In the absence of great leadership, companies struggle to engage and retain their best and brightest employees, and anticipate and effectively respond to market changes.
Executives and HR professionals understand the importance of putting the right leaders in place, but some debate remains over whether it’s best to source candidates internally or externally. Bringing in people from outside can infuse a company with fresh new ideas and a new perspective on how to get things done.
But multiple studies suggest that developing leaders internally might be the better approach. Matthew Bidwell, a Wharton School professor, studied more than 5,000 U.S. employees and found that it cost 18 percent more to hire outside employees and employees who were not promoted from within tended to underperform peers who were. In fact, the research says outside hires were 61 percent more likely to lose their jobs than internal hires.
Bidwell also suggests that institutional knowledge is important and employees who are already a good fit with the company’s culture and have a strong understanding of the processes are in a better position to make a difference quickly. There is no doubt that developing leaders internally is a more cost-effective and efficient strategy, which may explain why leadership development spending is up 14 percent, according to Bersin by Deloitte research.
Regardless of what side of the debate you’re on, it’s a good idea for companies to continuously build their talent bench strength. A strong pipeline of talent enables organizations to seize new opportunities – quickly. Here are three steps companies can take to build bench strength via succession planning:
Identify the right candidates. The first step is to assess the skills needed to advance the company’s progress toward its vision, outline the core competencies required and identify potential candidates. That’s exactly what this process is about – identifying talent potential. Understanding the difference between high potential employees and high performers is important. Future leaders – your high potentials – actively show an interest in taking on more responsibilities, leading people, and contributing and advancing new ideas. High performers stand out because of how well they do their job, which doesn’t always transfer in positions of leadership. After all, technical skills and subject matter expertise are different from the skills potential leaders have an interest in when it comes to getting the most out of the people and opportunities available within an organization. Finally, it’s critical to assess all candidates according to the same standards to avoid bias by using a variety of tools to evaluate potential, including 360-degree assessments as well as performance data.
Develop leadership skills on a continuous basis. Once the right candidates are identified, managers should begin developing employees’ leadership skills, discussing career objectives as well as outline the experience, skills, and training employees will need to advance. The best approach to ensure high potential employees are progressing along their development plan is for managers to have frequent one-on-one meetings with employees to talk about leadership development, with supervisors outlining next steps, training and offering stretch assignments that will help the employee meet his or her goals.
Retain leaders with real-world application of new skills. It’s not enough to just talk to employees about leadership skills and provide training; they’ll also need to practice their new skills on the job before they’ll be ready to move into more responsible roles. Stretch assignments that allow high-potential employees to direct projects or supervise teams are a great way to build their confidence as they apply what they’ve learned to real-world situations. It also instills a greater sense of ownership, which can keep employees engaged and onboard for the long term.
Having a strong leadership pipeline has always been important, but agility and a deep bench are even more crucial in a rapidly evolving business climate. While it might not always be possible to fill open leadership roles internally, research shows that’s the best way to put someone in place who can hit the ground running. By following these three steps, companies can groom next-generation leaders who can take on new opportunities and ensure businesses continue trending towards meeting its current and future goals.
Joanne Wells is the manager of Learning Centre of Excellence at Halogen Software.
