Making internal boardroom appointments pays dividends

Citation

Uren, L. (2012), "Making internal boardroom appointments pays dividends", Strategic HR Review, Vol. 11 No. 4. https://doi.org/10.1108/shr.2012.37211daa.002

Making internal boardroom appointments pays dividends

Article Type: Strategic commentary From: Strategic HR Review, Volume 11, Issue 4

Thought leaders share their views on the HR profession and its direction for the future

Lesley UrenCo-founder and Director of Consulting at Jackson Samuel.

Whether to grow top talent or buy it in is a common debate within organizations, especially when they come to form the talent principles or philosophy that will shape their talent management approach (Jackson Samuel, 2007).

While most great organizations know that, in the true sense, talent management is about identifying and developing internal talent, they often hit a stage in the succession planning process where they start to look for talent externally. The reasons can be varied: perhaps their internal talent is not quite ready for some of the most senior roles, or maybe there is a feeling that it will be beneficial to bring in fresh talent that can respond to a new strategy. Alternatively, the internal politics may not allow for certain people to be selected over others.

Whatever the reason, the “Should we grow or buy top talent?” decision is always a tough one and has wider implications – such as the messages and signals that such decisions send to the rest of the organization, and also the costs associated with searching externally.

Different approaches deliver vastly different results

Talent management specialists Jackson Samuel sought to explore the impact of the promote or recruit decision by comparing the Total Shareholder Returns (TSRs) delivered by a cross-section of leading-edge global and national organizations, and mapping them against the percentage of internal executive committee appointments made by each organization. (TSR is defined as the percentage change in the value of an investment in the shares of a company from year 0 to year 5, when dividends are reinvested in those shares.)

Interestingly, this research revealed a significant correlation between the percentage of internal appointments made into an organization’s executive committee and TSR. The average TSR delivered by organizations where more than 50 percent of top-level appointments came from within was a massive 51 percent higher than that delivered by organizations where 50 percent or fewer executive committee appointments were internal.

The average TSR for organizations where more than 50 percent of top level appointments were internal candidates was +28 percent, while that dropped to -23 percent in organizations where 50 percent or fewer of executive committee appointments came from within – see Figure 1. In fact, a mere one-third of organizations that had brought in more than half of their top talent from outside had actually delivered a positive TSR.

So why is there such a marked difference?

Great talent management is about matching the right person to the right job, and on occasions that may indeed mean having to look externally. But, why is it that organizations where a majority of the executive committee are internal appointees deliver on average a 51 percent higher TSR than those where external recruits are in the majority?

Drawing on our experience and expertise as specialists in talent management, we know that talented people who have worked within an organization for some time – during which they have built a tacit understanding of the business, the people and most importantly “how things really work” – are generally better equipped to generate the best results. Internal appointees can also be stronger because they have been developed by an organization’s own talent management program, which will have been structured to not only meet the specific developmental needs of their own talent populations, but also with a view to delivering suitably skilled and experienced talent as part of a well-managed succession planning process.

Identifying, developing and promoting internal talent to the top positions also sends a strong, positive message to the rest of the organization. This highly visible demonstration of how you view and value your internal resource, and the resulting top-level opportunities that exist for internal talent, will have a positive effect on employee engagement, motivation and also on individual and business performance.

How to deliver bottom line benefits through great talent management

The benefits of leveraging talent internally are clear, so how can this be achieved? We suggest a five-step approach (Jackson Samuel, 2011):

1. 1.

   Identify the key value generating roles within your organization and the skill sets required to successfully fill these positions.

2. 2.

   Identify, segment and get to know all the talent (including leadership, technical, operations, etc.) within your organization.

3. 3.

   Develop personalized talent development plans for each individual.

4. 4.

   Map out career progression plans for your talent population, so that individuals are suitably developed and nurtured in readiness to take their place on the executive committee at the appropriate time.

5. 5.

   Deploy your talent in the roles that are best suited to their own skills, ambitions and the needs of the business.

About the author

Co-founder and Director of Consulting at Jackson Samuel, Lesley Uren is one of the leading thinkers working internationally in the field of talent management. Her depth of expertise comes from over 20 years’ senior-level corporate and consulting experience, allied to her ongoing commitment to applied research. Over the last eight years, Uren has led and co-authored four substantial pieces of research into talent management, which have made a significant contribution to understanding what organizations need to do to manage their most talented individuals effectively. Lesley Uren can be contacted at: lesley.uren@jacksonsamuel.com