Developing internal talent that is poised to staff key management positions is often a prudent way to resolve sudden or planned executive change. Promoting from within provides insiders with several advantages including an intimate knowledge of the company’s operations, policies, culture and customers enabling them to quickly get up to speed and be better positioned to impact the top and bottom lines.
Conversely while promoting from within is expedient, insiders may not always be the best choice and frequently are promoted for the wrong reasons. For example, insiders may be under qualified or have peaked career-wise and may lack the necessary strategic vision and leadership skills required for a senior management position. Therefore while a seemingly inexpensive and quick solution, a weak internal promotion will likely generate both immediate and long term negative consequences.
History has shown that progressive, well run businesses are populated with a blend of internally and externally developed executives. Having this kind of balanced manpower mix encourages dynamic push/pull interactivity in the “C” suite which typically generates creative problem solving. Clearly superior and innovative decision making is a product of a management team’s collective and varied experience as well as its quest for excellence by constantly challenging the status quo.
There are many examples of companies that have largely relied on a promotion from within policy. One of the most prominent is General Motors, which for many years almost exclusively staffed its senior ranks by promoting internals. This method worked well when competition was not globally intense. However when agile competitors developed better products and more aggressive marketing techniques, G.M. slipped into dire straits, especially when economy turned down. It became very apparent that many of GM’s problems could be attributed to the insular thinking found in their notoriously inbred executive suite.
So how does management decide on which is the best course of action to take when key executive openings arise? The answer in some cases may be clear particularly if a well thought out succession planning process is in place to facilitate thoughtful and orderly internal transitions. However leadership must be continually be cognizant that relying too heavily on insiders may negatively impact the quality of the senior management team if more experienced, creative and resourceful outsiders are overlooked.
A solution for the insider vs. outsider dilemma exists and many forward thinking companies rely on a dual screening process to assure that internal and external talent is vetted. By doing this, management can compare and calibrate its internal talent options against external possibilities ensuring that an array of talent is considered and that ultimately the best person is hired. Progressive thinking management should view the dollars spent on dual processing as investment spending. After all, it’s a well known fact that great people really do make a significant difference and that companies that subscribe to this philosophy generally perform better.
Clearly investing in hiring the best talent provides a great competitive advantage for businesses and other organizations. Therefore human capital investing deserves to be on par with other capital outlays designed to improve productivity and provide competitive advantages.
If you agree with this premise make sure that the people who are responsible for making key management hiring decisions are committed to selecting internal and external transformative leaders. Settling for anything short of this is silently costing your company lost revenues and profits that far exceed the costs associated with truly hiring the best talent.