In the old days, if a CEO was hired from outside the company, it was usually done as a last resort—either a suitable successor hadn’t been groomed, or the current CEO was forced out suddenly. Times are changing, however, as more companies are purposely seeking outside CEOs, according to the latest CEO Success study from Strategy&, PwC’s strategy consulting business. The study revealed that from 2012 to 2015, boards chose an outsider CEO in 22% of planned turnovers, up from 14% from 2004 to 2007.
Why the rise? Hiring an outsider CEO can result in better company performance. Firms hiring from other industries showed better stock performance and profitability within a few years than did firms hiring from inside their industry, says Alexandros Prezas, coauthor of a separate study, “Outsider CEO Succession and Firm Performance,” published in the Journal of Economics and Business. The relatively high performance of outsiders can also translate into a lucrative opportunity for those willing to make the move. The compensation package offered to CEOs hired from outside the industry tends to be higher and more tightly linked to the long-term performance of the firm, Prezas says.
Considering a leap? These tips can help you make the transition and point your career trajectory skyward.
There likely are industries that have a common structure or similar clients and customers as your industry. Are you familiar with growth through acquisitions? International holdings or clients? Distribution? Private equity investment? Look for situations where your familiarity with these types of experiences can help in another industry, says Lisa Thompson, managing director of professional services at Dallas-based Pearson Partners International.
Not all industries will be open to an outsider, so focus your energy on those that seem less narrowly specialized. “It would be hard to make a case for making drastic changes, such as switching from manufacturing to health care,” Thompson says. “It is always easier to make a case for a change in industries when the industries are somewhat related or have similar markets.”
According to the Strategy& study, industries most amenable to hiring outsider CEOs include telecommunications (38% of incoming CEOs from 2012–2015 were outsiders), utilities (32%), health care (29%), energy (28%), and consumer staples and financial services (both 26%). Conversely, the lowest share of outsider CEO hires was in IT (15%), materials (19%), retail and consumer (19%), and industrials (21%).
As you come across companies that interest you, check out online resumes of their executives to see if they have skills and experience comparable to yours, Thompson says.
It’s always going to be risky for a business to bring in a candidate from outside the industry, which means you have to make a strong case for how your experience will make a difference for the company, Thompson says. Research what challenges and opportunities of the new industry are similar to those from your old industry. Clearly connect your experiences to the prospective employer’s needs.
For example, if you have experience with mergers and acquisitions, turnaround situations or working in public companies, you might be valuable to a company in another industry that’s dealing with a similar situation, so show how that sets you apart from the typical candidates. “Switching industries can help add a broader perspective to a candidate that is not often available when sticking to the same industry throughout a career,” Thompson says.
Firms often hire executives from the outside when the company is low-performing or in crisis. They may be looking to shake things up, so don’t be afraid to emphasize that you’d be a break from the past. You’re someone who offers not only a relevant skill set, but also a new way of thinking, and could help a company develop innovative solutions to help them—and your career—forge ahead.
This article originally appeared on Monster and is reprinted with permission.