When finding your next generation of leaders, it pays to start by looking within your organization. The best candidates for executive and senior manager roles are often the ones who already know your organization, its culture, and its key goals and strategies. Internal promotion carries numerous benefits for organizations, from time and money savings to improved employee retention and engagement.

In this article, we review cross-industry benchmarking data on the prevalence of internal promotion to leadership positions, explain why it’s important to track internal promotions, and provide guidance for thinking holistically about leadership promotion decisions.

APQC finds that organizations at the median have filled 45% of senior management or executive positions through internal promotion in the past three years. Organizations in the 75th percentile fill the most open leadership positions internally (60%), while organizations in the 25th percentile fill 35% of open leadership positions internally.

 Why internal promotion matters

There are many benefits to filling an open leadership position by promoting a current employee. These include:

• Reduced time and cost to fill: You will fill positions faster if you have already identified and prepared potential successors. The cost to fill will also be lower without the use of executive recruiters.
• Faster time to productivity and value-adding performance: Leaders promoted from within often have wide-ranging networks and relationships that make them effective leaders. Ideally, they have already been prepared for eventual promotion and are ready to step into the role quickly.
• Enhanced retention of people and knowledge: Internal promotion helps support retention across the enterprise. When employees see their peers being promoted, they see that advancement is possible for them as well. When leaders are promoted internally, their knowledge and expertise also stay within the organization and can transfer to others through mentoring and coaching.

Why tracking internal promotions is important

There are at least four reasons why you should measure and track your internal promotion rate for leadership:

1. Doing so enables you to be more intentional about how you fill leadership positions. With the trend toward flatter organizational structures, it’s critical to think about these decisions strategically.
2. Tracking internal hiring helps ensure that your organization is hitting its promotion rate targets and reaping the associated benefits of internal promotion.
3. Keeping internal promotion on your radar will help you remain competitive as an employer. Employees are more likely to join and stay at organizations that they see as committed to internal promotion and advancement.
4. Mandatory human capital reporting requirements and voluntary human capital reporting frameworks often include internal promotion rates in general, and sometimes specifically, for leadership positions.

Interpreting your benchmarking results

There is no ideal percentage toward which you should aim for this measure. You should interpret your benchmarking results in the context of your organization, its needs and its constraints. The following factors are important for contextualizing your benchmarking results:

• The leadership capabilities that you need to execute your organization’s mission and strategy. Are these readily available, or can they be realistically developed within your organization?
• Your organization’s retention goals and needs, including DEI-related retention goals. If you struggle to retain mid-career employees, you may want to look at your targets and performance for internal promotion into leadership positions.
• Your organization’s budget and infrastructure for identifying and developing potential leaders. Does your organization have the budget and staff necessary to identify, develop and assess potential leaders for promotion?
• Any regulatory or labor union requirements that relate to how positions are filled (for example, diversity requirements).

Build a structured approach to internal promotions

Current employment trends like shorter organizational tenure and fewer promotion opportunities mean that it is more important than ever to design a thoughtful and deliberate approach to promotion. Open positions should not simply go to external hires due to a lack of planning or strategy on your part. Ideally, there should be a rationale for your decision regardless of whether you decide to hire internally or externally.

As you design your approach, it’s important to do so holistically in a way that accounts for the areas below.

Human capital strategy

Your human capital strategy is the foundation for how your organization approaches internal promotion. At a high level, this plan should align with your business strategy and identify the people capabilities that your organization will need to successfully execute it.

Workforce planning

Your workforce plan should consider the specific skills, competencies, knowledge and experience that your organization will need today and in the future. It should account for anticipated retirements, other turnover, and internal moves, identify specific positions that will need to be filled, and select the approaches that will be used to fill them.

Succession planning

Succession planning focuses on senior leadership positions and formally makes plans for how these positions will be filled in the future. As you work to identify high-potential talent for succession planning, it’s important to look beyond direct managers for recommendations. For example, many leading organizations also leverage certified career coaches and development advisors. These roles often have the visibility and strategic focus to see the best opportunities for a high-potential employee that may not be apparent to a direct manager. Employees may also feel more comfortable candidly discussing their career goals and development opportunities with someone who is not their direct manager.

Communications

It’s important that employees know what your organization’s high-level strategy is for career advancement and leadership positions. More information allows employees to pursue career advancement proactively. It’s also critical to set realistic expectations about career advancement opportunities. Otherwise, what could be an engagement and retention tool can quickly become a driver of disengagement and, eventually, unwanted turnover.

External hires

While internal promotion brings many benefits, there are scenarios where it makes sense to fill a leadership role with an external candidate. For example, organizations getting ready for a significant transformation may want to recruit leaders who have successfully led such transformations elsewhere. Or in some cases, there simply may not be internal successors ready to fill a role. Use external hiring when it makes strategic sense given your business and workforce planning goals.

Key takeaways

Filling open leadership positions internally reduces time-to-productivity and recruiting costs while helping to increase retention and engagement. To achieve these benefits, it is critical to think strategically and intentionally about internal promotions. Your approach needs to be supported by the right infrastructure and should also make sense against the backdrop of your business and workforce planning goals. HR leaders who take a holistic approach to promotion will be well-positioned to identify the next generation of leaders and help them step into the spotlight when their time comes.

*

Data in this content was accurate at the time of publication. For the most current data, visit www.apqc.org. 

The post How to avoid overlooking your best leadership candidates appeared first on HR Executive.