Are Your Company's Rising Stars Ready for the Big Promotion? Here's How to Make Sure They Are.
With strong organizational support, your hard-working employees have a fighting chance to become your next great executives.
Opinions expressed by Entrepreneur contributors are their own.
Companies love to think that that outside hire they've just scored is the silver bullet that will solve their problems. But without constant, focused development and serious planning, that person could actually turn the organization into a bull's-eye.
Consider GM's journey with outsider Johan de Nysschen: Thinking Nysschen would serve as the shot in the arm its Cadillac brand needed to compete in the luxury car industry, GM installed him as president of the brand with high hopes. But over the subsequent few years he then served in the position, Cadillac's sales declined 11 percent.
In April, GM's top brass replaced de Nysschen with someone who had been with the organization for decades -- someone who already knew the ins and outs of how the company worked. Whether the decision to hire externally to fill the role of president was a fatal one isn't yet clear, but this story serves as a cautionary tale.
According to some schools of thought, hiring from outside your organization results in higher-quality leaders than does promoting from your rank and file. In some situations, that might be true, but as GM's experience shows, it's not always the case. Instead, executives looking to fill management positions should focus on offering continual leadership development with the intent to promote from within.
The risks of hiring externally
What's the risk of bringing in outsiders? It all comes down to squandered resources, the largest of which is money. Recruiting costs are hefty. Plus, if you have a superstar at your company who makes $100,000 but isn't ready to be promoted from within, you won't be able to hire someone at $110,000 instead. You'll probably need to hire someone at $150,000 or $200,000 to ensure this new leader can command respect from your current employee.
In my experience, a $200,000 external hire can cost anywhere between $300,000 and $1 million over a five-year period. And the largest portion of that cost occurs because of the people who have jumped ship because they weren't promoted.
If your $100,000 superstar sees someone just "5 percent better" get hired, he or she will likely wonder about the lack of help needed to make that 5 percent improvement himself (or herself). Whether that person then leaves alone or leaves and takes teammates, the resulting walkout vsn creates gaps and friction.
Investing in your people
As reported by the Harvard Business Review, about half of those executives who are hired from outside an organization reach the point of failure before the 18-month mark. It's clear, then, that an external hire likely won't be the silver bullet to solve all of your company's problems. Instead, you should focus on investing in your own people.
To do that, ensure that your current employees are ready when an opportunity for promotion comes around, by building an internal leadership development plan. Creating a framework for training your employees to take on different stages of leadership might sound daunting, but if you begin with the following steps, you'll be on track to help your workers attain their career goals and improve your chances of making successful promotions.
1. View leadership development as an investment portfolio.
You're investing in your people, so pick a small number of individuals and put a significant amount of training money into each. Sign retention agreements for your fiscal protection. Begin those talented workers' leadership development with assessments in an array of fields, from problem-solving to cognitive skill, to determine a quantitative basis for improvement.
After assessing these future leaders, determine the objective growth potential for each. Johnson & Johnson does this, as Cornell University researchers explained in an article on the conglomerate's training processes. The company puts people who want to rise through its ranks into the Johnson & Johnson Standards of Leadership program. By creating a protocol, the organization ensures all executives will meet basic skills and abilities before moving up the corporate ladder.
2. Choose short-term ways to invest your money.
After you've determined which potential leaders you want to invest in, determine the ways in which you'll do that investing. Limit your choices to short-term activities. For instance, try sending an employee to a conference and then following up after a month or two to see how he or she has implemented the knowledge gained through that experience.
Be careful about sending employees through degree programs, as those are long-term investments that often cost five to 10 times more than individual training courses or conferences. Plus, some employees will use a degree program as a résumé builder or opportunity to find other employment.
Your particular investments should be low-cost and incremental so you can evaluate your ROI every quarter. David Blake, CEO at e-learning company Degreed, agrees, based on his company's research, that smaller, more regular development opportunities are the most effective.
3. Ask potential leaders to match your dollar investment with a time investment.
Although it makes sense for you to provide your leaders with the right tools, the entire improvement process can't be up to you. The people you're investing in need to take time outside of their work lives to improve their executive leadership talents. Whether they read books, watch podcasts or take courses, their time match must be consistent and tangible.
Engage your prospective or current executives in regular one-on-one and group coaching sessions to ensure they're following through. They'll have the chance to report on what they've done, what actionable goals they've achieved and what they plan to do next.
If the coaching session is led by a current or former CEO, your executive can get feedback and advice from someone who's been in his or her shoes. As a bonus, you'll be at the forefront of your industry if you make strides now. According to a Deloitte report, 56 percent of participating companies surveyed said they hadn't prepped for future leaders, and only 7 percent had millennial-based leadership programming.
At the end of the day, the crux of your company's decision doesn't need to have an external-versus-internal focus. If you commit to improving your most talented, engaged employees through a well-structured leadership development program, the answer to that question should be a no-brainer. With strong organizational support, your hard-working employees have a fighting chance to become your next great executives.