Who doesn’t remember the tale of how Apple fell into a state of disarray after hiring John Sculley and ousting its founder, Jobs? So many alarming tales have been written about outside leaders who failed spectacularly in the job. 

While one can certainly make a case where outsider CEOs may be a better fit, leadership grooming is very crucial to have insiders move to top management and excel there.

And there are signs companies may be smartening up.

Internal CEO hiring is now becoming normalized with many high-profile CEO promotions such as Satya Nadella, Sundar Pichai, and recently Parag Agrawal from Twitter. And these CEOs have performed spectacularly well, especially the first two, despite not being founder-CEOs.

Here is why.

Importance of leadership grooming

Outside leaders fail not because they can’t fit the folks’ shoes they replace. 

It is because they fail to uncover and correct skill gaps that can derail even the most promising young executives. Outsider leaders are also more likely to fall short, especially when it comes to an understanding of the DNA, inter-organizational dynamics, and the nuances of the different functions that an insider can quickly grasp.

This problem doesn’t apply to just outsiders, though.

Several insiders fall short when promoted without a proper leadership path. 

A fairly high-profile example was that of Coca-Cola’s M. Douglas Ivester, longtime CFO, and the second-in-command, who couldn’t leverage the role/have the strategic vision to lead the company. He was later forced to resign after a short stint of 2.5 years due to several reasons, such as a sharp fall in share price and wrong PR moves.

And the tale was repeated when Barbad, ex-CEO of Mattel’s Barbie brand, failed due to micromanagement and lack of experience in finance and strategy. This, despite her growing the brand nearly tenfold in less than a decade before she ascended the top position. 

Companies typically pay far less attention to the entire leadership training process and the various stakeholders, such as the CEO, the CHRO, and the board of directors. 

Firms who get it right do so because they manage to effectively collaborate on their leadership development programs, often dress-rehearsing internal candidates for the job and providing them with challenging assignments to manage actual business lines.

Sam Palmisano, the former CEO of IBM, had this to say about leadership grooming on HBR.

“The responsibility of the CEO is to prepare multiple alternatives for the board to decide. They can go outside if they feel it’s appropriate. I’d argue you should go inside because insiders know the place the best and they’re going to have a leg up."

Set up processes to groom the next leader from within

Companies that focus on their long-term health and cultivate future leaders develop strategies to enable leaders from within. 

Here is how they build a stream of a steady, reliable pipeline of leadership talent.

Tip #1: Focus on Development

One way to provide leadership or management experience to folks is by giving them ownership to run their internal enterprises or projects. 

Google’s 20% project, a famous side project, gave birth to some of its most prominent offerings, such as Gmail, Adsense, and Google News. They were influenced by something that 3M launched way back in 1948, which promises employees a guaranteed “15% time” to dedicate their work hours to a personal project.

But, you don’t necessarily have to run a new-age organization to focus on your employee development. Managers can also make lateral moves across functions and business units in more traditional organizations. 

Case in point, according to HBR, one of Dow’s global business heads became the president of operations in the Asia-Pacific region to gain a cross-functional perspective.

You could try something similar in your organization by giving promising leaders a taste of something different from their crucial area of expertise.

Tip #2: Identify crucial positions

While leadership coaching usually focuses on the very top of the organizational hierarchy, We at Peakperformer have noticed from our experience that leadership development usually begins in middle management. 

Not only do middle managers play a crucial role in being key contributors, but your overall attrition also depends on your middle management.

HR leaders should also focus intensively on lynchpin positions in the knowledge era — jobs essential to the organization’s long-term health. While these roles are typically harder to fill, companies can focus on internal leadership development programs to ensure a healthy pipeline by monitoring the pipeline for these jobs. 

Tip #3: Develop the leadership pipeline with a bigger team

Many organizations assume that people either have leadership potential or they lack it entirely. This is a wrong take because you can teach leadership with the right executive coach just like any other skill.

HR leaders should ensure that the senior management assignments should be owned collectively by the leadership team, thus providing more than one coach for every aspiring leader.

Additionally, judging leadership potential too early and on somewhat unsubstantiated assumptions should be avoided wherever possible.

Tip #4: Ensure Transparency

In the past, organizations weren't very transparent about their performance & appraisal policies. A lot of this was done to protect the interests of those who weren't on a fast track to success or to avoid uncomfortable conversations. Fortunately, it's no longer the case today.

With open communication being the norm in modern workplaces, executive coaching is being prioritized by companies to ensure that new leaders succeed in their roles.

Given that the employment contract is now based on performance—rather than loyalty or seniority—you should make the entire process transparent so folks can get motivated and contribute better.

Tip #5: It is ok to get help

Across roles, knowledge workers are facing unprecedented challenges in a post-pandemic era. 

They need new tools and frameworks — an entirely new mindset — to successfully navigate an increasingly complex and uncertain future. 

The solution to this is leadership coaching to address the specific challenges areas of improvement and create tailored solutions to help your young and senior leaders reach their goals. At Peakperformer, we provide personalized leadership coaching and help executives resolve their day-to-day challenges.

Our digital leadership coaching platform is being used by tech behemoths such as CRED, Groww, MPL, Bizongo, etc.

We help people leaders transform employees into global leaders in a practical, scalable, and measurable way.

If you have read this far, do check us out!

Also, if you like this topic, do join us at People Matters Workforce Productivity Conference to listen more on how to build leaders from within.