Apple's Hiring Spree Has Potential Pitfalls

Apple (NASDAQ: AAPL  ) has traditionally relied heavily on homegrown talent for its senior executive position. But over the past few years, the company has been on a hiring spree, picking up high-profile professionals for senior management positions. As an Apple shareholder, I'm concerned about the potential pitfalls of this new hiring strategy. 

Apple's been on a hiring spree
This year, Apple has been snapping up high-profile executives. Angela Ahrendts stepped down as CEO of Burberry to lead Apple's retail operations. Paul Deneve, former CEO of Yves Saint Laurent, has joined Apple to head the somewhat mysterious "special projects" group. Lisa Jackson, former head of the Environmental Protection Agency, was hired to head environmental initiatives at Apple. Kevin Lynch, former chief technology officer of Adobe, is now Apple's VP of technology. Luca Maestri, Apple's new corporate controller, was hired away from Xerox, where he was the chief financial officer. Those are just some of the higher-profile hires in 2013.

If you look back a few years, the list of high-profile outside hires continues to grow. Apple has added an iTunes Europe marketing executive from Microsoft, an iAd operations lead from Adobe, a VP of sales from United Continental, a Latin American operations chief from Sony Ericsson, a channel sales director from Hewlett-Packard, a cloud expert from Yahoo!, and a lead tax accountant from Symantec.

Potential pitfalls
Even with their gold-plated resumes, it's unclear whether these new high-level executives will succeed at Apple. Fancy credentials don't guarantee job performance, especially in a new organization. Outside hires may find it difficult to adapt to Apple's culture, and it takes time to develop an internal network at the new companies. Academic tudies point out that new hires often struggle, especially in their first few years on the job. Apple's recent track record with big-time outsiders carries a few black marks. John Browert and Mark Papermaster, for exaple. both came with sterling credentials, and neither lasted very long at Apple.

Obviously, time will tell if Apple's cadre of senior executives hired over the past several years will succeed. But the more important question is: Why does Apple need to bring in so many outside managers? According to studies by Jim Collins and Jerry Porras, authors of Built to Last: "Visionary companies have shown, time and again, that they do not need to hire top management from the outside in order to get change and fresh ideas."

Foolish takeaway
Going forward, I'll be rooting for Angela Ahrendts, Paul Deneve, Lisa Jackson, Kevin Lynch, and all of Apple's other new hires. But I'll also be keeping an eye on Apple's hiring activity -- hopefully the pace of high-profile outside hires will slow down significantly. I'd like to see the company focus more on developing talent internally. 

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  • Report this Comment On December 10, 2013, at 7:47 PM, margiecfl wrote:

    ummm .. could you not have summed this article up in three sentences?

  • Report this Comment On December 11, 2013, at 2:29 AM, johnestromjr wrote:

    Brendan, Apple is growing and, like it or not, they need to hire people. I'm sure the majority hired for upper echelon jobs are workaholics and won't need to be encouraged to do their best. And I'm guessing they will be well compensated. There is a lot of talent Apple will need, for example, if they're going to develop a strong gaming division and probably few in-house employees have the skills or background. Same with an iTV if Apple does develop that line of products. Relax, Apple makes very few mistakes and if they do they make changes and keep on moving forward. This is not the time for Apple to be passive or indecisive.

  • Report this Comment On December 11, 2013, at 8:52 PM, TMFWillSommers wrote:

    Hi johnestromjr -

    Thanks for reading the article and providing feedback. You raise a good point about Apple's growth and the correlated need for more employees. And, bringing discrete outside skills could be beneficial.

    On the flip side, Apple's best results have driven by an internally-promoted senior management team. And, my personal preference, based on my experience and some academic research, is for organizations that rely on talent developed internally. Over the coming months, I'll keep following Apple's management, and I'll publish additional articles on this subject.

    Finally, just to be clear, I'm expressing a concern about hiring strategy and management, which is one of many factors in an investment thesis. I'm NOT saying "sell Apple because its hiring outsiders." I'm just hoping to provide some additional analysis/commentary on one of many factors that contribute to my overall investment thinking on Apple (by the way, I'm a shareholder).

    Fool on,

    Brendan

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