Top 10 Reasons to Consider External Candidates

//Top 10 Reasons to Consider External Candidates

Top 10 Reasons to Consider External Candidates

2018-08-30T21:19:55+00:00By |

In that we are an executive search firm, it may seem fairly self-serving to include, in our newsletter, an article advocating external hires. The obvious truth is that our entire industry goes away if organizations quit recruiting leadership from the outside. And yet, surprisingly, internal promotions are equally critical to the success of the executive search business. We have found that it is virtually impossible to consistently recruit top talent to an organization that fails to regularly promote from within. In fact, great organizations build sophisticated and valuable succession plans that preserve and perpetuate a desired culture and give employees a sense of security, direction and personal value.

When an executive opening exists, organizational leaders must first determine if it is a necessary role. Once agreement is reached that a position is to be filled, the leadership team must determine whether the organization is best served by redeploying someone internally or recruiting externally. The decision to promote someone into the role should be strongly considered, especially if most or all of the following circumstances exist:

1. A succession candidate has been groomed for the role and the promotion is part of a well-orchestrated, strategic succession plan.

2. The internal candidate possesses required institutional knowledge, the significant lack of which in an external candidate would reduce his/her likelihood of success.

3. A suitable solution exists for re-filling the position that the promoted candidate will be vacating.

4. There is no long-term threat to the organization by dismissing this opportunity to attract talent in from the outside.

5. The promoted candidate has the capacity to continue to grow into future promotions and thus does not “block” a succession path to the most senior leadership roles.

Where any of these circumstances does not exist, a prudent leader will understand the ramifications of such a promotion and will contemplate a strategy to offset the institutional concessions created by the promotion. For instance, if an internal candidate is promoted into a role but does not have the capacity to be further promoted, an organization must either identify other competent leaders within the organization who can be promoted into the most senior roles, or must establish a development plan that prepares the promoted employee for a future more senior leadership role, or must recognize the likelihood of recruiting externally for the more senior role in the future.

Like promotions, geographical and functional re-deployments can make sense. They are rarely the best reaction to a surprise departure, but they can make sense when they are contemplated as part of a larger strategically developed succession plan. Some organizations routinely and valuably move executive leadership prospects through a number of geographically and functionally diverse roles in order to associate them with various parts of a business and prepare them for increasingly responsible general management roles. Like promotions though, these decisions must be made carefully and strategically, with a readiness to recognize some of the factors that might hinder the success of an otherwise logical relocation of employees:

1. Culture is local. Cultural alignment in one part of an organization is no assurance that that same alignment will exist when an executive is moved into a different part of the business. Every large organization eventually realizes that it does not enjoy the cultural homogeneity to which it aspires. It is ultimately comprised of numerous micro-cultures that often, only begrudgingly align.

2. Family matters. The executive may love the new job, but the family may hate the new town. Too often, companies fail to adequately consider the shock that a family incurs when asked to find new schools, a new church, new neighbors and a whole new set of friends. Resentment on the part of a trailing spouse can be the total “un-doing” of an otherwise successful internal transfer. Interestingly, relocating in order to win a new job seems to create less stress than does relocating in order to keep a job.

3. Regionalism exists. In the comedic movie “My Cousin Vinny,” Joe Pesci plays a New York attorney who comes to the South to try to get his nephew out of a small town, Alabama jail. The humor plays off the stereotypically opposite styles, which every viewer sees as credibly realistic conflict that could also be played out at the office when executives are relocated from one region or country to another.

4. Skeletons transfer. Every known mistake that an internal candidate has made precedes them to their new role at a company. The one thing that benefits every new recruit to any role is that skeletons are generally left behind. Before I came to CarterBaldwin, I worked in a manufacturing plant where one day I made a big mistake that most of my co-workers knew about. As I write this, I can still feel the knot in my stomach from the second mistake that I made on the same day – when in the “privacy of my office” and not realizing that I was on the company-wide intercom, in a fit of frustration I proclaimed, “I am so stupid…I am just so stupid” – saying it and simultaneously proving it! That’s one skeleton I was glad to leave behind.

5. Stars choose. One of the most frequently stated reasons that exceptionally strong leaders are willing to take our recruiting call is that they are not excited about the geographic location that their next internal move may require. They often picture it as “having to change jobs and cultures anyway, so this is the best time for me to look externally.” Amazingly, companies that push relocations and promotions as a part of their culture without due consideration given to an employee’s aspirations, values and family circumstances, may be driving their most competent people into the arms of their competitors.

The cost of relocating an executive and then still having to back-fill his/her vacated role will not make sense unless it is part of a larger organizational succession plan, and, as we have seen, there are often hidden factors that may negatively impact the success of an internally re-deployed candidate. And if the move, for whatever reason fails, there are now two senior level vacancies with which to contend!

While in some instance the best way to fill a position may be a promotion, or perhaps even a lateral move from one function or geographical location to another, there are reasons why an organization might choose to look outside of itself to fill a critical leadership role:

 

1. To create greater diversity among your leadership team. My dad graduated from Georgia Tech in 1952. There were four Asians, but no women, no Hispanics, and no African-Americans in his graduating class. Such statistics would be unthinkable today…society is different and Georgia Tech is different. Organizations and institutions have a strong desire (marketing requirements might consider this a need) to reflect their constituents. In a common reflection of the day, the Chief Diversity Officer at a Fortune 100 company once told me, “Diversity isn’t a black/white issue…it’s green!” What he meant was that his company was determined to reach all prospective customers and that making certain that those customers felt supported and represented within the senior ranks of the company was a critically strategic component to the executive recruitment function.

The same is often truer for many not-for-profit organizations which recognize that the changing color of America requires a progressive mentality in building diverse executive leadership teams. In certain areas where minorities have long been under-represented, this creates some challenges from a recruitment standpoint, but unless the organization commits to diverse external recruitment, it has little choice but to perpetuate its current cultural demographics.

2. To avoid the success endangering variables of relocation. Discussed briefly earlier, relocation of otherwise strongly qualified internal candidates may create risk-producing stress on both the part of the candidate and the organization. From the candidate’s perspective, with a new job and a move they are experiencing simultaneously two of life’s biggest stress factors (with divorce and death of a family member being the other two). This is compounded by the fact that the family may resent the move and the complete social reorientation required by new schools, churches, neighborhood, bank relationships, hair-dresser and even friends.

These personal stressors often play themselves out exponentially at work. When a trailing spouse is unable to find meaningful employment or social connectivity, or when the kids make a poor transition into a new school, resentment builds toward the organization that required them to make a move that they would have preferred not to have made. NOTE – while I use the term “trailing spouse” to be as inclusive as possible, in many years of executive search we have found that it is actually the wife/mother in a traditional family that has the most influence on family location and lifestyle. My dad told me as a youngster, and I have found it to be true on so many occasions, “I make all of the really big decisions in this family, like who ought to be President, what the economy is going to do and whether we ought to be at war. Your mother makes all of the little decisions like where we are going to live, where we go to church, what kind of car I drive and what I get to wear.” It was funny then, but as years go by I have seen the truth of this over and over in critical cases of relocation.

3. Because the competition really is better. OK – maybe they are not better, but they are winning in some areas that you’d like to win and they have some extraordinarily talented people that you are weary of hearing about from your customers and prospects. There are four things that occur when your organization recruits the top talent from their competition:

  • Your team is strengthened. There is a morale boost that comes from knowing that, all else being equal, a competent and market-knowledgeable leader would rather work with us than with them.
  • The competitor’s team is weakened. Some organizations have obvious, strong, direct competition. In a limited market, there is only so much business, customer opportunity, market share, etc., to go around, and when you recruit key leadership from your competitor, your strength increases and the competitor’s position is compromised. Most of us want our customers, clients and partners to win, and are far less enthusiastic about the strength of our competitors, so recruiting their top talent can be a double victory…we grow and they shrink.
  • Both companies sense a victor. When one company buys another I am no longer amazed that the buying company almost always says “we acquired them” in regard to the same transaction that the bought company describes as a “merger.” There is something satisfactory about being the buyer and something far less satisfactory, unless you were a significant shareholder, about being the bought. Similarly, when you hire top leadership talent from your direct competitor, there is no ambiguity in regard to who owns the victory.
  • The market takes notice. Sometimes customers move immediately with the hire. Sometimes, for reasons of non-competes or contractual timing the move is less immediate, but when you hire top leadership talent from your competitor, you gain inertia in your market and recognition among your industry peer group.

4. To bridge a leadership maturity gap. In many instances the right succession plan and even the right successor are in place but timing is not, and the best internal candidate is not quite ready for a role that needs filling imminently. Often, the best forward move is to identify and recruit an external candidate who, at the right career stage, can lead with wisdom and competency, while simultaneously preparing the internal successor for a seamless future transition.

One company, a $500M family business has done this well over multiple generations. I met the nearly seventy year old Chairman (Buck) who was asking me to fill a Chief Financial Officer role. He told me that his father had started the business and that when his father was ready to retire, he (Buck) was not ready to accept the full responsibilities associated with leadership. Buck’s dad hired a strong executive to run the company for more than a decade while Buck prepared to take the helm. Thoughtfully, Buck brought his new boss’ son in to work at the company as well. Buck later became CEO in a transition that occurred so smoothly that when the time came for Buck to retire, he was able to appoint his old boss’ son, now a senior executive at the company, to the CEO role while Buck’s son continued to grow and learn the business. Amazingly, this company grew to significant stature with the “owning” family transitioning generational leadership back and forth between these two families as each future CEO was being groomed to take the helm.

Finding the person, who will support and cherish the culture while preparing the next internal succession candidate for their future leadership role, creates a strong justification for an external hire.

5. To support geographical expansion. If an organization needs expertise that it does not possess internally in order to support or expand in a certain country or geographic region, it will generally recruit beneficially from the outside. There are two ways that this can be accomplished:

  • By acquiring a geographically well situated company or accomplishing a mass hire “Lift Out” described more fully in #7 below.
  • By hiring leadership personnel who have already established an expertise in the geographical region that aligns with your business plan. Sometimes there are language and/or cultural barriers, but just as frequently, the value comes with the knowledge of regionally situated customers and prospects or the recognized niche that some geographies have developed, i.e. if you need someone to lead your call center in India, it is better to recruit someone with that expertise than to transfer your best inside salesperson from Des Moines.

6. To gain expertise in a market, product, technology or service offering.Perhaps the single best reason to recruit from outside of your current organization comes with the recognition that there are many opportunities for improvement to be accomplished internally and the team that is presently in charge has not yet been able to take full advantage of those opportunities. Sometimes the best talent is not only lacking within your company, it may not even be within your industry. As technology continues to shape operational culture of virtually every organization, more and more executive level positions are being filled with external leaders who have developed a certain skill set rather than internal leaders that have developed a specific product or industry knowledge.

When an organization looks to recruit outside of its industry, it is usually looking for a leader who can bring a “best practices” mentality to the organization. Sometimes specific issues like execution or institutionalization of processes become critical. On other occasions, there is a desire to expand into markets where the organization has little or no experience.

When was the last time that you saw someone with a pager? Right…one reasonably large company that built and serviced pager management networks had a very strong cash position and a market that was declining rapidly toward complete obsolescence. They determined to preserve the business by recruiting an entire senior management team that had strong telecommunications software expertise. Ultimately, they reformatted (and saved) the company by using great recruitment strategies to entirely shift the company’s core product line into a product set that was more aligned with the future needs of their then-current customer base.

7. Instead of buying a company (take their talent!). In many instances a small company that aggressively desires to grow, or a larger company that is looking to accentuate a niche area within their business, may contemplate the acquisition of a business to meet that need. Acquisitions can be very costly in terms of both time and dollars, and in some instances, the employees who made the smaller business valuable leave as soon as possible after the acquisition. There is an alternative.

Oftentimes, a small team within a larger company may feel like they are not fully appreciated, or that their relatively small scale keeps them from playing a significant role in the large company. Sometimes an entire small company may not have the resources to grow or the visibility to compete in a national marketplace. In both instances, they enjoy working together, but all of them collectively feel a bit “overlooked and unknown” in either a large company environment or in a national market where their presence goes unnoticed. The idea of recruiting a leader and his/her team in a “mass recruiting” project is known as a “lift-out” and can be deftly accomplished in certain situations.

The advantages of a lift-out include the facts that:

  • It keeps a well-functioning team together.
  • It is far less expensive than buying a company, even if you are paying hefty recruitment fees.
  • It includes only the willing employees, creating far fewer post-acquisition departures.
  • It is immediately accretive to a business plan.

In general, a lift-out can be the least expensive, most productive way to “bolt on” a business unit or to quickly expand into a new market, industry, geography or product offering. It is important to understand non-compete and non-solicitation agreements that may be in place and may restrict some lift-outs from occurring.

8. To redirect your company culture. So many times when a company is recruiting, the leadership team works to identify candidates who will be a strong cultural match. But what if the company has a culture that it does not want to perpetuate? What if the culture is broken? or unproductive? or antiquated? Given that cultural alignment is one of the four critical components to a successful hire (along with skill set, aspirational alignment and trustworthiness), it should be noted that alignment does not mean culturally aligning with where the company is presently, but more critically, with where the company wants to go in the future…sometimes the same as the present but sometimes very different.

There is no better time than when hiring a senior executive and no better means than hiring a senior executive to begin shifting company culture. If a current culture does not allow the company to hold itself accountable for reaching critical corporate goals, the board can hire a CEO that will change that culture. If the CFO has built an environment that is marked by low morale and employee turnover, the CEO can hire a CFO who can improve that culture. If a sales team has not, with ample opportunity, been able to diversify itself in order to reflect the customers it seeks to win, a new VP of Sales with a history of building diverse sales teams can solve that problem.

Cultural alignment is the most critical component to the overall hiring strategy. Every company has a culture and that culture will be either set intentionally by the leadership team or unintentionally by the strong personalities randomly placed within the organization. Wise leadership develops a model for future cultural expectations and then intentionally works to recruit leaders who will become the champions of that model.

9. To create senior succession options. Nothing works against my executive search industry more than great succession planning and yet there are few corporate initiatives for which I have a deeper respect. To see a CEO retire and to know that the board and the team have already spent, perhaps, years preparing the next CEO for this occasion, is a thing of beauty to all observers; to shareholders especially, for it assures a stable transition and the likely perpetuation of all that is good in the organization. For a succession plan to succeed, it must be embraced at the highest levels of an organization, it must be strategically intentional and it must allow for variables.

Any succession plan that allows for only one successor is fatally flawed. Along any corporate or organizational career trajectory, variables and barriers are encountered that may prevent the likely succession from occurring. Personal or family health factors may come into play. Moral turpitude has removed more than one likely successor from otherwise stellar career prospects and even an unforeseen shift in market conditions may change the direction that an organization takes with its leadership plan.

Great organizations recognize the value of “Bench Strength,” that is having the right executives on the team to lead the company even if the executive we thought would lead the company is not able or is disqualified. Great organizational leadership recognizes the importance of recruiting succession candidates into meaningful leadership roles where they are also ready to stand-in, when necessary, as the organization finds its often circuitous trajectory into the future. And a wide array of bench strength is best developed by recruiting to build a diverse management team from various functional backgrounds and skill sets and yet who share a strong personal commitment to the organization, its culture and its future.

10, To maintain an accurate benchmark for internal candidates. Based upon all of the discussion around the value of great succession plans one could argue that great organizations rarely recruit from the outside. Interestingly and somewhat conversely, I would also venture, that the least talented of leadership teams are often those who never recruit from the outside. I have, on occasion, encountered management teams where everyone has twenty years of seniority, everyone is equally over paid by market standards, and everyone basically performs at a level that would make them virtually unemployable elsewhere. In a great quote from the Apostle Paul (2 Cor. 10:12) we read, “for we dare not make ourselves of the number, or compare ourselves with some that commend themselves: but they measuring themselves by themselves, and comparing themselves among themselves, are not wise.”

Although I greatly dislike the term “fresh blood,” we have all heard it said in regard to new leadership. An organization that is content to only understand the ways it sees things and only operate in accordance with its own best practices misses the growth opportunities that come from a more diverse management team with a broader set of organizational and career experiences. It is only in comparison with a representative external field that an internal candidate for hire truly be considered “the best available.”

As any organization develops its succession plan and begins to conceive the impact that likely successors will have upon its future, it will need to simultaneously support that plan by strategically recruiting competent leaders. As various options are considered in filling its most critical senior leadership roles, the effective leader should take both internal and external candidates into full consideration.