Promote or Hire?

I understand your dilemma. You have this vacancy and the internal candidate just doesn’t have it, he (or she of course) doesn’t have the education, hasn’t done the job before and you are just not that confident that he/she can do the job. On the other hand you have this person that fits the role perfectly, has worked with the competitor and has a solid resume.

What should you do; promote or Hire?

I have always been fascinated with this dilemma; do we go outside or do we hire internally. Now external research from Wharton management professor Matthew Bidwell found that:

“external hires get significantly lower performance evaluations for their first two years on the job than do internal workers who are promoted into similar jobs. They also have higher exit rates, and they are paid a substantial premium to attract them from their previous jobs. On the plus side for these external hires, if they stay beyond two years, they get promoted faster than do those who are promoted internally”.

My whole corporate life I have worked with a company that breathed and lived the ‘promote from within’ culture and my Unilever career has been a fantastic example of its success. Of course even that philosophy can have its downside and Unilever had to recruit a CEO from outside its own ranks a couple of years ago (I will touch upon when to and what to look for in a recruit from outside in my next post).

Companies in Asia are evenly split, some are fans of the ‘recruit the best in the market’ philosophy and others are the ‘promote from within’ supporters. In the Middle East however, often due to the lack of home grown talent, companies focus on hiring the best and when their shelf life is over, hire the next person. With South Asia as a large professional talent market at their doorstep, they have been very successful in doing so and have built huge businesses as a result of it.

The biggest problem of course is that this approach works well when the going is good (and the global talent market is down) however is very difficult to sustain over generations. If you want to grow a sustainable business that to quote Jim Collins want to be “Great by Choice” then you have to make sure you grow your own talent pipeline.

So when you are facing this dilemma, try your internal candidate. You know what you get, other employees in your team will get a motivational boost as they see that career growth in your organization is possible, you get better performance for less costs and you build at the future of your company.

Not a difficult choice is it?

– Paul Keijzer

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8 thoughts on “Promote or Hire?

  1. Excellent post Paul. In my perspective, all depends on the organizational culture and how they nurture human talents and get the best out of them. Companies who have adopted ‘Employees First!’ strategy, usually have significantly low employee exits.

    Believe the dilemma remains that why do employees (internal/external) leave an organization?

  2. I’d disagree a little. This ought to be a circumstancial decision. The idea should be to hire the most appropriate person (internal or external). Sometimes, we do not have “ready now” successors. Promoting them, may be a morale boost for the other employees, but it may not be the best business decision in this competingly brutal corporate world 🙂

    • Genuinely speaking, there are numerous aspects (both internal and external) that shall be considered before making any hiring decisions. All I mean to say is, if the corporate culture is strong i.e. they promote the leadership notion & having a proper succession planning, probability remains high that there will be ‘ready now’ successor. Doesn’t work all the time though and I acknowledge, sometime it’s difficult to juggle the balls!

    • You are absolutely right Faraz, but all being equal or even a little but unequal I still would go for internal promotion. It is cheaper and as the research shows the internal candidate most likely performs better.

      • Another reason to be more inclined for considering internal staff for a position is, they are already familiar with the culture and work environment and for external individual to adjust, especially in a large set-up can, at times be very harsh.

  3. Hello Paul,

    Your articles are very interesting and the one this time is a point that is effecting my company a lot. Anyways I’d suggest you a topic.

    Hiring Ex staff / Employees.

    People who have worked previously with companies – should they be hired again? What should be the gap period for re-employment. Will they add new skills during the time and add value to businesses? Chances of retention are high / low considering they know the people, values, business and Culture?

    – Adnan Kherati

    • Adnan,

      Thanks for the comment and the suggestion, will certainly have a go at this topic in the future.

      Stay in touch and do keep on following the blog!

      Paul

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