When hiring your next CEO or director, bear this in mind: research has revealed that ‘growing your own’ creates better perceived, more highly regarded leaders than hiring externally.
 

A majority of UK employees have more respect for leaders who have worked their way up through an organisation. Two thirds of the employees surveyed considered ‘home-grown’ managers to be good or very good leaders.

This perception, however, contrasts with current leadership reality at UK organisations. The majority of UK companies hire externally for leadership positions. Only 38% have leaders in their companies that are promoted internally, with just 35% of future leaders identified and nurtured through leadership programs.

Worryingly, the research indicates that current leaders – under more pressure during the recession – are losing the confidence of their employees.  Of the 1,020 employees surveyed, only 38% were confident that their leaders and senior managers will bring the company through the recession.

The Taleo study of UK-based organisations with an average employee size of 1,600 consideeds how companies find and develop strong leaders. Theyclaim British businesses are not optimising their internal development of talent, leading to an overall lack of confidence in business leaders.

Key findings:

• Internal is best – Internal promotion is the most effective leadership development strategy. 66% of companies who recruit from within have leaders regarded as good or very good, compared with 51% who generally recruit from outside the organisation

• Confidence is lacking – Only 38% of employees are confident that their leaders and senior managers will bring the company through the recession. Just 35% think their leaders effectively communicate company goals and objectives

• Mobility and feedback drive engagement – In terms of impact, 76% of employees say they would be more committed to their company if they had a clear view of promotion and job opportunities, while 74% say regular appraisals would drive up their level of commitment.

“In difficult times, employees turn to their leaders for direction. They put their trust in leadership’s ability to do the best for an organisation and see it and the employees through the hard times,” said Alice Snell, vice president, Taleo Research. She continued, “To have the right people in place at the right time, companies must have a robust talent management strategy – enabling leaders who strengthen an organisation to be identified, developed, and retained.”

Snell added: “The findings of the Grow your own CEO study highlight large gaps between leadership development best practices and organisations’ actions. By investing in internal talent, giving people broad-based development programmes and visibility into opportunities throughout the organisation and the means to take up these opportunities through internal mobility programmes, companies can maximise their own talent assets. Organisations can build greater productivity and motivation from employees and benefit from superior leadership.”

In addition to direct cost savings associated with internal mobility instead of external recruitment, employees promoted from within deliver greater productivity faster. Using an employee who already understands the culture and practices of an organisation means leaders are more productive quicker. A recent study by Mellon calculated the Median Time to Full Productivity for external executives at 26 weeks and internal executives at 16 weeks.

Snell concluded, “If, as PricewaterhouseCoopers’ Global CEO Survey states, 97% of CEOs describe access to and retention of key talent as their number one source of competitor advantage, many are missing opportunities by not having structured mobility and performance management programmes in place. Apart from identifying and guiding the leaders of tomorrow to deal with ever-changing business challenges, the presence of leadership and development programmes drives up engagement by 67%.”