Companies with high rates of internal hires experience greater retention.
The most commonly cited reasons for hiring and promoting internally are to motivate employees and boost retention.
Employees at companies that hire and promote more internal candidates stay 41 percent longer than workers at companies with lower internal hiring rates, according to LinkedIn’s 2020 Global Talent Trends report.
It’s faster and cheaper to hire from within the organization because internal candidates already know the job and the organization.
However, to realize those benefits, organizations must develop a formal strategy and process to ensure that objectivity and equity are achieved. Otherwise, unintended nepotism, partiality and entitlement can weaken human capital output and employee loyalty.
Formal internal hiring programs should include these key elements:
Diversity. This is needed to ensure that the organization has sufficient bench strength, which is the ability at any given moment to have more than one qualified individual ready to be promoted. Organizations that hire with diversity in mind will benefit exponentially from the varied opinions and solutions the candidates bring to solve organizational challenges.
Transferable skills. Internal candidates who have tenure tend to understand the business mission more completely. When employees seek to broaden their career interests, employers should pay attention. Providing career counseling for individuals who have already performed well for the organization will boost employee morale and perhaps increase retention. Placing an emphasis on individuals who desire to grow with the organization can build a committed employee base and strengthen internal culture.
Employee development and mentoring. Employees who have been hired as interns or who participate in developmental programs and have already demonstrated success in these temporary programs are good candidates to fill open positions. Providing constructive feedback can improve employee engagement and is critical to an employee’s growth. Internal promotion decisions shouldn’t be based strictly on tenure; this quid-pro-quo thinking generates negative feelings in otherwise high-achieving individuals.
Leadership development. It’s just as important to retain talent as it is to attract it. Once you have an employee base that meets the needs of the business (generally evident in the year-end bonus payout), you must nurture that talent through continual improvement, just as the organization seeks to do in its ongoing business processes. If a business is to rely on promotions through organic growth, it must invest in keeping that internal talent satisfied with challenging projects and reward programs that recognize employee commitment and effort.
Empathy for employees’ individual needs. If we have learned anything from the pandemic, it’s that work can be done in a variety of settings. Job sharing or flexible work schedules can accommodate an individual’s personal needs. In many cases, organizations lose key talent due to lack of empathy. Promotable employees leave.
When an organization seeks to understand an employee’s challenges and has the resources to make an accommodation, this increases the chances that the individual will feel valued and will choose to stay and further commit to the employer.
Feedback. Finally, after the role is posted and filled with the most qualified internal candidate, the organization should communicate with the employees who applied but were not selected.
Direct and meaningful feedback will go a long way for a person who is looking to advance within the organization. Otherwise, the individual may become confused or resentful for not understanding what it takes to reach the next level.
Jean Bayuk, SHRM-SCP, CCP, is an HR consultant and total rewards executive in Newark, Del.
External hires can bring a fresh perspective and ensure greater diversity.
Prioritizing internal promotions within organizations sounds inviting. However, it brings inherent challenges when it is done in a vacuum or when it takes the place of finding qualified, capable candidates for positions.
Filling managerial jobs through promotions can cause long-term harm to an organization by impacting the organization’s viability, culture and inclusion opportunities. One needs to take a critical look to determine if the internal candidate has the skill set necessary to be successful or if making an internal hire is simply the easier decision.
Transitioning into a role as a leader means moving from carrying out or operationalizing tactical plans to creating strategic ones. There are two skills that become incredibly important when employers consider internal applicants for leadership roles. The first is the employee’s ability to move from an individual contributor role to a people leader position. Can the individual mobilize others to complete tasks?
The second is the individual’s ability to move an organization to the next level, understand greater business priorities, engage in strategic planning and decision-making, and, most importantly, grasp how all of these elements align with and impact an organization’s people management priorities. Unfortunately, most organizations are so lean that they need people to hit the ground running and don’t have time to wait for internal candidates to develop these skills.
Externally hired leaders often have fresh eyes to observe cultural shortcomings that people who have assimilated may overlook. Recent Gallup polls show that 74 percent of all employees are actively disengaged—a trend that transcends industries, roles and pay. Additionally, about 1 in 5 employees have changed jobs in the last five years due to a toxic workplace culture, according to research by the Society for Human Resource Management. Promoting from within can perpetuate the negative behaviors that an organization seeks to eliminate.
The importance of diversity, equity and inclusion (DE&I) in workplace culture is another factor that many leaders are just beginning to recognize. The primary place to begin DE&I practices is the talent attraction strategy, including recruitment, applicant selection, interviewing, candidate selection and hiring. McKinsey & Co. has been tracking diversity efforts in organizations since 2015. Its data reveals that companies with stronger gender and ethnic diversity on leadership teams outperform their counterparts. Let’s consider when internal promotions are prioritized over DE&I initiatives. If everyone inside an organization or in the C-suite looks the same, then looking externally to gain diverse perspectives is key.
Throughout my career as a practitioner, I have watched many organizations make the crucial mistake of prioritizing internal promotions over getting the skill sets needed for the position. The way I see it, there are two options: There’s the easy thing to do, and there’s the right thing to do. Yes, it seems much easier to place internal candidates. They know the secret handshakes, the traditions, the stakeholders, where office supplies are stored and how to fill out business expense reports. Because they don’t need to learn about the organization, they can get to work more quickly. But is that enough? Will they help drive the organization to its future by broadening the old way of thinking, challenging the status quo and bringing fresh perspectives to the table?
When done correctly, hiring from outside your organization can offer valuable opportunities to cultivate new leaders. In the end, doing so can build new capacity, increase diversity in your workforce, ensure better organizational performance, and ultimately foster stronger mission and bottom-line impact.
Jeannie Lloyd, SHRM-SCP, is a senior human resource consultant at Nonprofit HR, which is based in Washington, D.C.