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Promotion From Within Is Good For Companies

by Michael Stern
This week’s column won’t win any awards from my colleagues in executive search.
The latest management trend I’m seeing: more promotion from within.

At a time when business is practically dredging river bottoms to hire new executives, more Canadian companies are looking for talent the old-fashioned way – by developing it in-house.

It’s a positive trend for everyone but the headhunters. Younger executives get a chance to shine, employers save some money, and people can actually conceive of having more of their careers within one organization, instead of thinking they have to job-hop their way to the top.

Case in point:
A distribution company I know recently had to replace its VP operations. There was no clear heir apparent, so it would have been natural for the company to look outside, perhaps to a competitor. But the CEO chose instead to fill the position from within. He chose to invest in an up-and-comer from another division – someone with internal credibility who knew the company, its hot points and its culture.

Of course, companies have always promoted from within. The new wrinkle I’m seeing is that employers are now showing much more concern for helping promising internal candidates evolve from manager to executive. With appropriate training, and some ongoing consulting from an executive coach, the CEO is confident the new guy will grow into his job fast – saving the company a long search and a disruptive transition.

It wasn’t always this way. For years, most employers have followed a three -step formula for managing transitions. Step One: Congratulate the executive on their promotion. Step Two: Show them their new office. Step Three: Wish them luck.

The newcomer was left to make their own way. If hired from outside, they had to learn the company history, culture, and unique ways of doing things. If the candidate had been kicked upstairs, they had to figure out for themselves how to make the transition from middle manager to senior leader.

Both adjustments take time and usually involve bumps and bruises. But employers couldn’t see any alternative. Even if they wanted to, executives today are far too busy to mentor others.

What’s making the difference is coaching. In the past few years, a new breed of self-employed business coach has emerged, specializing in helping executives become more effective. Some are more qualified than others, of course; as an industry, coaching is totally unregulated.

But given the way business has neglected management development – happily handing it to outside consultants who could base a day-long seminar around the leadership attributes of Gregory Peck in Twelve O’Clock High – the emergence of coaching comes none too soon.

Using outside coaches is making it possible for senior executives to consider internal promotions that didn’t make sense before. By helping new executives accentuate their strengths and develop their weaker areas, these coaches help fill the leadership gaps that used to yawn too wide.

It is those gaps that normally compel companies to look outside for new talent. Sure, employers like to talk about new blood and new ideas, but company culture and experience count for a lot too.

I’ve always said that a company should hire from outside only when the external candidate is at least 20-25% “better” than the best internal nominee. It’s a pretty rough calculation, I admit. The point is that internal candidates’ knowledge of the organization, its people, its products and its goals – and the fact their character is a known commodity – can compensate for an outsider’s breadth of experience or stronger leadership skills. That could open thousands of new advancement opportunities for talented managers who are “almost good enough”, but haven’t had the leadership experience to make them shoo-ins for promotion.

If a company is willing to help an internal candidate through the transition, especially through coaching, that tips the scales even more toward promotion from within. Now you can have the corporate memory and experience, the morale boost that comes from hiring “one of our own,” plus a candidate who has an excellent chance of developing into an enviable leader.

This won’t end the “war for talent”. So rest assured: you won’t see search consultants holding up signs that say “Will headhunt for food” anytime soon. There will still be lots of poaching of top executives from other companies.

But in a war, you need all the tools at your disposal. Executive coaching is still new, and there’s still some confusion about what a coach actually does. But I believe the market is sorting itself out – and that coaching will become an even more powerful business tool.

It may even help you turn up more “diamonds in the rough” in your own organization.