When it’s time to fill a top position in a company, employers typically have two options: hire fresh blood from outside the organization or promote a high achiever from within the company. There are pros and cons to both approaches. Here are a few factors to consider before deciding on the best route.

Institutional Knowledge vs. Fresh Perspectives

When someone is promoted within a company, he or she likely already knows a lot about the inner workings of the organization. By drawing from institutional knowledge, a company can cut down on the time it takes to train a new employee. Being in-step with the company’s goals and culture can make an internal hire better-equipped for a leadership role, but it could also prevent the company from innovating.

Alternatively, a new hire from outside the company can bring fresh perspectives and new ideas to a company that may have stagnated. An outsider can offer new skills and knowledge that no one else in the company has. Still, these new employees will need to be trained and learn the company’s culture, and it may turn out that they don’t fit in with the company’s vision.

Employee Morale

The willingness to promote from within shows employees that there are opportunities for advancement within the company, which can improve morale. Team members who feel they have the potential for career advancement in their current job are less likely to leave and more likely to work hard. However, companies that don’t have a clear system for evaluating performance can make promotions seem arbitrary, increasing competition and causing resentment among employees. Either way, companies should have a solid performance achievement plan in place.

External Recruiting

At the same time, there are benefits of hiring from outside the organization and situations when that approach is preferable. If a company is expanding or adding service lines, internal promotions and transfers may not be feasible, particularly if specific skill sets are required in the new division. In addition, if a company is looking to grow, adding team members from the outside will help them to achieve growth goals. In any case, when companies look for top talent, they should incorporate the right interview questions into the hiring process.

Cost and Speed of Hiring

For companies that have a clear system in place, internal hiring can often be faster and more cost-effective than recruiting from outside the organization. In addition, employees promoted from within may be able to start faster by skipping the onboarding and training process.

Still, an internal hire will leave the position of the promoted team member open. Even if an employer continues to promote other employees to fill an open spot, eventually there will be a vacancy that needs to be filled from the outside. Employers should evaluate each position carefully to decide which part of the organization stands to benefit most from an external hire rather than always backfilling the lowest position in the food chain.

Whether you’re planning to make an internal hire or to launch a job search, LBMC can help. Contact us today to learn more about our services.

All content and services on this page are offered by LBMC Employment Partners, LLC. LBMC Employment Partners, LLC, is part of the LBMC Family of Companies and is an independent entity with services and products being provided exclusively by LBMC Employment Partners, LLC.

LBMC Employment Partners, LLC, a member of the LBMC Family of Companies, is a world-class professional services firm. LBMC Employment Partners provides a comprehensive suite of human resource-related services to businesses including Professional Employer Organization (PEO) services, HR Outsourcing (HRO), Payroll, Human Resource Consulting, Employee Benefits, and ACA Compliance Consulting. For more information visit www.lbmcep.com.

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