DDBA 8581 Week 9 Grow, Hire or Borrow Comparison Example

Grow, Hire or Borrow the Gulf Distributor Relationships: A Sourcing Comparison for One Capability Gap That Weighs Time to Performance, Cost, Failure Risk and the Risk That the Capability Walks Out Again

Student Name

Walden University

DDBA 8581: Succession Planning: A Survival Tool of the Fittest

Instructor Name

Month Day, Year

Grow, Hire or Borrow the Gulf Distributor Relationships: A Sourcing Comparison for One Capability Gap That Weighs Time to Performance, Cost, Failure Risk and the Risk That the Capability Walks Out Again

The Gap

The Week 5 bench review found that the Gulf regional sales director's distributor relationships exist only partly elsewhere: an inside sales lead knows three of the nine distributors. Since the director's resignation, the gap is open. This comparison weighs three ways to close it: develop the inside sales lead, hire an experienced director from outside or borrow an interim sales executive on contract while deciding.

The Comparison

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Table 1

Three Options for the Gulf Distributor Relationships

What the Research Says About Each

Bidwell (2011) studied an investment bank's employees and found that outsiders brought into comparable jobs earned noticeably more than promoted insiders, were rated less favorably during their first two years and quit at higher rates. The findings come from one firm in one industry, but they caution against assuming an outside hire will deliver faster.

Groysberg et al. (2008) studied star equity analysts who moved between firms and found that their performance often declined after the move, especially when they moved alone, because part of their performance depended on their former firm's resources and colleagues. Distributor relationships are partly personal and partly the company's: distributors buy products, service and terms the company provides, not only the director's attention. An outside director would bring relationships with other distributors but would have to build these nine.

Neither study proves that insiders always win. Developed insiders become more valuable to competitors, which is exactly how the company lost its director.

The Framework

Lepak and Snell (1999) proposed that organizations should manage different kinds of human capital differently depending on how much it contributes to strategy and how specific it is to the firm: capabilities that are both valuable and firm-specific are best developed internally and retained through long-term commitment, while valuable but general capabilities can be acquired from the market. The Gulf relationships are highly valuable and partly firm-specific, which points toward development, supported by a retention arrangement.

Recommendation

Borrow an interim executive for four to six months to protect the nine relationships now, while developing the inside sales lead along a route like the Week 6 design, with a retention bonus vesting over three years. Revisit an outside hire if the lead's development stalls at six months.

Why Not Simply Hire the Best Outside Candidate

An outside director from a competitor might bring distributor relationships of their own and could be productive sooner than the inside sales lead. That is the strongest case for hiring. But the company's nine distributors are the ones at risk, and an outsider would have to earn their trust from scratch, as the portability research suggests. An outside hire would also cost more and, on the bank evidence, be more likely to leave, which would reopen the gap. The recommendation keeps the outside option open: if the inside lead's development stalls, the company will have used the interim period to learn what the role needs and can search with sharper criteria.

Retention Terms

The retention bonus for the inside sales lead should vest in thirds over three years and be paired with a clear path to the director title, so the company does not train a capable person for a competitor.

What Would Change the Recommendation

If the inside sales lead declines the role, or if two or more of the nine distributors signal they will follow the departed director, the case for an experienced outside hire strengthens sharply, and the search should begin at once.

Timing

The interim contract should start before the departing director's last day, so the nine distributors never face a week without a named contact.

Limits

Cost figures are estimates. The inside sales lead's willingness to take on the role has not been confirmed.

References

Bidwell, M. (2011). Paying more to get less: The effects of external hiring versus internal mobility. Administrative Science Quarterly, 56(3), 369-407. https://doi.org/10.1177/0001839211433562

Groysberg, B., Lee, L.-E., & Nanda, A. (2008). Can they take it with them? The portability of star knowledge workers' performance. Management Science, 54(7), 1213-1230. https://doi.org/10.1287/mnsc.1070.0809

Lepak, D. P., & Snell, S. A. (1999). The human resource architecture: Toward a theory of human capital allocation and development. Academy of Management Review, 24(1), 31-48. https://doi.org/10.5465/amr.1999.1580439