What happens when employees move up from the inside? All sorts of wonderful things: Trust and loyalty increase, not only for the person promoted, but with the peers as well. When top employees get a sense they can go somewhere in the company, they are more likely to hang in there and ride it out, brushing off requests to work for other splendid and quickly promoting companies. Your company benefits from a strong succession plan, and stability in the workforce, plus the bonus of knowing the track record for the promoted employee.
External candidates paint themselves in the best possible light to get a job. They practice excellent responses with a little help from YouTube. Perhaps they present a resume crafted by a hired expert, and glowing references from an out-of-work roommate and Uncle Harold. Then they have a great, feel good conversation with the hiring manager who gets a good “gut feeling” for a candidate who turns out to be a late sleeper and a snarky “non-team player.” In addition:
- External hires cost more (in one study1, new hires made an estimated 18% more than internal promotions for the same job).
- External hires score worse on performance reviews (because employers underestimate how long it takes a new employee to get up to speed and show success within the organizational culture).
- The performance of the entire team dips as team members focus on bringing that new person up to speed.
- External hires are 61% more likely to be fired from their new jobs over those who are internally promoted.1
Wow, a failure rate of 61%? Think about this: Recruiters do not like much risk, and will pick an external candidate with as close as possible the experience level needed in the job. External hires are often making a parallel transition for a similar level job and still failing at higher rates. As compared to the internal candidate who came up from a position of lesser authority, and less responsibility! This speaks loudly to the business advantages of purposely and effectively cultivating a learning culture, which expects and enables employees to move up in the organization.
How to set up a strong internal pipeline of talent:
- Assess the current rate of internal hires and determine a target to increase it.
- Use development-planning activities to make it clear to interested and talented employees that they could be a successor when they reach the required competency level.
- Talent management employees and leaders should meet regularly to discuss talent readiness and ongoing learning activities.
- Try not to hire a blood relative or in-law of the decision-maker. This sends a message loud and clear that talent is not a requirement, and it is hard to undo that perception.
- Remove incompetent leaders. I know this is a hard one, because it causes a disruption in the short term, but imagine how poor they are at cultivating a highly competent and productive team and the long-term effects of this failure.
If you are in the HR world, you know how costly recruiting can be. The time spent in sourcing talent, posting jobs on career sites, coordinating and sitting through interviews and meeting afterwards to weigh the candidates’ merits, and sifting through follow-up phone calls and thank you notes while the candidates nervously wait. Meanwhile the team is short handed, overworked and often demoralized as they wait for news about their new boss/peer and plan on how to bring this person up to speed so they can take that burden off of them. If that new peer or boss fails to come up to speed quickly or makes very costly errors, and is let go, then the cycle starts again.
Now, let’s say employment records show that a prospective internal candidate had three years of “Exceeds Expectations” ratings and successfully completed all development plans. Their name comes up often as a key expert with a can-do attitude and an ability to influence others. But they are passed over in favor of an external hire who doesn’t understand the business, needs lots of help and causes much re-work. The next time a recruiter calls, they just may listen closely to the tempting offer laid out for them, and be lured away.
1Bidwell, Mathew, April 3, 2012 -The Wall Street Journal, Is It Better to Promote From Within?
Also, adapted from Building Giants: A Proven System to Transform Your Workforce Through Effective Training, 2016 Katy Caselli.
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Are you wondering how to start growing a learning culture in your organization? Contact Katy Caselli for a free consultation to discuss your organization’s learning and development needs: KCaselli@BuildingGiants.com or 919 564 6855 8:30-5:00 EST