Internal Promotion vs. Hiring an Outsider: 5 Things to Consider

It's always tough for business leaders to make promotion decisions, especially when it comes to choosing whether to hire somebody from outside the company versus promoting a good internal employee. There are pros and cons to both strategies. The decision ultimately boils down to whether you want to favor continuity or bring in a fresh perspective, and either direction could be appropriate for your middle market business. This can be a delicate decision, as the smaller number of employees at a middle market company means your choice won't go unnoticed.

When you promote someone internally, the immediate benefit is continuity. The in-house person is well-known to your close-knit team and has established a fit within your overall midmarket company culture, and that familiarity will help them hit the ground running. It also shows your other employees that you reward and recognize hard work.

If you choose to hire a candidate from outside the company, that person will come in with a clean slate and a different perspective. It can be refreshing to hire someone who isn't familiar with the way your business works, and the new ideas or fresh approach that the newcomer brings to the table can have a positive effect. If you're not satisfied with current results, then looking outside might be just the jolt your company needs.

When a job opening arises, use the five following points to weigh your decision:

  1. Analyze your company's current results, and focus on internal candidates first. Are you happy with the status quo at your business? If results have been satisfactory over a long period, then favoring continuity might make more sense, and you'll want to first look to one of your best in-house people. If you're seeking different results, internal development might be the long-term answer, but an outside candidate may be a better fit in the meantime.
  2. Think about how a promotion or outside hire will change team dynamics. Hiring someone from the outside may or may not offer a quick fix. The positive change you're looking for is a real possibility once the outsider learns the ropes, but consider whether that will do damage to a group of employees who already work well together. If you're happy with the results your current employee pool is generating, it may not be worth throwing a new person into the mix.
  3. Consider the cost (in terms of money and time) of promoting versus hiring. When someone moves up the ladder internally, they get a pay raise — but you'll have to draw up an entirely new salary for an outsider while spending time and money onboarding them. Building working relationships takes time, and while a new employee gets up to speed, productivity won't improve. Think about whether it's worth your time to go through this transitional period: Is the quality of the hire worth the investment, and will your team benefit drastically?
  4. Question if new blood will really usher in improvements. Will bringing someone new on board really lead to better results? According to research from the Wharton School of the University of Pennsylvania, external hires actually get significantly lower performance evaluations than internal workers who are promoted. Some findings come out in favor of outside hires, but only if you're willing to wait a while: The study shows that external people get promoted faster than internal people if they stick around for longer than two years.
  5. Decide whether a shake-up is what you need. Outsiders are much more likely to disrupt a team dynamic, but "disruption" doesn't have to be a negative. If change is what you're looking for, a newcomer may be just what the doctor ordered. If you're actively seeking change, then the transition time or a shift in interpersonal relationships could be worth it in the end.

The main takeaway is to assess your middle market company's dynamics and results. If everything is trending positively, why make waves? Focus on internal development and identify the best candidates for promotion. On the other hand, if results are flat and teams or departments aren't gelling, it might be worth the investment in time and money to bring in a newcomer. An internal promotion or a brand-new hire each have their own implications, so make a final decision based on continuing a good thing or ushering in a different perspective.

Should internal employee development be a major priority at your company? Let us know what you think by commenting below.

Boston-based Chuck Leddy is an NCMM contributor and a freelance reporter who contributes regularly to The Boston Globe and Harvard Gazette. He also trains Fortune 500 executives in business-communication skills as an instructor for EF Education. Circle him on Google+.


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