A lauded human service organization finds itself at a crossroads. Its longtime CEO, who has ably led the organization for nearly two decades, is ready for retirement. When the board retains an executive search firm to help them identify their next leader, the search committee proves receptive to advancing someone from within the organization. But when it’s time for the consultants to evaluate internal applicants, they’re met with gaping holes in key experience areas—a highly capable COO never charged with any level of fundraising, an innovative VP for Programs who never interacted with board members outside of structured meetings, a dynamic external relations executive with only a glancing understanding of the work performed on the ground.
Given the proper commitment of time and resources, any of these individuals could have successfully stepped into the CEO’s chair. Armed with both a deep understanding of the organization and a well-balanced set of leadership qualifications, the learning curve for these internal candidates would have been much shallower than for an outside hire. But because the work of these top executives remained siloed over the course of their careers, their resumes wind up in the middle of the pile—and over the next few years, they all depart for opportunities to develop professionally elsewhere, creating upheaval for an organization in transition.
Even with a strong newly recruited hire steering the ship, this scenario is far from ideal.
Why look closer?
While external candidates can provide a fresh perspective and new networks for an agency looking to shake up flagging programs or solve endemic cultural problems, there are obvious benefits to having strong internal professionals as part of the candidate pool—particularly for organizations looking to extend and build upon existing successes.
Studies of corporate executives have found that internally promoted CEOs outperform external hires in improving shareholder returns, according to the Harvard Business Review, partly because they require no lag in getting up to speed or integrating into an existing organizational culture and carry with them an inherent understanding of what needs improving and what already works. A familiar face at the helm provides a helpful staging point for community relations—and internally, seeing colleagues advance professional builds staff morale and a positive organizational culture.
The very best recipe for hiring a talented, well-matched CEO is a thorough executive search process that includes both a full examination of leaders in the marketplace and a sharp eye out for in-house talent who are ready to step up—and yet all too often, a docket of strong internal candidates is seen as a lucky break rather than a carefully planned certainty.
As part of a 2014 study by The Conference Board, the Institute of Executive Development, and Stanford University, 39% of surveyed board members reported that they currently had no internal executives who could take on the organization’s top role on a permanent basis. Meanwhile, only 55% of respondents claimed that they understood the strengths and weaknesses of top staff “extremely” or “very well,” highlighting a communication breakdown between the board and staff—wittingly or unconsciously blockaded by current CEOs themselves.
How does this happen?
Time is the key reason succession planning falls by the wayside. Both CEOs and boards have increasingly jam-packed dockets, spending every spare moment grappling with the minutiae of day-to-day administration. Apart from the days boards and staff set aside for long-term strategic planning, it can prove challenging for board members and CEOs to fit another major ongoing responsibility into their busy schedules.
Another daunting factor is the board-CEO relationship itself. Board members might be careful not to undermine the autonomy given their CEO by explicitly demanding a succession plan and closer, more open relationships between board members and staff. Likewise, a CEO might feel reticent to discuss a plan for departure, fearing that such a discussion might undermine their own tenure and lead to an earlier transition than they’d hoped for. Lastly, there may be some worries over how best to promote the development of staff members without creating a competitive, toxic environment, in which executives feel they’re in a race for the top seat.
Overcoming the hurdles
If staff development is built into the day-to-day life of the organization in an intrinsic way, it will quickly feel like a way of working rather than an imposition. Open communication about succession planning between CEOs and board members can clear the air around what might initially feel like a tricky subject—and the very act of mentoring and developing staff only strengthens the leadership capabilities of CEOs. Likewise, a well-planned, holistic strategy for staff development and team-building will ensure that the organizational culture is one of camaraderie and mutual respect, in which every staff member feels valued as part of a team and roots for the success and growth of his or her colleagues.
With that in mind, here are six quick strategies for bolstering your leadership pipeline.
6 Ways to Build Leaders from Within
While this process of investment is designed to create a talent pool from which to draw in the future, it also strengthens the quality of the management team today. Therefore, it truly is a win-win for everyone.
David Hinsley Cheng is a Partner at DRG Executive Search where he has been working exclusively with nonprofit boards lead CEO searches for over 22 years.