In earlier post on best practices when hiring a manager I mentioned that the small business owners should first try find an internal candidate and promote someone who is already working with you when you need to hire a manager. The feedback we received on the post as well as discussions with other small business owners has validated this practice. The reason is obvious. Any mistake made in hiring a manager will hurt your business for a long time. The best example of why this is the case can be seen in the difference in last 10 years in the performance of America’s two storied technology companies.
Look at the stock performance of IBM and HP. While IBM has experienced tremendous growth in those 10 years HP has gone in exactly the opposite direction. One of the factors that has contributed to this divergence is the way they have hired CEOs. IBM has had only 2 CEOs in the last 10 years. Not only that, they were both promoted from within and were groomed for several years prior to that. On the flip side, HP has gone through 5 CEOs since 1999 – all of who were hired from outside. I believe this is the primary reason why both companies are where they are. Let me explain the reasons why internal candidate is your best choice when hiring a manager.
- Consistency – Your current employee is already familiar with how your business is running and what is expected of the manager to keep it growing. He knows your company culture and can mesh well with the rest of the employees because he has already been working with them. He has been through the ups and downs of the business in working with you. He is less likely to take drastic actions that will jeopardize your business.
- Risk – When you promote an existing employee to manager you are getting a proven candidate. You know him well and you can tell exactly how he will turn out as a manager. In contrast, you are rolling a dice when hiring someone from outside. While you can take all precautions during the hiring process and follow these suggestions to hire best manager you will uncover true colors of anyone only after working with him for some time. This is perhaps the most important reason to promote an internal candidate instead of hiring from outside.
- Cost – Hiring an outside person for a manager position is expensive. There is not only the obvious expense of recruiting, but you also have hidden expenses in terms of training and onboarding, not to mention the associated risk mentioned earlier. You are likely to incur few hundred to several thousand dollars in expense when hiring from outside. The cost is practically zero when you promote someone from within.
- Speed – Associated with the cost is the time it takes to hire an outside person. The hiring process involves advertising, screening resumes, interviewing, getting referrals before you can even offer a job to someone. It doesn’t end there. After the person is onboard it will take another 2-3 months before he will be able to make full contribution. He needs to go through training and become familiar with the intricacies of your business. Again, this time is reduced to minimal when you promote someone from within.
- Employee Retention – Promoting internal candidate also helps with improving employee motivation and retention. Every employee, and especially good ones, wants to grow in their career and make more money. Promotion gives them opportunity to grow and sends a message to other employees that their hard work will get rewarded.
What is your opinion? Is it better to promote someone or hire from outside?