Employees want to be challenged. If you don’t develop them professionally and give them room to grow, you will eventually lose them. That’s why promoting from within should always be given consideration! Not only can you save time and money through the hiring process, but you can also create a positive work culture. Your high-performing employees want to know that they have a future with your company.
Finding promotion-worthy employees isn’t just a matter of luck. Upper management should be advising the supervisors to identify and mentor potential leaders that are currently within the company. One way to accomplish this is to provide opportunities for employees to improve their skills and increase their knowledge. That might be through classes or seminars, by shadowing other employees and even cross-training employees in other departments or skill sets. However you do it, the minimal investment you make can pay off big.
Let’s look at the difference between costs associated with an external hire compared to an internal promotion?
The external hire: Be prepared to pay for advertisements, job postings, drugs screens, background checks, and any other pre-employment assessments. Don’t forget to add in the cost of time spent reviewing resumes and interviewing multiple candidates.
Internal promotion: You can cut out the costs of the drug screen and background checks. You should also spend a lot less time screening resumes and interviewing candidates. (Word to the wise: don’t skip this step entirely for internal promotions. Even the employee you know well should be given the courtesy of a formal interview.)
The external hire: New hire orientation and initial job training should be considered as time cost for both the new hire and the personnel conducting the training.
Internal promotion: The employee being promoted should already be familiar with company policies, practices, resources and expectations which will dramatically reduce the cost of orientation and training.
The external hire: Before they can start, your new employee will need a workstation set up. You may need to pay for a new chair, computer, software, phone or other special equipment. And don’t forget to add in the cost of time to get everything ordered and made ready.
Internal promotion: Set up is usually not required. Maybe just a simple office move is needed.
The external hire: Salary and benefits are the biggest, most obvious cost of hiring. If you want a rough idea of what this cost could be, multiply the salary to be offered by 1.25 to 1.4 times. For example: salary and benefits for a $40,000/year employee could equal as much as $50,000 to $56,000.
Internal promotion: According to a recent study, external hires generally get paid an average of 18% more than employees promoted from within the company. (Another word of caution: don’t assume you can pay your internal promotions less than you would an external hire for the same position. Your employees will know what their compensation should be and will not hesitate to look for other options if need be.)
I leave you with this statement that I have seen many times and personally love:
CFO: What happens if we train them and they leave?
CEO: What happens if we don’t and they stay?
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