Should I hire senior leaders from outside or grow them from within?

Should I hire senior leaders from outside or grow them from within?

The short answer: where you can, grow them from within. Internal people already know your clients, your culture and how the agency really works. What they usually lack is leadership practice, and that can be developed. Hire from outside when you need a capability you genuinely don't have, then invest in helping that person settle in. Either way, the leadership work around the role matters more than the hiring decision. If decision rights are unclear, an outside hire and an internal promotion will both struggle.

Why outside senior hires often disappoint

It's an appealing idea. Bring in someone experienced from a bigger or better-known agency and they'll bring the structure and leadership you're missing. Sometimes it works brilliantly.

Often, though, it doesn't. An agency M&A adviser I spoke to recently put it simply: senior people brought in from outside often don't turn out to be as good as you think they are. I've seen the same pattern across the industry. Senior people move from agency to agency, and a couple of years later they've moved on again. The agency then promotes from within after all, because those people know the business.

The reasons are rarely about talent. The new leader doesn't yet know the clients or the history, and may be expected to fix things without the authority to do so. Meanwhile the founder or MD may still hold the decisions that matter. Finding good people was a challenge for us at 4D too, and I've learned since that how a role is set up matters as much as who fills it.

Why internal promotions struggle too

Promoting from within has its own difficulties. The people you promote are usually excellent at the work, which is why you promoted them. Leading others to do that work is a different skill. They may be leading people who were their peers last month, and they will be tempted to keep doing parts of their old job, because they're good at it and it's quicker.

Without support, that's how agencies end up with a senior team full of capable people who have each stepped half up into a bigger role.

How to decide

A few questions help:

• Is the gap a capability the agency doesn't have at all, or leadership practice that existing people could develop?

• How much does the role depend on knowing your clients and history?

• Is the role clearly defined, with real decision-making authority?

• Are you prepared to step back from the decisions this person will own?

• How much time do you have before you need the role working well?

If the honest answer is that the role isn't defined and the authority isn't clear, sort that out first. Otherwise you'll hire, or promote, into the same problem.

If you're thinking about selling

Buyers look closely at the strength of the leadership team beneath the founder. The same adviser's view was that building a proper second tier takes two or three years at least, so it's worth reviewing your leadership team around five years before you might sell. Growing leaders from within takes time, which is another reason to start early.

What makes either route work

• A clear role, with the decisions that belong to it written down and agreed.

• Visible backing from the founder or MD, including for decisions they would have made differently.

• Development for the new leader, especially in the first year.

• Patience. New habits take months to settle, whatever route the person took into the role.

I've written separately about the first 100 days for a new managing director, which applies to many senior roles.

Frequently asked questions

Is it risky to promote someone who has never managed people? There is a risk if they're left to work it out alone. With clear expectations and support, it's often less risky than an outside hire, because they already understand the business.

What does a buyer want to see in the leadership team? Broadly, a team that can run the agency and keep its clients without depending on the founder for every important decision.

Can we do both? Yes, and many agencies should. An outside hire can bring a missing capability while internal leaders grow into broader roles. The leadership team then needs time to work out how decisions move between them.

If this sounds familiar

If you're deciding how to strengthen your senior team, I'd be glad to talk through the options. Get in touch.

Suzy Malhotra is the founder of The Leadership Line, which works with founders, MDs and senior teams in creative, events, experiential and exhibition agencies when responsibility needs to move. She co-founded and ran 4D Design, an exhibition and events agency, for nearly thirty years.