Is it better for your business to promote from within or find an outside hire?
There is no simple answer to this question and there are many definite benefits to either technique.
Before making any kind of decision, it is important to understand some of the benefits and drawbacks of each.
Pros of promoting from within
Probably one of the biggest benefits to promoting from within is that it provides motivation for your lower level employees. Your employees may have career goals or hope to move up in your organization. If you look for outside hires, your employees are given no incentive to work harder for that promotion.
Promoting from within is also beneficial in that it can save you A LOT of hiring and training costs. Don’t underestimate how costly it is to hire and train a new person: recruitment costs, hiring trainers, putting together training programs and most importantly, lost productivity while this individual is training. If you promote from within, you save on all hiring costs and the training that this employee requires will be significantly less.
Another benefit is that you would already know the promotion candidate, so there is less of a mystery as to how the employee will perform.
Cons of promoting from within
The biggest con to promoting from within is the lack of diversity and new ways of thinking that this strategy provides. If you are retaining all of the same people and hiring no new blood, the same ideas and ways of thinking will continue to be bounced off one another and reinforced. No new ideas will come about and it will be more difficult for these employees to identify problems since they are used to the environment.
Pros of outside hires
Opposite to the cons of promoting from within, hiring a new individual grants you the possibility of bringing in new ideas and ways of thinking. This means new marketing ideas, product ideas and process improvements. Just adding one new person could open up new creative avenues since they will be adding a new dynamic to the business.
You also get the benefit of being able to view the outside job pool and find new qualified candidates than the ones that you have already hired.
Cons of outside hires
Hiring someone new is expensive! Hiring, training and loss of productivity costs will pile up by hiring new people. In fact, the entire process of hiring a new person can cost 5 times the amount of the positions salary.
Also, while an inside employee would need time to adapt to a new position, a new hire will need even more time to adapt to the new employment environment.
Finally, outside hiring, as stated in the pros of promoting from within, can sap away the motivation of an existing employee who wants to move up. You may even overlook more than qualified employees of your own if you are looking for an outside hire.
There is no right answer as to which strategy is better. However, my suggestion would be to use a little bit of each technique. Allow for some new faces in order to bring in new, innovative ideas, but also provide motivation and foster employee retainment by promoting from within.