Passage:

Many present-day boards now recognise the need for careful succession planning. The Chief Executive Officer’s succession plans are commonly part of his annual performance review, and most boards now devote several meetings a year to the subject. One crucial decision that boards face is whether to select one of their own or an outsider. Unsurprisingly, firms in trouble are much more likely to look for fresh blood. When the business is running smoothly, directors are more than happy to pick an experienced insider, who will continue along the present path. Whereas promising senior executives will often abandon a struggling company, successful firm stand to have a large pool of talented managers to choose from. Occasionally, even a successful company appoints an outsider who can introduce some particular expertise. Many utility companies seek outside Chief Executive Officers to shepherd them through the complexities of deregulation. Many boards do consider outsiders even when the existing Chief Executive Officer is planning a normal retirement.