Promoting from within can be a very effective way to build your leadership and executive team. If you promote based on both performance and potential, these leaders are people who already know and understand your organization, values, products or services, customers, and objectives. Investing in and developing internal talent builds bench strength, keeps potential leaders engaged, and creates a culture of accountability, continuous learning, and improvement that can help drive your business forward. Internal hires can have an impact on business outcomes more quickly and cost-effectively.
The research has been done to back up these statements. In a study by Matthew Bidwell which compared internal to external hires, internal hires were often the better choice. Not only did they cost organizations 18 percent less on average than external hires in the same role, they also performed better on performance reviews. Most importantly, external hires were also 61 percent more likely to be fired.
Even so, according to Fortune, more than 50 percent of executives fail within the first 18 months of taking on a new job. And when turnover costs for executives can exceed 200 percent of their salary, high failure rates are highly detrimental to your organizational success. So why do so many organizations watch their newly promoted executives fail in their new roles, and what can they do to avoid these failures.
Why newly promoted executives fail.
While it’s true that an internal hire may have an advantage over someone who has just been brought into an organization, this is not an excuse to simply leave them be and assume that they will be successful right away. Many companies believe that the need for a comprehensive onboarding strategy diminishes when the new leader is promoted from within. But the fact is, the factors that got the leader to this new role are not enough for them to maintain performance.
Each time a leader changes roles, the level of complexity escalates and objectives and outcomes become more uncertain. To be successful, executives need to build adaptive capacity and find new ways of doing things. And as expectations and reporting lines change, they need to start building new relationships with key stakeholders within and outside the organization and update their current relationships with direct reports, peers, and their CEO.
Without the ability to acquire, implement and develop these capabilities, it’s very difficult for newly promoted leaders to have success. Eventually, they either leave voluntarily to find a new opportunity, are fired as a result of poor performance, or end up languishing in a role where they are just competent enough not to be let go. Do any of these scenarios sound as if they add real value to your company?
How can organizations minimize the risk of failure.
Leadership and executive development benefit the entire organization. Not only does it lead to better performance, but it also improves retention, engagement, and satisfaction. This trickles down from the executive level to their teams and the rest of the organization, creating a positive environment where everyone is working toward the same outcomes.
To create this environment and minimize the risk of failure by new executives, organizations must develop a strategic and powerful onboarding strategy for internal hires. You need to set the stage for effective assimilation and engagement through a structured and well-defined process. While it will look different than the onboarding strategy for new hires, it is equally if not more important to propel your leaders and in turn your business, to success.
An effective executive onboarding strategy is designed to help newly promoted leaders understand the organization’s expectations, shift their mindsets, behaviors and relationships, recognize business imperatives, and implement strategic action plans.
With a skilled executive onboarding coach, new executives can integrate in a more structured and effective way. The coach can help the executive set their agenda for their first 90 days, gain feedback and insights from key stakeholders, and take the opportunity for a strategic time out to practice their newly acquired leadership skills and capabilities in an open and supportive environment.
My challenge to you - evaluate your internal onboarding process.
It’s easy to think that internal hires can simply hit the ground running when promoted to an executive role. And though it’s true that internal hires may have more insights into the organization, culture, products, and services than an external hire, they still need to be supported during and after their transition through a defined executive onboarding strategy. To get started:
Determine the cost to your organization should a newly promoted executive fail within the first 18 months in their new role. Evaluate your current executive onboarding process and identify any gaps.
Partner with an experienced leadership strategy firm to design a comprehensive internal onboarding strategy that addresses any identified gaps and builds additional value-generating activities into the onboarding process.
Partner an experienced executive onboarding coach with your transitioning leaders to greatly improve their success and to realize a return on investment immediately.
Jennifer Collins is CEO of Radiant. Learn more about their leadership services.