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Promoting senior leaders from within is cheaper and produces almost identical performance, Willis Towers Watson revealed.
Speaking at the HR Directors Business Summit, the consultant found that promoted internal candidates cost 12% less than incumbents; conversely, external hires cost 16% more than the person they replaced.
While performance indicators were more mixed, Willis Towers Watson director of executive compensation Alasdair Wood noted that it was clear that senior succession had major implications for the health of an organisation.
Also speaking at the HR Directors Business Summit, director of talent management Radha Chakraborth (pictured) added that institutional investors and regulators had suddenly woken up to senior succession.
She noted that this could produce serious demands on HR directors: “If your chairman or your CEO or CFO hasn’t done so already, they will be coming to you in fairly short order to ask whether your senior succession plans and the work of your succession committee will stand up to investor and regulatory scrutiny, which is quite an ask.”
She emphasised that with regulators soon to be on the lookout, it was on the shoulders of HR directors to ensure that their succession planning processes effectively addressed the risk that a company was unable to deliver a long-term leadership strategy because the wrong leadership team was in place, or that unexpected vacancies disrupted the business.
Chakraborty added: “The pressure cooker that you get around senior succession planning tends to derail some of the processes you have in place – or at the very least expose their weaknesses.”