Leadership: Selecting vs Cultivating Talent

Every organisation has its understanding of what makes a good leader, and it is influenced by their culture, industry and even goals. However, for some time several characteristics have been largely accepted as “must have” in a leader. It is suggested that high intelligence, self-confidence and persistence are associated with successful leadership. Later, however, it was noted that said characteristics help an individual to become a leader but not necessarily to succeed in a newly acquired position. Therefore, leader selection becomes a crucial process in organisational success. There are two contrasting approaches that a business can adopt, headhunt for an already succeeding leader or train and develop their own.

Let us begin with the benefits of hiring an already succeeding leader. A key advantage of bringing an outsider is their unique baggage of experience. Foremost, they will already have experience of leading and most likely would know what works and what does not. Therefore, they might save money and resources long-term, in comparison to a newly trained leader who yet needs to trial & error their way. Furthermore, increasing diversity at the senior level can significantly increase the performance of an organisation. It is worth noting, that diversity in this context implies diversity of thought and experience. A diverse workforce feels comfortable discussing varying points of view that generate more ideas and innovations.

On the other hand, the cost of headhunting can vary significantly but no doubt that it is an expensive process. For an organisation, executive search is one of the biggest expenses. What makes it worse, is that newly appointed CEOs sometimes fail which requires repeating the hiring process, essentially doubling the costs. Additionally, there is a common belief that the best workers are not looking for a job, suggesting that top performers are already in employment. According to LinkedIn’s Global Talent Report, almost 80% of the global workforce are passive job seekers meaning that they already have a job, yet they are open to new opportunities. This puts further strain on the hiring process as it would require poaching and even greater salary offers.

Now that we have discussed the option of outsourcing a leader, let us examine the notion of the development of a leader by the organisation itself. The first major benefit of training programs is the cost savings in the long term. While the costs of leader development initiatives might be high at first in the long run it tends to be cheaper than continuous headhunting. Reports suggest that the costs of replacing an employee can be as high as 60% of their annual salary. Therefore, it could be financially favourable for the organisation to rely on internal hiring and development. Additionally, promoting leadership development training is great marketing for the organisation. Research shows that by advertising career development programs within the organisation, the employer's brand image improves. The public image of an organisation plays a crucial role in various aspects of business. Organisations with strong well-established images tend to receive better candidates for their roles and employees on average remain longer with an organisation. Therefore, it could be argued that creating leadership development programs is financially desired for organisations due to numerous advantages and side effects.

Nevertheless, no matter how many side-benefits an organisation gets from leadership training it is all meaningless if newly emerged leaders are not competent. Work literature suggests that having an incompetent leader can be detrimental to organisational performance. Thus, the process of training a future leader becomes ever so important. However, creating an effective development program is not a straightforward task. Times change and so do markets and laws, a successful leader of today might not perform in 10 years. Adopting a teleological approach to training might not be as effective as natural selection. Moreover, using present literature to train future leaders can turn out catastrophic for organisations. Ill-prepared leaders can destroy relationships, ruin the brand image and cause downfall.

Overall, the quest for effective leadership remains a dynamic and evolving challenge for organisations. The decision between hiring external leaders and nurturing internal talent presents a multifaceted dilemma. Hiring experienced leaders from outside brings immediate expertise and fresh perspectives, potentially enhancing organisational performance and fostering innovation. However, this approach incurs substantial costs and risks, including the possibility of a mismatched cultural fit and the challenge of integrating the newcomer into the existing framework. On the other hand, investing in internal leadership development programs offers long-term benefits, including cost savings, heightened employee loyalty, and enhanced organisational image. Yet, the effectiveness of such programs hinges on their ability to cultivate competent leaders equipped to meet the evolving demands of the future. Striking a balance between theoretical knowledge and practical experience is essential, as is devising strategies to mitigate the risk of talent turnover.

In conclusion, the pursuit of effective leadership necessitates a nuanced understanding of organisational context, a commitment to ongoing learning and adaptation, and a recognition of the inherent uncertainties and trade-offs involved. By embracing a dynamic approach to leadership development and selection, organisations can position themselves for sustained success in an ever-changing landscape.