For any organization to be on a sustained growth journey, it is imperative to have a continuous presence of effective leadership at the top. An unplanned or unexpected exit can lead to a crisis in the organization with widespread ramifications. Given the increasingly dynamic environment influenced by shareholders, market, technology, and government regulations, the tenure of leaders at the top is becoming uncertain. In such times, organizations are often faced with a choice of identifying leaders from the internal pool vis-à-vis other organizations.
The right leadership: Looking within
To prevent organizational turmoil due to a sudden absence of top leadership, Indian organizations are increasingly selecting leaders internally through a process of succession planning. Planning for successors from within lends a certain level of predictability to the future of the organization. It not only conveys the strategic direction that the organization intends to take, but also indicates the approach that it would adopt to move in the said direction. Succession planning also provides some assurance about the continuance of current organizational values and the fulfillment of expectations from the successors. Besides, the appointment of future leaders from the internal talent pool makes a statement about excellent leadership development programs and the confidence of the organization in its resources.
A decision to choose a leader internally presents additional advantages. The leader understands the organization’s vision and strategy, knows the existing strengths and weaknesses, and is aware of the business processes and procedures. Most importantly, the values and culture of the organization are ingrained in a leader who has been around for a while. All these factors facilitate a smooth transition in leadership, ensure the continuance of business strategy and operations, and create certainty about financial stability.
Planning for a successor involves grooming the potential leader ahead of time. Not grooming the next rung of leadership is bound to cause situations in which no one suitable candidate in a position to assume the reins of the organization when the time comes. The second rung is generally responsible for managing specific business functions, product lines, or geographies. A leader selected internally without being groomed may find it challenging to think, plan, and act from the standpoint of achieving the broader organizational goals. Similarly, without prior training and support, they might find it tough to make decisions that have an organization-wide impact.
The flip side
There are, however, some risks in choosing a leader from the internal pool. It may create unrest amongst the top management team comprising of peers who may be discontented with the elevation of one of their colleagues. Consequently, the new leader may find it challenging to influence the top management team. Moreover, new leaders may find it challenging to embrace new ideas, technology, processes, and strategy, thus reducing the possibility of organizational change initiatives. Additionally, internal succession planning may not work in organizations that are small or that do not have a well-structured second rung of leadership. It also may not be beneficial if a conscious decision is made to steer the direction of organizational growth by bringing about a drastic change in the vision, mission, and goals of the organization. In such a situation, organizations would prefer to select a leader from outside who comes with a fresh perspective.
A leader chosen externally may find it easier to build credibility and gain respect from the top management team. They may be able to introduce enterprise-wide changes to align the organization with the changing environment and take the organization to the next level of performance and growth. Similarly, new leaders may bring about a new vision and generate fresh ideas and change the way communication is done, and operations are conducted within the organization. However, a lack of understanding about the existing organizational values, culture, processes, and people may create impediments to the effectiveness of the new leadership.
To summarise, the selection of leaders based on an internal pool may work well for organizations that intend to follow a defined strategic direction on the foundation of existing values and culture. In this regard, succession planning for leadership positions gains prominence as a strategy. However, hiring leaders from outside may be an appropriate solution for organizations that intend to make a fundamental strategic shift and are willing to change their path to achieving the transformation.