Should you fill a position internally or hire from outside the company?

Article originally published in the American City Business Journal on February 1, 2021.

As leaders, we have all faced the decision of whether to fill a job by promoting an internal candidate or hiring someone from outside the company. What are some of the factors to consider when making this decision?

Is this an opportunity to redefine the responsibilities of the position?

Whenever a position opens, it’s an opportunity to reorganize and either combine or separate the responsibilities of the position. What are the levels of experience and expertise needed to fulfill the responsibilities of the redefined job? 

You should develop a list of short-term and long-term expectations of the individual you hire for the position. During the interview process, you can discuss these, so the candidate knows what is expected of them. You also should select a candidate that will have the credibility internally and externally to be successful.

What is the company’s long-term strategy for developing an in-depth leadership team?

Your talent development strategy should include identifying and developing those employees who have the potential to someday move into senior leadership positions. 

You want to give these high-potential employees the broadest experiences by moving them to new areas of responsibility within the company. This works well when they are surrounded by a strong team. 

This is how I advanced through my first three of 11 positions at PQ Corporation. I joined the company as a chemical process engineer, followed by two lateral moves – to a position evaluating financial business alternatives and justifying new capital investment, and then to a product manager position, my first line operating responsibility. The product manager position was the stepping-stone in my journey towards P&L responsibility of a business unit, which eventually led me to becoming CEO of the company. 

Are there qualified internal candidates?

Promoting an internal candidate sends a strong message to the organization. To keep talented people, they need to feel that there are opportunities for advancement within the company. You also maintain institutional knowledge of what has occurred in the past, which can help your future success.

You are not going to keep all of your talented employees. Some will be recruited by other companies. You should take satisfaction that you helped them develop and wish them well. Former employees who depart on good terms form a network that will be helpful to you in the future. 

Does this position need a fresh perspective that only someone from outside the company can provide?

Going outside the company to fill a position provides an opportunity to bring a fresh perspective and learn what other companies are doing. It helps you not only learn what the best practices are, but also the common practices within your industry. There is nothing better than learning from a new employee who has actually implemented best practices at a previous company.

Benchmarking other companies is critical to determining where your company stands on a host of issues. Hiring an individual from the outside can facilitate the benchmarking process.

Should you take this opportunity to strengthen your management team by hiring from the outside?

As the competitive environment changes, so do the demands on your senior leadership team. Perhaps your team lacks a specific skill or experience needed to compete or take your company to the next level. It’s more expensive to hire from the outside, but it’s the way to get the talent needed to move the company forward.

For many positions, companies interview both internal and external candidates for a position as a way of validating an internal candidate. Interviewing external candidates also exposes any talent gaps that you might have.

I have had a number of CEOs whose boards that I sit on remark to me that the individual they hired from the outside strengthened their leadership team and brought a new operational and strategic perspective to the company. That opportunity would have been missed if the position had been filled with an internal candidate.

Internal candidates are well known to the organization, increasing the probability of their success. No matter how much due diligence and reference checking you do on an external candidate, the probability of their success will be less than an internal candidate.

So what is best – promoting from within or hiring from the outside? Hopefully, the factors outlined above will help guide your decision.

Stan Silverman is founder and CEO of Silverman Leadership and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read nationally syndicated columnist on leadership, entrepreneurship and corporate governance. He can be reached at Stan@SilvermanLeadership.com.

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