For Growing Firms, Rookies Make the Best Recruits
Companies looking to inject new life often add a new member to the top management team. Top management team members set a firm’s strategic direction, so the capabilities and knowledge that each member brings is critical. Conventional wisdom says firms are better off hiring people with prior experience and skills that mirror the job. But new research from the University of Maryland’s Robert H. Smith School of Business finds that many firms benefit from hiring rookies who are new to the top management level.
Rajshree Agarwal, the Rudolph P. Lamone Chair and Professor in Entrepreneurship, and two co-authors studied the wireless telecommunications industry from its inception through maturity. They examined where firms recruited new top management team members and what kinds of advantages and disadvantages each of them bring.
The researchers looked at whether the top management team’s new recruits should come from a rookie population – middle managers that don’t have experience at the top level – or from top management veterans from other companies. The researchers also considered other factors in the new hires: What type of experience do they bring? Are they from within the firm and being promoted internally? Are they from industry competitors from rival firms, or are they people who are coming from outside the industry?
To make the best hiring decision, Agarwal says a top management team needs to carefully weigh its options, based on the industry and what the firm needs. For new and growing industries, operational knowledge become much more important because the existing strategies that are working in other industries might not apply to the new industry.
New outside rookies – those new to top management and the firm – bring higher firm growth than other types of executives. They bring useful knowledge of the operations of competitors and other firms, and they are easier to socialize and integrate with the existing team. Seasoned outsiders – those with prior top management experience, but in a different industry – contribute to growth only when the existing top management team has a long tenure. Typically, says Agarwal, seasoned top managers have their own set ways of thinking about managing. Only a longstanding top management team can weather the disruption to internal power dynamics when adding a seasoned newcomer to see the potential benefits.
Read more: Rookies and Seasoned Recruits: How Experience in Different Levels, Firms and Industries Shapes Strategic Renewal in Top Management is featured in the Strategic Management Journal.