Promoting From Within vs. Hiring Externally: Which Is Better?

Promoting From Within vs. Hiring Externally: Which Is Better?

Angela MacDonald Sep 21, 2017 9:51:54 AM

It’s time to fill a higher-up position at your company, and you’ve got two options: is it time to promote someone internally, or should you search outside the company for a suitable candidate? HR managers face this question all the time, and it’s a hard one to answer. There are advantages and disadvantages to both, so let’s take a look at what might happen further down each road.

Promoting Internally: The Pros

1) Internal recruitment will support you in advancing your own talent, which in turn increases retention and can improve performance. If you’ve set KPIs to determine who your high-performing employees are, you might already have an indication of who’s excelling in their role and may need a new challenge.

2) When one employee succeeds, everyone benefits. Promoting internally is known to have a positive effect on staff morale because it’s a concrete indicator that your organization rewards for high performance. And with higher performance comes the opportunity for new or additional responsibilities, for the employee to move to a department of interest, or get promoted.

3) Internal hires also keep your hiring costs down. If you’re promoting from within, you’ll save on the cost of posting on job boards, websites, with hiring agencies, newspapers, social media or referrals. Some companies have an internal job board, but regardless if you have one or not, the up-front costs of preparing the open position are extremely low in comparison to hiring externally.

4) The hiring manager often has knowledge about internal candidates, and typically has a relationship with them as well. Knowing a great deal about your internal candidates and their performance will often shorten the interviewing process, getting you back to business sooner.

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Promoting Internally: The Cons

1) If you’re promoting internally, you may be filling one position while opening another. Your candidate’s role now has to be filled, which brings you back to the original question for this new position. It’s like a domino effect. So, if you hire internally and now have to fill that person’s position, you may be limited with other internal options.

2) Hiring internally often promotes a sense of status quo, since existing staff may stick with the same or similar ideas and approaches that they’ve historically used. This could limit your company’s opportunities to try new ideas or think outside the box. If you’re trying to really shake things up, this approach may not be as effective.

3) Even though internal hiring may offer incentives for staff and motivate high performance, it can also increase competition, which can negatively impact culture and team performance. Employees may feel the need to compete with each other to get ahead, which can cause interpersonal conflict. This may be exaggerated between employees who feel as though they’re a great fit for your open positions but aren’t promoted.

4) Advancement opportunities may cause other employees to get impatient. If employees believe that the only way they’ll get promoted is when someone leaves a more senior position, they may start looking for other opportunities with faster advancement.

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Hiring Externally: The Pros

1) Sometimes a company needs revitalization. Bringing in new candidates from external avenues can provide the company with new perspectives and ideas that may support the company’s growth and advancement. As SHRM notes, "Employers also use external recruitment to attract individuals with the necessary skill sets, especially when seeking to grow the business or take it in a different direction."

2) Hiring externally opens the company to a much larger pool of prospects to choose from. In many organizations, there are only a handful of current employees who are ready to fill an open position. Hiring externally eliminates those limits.

3) Candidates may have additional skills and experiences to complement the role.

4) There’s a lower chance for internal resentment, competition, and conflict when hiring externally. Employees may not feel like they’re competing with each other to get ahead, which may foster a more positive team dynamic.

Hiring Externally: The Cons

1) Recruiting from external sources is more expensive than promoting from within. You’ll have to account for advertising fees from online recruiting sites, recruiting agencies, social media sites, magazines or newspapers.

2) Hiring externally is also a longer process. It takes time for HR or the hiring manager to shuffle through resumes, screen candidates, and interview candidates (sometimes two or three interviews per person). This can drastically extend the length of time it takes to fill the position. In fact, Workable estimates that the average job in America takes nearly a month to fill.

3) There are limitations to how much information you can glean from a resume and interview. They might have the education an experience, but are you really getting the full picture when it comes to their behavioural qualities? Often, it takes about 3-6 months before you’ve really got a full picture of an employee’s personality and natural behavioural traits.

4) There will always be some uncertainty about how external candidates will blend in (or not) with your current work culture. Sometimes, candidates seem great on paper and in the interview, but end up creating rifts in the corporate culture. Hiring for culture fit is a critical piece when you're hiring external candidates.

The bottom line here is that there are a number of powerful benefits and critical drawbacks to either promoting from within or hiring externally. This Forbes article indicates that promoting from within is usually the preferred choice, and that the costs of hiring externally are typically quite high. But I recommend considering what your goals are for the role: what’s the impact you want this person to have in the organization? Retention rates, performance, and company culture might be positively impacted by promoting from within, but if you need an injection of new ideas to change course, an external hire might be the catalyst for significant change.

Topics: Talent Management, Hiring Strategies

Angela MacDonald

Written by Angela MacDonald

Angela is the Manager, Client Success and Training at McQuaig where she consults, educates, trains, and develops clients in regards to successful hiring, onboarding, and developing the best staff.