When leaders retire or leave their roles, businesses lose money. Hiring external leaders is expensive and time-consuming: On average, you’ll spend over 30 days to hire new leaders, with the time to fill (the period from job opening availability until hiring) much longer than that. In fact, time to fill can last up to 45 days for low-level roles, and headhunters often quote six to eight weeks simply to create a shortlist of candidates for higher-level executive roles (actual time to hire for executive roles can exceed 100 days).

Additionally, once you make that shortlist, you might find some candidates don’t fit your organization or leadership style. Take JCPenney’s optimistic hire of Ron Johnson, a promising leader who fronted Apple as the tech giant expanded their successful retail stores. At JCPenney, Johnson’s policies saw stocks crash, sales drop 28%–32%, and poor pricing strategies that resulted in this expensive new leader being fired just 17 months after hire.

The SHRM Talent Acquisition Benchmark shows only an average of 25% of roles are filled internally. Yet, developing leaders internally enables your organization to train people to take on responsibilities in a way that aligns with its values and meets its needs — without paying the high cost of outside recruitment.

We’ll walk you through six strategies for internal leadership development that’ll save your organization time and money and produce strong, capable leaders from your own personnel.

Build a leadership pipeline

A leadership pipeline functions as a shortlist of internal candidates who show promise for leadership positions and have a clear path to get there. This starts with determining which positions you have to fill, your deadline to fill them, and what a well-developed candidate for that role looks like. Follow the below steps to construct a robust leadership pipeline: 

  • Identify leadership positions and create a corresponding leadership matrix.
  • Rank how critical each leadership position is using a scale (usually 1–3. For example, a score of 1 would apply to a team lead in a primarily self-managing or mature team, while a 3 could be assigned to a CFO whose absence would cause critical processes to stop and the business to lose money).
  • Use predictive analytics or manual prediction to determine when you have to fill those roles. How long do people stay in the organization? What’s the churn rate for leaders? Who’s close to retirement? Is anyone showing signs of discontent?
  • Establish what success looks like in those roles. Normally, 360-degree feedback, competency matrices, and behavioral interviewing will reveal what traits leaders have. At the same time, it’s important to keep in mind that success varies by role, and significantly different people can make significant achievements in the same position.
  • Develop a prioritization matrix for hard and soft skills in leadership roles (e.g., for team leads, soft skills like people management and emotional intelligence are more important than business strategy and long-term planning).
  • Construct development tracks, prioritizing critical roles
  • Use internal assessments and performance testing to highlight strong candidates for upcoming roles and move them into those development tracks.

Each organization takes a different approach. For example, you may choose to have discussions with prospective leaders about growth opportunities and how development will affect them. Others prefer to develop all employees and introduce leadership as an option for promising candidates fairly late into the process.

Integrate personal development as a standard

Providing opportunities to grow in a career improves motivation and workplace engagement through fresh challenges. Giving your employees the tools and platforms to do their jobs better should be standard across the company. You can achieve this by offering on-demand professional development opportunities (by team or function) and coaching and mentoring

For example, a digital learning portal gives people access to training and development for a wide variety of skills that add value to your organization. This allows even those who aren’t moving into the leadership pipeline to grow professionally and advance their careers.

By continuously providing challenges, your employees will stay interested in their work and remain productive. It also encourages people in your leadership pipeline to pursue specific training programs and coaching without explicitly promising a leadership role in exchange, as they aren’t always available.

Implement horizontal movement throughout the organization

Diverse experiences are key to cultivating leaders who understand the organization from multiple perspectives. Rotating between different roles and departments has been a standard practice in leadership development for decades, and creating natural, horizontal movement throughout your organization supports this nurturing. It also enables people you don’t explicitly recognize as potential leaders to develop themselves and broaden their professional horizons

Embracing horizontal movement requires you to develop internal job boards and hire from within the company. It could also mean implementing skills-based hiring, where you create a matrix of skills relevant to roles and hire candidates based on their competency in those skills.

Flatten hierarchy to spread leadership experience

Organizations (even large ones like Facebook, Amazon, and Google) are increasingly moving towards a flatter hierarchy, especially at the team level, where Agile and Scrum push teams towards self-management and self-organization. While this might seem counterproductive to leadership development, it can actually benefit your efforts. A flattened hierarchy exposes all personnel to leadership roles and tasks, encouraging the behaviors and skills necessary to lead while still offering the support of team leads and Scrum masters. 

Flattening hierarchy is a big step though, especially if your organization hasn’t developed plans to that extent. Still, many organizations are shifting away from delegation towards encouraging individuals to self-organize and develop the confidence and experience to create outcomes on their own — with support rather than direction from leaders.

Train and coach employees before their promotion

Moving into a leadership position requires a significant mindset shift. As such, new leaders often need significant coaching and mentoring to adapt to their roles as facilitators and coaches. 

That should come before employees are promoted to higher-level roles, or at least be incorporated as part of their transitional period. It can also be helpful to shift people into in-between roles, such as product manager, where some technical work is still required, but a larger portion of the role is built around facilitation and enabling work to happen. During this time, you can offer training and coaching and see how well the individual adjusts their mindset. 

Let employees decide how much to invest in their careers

It’s important to create development opportunities across your organization. However, those programs don’t have to be mandatory. Some required education is good, for example, when people adopt new roles. When you move people into leadership roles especially, delivering leadership courses (online or via workshops) provides the tools, vocabulary, and skills to perform well in their new job.

At the same time, offering opt-in programs like optional workshops, training programs, and on-demand development enables you to see who’s motivated. For example, someone who takes every available course, pursues on-demand development, and talks about their career track with HR shows high ambition and likely possesses many of the behaviors you want in a leader. Actively developing their behaviors and skills can help you pinpoint your organization’s next crop of potential leaders.

Invest in internal leadership development for a powerhouse company

Filling leadership roles externally can be significantly time-consuming, risky, and expensive. According to the Korn Ferry Group, finding new leaders for mid-range positions will cost 20% of the role’s yearly salary to hire, while for executives, it skyrockets to 213%. Instead, take that same budget and invest it into your existing workforce.

This brings numerous benefits, including a shorter time to hire (because you already have people in the pipeline) and increased employee engagement (because you provide professional development and advancement opportunities).

Most importantly, by expanding the skills and competencies of your individual employees, your organization will enjoy greater success and cultivate capable leaders from within.