As a business grows new positions are created and the challenge to fill those positions with quality personnel is never an easy one. Arguments can be made for either promoting internally or hiring externally. Below is a look at both positives and negative of promoting internally and hiring externally you may want to consider.
Positives for Promoting Internally:
The break-in period will be shorter because of their familiarity with the firm and its terminology. It can be cheaper due to a reduced need to do expensive advertising and to orient an outside hire.
Internal candidates generally have no other external offers so
1) there is less likelihood of a bidding war and
2) they are less aware of market salaries so they're less likely to demand a higher pay rate than what was offered.
There can be a more accurate assessment of internal candidates because they are "known" due to inside the firm references and performance assessment records.
Because internal promotions know the culture already there will be less of a chance of a failure due to a poor "company fit."
Promoting from within allows us to do almost all of our external hiring at the "entry level". Entry-level jobs are cheaper to fill, have a larger candidate pool and it gives us more time to train and assess those that aspire to reach higher level positions. Also if we make a "bad" hire the dollar consequences are lower for entry level hires
Internal hiring reinforces the culture and sends a message that loyalty and performance will be rewarded with a promotion In periods of high employment there may be few external candidates to consider, so internal hiring is the only available choice
Negatives for Promoting Internally:
Many internal placement systems are based on seniority, which may not result in the highest quality hire in a fast changing industry.
When contacts and experience in areas that are new to the firm are required, internal hires just don't qualify.
So called "inbreeding" where the lack of diversity of ideas and thinking occurs as because outside "blood" and contra thinkers are not brought in to the firm at higher levels.
Unless there is a good development/ training program, internal promotions may be slow to reach their expected productivity levels. The cost of internal development programs may be higher than hiring "already trained" external talent.
Promoting the most experienced or skilled person does not always mean the candidate will succeed. The skills required to be a great player are different than for being a great coach.
There is a tendency for managers to hire "people they know", which can frustrate any isolated or less connected workers. .
Reasons to favor outside hiring:
New hires can help you identify other potential candidates to "poach" from their firm.
New hires ask "why we do things that way" so we are often forced to re-think the way we do things.
It keeps our employees on the edge because they know they must compete against outsiders for jobs.
Outside hires don't have political alliances already set up. This can help them implement new ideas without the "baggage" of past political battles.
Already trained external hires may give us "instant talent" for new products, programs, and skills.
In a stagnant culture, "outsiders" might help "shake things up" and help us evolve our culture.
Problems with outside hiring:
Outside hires can weaken the corporate culture by bringing in counter culture people.
The turnover rate for external hires is almost always higher than internal promotions because the candidates must both adjust to a new environment and they come to us as relative unknowns.
In a tight job the (potentially) higher starting salaries of outside hires may cause internal equity issues and eventually increase all salaries. .
Hiring talent away from customers and suppliers may harm your business relationships.
Legal issues can occur when hiring intact teams, top technical talent with non-compete agreements.
External hires have already demonstrated their lack of loyalty by leaving their firm. They may have the same lack of loyalty at our firm, resulting in a high turnover rate.
