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Promote from Within, Or Hire from Outside? It Depends
By Richard Hadden and Bill Catlette
Don't you hate when someone answers your thoughtful question with the noncommittal "It depends"?
Yet when asked "Is it better to promote from within or hire from outside?", that's the only good answer. It depends.
If the success of FedEx is any indication, it would seem that promotion from within is absolutely, positively the way to go. Eighteen of the company's current VP's started in non-management jobs when the company was still known as Federal Express.
The question of promoting capable professionals, already steeped in your organization's culture, versus bringing in an outsider with different skills and perspectives is not unlike the classic make-or-buy decision that has faced businesses for centuries. And like the make-or-buy question, the promote-or-hire issue should be tackled as a business case, not as a matter of personal preference.
And the answer is always, of course, it depends.
It depends fundamentally on people, skills, and timing. Do you already have the person with the skills, temperament, experience, perspective, aptitude, desire, willingness, and in some cases, mobility to take on the job? Or does that person happen to be on someone else's payroll at the moment.
And while being on your payroll already shouldn't make anyone a shoe-in, it's no small recommendation.
Employers who practice promotion from within cash in on the investment they've made in employee training.
Tracy Koon, of computer chip maker Intel, says that while her company has no written policy regarding internal promotions, it's strongly encouraged and widely practiced. "We have an ingrained cultural value regarding developing our employees," says Koon, "and that means providing internal opportunities." Intel spends more than $300 million a year on employee development, and in any given year, about 10% of Intel workers move to other jobs within the company.
How do you grow your people? At Johnson & Johnson, they grow their people by moving them around. So says Michael Carey, VP of Organization Planning and Development at the health products giant. Often, talented people have to move to another company to develop professionally. But not at J&J, whose 190 businesses worldwide provide ample opportunity for almost any related endeavor.
And then there's the culture thing. Promoting internal candidates provides continuity and reinforces cultural norms. Those promoted from within usually arrive in their new positions with a better understanding of the company's culture. New hires can learn the culture, to be sure, but it takes longer.
Pioneer College Caterers is a Nashville based contract food service management company serving small, private colleges and universities nationwide. HR Director Shane Rushik described his company's procedure for moving managers up the ranks.
Every quarter, president David Nicely, who started with the company as a cook more than 20 years ago, sits down with the corporate staff to identify candidates for development opportunities. Positions are filled by matching the company's needs with a candidate's development level and willingness to relocate.
"Because our market is unique," says Rushik, "we find managers are more successful when they're already familiar with our systems, our management style, and our culture. We've learned from experience that a talented manager we've developed ourselves will usually do better for us than a new hire, even though that new hire may have more food service experience."
As employers struggle to retain top talent, a well-earned reputation for promoting from within can help them win the battle. It provides an incentive for workers to remain loyal to their employers and gives them something exciting to look forward to and to work toward.
While companies like Intel and J&J don't have a formalized promote-from-within policy, others, like Pioneer and Enterprise Rent-A-Car, take a more structured approach, with clearly defined career paths.
Enterprise starts most managerial candidates in the role of manager trainee, and then, based on the trainee's performance, promotes him or her as positions come up. Northeast Florida General Manager Bob Albrecht, who started with the company as a trainee in 1981, says the promotions are based much more on merit than on seniority. "It's up to the candidate," says Albrecht, "as to how quickly they move up the ladder."
For Albrecht, the advantages of this process are clear. The system encourages entrepreneurial skills, teaching managers to run their own businesses. Enterprise stresses performance and accountability for results in making promotions. More senior managers can relate to the problems of those in training, because they've been there. Managers in training like the process, too, because they know it's not likely that an outsider will jump a rung on the ladder without paying the requisite dues.
We've all heard (or experienced first-hand) stories in which someone felt they had jumped through all the required hoops, only to be passed up for a promotion filled by an outsider. This always hurts, but never more so than when the promotion looks like cronyism.
Does it ever make sense to hire from outside rather than promote from within? "Sure it does," says J&J's Carey. A healthy dose of outside perspective and influence is a good thing. At J&J, a red flag is raised if they find that fewer than 70% or more than 90% of their promotions come from existing employees.
The others I talked to agreed. Each has a strong preference for promoting from within, but they each realize the value of bringing in talent from beyond the corporate walls as well. Their advice: look to the outside to broaden the company's perspective, add depth to its capabilities, or especially to fill a specific skill need they can't meet internally.
In other words, it depends.
Please print the following attribution for this article: Bill Catlette and Richard Hadden, co-authors of Contented Cows Give Better Milk, help clients clobber the competition by having a focused, fired up, and capably led workforce. They deliver powerful conference keynotes and leadership training. They can be reached at 800-940-7006 (+1-904-720-0870 from outside North America) or www.ContentedCows.com.