Don't hire leaders, train them.

In 2016, a study was released by Harvard Business Corporate Learning that found that only 7% of the surveyed organizations felt that they had a “Best in Class” Leadership Development Program. Only 7% of organizations feel that they are truly preparing the best future leaders for their organization! According to best-selling author and leadership Speaker Bobby Umar, “Good leaders develop ideas. Great leaders develop people. The best leaders develop new leaders.” If we are to take this as truth, then that means that a whopping 93% of organizations are failing in having the best possible leadership. How much potential are you missing? Roughly 40% of organizational leaders feel that the leadership within their organization is at very good or excellent. When HR professionals within the organizations were surveyed, only 30% felt that their organizational leadership was very good or excellent.

The survey also found that nearly half of the surveyed businesses felt that, while important, leadership development was not a critical business investment. The goal of this article is to present an argument that we are failing our businesses, ourselves, and our people with this attitude and we need to retrain our way of thinking into understanding the critical importance of leadership development.

To me, one of the surest signs of organizational stability and effective leadership is promotion from within. When employees can grow from their current positions and are equipped and prepared to take on greater roles of responsibility, then the leadership has done its job. If others must be brought in to assume leadership roles, that means that the existing leadership has failed in its number 1 responsibility of empowering others to grow, develop, and ultimately succeed. 

One of the many invaluable lessons that I have learned over the years is that no one is irreplaceable. At any given point, any of us can be plucked from the position we are in and placed somewhere else or eliminated altogether and our industry would not collapse. But if you were to be pulled from your position (whether it be for promotion, retirement, etc.) or had to take some time away from your duties, have you enabled others to be able to step up and take over the void you fill?

"I start with the premise that the function of leadership is to produce more leaders, not more followers." - Ralph Nader

At this point, you are probably asking yourself 3 things: Why should we build our leaders internally? Is it worth the investment? How do we produce more great leaders? Let’s answer these questions one at a time.

Why should we build our leaders internally instead of hiring them?

Roughly half of the entire workforce is currently made up of millennials. With approximately 10,000 baby boomers retiring each day, 84% of organizations expect a shortage of leaders within the next 3 years. This means that organizational leaders will need to either be grown organically and internally or sourced from outside of the organization. While it’s true that hiring leaders from outside of the organization can bring in fresh new ideas, it is not always the most cost efficient or supportive of the organizational culture. Shaking up an organizational culture, just to shake it up is not always a good long-term strategy, and few executives are actually very good at this.

On top of this, something to consider is that if there is a shortage of leadership because of current leaders retiring, that trend will remain across industries and make it harder to find effective and affordable leaders. Leaders that are hired into an organization are not only paid more on average than those promoted internally, but they often are less likely to stay with the organization and receive lower performance evaluations versus those that were internally promoted. According to the article by Wharton Executive Education, it can take hired leaders 2-3 years to become as effective as those who have been there already, while collecting a higher average salary. This is a huge waste of an organization’s time and money.

The military calls officers that first served as enlisted personnel “mustangs”. These officers are generally (obviously with exceptions) more respected by the enlisted personnel that they lead over officers that were placed in leadership roles right away. The idea is that these leaders will respect their personnel more because they understand the position that they are in. This understanding and respect will influence their ability to make decisions that others can trust.

 By developing leaders internally, you will get individuals that are already familiar with the organizational culture and have well adapted networks both within the organization and amongst your affiliates (vendors, partners, suppliers, etc.). Additionally, by promoting from within the organization, you can be more sure of a good fit because you will have more reference information to work with (Byham & Bernthal). Your organization won’t have to guess about their performance.

Still not convinced? Studies have found that failure rate of senior executives hired from outside of the organization is 34%, whereas those promoted from within the organization have a failure rate of only 24%. So, your odds of hiring a failure to an executive level position are greater than 1 out of 3 versus your odds of promoting a failure to an executive level position being less than 1 out of 4. What about lower level leadership positions? Overall, organizations that promote from within have a failure rate of just 14% versus the 24% experienced by organizations that hire from external sources.

That may seem like a small difference, but when it’s your organization’s money on the line, it’s all the difference in the world. They also note that organizations that rely on external sources to fill middle management positions have nearly double the turn-over rate of those that promote from within. I believe that this comes from not only the established organizational fit that we have already covered, but also a sense of loyalty to an organization that believes in its people enough to help them with opportunities to grow. Forbes Magazine suggests that people that have helped instill the organizational core values and helped the company grow are rewarded with advancement opportunities, which in turn reinforces those values and helps inspire and engage others. Research suggests that the cost of employee turnover within an organization can be as much as one and a half times the annual salary of the employee. Considering your leadership staff are generally also your highest paid, this indicates huge potential costs.

Is it worth the investment?

If nothing that was said in the previous section convinced you, consider the following.

According to training and development research, more money is spent on leadership development than any other area of corporate learning, yet 71% of companies do not feel their leaders are able to lead their organization into the future. So, is it worth it?

CEOs agree that culture, employee retention and employee engagement are areas that need immediate attention in order to continue to grow and remain competitive.

If you want to increase your return on investment, you can’t just promote the best and brightest. You have to prepare them. In order to make leadership development efforts receive the highest ROI, you must align your efforts to your business needs and consult with others when defining the measures that reflect those business needs. If you’ve ever heard of SMART planning, you know that goals should be Specific, Measurable, Achievable, Relevant, and Time-based. If you are going to make an investment into someone. Make sure you are following up on it. See how that individualis growing, what their thoughts are on their development. Be specific about what you expect from them and how you will measure their successes. Make sure that the goals you set and the measurements you use for success are both something that can be reached with reasonable effort and something that their training is relevant to the type of role they will be filling. Follow up at regularly scheduled intervals. You don't invest money into the stock market and then just forget about it do you? No, you monitor how your investments are doing and make adjustments when needed. If you take this kind of care for your own finances and investments, wouldn't it make sense to do the same for your business?

How do we produce more great leaders?

I have written before about the importance of servant leadership. You have to set the example for how a leader should act and make serving those you are responsible for your top priority.

When you want to fill important leadership roles or plan for future important leadership roles that will need to be filled, look at the personal, not just the professional, resume of the individuals within your organization. Who has the characteristics that you want in a leader? Skills can be taught and molded but personality is something that can’t. When you are wanting to build your bull pin of potential leaders, there are three groups of behaviors that you want to work on engaging your employees in building according to Sumit Harjani (2016). We need to take a systematic approach to developing leadership potential through building personal leadership, team leadership, and execution leadership.

According to Harjani, personal leadership is the ability to build self-awareness, develop emotional intelligence and influencing skills. According to leadership consultant and executive coach, Dr. Stefani Yorges, self-awareness and emotional intelligence are two of the most important characteristics she looks for when agreeing to take on a client. This ability is integral in accepting feedback and a willingness to improve. Team leadership is the ability to coach, give feedback and identify and develop talent. Who do you have that takes the time to show others how to improve? This person is already exhibiting signs of leadership that should be supported and nurtured. Third is executive leadership. This is the ability to think strategically and make decisions. I have a quote on my desk that says “Be decisive. Right or wrong, make a decision. The road of life is paved with flat squirrels who couldn’t make a decision.” As leaders, we need to match these things to our business needs and then design programs to build on these needs.

As I mentioned before, despite billions of dollars being spent across organizations for leadership development, many organizations feel that they aren’t prepared for the leadership needs of tomorrow. Are you judging the potential leaders of tomorrow based on yesterday’s business needs? One of the biggest problems with traditional executive development programs is that they focus primarily on strategy development and financial analysis rather and underplay the importance of relational, communication, and affective skills (Moldoveanu & Narayandas, 2019).

If the system does not change, it will continue to set people up to fail.

Darleen DeRosa, managing partner of Onpoint Consulting, argues that in order to identify tomorrow’s leaders from today’s organization there are 6 steps that need to be taken.

First, develop a success profile for each position. What is needed to succeed in a particular position? Create a profile of what it takes to be a successful leader in a particular position.

 Next, conduct behavioral interviews. Determine how self-aware a potential candidate is based on how they view their own performance in the characteristics that you are looking for vs how others see them.

Collect 360 Feedback. This can be tricky and requires some training for individuals in how to give effective feedback as well as how to interpret the feedback that is collected. It’s also a good idea to prepare the candidate for how to receive and accept the feedback that they get. Receiving feedback can be difficult. It can often lead to hurt feelings and resentment. Training candidates on how to take feedback that they may not like is important once they get through those feelings. Much the same way people go through stages of grief, these feelings are natural and important.

Administer Leadership Questionnaires that will allow you to measure the key characteristics, preferences, and motivations of leadership candidates in an objective, data-driven manner. 

Engage leadership candidates in simulations of the kinds of situations that they may face in the role. Perhaps have them shadow someone in the role currently or “spend a day walking in their shoes”. Experience is the best teacher. In the Marine Corps, despite the fact that there is a set rank structure and chain of command for EVERYTHING, allowing junior enlisted to lead teams conducting certain tasks or duties is an effective way to have them hone their leadership skills before they are placed in positions where people’s lives literally depend on their ability to lead.

Provide feedback to the stakeholders. Keeping the other levels of management apprised of the progress of the candidates so that they can make decisions regarding succession planning.

 Review Assessment Results with Leadership Candidates. We already discussed the importance of teaching candidates how to receive feedback. Once they are open to accepting the feedback, reviewing the results sets the basis for a development plan to grown them into the leaders you need.

Putting it together. Get help!

Using external sources to hire leaders may be expedient but is not necessarily the best option for the organization long term. You invest a lot of time and energy into your employees, not training them to become the next leaders of your organization is a waste of those resources and a huge disservice to the people you serve. I say this again, the people you serve. That is who you are as a leader, a servant.

Make it your top priority to establish a long-term leadership development program and philosophy. It’s not as easy as it sounds. I recommend bringing in an expert in leadership development and coaching, that is trained in conducting the necessary assessments, interpreting the data, and developing action plans to build your leaders. Make the investment and make it count. Building your organizational leadership brand is possible and more attainable than you might think. All it requires is some coaching to help you identify your "blind spots".

As always, take care of your people and they will take care of your business.