Is it best to promote internally or hire externally?
There are pros and cons to each consideration. In some cases, it is an easy decision. When there is a pipeline of strong internal candidates, hiring from within is a no-brainer.
Internal candidates already know the company, its culture, and its people. Hiring from within is cheaper and faster, plus it sends a strong message regarding career advancement.
Additionally, having qualified internal candidates reflects well on management. It should be every manager’s goal to delegate for their subordinates’ long-term growth. This includes giving tasks that will help subordinates “learn the company” and prepare them for greater future responsibilities.
There are, however, inherent challenges to promoting from within. These include turf wars, jealousy, and the potential potholes in managing former peers or superiors.
One prominent example of a failed internal promotion is the case of Thomas Staggs at Disney. Staggs was identified as the successor to CEO Robert Iger and was placed in the COO position three years before Iger was expected to retire.
Unfortunately, the transition was handled poorly. The two men’s positions overlapped and they kept bumping into each other. Ultimately, Staggs left in frustration because Iger was not ready to hand over the reins.
In spite of such failed transfers, internal hiring is typically the best move for a company. But hiring from outside becomes necessary and even appealing in a couple of specific circumstances.
1. The absence of internal candidates
In the absence of qualified internal candidates, external candidates must be sought. In such situations it is worth considering why there are no qualified internal candidates and how that might be changed going forward.
2. The creation of a new position or department
When a new position or function is created, there may be no one inside an organization with the skills or qualifications to take on that role. Here, too, one must look externally.
There are also times when a fresh perspective is needed to “shake up” an organization. A radical example of this occurred when GE’s Jeff Immelt hired 5,000 engineers and 5,000 salespeople in 2001, in order to help drive a culture of innovation.
External hires can offer fresh perspective and new ways of working. They are not wedded to existing, often outdated, processes.
On the other hand, external hires have a steep learning curve when it comes to understanding the company, people, and key issues that they will have to deal with. These barriers to entry have been shown to lower the success rate of external hires when compared with their internally hired counterparts.
THE TAKEAWAY: Internal hires offer a cheaper, faster, and often more successful option than external hires. However, external hires should be sought if there is a dearth of internal candidates or if new perspective is sorely needed.
Click here to join the DNA of Leadership mailing list