Friday, September 30, 2011

Why growing talent from within is a smart rule of thumb

Succession planning is a very big deal these days. Put another way: growing and keeping talent for rainy days and beyond. But what I have always found puzzling is the tendency for many organizations to look outward rather than inward, thereby ticking off a lot of people. Why is the “devil you don’t know better than the one you do” in so many recruiting efforts?

Maybe it’s the quick fix approach in search of the Holy Grail. That shiny new person, full of energy, exuberance and efficiency tools will shake things up a bit. Get people moving. Save some costs. And above all improve productivity.

If it were only so simple. Organizations must refresh with new hires but not at the expense of ignoring those within. If everyone is counted in instead of being counted out via a “high potential” selection process upfront, the organizational culture has a greater chance to flourish.

There are plenty of studies showing that superstars don’t contribute as much as you think to organizational success. A superstar is one member of a team. All other members play different, yet important roles in getting the job done. If the superstar is an outsider, that person has a distinct disadvantage - not having a deep knowledge of the business. If the powers that be signal that an outsider is the best choice, the lines harden internally making the job of the new recruit almost impossible. Besides, like any economy, all “classes” are needed to contribute to growth and robustness. The worker bees do good!

But, what about the value of recruiting outside CEOs? Joseph Bower at the Harvard Business School has analyzed 1,800 successions and written about them in his book The CEO Within: Why Insider-Outsiders are the Key to Succession. Bower’s findings confirm that an organization’s performance financially is “significantly better” when persons who are insiders move up to the top job. This flies in the face of the conventional wisdom of boards.

In Bower’s words, “it takes hard work to grow talent”. That’s why human resources departments are vitally important for guiding the talent strategy and setting up the right supports and systems for many to flourish. Nature does well with diversity. So can we.

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