Why Is Apple Bringing In Corporate Elites?

Over the past few years, Apple (NASDAQ: AAPL  ) has been on a hiring spree, picking up high-profile professionals for senior management positions. As an Apple shareholder, this concerns me. Despite gold-plated resumes, it's unclear whether the new hires will be effective. But, more importantly, I don't understand why Apple needs hired guns. Historically, the company has been successful with homegrown talent. Does Apple lack the ability to develop future leaders? Is Apple going to become a company led by highly paid, highly qualified corporate-types? On both counts, as an Apple shareholder, I hope not.

Historically, Apple's success has driven by homegrown leaders
During the second Steve Jobs era, a period of incredible success (iPod, iTunes, iPhone, iPad), Apple's leadership team remained fairly consistent. Most of the leaders were promoted internally. Consider some of the members of the executive suite during the period who had the greatest impact -- Jony Ive, Scott Forestall, Bob Mansfield, Ron Johnson, and Tim Cook. They all joined Apple with solid experience and skills, but none of them were high-profile hires. None of them parachuted directly into top jobs at Apple -- they worked their way up over time.

The architect of Apple's incredible design, Jony Ive, joined Apple in 1992, only a few years out of design school. Scott Forestall, a driving force in Apple software, started working with Steve Jobs at Next in 1992. Bob Mansfield, who led Apple's hardware engineering for the iPod, iPhone, and iPad, joined Apple in 1999 when it acquired his employer, Raycer Graphics. Ron Johnson, who built Apple's retail business, joined Apple in 2000, leaving his position as head of housewares at Target (NYSE: TGT  ) . Tim Cook joined Apple in 1998 to clean up the supply chain. Previously, he was VP of corporate materials at Compaq, where he was described as "not very senior or visible."

And of course, Steve Jobs was the ultimate homegrown leader at Apple. With literally no credentials or experience, he founded the company along with Steve Wozniak and Ronald Wayne. Before Apple, Jobs had a resume that included the following major points: dropping out of Reed College, working as a "valuable but difficult" technician at Atari, a spiritual quest to India, and using lots of LSD. Not exactly a sterling corporate resume, but he had tremendous vision for creating "insanely great products." To fulfill his vision, he used an unconventional (and often unprofessional) management style, which turned out to be highly effective.

Why is Apple bringing in hired guns for senior management?
Apple's amazing success over the past decade has been driven by internal talent. So why is the company so focused on pulling in external leaders? As an organization, is Apple unable to develop leaders and innovative thinkers? Has Apple's culture become so stale or dysfunctional that its needs an injection of outside thinking? Does Tim Cook think buying talent is more effective than developing it? Honestly, I hope the answer to all those questions is no. But it certainly causes me concern.

Foolish bottom line
Apple is an amazing company, and I'd like to see it succeed. After all, like many Fool members, I'm a shareholder. I'm also a dedicated Apple customer, but as an investment analyst, I can't be blindly loyal to the company. I need to dispassionately assess its business practices, and this new hiring strategy raises some concerns for me. I'd prefer that the company relied on internally developed leaders. On its own, this concern doesn't make me bearish on the company. After all, Apple still has a great brand, loyal customers, excellent products, and solid financials. But it does make me question Tim Cook's management practices, and I'll continue to monitor the situation.

Maybe it's just my personal bias, but I'm skeptical of highly qualified corporate hires. Conventional people and strategies generate conventional results. Since I'm looking for extraordinary investment returns, I prefer radical or non-conventional people. If Steve Jobs has taught me anything, it's that.

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  • Report this Comment On December 23, 2013, at 7:39 PM, djtetsu wrote:

    I read this and your other article and think the reason is .. there are no one specialized in those fields in Apple where they are a software / hardware company.

    The Burberry lady for designing mall stores for example. I've read some of the others: Europe marketing executive, Latin American operations chief, a cloud expert, lead tax accountant.

    But yeah , I agree, no one wants to listen to a guy coming in from the outside thinking they're the hot shot. :)

  • Report this Comment On December 23, 2013, at 7:45 PM, johnestromjr wrote:

    Brendan posts..... "I don't understand why Apple needs hired guns"

    Two reasons and if you own Apple stock you should know them. Apple is GROWING both in size and product line. There is very good growth in the sectors they're now in but there are also going to be major new areas. I'm not sure about "wearable" technology such as the iWatch but would not bet against it. Sooner or later they're going to begin marketing an entirely new iTV which should be both Interactive and provide virtually any content you want to see any time you want to see it. I'm guessing a combination of a super computer bringing in virtually any music or video to your VERY high definition TV screen. I've heard talk they may [hope so] get into the medical appliance field as well - possibly surgical instruments or devices like stents. The cost of a stent is nearly $2000 each and the medical profession goes through a LOT of them. So Apple is going to need new talent - they can't grow it all in-house.

  • Report this Comment On December 23, 2013, at 8:24 PM, TMFWillSommers wrote:

    Hi johnestromjr -

    Thank you for reading all three of my articles on this issue, and thank you for providing thoughtful feedback on each one.

    You raise a very valid point. Apple is, indeed, a growing company, and that growth requires new employees. However, I'd contend that Apple has always been a growing company, and it's always done better with homegrown talent than hired senior managers. And, if they need specific expertise in an area, I'd support bringing in more junior experts, but not hiring star managers from other corporations to parachute into top spots.

    That's just my opinion on Apple's hiring strategy. However, I hope that I'm proven wrong and these outsiders do a great job for shareholders (including me).

    Regards,

    Brendan

  • Report this Comment On December 23, 2013, at 11:28 PM, JaredPorter wrote:

    Dear Brendon,

    Excuse me, but who the heck are you to want to micro-manage the Apple HR department? I'm a small shareholder too and I'm perfectly at peace with SJ's hand picked successor, Tim Cook's having the authority and responsibility to hire and fire who ever the heck he deems worthy to do the job. You must be implying you disagree with the hiring of Angela Arendts to come aboard as the new head of retail and online services since there are no other noteworthy hires on deck that I'm aware of. For what it's worth, I think this is a brilliant hire and fit. As the highest paid CEO in England last year, Ms Arendts brings a wealth of experience and a proven track record in high-end multi-store retailing to do a bang up job and rapidly expand into territories like China where I believe she opened and supervised over 100 stores for Burberry! Wasn't the very successful Ron Johnson hired from the outside when everyone was predicting Apple stores would flop?

    My principal point is let Tim Cook and the Board continue to keep Apple making gobs of profit and expand their business without the Monday morning quarterbacking of peanut minded gadfly, self-styled personnel pundits who want to micro-manage their decisions from outside the company's walls. TC will ultimately be ultimately responsible for the success or failure of Apple, so as long as we are satisfied with his performance, let's not nit pik his day to day operations. Believe me, he's got about the toughest, most visible job in corporate America to worry about already!

  • Report this Comment On December 24, 2013, at 6:23 AM, Jjkiam wrote:

    Sorry but the whole premise of your article is based on a fallacy. That Apple only promoted from within! Where did Jobs turn to when he brought Sculley in?

    Most of the senior executives at Apple did not begin their careers at the company! So your thesis is disproven from the start! As to some of Apples more recent higher profile hires, bringing in the CEO of one of the most successful and innovative fashion retailers, esp in ASIA and also bringing in a designer from one of the most iconic fashion brands EVER seems to be a pretty strong indicator of not only how committed Apple is to growing its retail presence but most importantly how committed they are to reinventing their retail experience with new products that are even more obviously fashion forward such as the much rumored Iwatch! Apple clearly is not planning on rushing ANYTHING to market like the clunky Samsung smart watch dud and that makes me very confident in Tim Cook as an investor!!!

  • Report this Comment On December 25, 2013, at 5:44 PM, merican wrote:

    Obviously the writer has no experience in the workings of a large company. Apple has a vertical product line and the intelligentsia in the media is constantly complaining about a lack of current thinking outside the box. Now APPL is looking to diversify it's product lines and you want them to use people who most likely have little or no expertise in the areas they are probing. I worked in a large company and when we moved into a new area we went out and hired the best and brightest people we could find in the respective disciplines and that always worked out to our advantage. I too am an an AAPL investor and believe this strategy is dead on.

  • Report this Comment On December 26, 2013, at 12:01 AM, Bujutsu wrote:

    Jjkiam has a good point... Even Tim Cook did not start at Apple. He spent time at Intelligent Electronics, aned even Compaq for six months, prior to Apple.

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