Promoting from within vs. hiring from the outside

August 5, 2012

I’ve had this on my mind for a couple of months now.

The choice between promoting from within or hiring from the outside is something you cannot avoid as a leader. Whether you manage a team or a leadership team it’s going to land on your lap at some point.

Some years back my preference was to favour promoting from within, almost exclusively. For a start I got my break from someone (thank you Constant!) giving me a shot at something I was entirely unproven at, so I naturally feel a desire to be able to do the same for others. There are some strong advantages to doing so – you can normally fill the role quicker, you know what you’re working with and it sends a great signal to everyone in the company about the potential to progress their career. Ultimately if a company is doing this well, it’s doing something right in terms of attracting high potential talent and developing it.

However, there are risks to promoting from within and they have bitten me hard a few times (particularly as I was still learning the basics of leadership myself). If you misjudge peoples potential to be able to perform both now and most importantly grow into the role at the pace the business needs them to, it can be disastrous. And I’m not exagerating- a huge amount of effort and time is wasted, relationships can be ruined, everyone goes through a stressful and crappy time (particularly the over-promoted individual) and it can often result in the over-promoted individual leaving the business (their old role is not always available and sometimes they’ve just had enough). Considering they were normally promoted because they were very good at what they did in their old role, you’ve just lost a really good person. I’ve definitely been successful in getting the individual back into their old role or another suitable role, but sometimes the relationship is never quite the same. Lastly, remember that signal you wanted to send to the rest of the company? It’s not a great sight for onlookers…

Get it wrong a couple of times and you can be tempted to play it safe and prefer to hire from the outside and this was certainly true for me over the last year or so.

Hiring from the outside has some big benefits and the biggest is that you can bring someone in who’s been there, done that and probably done it several times before. In fact often they will come in and open your eyes for how things need to be done so you can certainly learn a ton when hiring very experienced people. A fresh set of eyes will often bring in a fresh perspective on things which can be very powerful too.

As safe as this seems, there are also some risks to hiring from the outside. On the flip side to promoting from within, you don’t know who you are working with and generally only get to spend a few hours with the individual before making the decision to bring them on board. Slick talkers can exagerate their previous achievements and give you false confidence in their ability and sometimes what you get isn’t quite what you thought you were getting. Whether the individual can fit into the culture of the company is also a big question mark. Again, you can get a feel of this throughout the interview process, but cannot never be 100% sure how things will pan out (I’ve seen some people let go in their first week due to a complete misfit of values). You can check these things with references but who’s going to give a reference that will contradict what they have been telling you?

The best way I have found to mitigate the risks of hiring from the outside is to do your own homework and search out people who have worked with the individual before and ask some discreet questions. Getting several people into the assessment process is also critical. I’ve felt pretty good about some individuals to only find that some of my leadership team picked up on some things I hadn’t and it led to a decision not to hire.

I’ve also been bitten hard a couple of times on people not quite being what you expected and ultimately having to exit them from the business. If you find yourself in this situation, be fair to the individual and if necessary generous in their exit package. Ultimately a decent amount of responsibility lies with yourself for hiring them in the first place and parting ways in a positive or at least neutral way is always best.

So where does that leave my preference? Well, I don’t think it’s quite as simple as that.

There will be times when hiring from the outside is always the preferable option and this is normally the case with very senior roles (the gap for internal people to jump is too big) and roles which are new functions for the company of which there is no experience within the company itself. Often going out and getting people from the outside will work better here. I’ve seen this happen really well in many occasions in the last year or so.

However my risk profile for promoting from within has changed over the last couple of months and I’m willing to take a few more risks with it. As I mentioned above, it all comes down to your judgement on their potential and their ability to grow into the role inline with your expectations and you’ll need to commit to providing the right coaching and support. But, if I have a role and have a few good external candidates and a promising internal candidate that has the right attitude, is eager to prove themselves and has a solid view of where they sit now and where they need to get to in the next 6 months, I’m much more likely to give them the shot vs. a few months ago. The positives I just mentioned outweigh the unknown for me.

The closing point I wanted to make is that companies need to think and work hard about fostering a culture that develops internal talent and promotes from within. It also needs a learning and development function that can support that culture. They need to be proactively thinking about succession planning and flagging individuals with potential early and starting to have conversations with them and providing them with the right coaching and support as early as possible. And they need to be in a position to properly support people who move into bigger roles. Considering peoples potential to move onto the next role at the recruitment stage is crucial too.

Companies that do this well should be very proud, because it isn’t easy and takes a ton of effort and some talented people to pull it off.

  • mattblumberg

    Hard to know how to comment on this other than to say “I couldn’t have written this better myself.” Very well articulated. We have that exact same though process and think about it situationally as well. The only thing I can add to it is that I think as companies get bigger, this dilemma might get a bit easier because the talent pool internally is larger and by definition has already added some more senior “outside” hires (who might be mid-level in a big company) who over time become “inside” and ready for promotion easier, into larger roles. If that makes any sense.

    • http://www.danielclough.com/ Daniel Clough

      Thanks Matt and that’s a good point. It’s definately easier when you have a bigger pool of talent to pick from. I guess it all comes down to the quality of the hires and the potential that lies within that talent pool.

  • matt@myblumberg.com

    Hard to know how to comment on this other than to say “I couldn’t have written this better myself.” Very well articulated. We have that exact same though process and think about it situationally as well. The only thing I can add to it is that I think as companies get bigger, this dilemma might get a bit easier because the talent pool internally is larger and by definition has already added some more senior “outside” hires (who might be mid-level in a big company) who over time become “inside” and ready for promotion easier, into larger roles. If that makes any sense.

    • http://www.danielclough.com/ cloughie@gmail.com

      Thanks Matt and that’s a good point. It’s definately easier when you have a bigger pool of talent to pick from. I guess it all comes down to the quality of the hires and the potential that lies within that talent pool.

  • http://www.danielclough.com/ Daniel Clough

    Thanks Matt and that’s a good point. It’s certainly easier when you have a bigger pool of talent to pick from. I guess it all comes down to the quality of the hires and the potential that lies within that talent pool.

  • http://www.danielclough.com/ cloughie@gmail.com

    Thanks Matt and that’s a good point. It’s certainly easier when you have a bigger pool of talent to pick from. I guess it all comes down to the quality of the hires and the potential that lies within that talent pool.

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