Senior executives frequently tell us that they have a policy of promoting from within. Many of the world's most successful companies have that same philosophy; however, even some of those companies must resort to going outside under some circumstances. This seems to happen when the company is in trouble and needs some new kinds of thinking and leadership to get the company back on track. A couple of examples:

Bob Nardelli…From General Electric to Home Depot: Not only did they bring in a complete stranger at the CEO level, but they didn't even bring in someone with a even a shred of retail experience. But Bernie Marcus and Arthur Blank probably made the right decision in bringing in Mr. Nardelli. They brought in a proven leader who will listen to those around him and will bring in the type of talent needed to complete the picture. He has brought in new thinking and implemented new methods and procedures that will probably further strengthen the successful organization that was built by the founders.

Paul Pressler…from Disney to the Gap: From the NY Post in November, The retail behemoth posted a same-store sales increase in October for the first time in 30 months - prompting many to predict the beginning of a turnaround. So what happened here? Pressler leaves Disney for Gap at the end of September and has already crafted a turnaround the following month? Later in the same article we read that the company's three division presidents were all hand-picked by Mickey Drexler and that the company had been doing the executive shuffle between its three divisions for the past two years…trying to get the formula right.

Time will tell about the wisdom of these two companies in recruiting outsiders from a completely different industry at the top. If both companies prosper, it will provide a strong reinforcement for the practice of bringing in exceptional leadership, regardless of their industry experience. It may also cause us to question the exclusive practice of promoting from within.

But for now, let's focus on how to make promoting from within work for the organization...such that the company never has to resort to bringing in an outsider at the CEO level. We think that a healthy combination of the following factors is a good idea:

1. A CEO leadership style that encourages thinking outside the box, challenging and questioning the current way of doing things. By encouraging new thinking all the time, the company avoids the emergency situation of having to bring in leaders at the top, a move that generally is followed by an overall cultural change…whether it is wanted or needed.

2. A culture that handsomely rewards creativity and continuous process improvement. By building this type of culture, an organization has a better chance of attracting the very best talent when it is time to recruit.

3. A company tradition of taking every recruiting opportunity very seriously…with a sincere effort to bring in the absolute best talent that will not only excel in the current role but will also be capable of taking on much larger roles in the future.

Why is Number Five so important? Because whenever you promote the wrong person, the outstanding players that should have been promoted will gradually leave the organization. They won't bolt out the door overnight, but they will leave nonetheless and they will rarely tell you the real reason they are leaving. Secondly, in addition to losing the ones who should've been promoted, the company sends a very strong message whenever it promotes people. It is telling everyone in the company the type of behavior that gets rewarded around here. If we promote the wrong people, then we are reinforcing the wrong kind of behavior in the eyes of the management organization. What does this do? Quite simply, people who admire/respect the type of executive that should've been promoted begin to reassess their long-term interest in the organization. Then when their "hero" leaves the company, they may choose to follow shortly thereafter.

So, in our role as executive search consultants, we are privileged to participate in the decision which leads up to the critical decision of "promoting the right people." And that is the decision to build an executive team with world class talent. The truly great executive doesn't just "make do" with the talent he/she was dealt. They make sure that they have superior talent in all key positions. By recruiting that superior talent on the lower rungs of the ladder, the organization avoids the need for outside recruiting at the more senior levels.

What steps are you taking to make sure that you are promoting the right people? Are you getting outside counsel? Are you conducting climate surveys? Do you really know what the masses think about the mid-level management team?

When I was Executive Vice President of Polo Ralph Lauren Corporation, I was empowered to bring in whatever staff I needed. Oftentimes, I would bring in outstanding young people and then create a job for them…even if it were simply a process improvement “special project” type of job reporting to me. In every case, the new person paid for themselves in a very short time and was either assigned a line position or was recruited to other parts of Polo within a year or less. I looked at this as somewhat of a “seeding” process for Polo; laying the groundwork for being able to do more promoting from within down the road.

FYI, one of those young “special project” people was just named President & CEO of Oxxford Clothes, the only manufacturer of hand-made tailored clothing in America He was recruited as a sales manager and then was promoted from within after the previous CEO left the company, and now he is dressing the President of the United States.

The bottom line: Promoting from within is a good idea. But in order to have the pipeline full of the right kind of talent for the top jobs later on, it is also a good idea to take advantage of every open management position to bring in the best possible talent. By occasionally going outside for this talent, you have the opportunity to continuously bring new ways of thinking into the organization.

Jim Hicks specializes in delivering value well beyond executive search. Following a 27-year career equally split between line management and consulting, he founded The Ansley Consulting Group in June of 1999. He sincerely feels that the most important decisions a CEO will ever make are those regarding the recruitment of leaders and those involving the selection of leaders to be promoted. Jim's former roles include COO of Nautica, EVP of Polo, Principal at Kurt Salmon Associates, and implementer of The Deming Method while working with Bill Conway of Conway Management. A former officer in the U.S. Coast Guard, he holds an Industrial Engineering degree from Auburn University and an MBA from The University of Hawaii.