An Embarrassment of Succession Fiascoes

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• Hewlett-Packard went outside for Carly Fiorina, who failed to grasp the company's culture. With HP's stock price declining, the dysfunctional board mishandled Fiorina's departure but recovered its wits to attract Mark Hurd. He rapidly restored HP's egalitarian culture and its sales.

• Procter & Gamble's board passed over A.G. Lafley to promote Dirk Jager to the top job and "shake things up." After Jager caused a management revolt, the board turned to Lafley, who has emerged as a great leader and superb team builder.

These recurring examples raise the obvious question: Why do so many boards wind up looking outside the company for new leadership? My view is that they spend far too little time building sound succession systems. Lacking well-tested candidates, they presume an outsider can quickly transform the company and its culture.

The evidence clearly disproves their assumptions. In his new book, The CEO Within, my Harvard colleague Joseph Bower makes an irrefutable case that the best CEOs come from within the organization. Outsiders have clear disadvantages: They don't know the company's culture, the key players, and the subtleties of the business. Beyond that, they have to spend valuable time building trust. Or, like Nardelli, they bring in an entirely new team, which causes morale problems.

Contrast these fiascoes with the smooth internal leadership successions at General Electric, ExxonMobil (XOM), Goldman Sachs, Johnson & Johnson (JNJ), General Mills (GIS), and Pepsico (PEP). These companies have benefited enormously from building strong teams of authentic leaders, which resulted in seamless transitions to new leadership.

If you are working in an organization that doesn't do sound succession planning and reward leaders, you might want to jump ship to one that appreciates authentic leadership—and provides you with the opportunity to make it to the top.

George, professor of management practice at Harvard Business School, is the author of two best-selling books, True North and Authentic Leadership. He writes his "True North" column every other week at businessweek.com/managing/.