Early Stage to Growth Stage - Becoming a Leader From Within Most people are successful because of a wider context around them but how to understand that
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As companies grow most entrepreneurs grapple with this question of "whether we should promote our current people or hire people from outside?". There is no clear answer to this question and any answer also heavily depends on the capability of senior leaders to grow the other leaders.
First, let's look at the reasons behind growing the leaders from within.
Organization's Branding - Talented people are ambitious; they want to work where they can grow. When you look at an organization that develops its leaders, you see the values that operate there - that management invests in their people. If an organization is seen consistently investing in its employees, it sends a strong message about the growth opportunities within. On the other hand, if senior people are brought in consistently from the outside to fill key roles, not only will the more ambitious team members leave but it can also repel potential internal candidates. Before companies even realize it, good candidates start quietly passing on the company.
Two questions that arise are: 1 - How do you structure your organization and measure its performance, and 2 - What percentage of the senior management team is promoted vs hired into the role? These two questions very simply frame the discussion to understand how an organization grows its people.
Culture Code - Every organization has a set of informal structures and routines which people need to know to get the work done. These unwritten rules are so deeply embedded that it takes a while for a lateral entrant to pick up these codes and sometimes they may be unable to fit with the organization's culture. Some lateral employees also come with an authoritative attitude based on their past experience, without taking a purview of the new setting that they have entered. Openness and humility are the two key factors for a lateral hire to be able to fit into the existing company culture.
Transferability of Context - We succeed or fail as a team. Most people are successful because of a wider context around them. Their success may largely depend on their former company's resources, networks and colleagues. When these people are put in a different context the success is not guaranteed. It can become more likely if you bring on a whole strong team from the outside, but you then also have to weigh it against the potential risks of whether that whole team and its dynamic will do well in the new context.
The Myth of Experts - You need them but they also come with their own baggage. They get institutionalized and find it hard to see other ways of solving certain problems. One certainly needs knowledge but to be able to succeed in a new environment, most of it is sheer hard work, persistence and experimentation- a different skill set altogether. The curse of knowledge and experience can plague an expert who feels safer following the beaten tracks. Moreover, turning a crank is different than building a crank, and in most established organizations, you rarely have the chance to build a crank. A transplanted "expert" can end up sitting in the office wondering how to make something out of nothing when all they have ever experienced is having all the systems, processes, and resources already in place to do their jobs.
An informal fifth reason for building up from within is to grow more responsible leaders in your organization- this is one of the most important skills for any senior leader. It is crucial to take responsibility for building the leadership pipeline. The more of this we do, the more employees can also enhance their own leadership skills and careers.
Sometimes it's hard to resist the enticement of hiring a superstar, and it can be demanding for companies to have the patience to grow leaders from within. But entrepreneurs should know that there is a cost of parachuting in talent from outside. It often pays much more to nurture and promote from within.