Is loyalty really the secret to corporate success?

Is corporate loyalty making a comeback? For “CEO lifers” like Nike’s newly appointed head Elliott Hill, it might be. Hill, who began his career as an intern at Nike, represents a breed of executives who have risen through the ranks without ever switching companies. Hill joins other career lifers like Mary Barra at General Motors and Doug McMillon at Walmart, suggesting that the path of the homegrown CEO may be having a revival, the Financial Times writes. Company lifers “foster continuity and enhance morale, as employees see clear pathways for their progression, which cultivates loyalty,” says co-author of The Life Cycle of a CEO, Claudius Hildebrand.

Internal hires bring a breadth of experience outsiders might lack: Having diverse, multi-functional experience within one company proves effective for aspiring CEOs in large, complex firms with multiple product offerings and brands across various countries, according to Kimberly Whitler, associate professor at the University of Virginia’s Darden School of Business. Chief executive of mining firm Anglo American, Duncan Wanblad, illustrates the possibility of obtaining critical, diverse experience within a single company through his 30 years across various functions and locations.

But “lifers” aren’t without their critics: While institutional knowledge runs deep for executives who have stayed with one company their entire careers, there’s the risk of tunnel vision, warns associate professor of human resource management at IE Business School, Monika Hamori. Companies in fast-changing industries, for example, might benefit more from leaders who bring in fresh perspectives from outside. LinkedIn founder Reid Hoffman would also posit that job hopping is a credible way of bumping up your salary and speed up promotions. “You can’t have an agile company if you give employees lifetime contracts — and the best people don’t want one employer for life anyway” he said.

DATA POINT- US-based data analytics company Altrata finds around a quarter of FTSE 100 CEOs are external hires, against 15% in the S&P 500. For internal CEOs, 6-10 years’ tenure is the sweet spot, according to their The Role of the CEO 2023 report(pdf). In the US, 20% of top CEOs have over 21 years with their companies—just 7% in the UK. Only 1% of S&P 500 leaders clock over 41 years at the same firm.