Promotions are a difficult assignment of any business. Choosing the right individuals for the right positions is what makes managers pull their hair out. The age-old question is whether or not to hire from outside the current workforce or to promote from within. This can be difficult as it is hard to know whether or not your current employees are suited to whatever job opportunity arises. Businesses in Ireland that use HR Software within their workforce management solution can record data within Recruitment and Performance Management modules. This helps HR can to track of current employees who fit certain roles. In this post, we examine the pros and cons of hiring from within.
A new study, recently published in the Wall Street Journal, looks at the cost of hiring employees from the outside, versus the alternatives of promoting from within. The study was conducted by Matthew Bidwell, an assistant professor at Wharton University. It focuses on patterns of work and employment. Bidwell compared the relative salaries of the individuals hired externally and internally, and his findings were somewhat surprising. Bidwell found that not only do external hires get paid.
Bidwell found that not only do external hires get paid more, but for their first two years on the job, they receive significantly lower marks in performance reviews. External hires are also much more likely to get laid off than are those promoted from within.
In today’s environment where our employees fear being replaced by not only new recruits but AI too, it is important to keep your employees and show them you value their loyalty.
Bidwell scrutinised seven years of employee data, from the U.S. investment banking unit of a financial services firm. This included information on 5,300 employees in multiple jobs, from traders and research analysts to support staff. He also examined data from another investment bank and a publishing company.
Motivation can help improve retention. This can be done in many ways from benefits to bringing employee’s to see a funny motivational speaker.
Easier Transition to New role
As you may already know bringing in a new employee into the flock and bring them up to speed quickly is a difficult and time-consuming process. This is a critical loss of productivity. A considerable amount of time is spent trying to transition into new tasks. However, when you promote a current employee, he or she is already familiar with your company’s goals. If you desire, it can be a seamless transition into a higher position. This enables your current workforce to feel rejuvenated by the ample potential for opportunity. Using a performance management system to find the right staff from within your business can increase employee retention rate dramatically. The employee will already be familiar with company objectives and goals.
Cheaper to Promote Employees
As a basic principle, it is far less costly to promote employees from within. Often new candidates from external places will look for unnecessarily high wages. They see a new firm as a new opportunity to advance their payslip, rather than advance any sort of company ethos. The actual costs incurred by looking externally also have negative ramifications. These include the cost of advertising and the training time it takes to screen, interview and take the new hire on their orientation. Invariably it can be months before any productivity is enjoyed from the outside recruit.
Invariably it can be months before any productivity is enjoyed from the outside recruit. Conversely, an internal promotion can reap rewards immediately. Even for a lack of experience, internal promotions can be largely beneficial to the company as opposed to the individual. Outside of some basic training and prepping time, there is little, if any additional cost to the company.
Realistic Fit for Team Culture
It’s important to note that a group of employees may take months, even years, to get comfortable working with each other in a team setting and perform functions in a productive manner. For higher positions in the company, you must honour the company culture and how well each employee fits into the greater scheme of things. Only through planned team building and proper job matching, will your company be able to grow and flourish.
This is undoubtedly a slower process when you have a new incumbent on board. If it’s fast results you’re looking for, hiring within is your go-to option. Hiring from the outside also has the potential to upset the current culture. This can lead to breakdowns in team cohesion and efficiency. Therefore, internal promotions are a better way to develop your teams within the corporate culture. Read about 8 Business EQ Strategies that can help with your project management.
Existing Loyalty to the Firm
If you’re lucky, your current employees have already demonstrated that they are loyal to the company’s cause and mission. This is largely rewarding for you as an employer. It allows you to gauge whether or not they will be suited to more responsibility. Therefore, it only makes sense that you would want to promote from within, rather than take a chance on a new hire who may decide not to stick around.
Employee loyalty is a very rare commodity in the business world. Many professionals are jumping ship for other opportunities on a frequent basis. Show how loyal and attentive you are to your hard working staff by offering internal promotions and employee development.
As you build your company and add new roles to handle additional tasks and projects, keep in mind all the advantages of succession planning by promoting from within. Take a careful inventory of the employees you have now, their skill sets and gifts. This will help you design a plan that helps honor the people who work hard for the success of the company every day.