Promoting from within should never be overlooked

If you’re making strawberry shortcake and you have a garden full of ripe strawberries in your backyard, it wouldn’t make much sense to run to the grocery store for berries. Likewise, if you need another second-shift supervisor, you’d be foolish to bypass any budding leaders on that team of technicians that you already hired and trained.

Promoting from within might not be an option for every company or every position, but it should always be given consideration! Not only can you save time and money through the hiring process, but you might avoid unnecessary turnover. Your high-performing employees want to know that they have a future with your company. They want to be challenged. If you don’t develop them and give them room to grow, you will eventually lose them.

Skylight Financial Group is a small company that gets it. It has taken top honors among small companies in the Cleveland area, being named the Top Workplace in surveys by The Plain Dealer for three years in a row. Skylight, with less than 100 employees, has a firm policy of looking internally when filling new positions. In the past five years they have filled eleven mid-level positions by promoting from within. Seven of those eleven employees began their employment as receptionists for the firm. No surprise, this company continues to thrive and is gearing up for expansion.

Finding promotion-worthy employees isn’t just a matter of luck. Just like that garden full of berries, your employees need some nurturing in order to grow. Supervisors and managers should be the ones tending that garden. Train them to identify and mentor potential leaders. Provide opportunities for employees to improve their skills and increase their knowledge. That might be through classes or seminars. It might be by shadowing other employees. However you do it, the minimal investment you make will pay off big.

Let’s start by looking at the bottom line. How do the costs of an external hire compare to an internal promotion?

Searching for the external hire: Be prepared to pay for advertisements, 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 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.)
 
Training the external 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.
 
Equipping the external hire: Before they can start, your new employee will need a workstation set up. Get ready to pay for a 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.
 
Paying 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. If that happens, you’ll have to add another fat category to your list of costs: employee turnover.)
 
Despite the obvious monetary benefits, promoting from within is not always the answer. If your goal is to put the right person in the right job, you will have to consider more than just budget. You may decide outsourcing is best depending on the type of position to be filled, the amount of time you have to fill the position, the culture of your team (would you benefit from fresh ideas and an outside perspective?), and—obviously—the internal talent pool.

Even if you can’t promote from within every time, establishing a culture that develops talent and rewards high performers is a win-win.

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