiring in the UK is the highest recorded by Strategy& since it started running the study in 2004 and is also much higher than the four year average of 40 per cent.

However, it appears that the top spot in UK firms is losing popularity, as turnover for chief executives is now at a record high. Also, the average tenure for chief executives in 2015 was 5.1 years, down from 7.3 years in 2014.

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"Boards of directors following well thought-through succession plans should have a deep bench of strong, internal candidates," said Gary Neilson, principal at Strategy&. "However, when the company needs to make transformational changes boards should factor the outsider option into their succession planning."

"Whether the new leader comes from inside or outside the organisation, companies that plan for chief executive succession more carefully are more likely to be better performing companies in general."

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Ashley Unwin, UK consulting leader at PwC, added: "Hiring a chief executive from outside the company used to be seen as a last resort. That is not the case anymore, as UK companies are making more external chief executive hires than ever before.

"This strategy seems to be paying off for companies globally as external hire chief executives are delivering higher total shareholder returns over the past three years. The opposite is true in the UK, where external chief executives hires are underperforming their internal peers."

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The report also found that the average age of newly-appointed chief executives in the UK in 2015 was 52, while three in ten held an MBA.

Chief executives in the UK are also less likely to have worked at the same company throughout their career, with just three per cent of incoming chief executives in 2015 having done so compared with 26 per cent of their international peers.

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