The Benefits of Building New Leaders Internally, According to LinkedIn Data
Leaders are built, not born. Every person in a leadership role had to make the leap, at some point, from being an individual contributor to someone who leads others.
Fresh LinkedIn data reveals that most “new” leaders — people moving from a nonmanagement role into a manager or higher seniority position — make that jump by joining another company.
It’ll be a career milestone for the employee whether they’re hired from within or without — but it’s a major missed opportunity for the former employers who could have fostered those new leaders internally. That’s doubly true for companies whose workforces still feel stuck in the Big Stay: If you’re not in a position to hire new leaders, now is a great time to focus on building your own. It’s about building talent, not buying it.
Read on to learn about the positive outcomes seen by companies that do cultivate leaders; the most common skills new leaders learned right before rising into leadership; and a look at where new leaders are promoted most often.
Employees stay longer and learn more at organizations that foster new leaders
Elevating employees to be first-time leaders is correlated with some major benefits around tenure, promotions, and learning.
To understand the potential upside of hiring new leaders internally, we separated companies into two main groups: those who never hired new leaders internally and those who did.
Then we divided the second group — those who did hire new leaders internally — into 10 equally sized groups, called deciles, ranging from the 10% with the lowest rate of internal hires of new leaders to the 10% with the highest rate (also called the 90th percentile). This allows us to further distinguish between employers who made these hires rarely and those who made them often.
As it turns out, employers that frequently fill leadership positions by elevating employees to be first-time leaders see upward of:
1.9x longer employee tenures (that is, how long workers stay at the company) 2.6x higher promotion rates (that is, the share of all employees who received a promotion in the last 12 months) 1.9x greater learner engagement (that is, hours spent on LinkedIn Learning by the average active learner)
In other words, at companies that routinely build new leaders, employees tend to stay nearly twice as long, get promoted over twice as often, and spend nearly twice as long learning.
While the data can only tell us correlation, not causation, it does suggest a strong relationship: A company culture that fosters new leaders also means workers will want to stay longer, advance internally, and develop new skills — adding more value to your organization.
Before becoming leaders, people learn skills like management, sales, and customer service
But what skills were those new leaders learning just before they stepped into a leadership role? We analyzed LinkedIn profile data for new leaders — whether hired internally or externally — to find out.
Whether you’re looking to hire potential leaders within your org today or you want to help employees develop the skills to be leaders tomorrow, these are the skills worth your attention.
While some skills seem pretty self-evident (management, leadership, teamwork), some other less-obvious skills may point to what makes a strong leader.
Project management skills suggest the ability to keep things moving smoothly, particularly when directing cross-functional teams; sales skills may speak to how new leaders need to persuade and motivate others; customer service skills underline the importance of emotional intelligence and grace under pressure.
Where new leaders are hired internally more often
Finally, let’s take a look at where companies are already building new leaders at a high rate.
Geographically speaking, both the North America and the Europe, Middle East, and Africa (EMEA) regions see slightly higher rates of internal leadership development: Both are at 43% as compared with the global average of 42% highlighted earlier. Conversely, Latin America (38%) and Asia-Pacific (37%) regions had moderately lower rates.
There were only four countries in which most new leaders were promoted internally: Poland (56%), Germany (52%), Austria (52%), and, bucking its regional trend, Japan (50%). On the other end of the spectrum, India (32%), Colombia (33%), and Peru (33%) were the only countries where fewer than 35% of new leaders rose through internal promotion.
We also see some intriguing differences across industries.
The top sectors for internal leadership development include financial services (48%); manufacturing (47%); oil, gas, and mining (46%); wholesale (46%); and utilities (45%). Many of these industries involve either highly specialized manual labor or place a premium on institutional knowledge and relationships, which favors existing employees. It may be especially critical for leaders in these areas to have an in-depth understanding of the technical details and relationships at play.
On the other hand, the accommodation and food service sector has one of the lowest rates of hiring new leaders internally at just 34%. The related retail sector also has a below-average rate of internal leadership development at 40%.
These industries are home to many nonmanagerial jobs with fast-growing demand, like deli clerk, retail salesperson, restaurant specialist, and housekeeper. However, it seems these workers rarely get a chance to move into management — at least, not without changing companies. Employers in this space may find it easier to attract and keep candidates if they lay out a clear path to leadership.
Final thoughts
In a nutshell, nurturing new leaders internally pays off. Most new leaders leave their current company to enter leadership — but the employers who let would-be leaders step up without stepping out see meaningful benefits. You’re not just gaining a new leader — you’re instilling a culture where employees know they can thrive.
Methodology
Global LinkedIn data, May 2022 to April 2024. This analysis only considers new leaders, those who moved from a nonmanager role into a manager (or higher) role. The rate of new leaders hired internally means the percentage of all new leaders who entered their new role while staying within the same company. Employee tenure is the median length of time an employee stays at the same company. Promotion rate is the median percentage of all employees who were promoted. Learner engagement is the median hours of LinkedIn Learning courses watched by active learners. The top skills list considers the skills most commonly added in the 12 months prior to their promotion by members who moved from a nonmanager role into a manager (or higher) role.
