Promote Internally or Hire Externally?

And how to decide, which way to go with.

In today's post, I want to focus on a subject which I believe to be quite important in companies, especially when you are looking for a senior hire and want to move up quickly.

In all my time working in various companies, this is one of the few challenges and dilemmas that most hiring managers face: whether to promote someone internally or spend the time hiring externally.

Both sides have their pros and cons, and in this post, I will try to give my point of view and how tackle it.

Lets dive in.

Why is this a challenge for companies today?

From my experience and observation, this dilemma occurs primarily for senior positions (think from “very senior manager”/ “head of x” roles and above).

Very rarely, I've seen it for mid-level positions, which usually end up promoting internally due to the mindset of getting up to speed quickly and not spending time & money on external recruitment.

Companies struggle with this because they need to balance nurturing existing talent with injecting new perspectives into the organization. We all know that bringing new, very senior talent into every organization automatically puts some kind of “pressure” on the company culture, current employee morale (especially if this is their new boss), and overall company operational efficiency.

On the other side, focusing only on internal promotion can eliminate the opportunities to explore fresh perspectives in terms of talent and different thinking. In today's market, with so many layoffs happening across the world, there will surely be a surplus of talent.

Of course, let's not forget two key components in favour of internal promoting:

• Speed ( no cost, no interview, no educating / onboarding )

• Business acumen ( knows the business in details, already owning some metics etc.)

As you can see, it can be quite a challenge for companies to decide where to focus. Luckily, there are always ways to think about this issue and how to approach it.

What are the common approaches and pitfalls?

In this section, I will explore the typical strategies companies employ when deciding between internal promotion and external hiring.

Internal Promotion

Approach:

Here, companies prefer to promote from within, valuing loyalty and a deep understanding of the company culture that existing employees possess. There are situations where an employee from another department can take this role.

( ex. SEO Manager > Digital Marketing Manager )

( ex. Head / VP of Growth > CRO )

Pitfalls:

The major one for me, and looking at the roles I’ve hired for, is the overlooking of potential skill gaps. Because the candidate is from within, we might miss thoroughly assessing their skills.

Another area is limiting diversity. Relying too heavily on internal promotions can restrict the introduction of new perspectives and ideas into the organization.

External Hiring

Approach:

Businesses opt for external hiring to bring in fresh talent with new ideas and experiences. The company may not have the right talent at the moment or the business might shift, and new experiences are required, which cannot be found internally.

Pitfalls:

The first one, in my opinion, is the higher costs. To recruit a senior person, it will take you at least 4 - 6 months. Also, the whole process of recruiting, interviewing, and onboarding can be more expensive and time-consuming compared to promoting from within.

The second pitfall is cultural mismatch. New hires might struggle to adapt to the company culture, leading to friction and a lack of cohesion within the team. Not to forget that as a senior role, your impact is bigger and can be a “toxic” experience if you are not a fit.

Hybrid Approach

Approach:

I’ve encountered this approach a few times, and it was interesting to see how it works. Essentially, the hiring team uses a combination of internal promotion and external hiring to balance the benefits of both worlds. It's important to note that the roles don’t need to be within the same department.

Let me give you an example.

A company I’ve worked with promoted an internal candidate to a senior software engineering position, simply due to their deep understanding of the company’s product and processes. There was no need for an external hire.

However, at the same time, we were looking for a marketing director, and although there was a good internal candidate, because of the essence and impact of the role, we sought externally. This was because marketing involves a lot of creativity, strategy, etc., and a new perspective on how to grow was more important.

Pitfalls:

On a company level, it might create inconsistency in standards. You need very clear guidelines; otherwise, you might cause internal anger due to less transparency and perceived unfairness in the promotion and hiring process.

A point that I consider pretty valid is around the management challenges. You need to be good at balancing both types of hiring, as you need to ensure that all team members feel valued and included.

I’m sure everyone knows a story where, within a team, someone suddenly got promoted without really deserving it (boot-licking, “knowing” the boss, etc.), and it garnered hate from all other team members.

Is there a better way to decide which approach to go for?

I would say 'yes,' and the reason is that I've been using some decision-making tips based on my experience as a senior leader.

When to promote internally?

1. The first reason is to look for transferable skills. Promote internally if you believe the existing employee has the skills and competence needed to perform at least the core part of the job and can learn the rest on the job.

2. Promote internally if your company has built an amazing culture and this is an area where you will not compromise with a candidate when hiring.

3. If reducing cost and time is important for your business, consider internal promotion.

4. Boosting employee morale is quite important. Promoting from within shows employees there's a career path and that their hard work is recognized. This is particularly relevant if your company values this approach.

5. Consider internal promotion if you are in a more complex industry which requires a longer onboarding and learning process.

When to hire externally?

1. Hire externally if the role you are advertising requires a very specific skill set or deep industry knowledge, which is currently unavailable within your company.

2. For senior leadership roles requiring strong leadership and management skills, external hiring allows access to candidates with established expertise in team management, employee motivation, and growth facilitation.

   This approach is particularly valuable when the position demands demonstrated capability for effective leadership and a history of success.

3. During periods of rapid expansion (scaling quickly), external hiring enables you to quickly fill crucial positions with qualified candidates who can immediately contribute. You can more easily source candidates who "have done it before" and can have an immediate impact.

4. Sometimes companies get stuck in their growth because internally, employees may already be exhausted or lack new perspectives and creativity, which slows down growth.

   Hiring externally introduces individuals with diverse experiences, perspectives, and problem-solving methods, which are vital for a "moving forward" approach. This strategy is particularly beneficial for established companies that may become entrenched in conventional approaches.

To summarise:

Promote Internally: Existing skills, culture fit, cost & speed and morale boost

Hire Externally: Specialised skills, fresh perspective, seeking growth, seeking leadership

For a closing thought, I would say that I've employed both approaches, and there is no definitive "best way”.

Understanding your current business and future vision is crucial; these are the perspectives from which you should make decisions about team or company-wide hiring.