When a new position opens up in your organization, are you more likely to hire from within or look for external talent?

Most likely, you’ll consider both options.  But what are the pros and cons of each? Obviously, each job opening will have independent factors that affect your decision, but it’s important to consider some factual evidence as you take on your next hiring acquisition. We compared the benefits of both to help you along in the process.

Promoting Internally

  • Saves Money – The cost of recruiting, training, and providing salary plus benefits can be astronomical for organizations. In fact, studies by University of Pennsylvania Professor, Matthew Bidwell, show that internal promotion almost eliminates the cost of hire, currently at $4000 per role. On the other hand, it costs 35% more per new employee for similar performance.
  • Lowers the Learning Curve – Your current employees already understand the ins and outs of your organizational structure, goals, and vision. They’re familiar with who they need to talk to for certain tasks, how to use company software and programs, and the little idiosyncrasies that make your company unique. With lower training costs, you’ll save valuable time and money.
  • Builds and Sustains Culture – Company culture is something that can’t be taught; it must be built from the bottom up. Mark Zuckerberg, Facebook’s CEO and founder, mentioned in a recent podcast that he believes promoting from within a company is powerful for a business’ culture.
  • Higher Retention Rates – Internally promoted employees are 60% more likely to stay with an organization, while external hires are 61% more likely to quit or be laid off. What’s more, Bidwell’s studies found that external hires have a 21% higher hazard rate of voluntary exit.  Let’s also go back to the Mark Zuckerberg interview.  He mentions, “One of the things that I’m most focused on now is just making sure that people have opportunities to grow.”  He went on to say, “It sends the signal to everyone else in the company that they can be those people in a few years, if they do good work and really excel.  I think that that’s pretty powerful too.” When employees believe that there is opportunity ahead, they’ll want to work hard to progress with the company.

Promoting Externally

  • Fresh Ideas – Sometimes, teams of employees can fall into the fallacy of “group think,” where they adhere to certain ideas and abstain from encouraging opposing ideas. Hiring a new employee can help “shake things up,” and sometimes, that’s all a company’s culture needs to get to the next level.
  • New Skills – By the same token, many times an internal employee will not have the necessary experience or skill set to exceed in a new position. For example, if you’re looking for a “Digital Strategist,” your current team of marketers may not have the specialized knowledge that someone from a different firm possesses.
  • Gain Competitive Intelligence – When you take an employee from a direct competitor, you’re automatically exposing your organization to the strengths and weaknesses of their prior company. This ties back to the previous two points, where fresh ideas and new skills can make a major change for the better.
  • No Political Alliances – Unless they’re a referral of several current employees, a new hire will not be acquainted with the “cliques” and “political alliances” that are bound to grow in any company. An outside hire will come in free of existing prejudices or impartiality.
  • Larger Supply of Candidates – The job market is vast, and there are so many reputable search firms out there today that can assist with finding the right talent. Simply put, there are an infinite amount of external candidates on the job market, while there may only be a few within your current organization.

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